Core Viewpoint - Zacks Investment Research has initiated coverage of Stratus Properties Inc. with a Neutral recommendation, highlighting a combination of development potential and operational challenges [1] Group 1: Company Overview - Stratus Properties Inc. is a Texas-based real estate development and leasing company, positioned to unlock value through disciplined capital recycling and a substantial land bank in high-growth markets [2] - The company has recently refinanced major properties, resulting in over $12 million in cash and expanded credit capacity, as it shifts focus to new developments in Austin and surrounding areas [2] Group 2: Valuation and Asset Management - Asset sales have validated Stratus's valuation strategy, with the sale of West Killeen Market generating $7.8 million in net proceeds, exceeding the company's NAV estimate [3] - Management's ability to extract value and redeploy capital is further demonstrated through transactions involving Magnolia Place and Amarra Villas [3] Group 3: Development Pipeline - Stratus controls over 1,500 acres of entitled land, with projects like Holden Hills and The Saint George addressing housing demand in Austin [4] - Recent regulatory changes in Texas have eased permitting constraints, enhancing long-term development potential [4] Group 4: Financial Performance and Challenges - Revenues fell sharply in Q1 2025 to $5 million from $26.5 million a year earlier, leading to a $2.9 million quarterly net loss due to no property sales during the period [5] - The company faces high leverage with $210 million in floating-rate debt, exposing it to interest rate volatility and liquidity pressures, as indicated by negative operating cash flow in Q1 2025 [6] Group 5: Market Position and Investor Sentiment - Stratus's stock performance has lagged behind peers, trading at a discount to its underlying asset value, but with elevated valuation multiples relative to the broader sector [7] - The market appears to be pricing in execution risks and limited earnings visibility, warranting caution for investors [8]

Investor Presentation March 28, 2025 CAUTIONARY STATEMENT This presentation contains forward-looking statements in which Stratus discusses factors it believes may affect its future performance. Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations related to inflation, interest rates, tariffs, supply chain constraints, Stratus' ability to pay or refinance its debt obligations as they become due, availability of bank credit, Stratus ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited consolidated financial statements for the quarter ended March 31, 2025, include balance sheets, income statements, cash flows, and equity [Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) Consolidated Balance Sheets | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Cash and cash equivalents | $12,006 | $20,178 | | Real estate under development | $274,625 | $274,105 | | Land available for development | $76,312 | $65,009 | | Total assets | $534,581 | $532,606 | | Debt | $207,838 | $194,853 | | Total liabilities | $241,998 | $235,039 | | Total equity | $292,583 | $297,567 | [Consolidated Statements of Comprehensive (Loss) Income (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20(Unaudited)) Consolidated Statements of Comprehensive (Loss) Income | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Real estate operations revenue | $25 | $22,123 | | Leasing operations revenue | $5,018 | $4,384 | | Total revenues | $5,043 | $26,507 | | Operating (loss) income | $(3,595) | $3,685 | | Net (loss) income attributable to common stockholders | $(2,875) | $4,552 | | Basic net (loss) income per share | $(0.36) | $0.57 | | Diluted net (loss) income per share | $(0.36) | $0.56 | [Consolidated Statements of Cash Flows (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Net (loss) income | $(3,757) | $3,697 | | Net cash (used in) provided by operating activities | $(13,495) | $6,547 | | Net cash used in investing activities | $(4,693) | $(8,392) | | Net cash provided by (used in) financing activities | $9,991 | $(9,059) | | Net decrease in cash, cash equivalents and restricted cash | $(8,197) | $(10,904) | | Cash, cash equivalents and restricted cash at end of period | $12,957 | $21,528 | [Consolidated Statements of Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Equity%20(Unaudited)) Consolidated Statements of Equity | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Total stockholders' equity | $191,459 | $194,705 | | Noncontrolling interests in subsidiaries | $101,124 | $102,862 | | Total equity | $292,583 | $297,567 | - Total comprehensive loss for the three months ended March 31, 2025, was **$(3,757) thousand**, compared to total comprehensive income of **$3,697 thousand** for the same period in 2024[16](index=16&type=chunk) - In Q1 2025, the company repurchased **21 thousand shares** of common stock for **$(410) thousand**[16](index=16&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [1. GENERAL](index=7&type=section&id=1.%20GENERAL) - The unaudited condensed consolidated financial statements are prepared in accordance with **U.S. GAAP** and reflect normal recurring adjustments[18](index=18&type=chunk) - In Q1 2024, the CEO's son received a **$22 thousand** annual incentive award and had an annual salary of **$124 thousand** before resigning in September 2024, forfeiting PPIP awards[19](index=19&type=chunk) [2. EARNINGS PER SHARE](index=7&type=section&id=2.%20EARNINGS%20PER%20SHARE) Earnings Per Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Net (loss) income attributable to common stockholders | $(2,875) thousand | $4,552 thousand | | Basic weighted-average shares outstanding | 8,037 thousand | 8,026 thousand | | Diluted weighted-average shares outstanding | 8,037 thousand | 8,151 thousand | | Basic net (loss) income per share | $(0.36) | $0.57 | | Diluted net (loss) income per share | $(0.36) | $0.56 | - For Q1 2025, **161 thousand shares** associated with RSUs were anti-dilutive due to a net loss, compared to **21 thousand** anti-dilutive shares in Q1 2024[20](index=20&type=chunk) [3. LIMITED PARTNERSHIPS](index=7&type=section&id=3.%20LIMITED%20PARTNERSHIPS) - Stratus holds indirect equity interests ranging from **10.0% to 60.0%** in five limited partnerships (Holden Hills, The Saint George Apartments, Stratus Block 150, The Saint June, Stratus Kingwood Place)[21](index=21&type=chunk) - Stratus made operating loans of **$1.5 million** to Stratus Block 150, L.P. in Q1 2025, bringing the total outstanding to **$7.2 million** as of March 31, 2025[22](index=22&type=chunk) Limited Partnerships Financial Summary | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Total assets | $278,518 | $276,756 | | Total liabilities | $153,109 | $151,433 | | Net assets | $125,409 | $125,323 | [4. ASSET SALES](index=9&type=section&id=4.%20ASSET%20SALES) - In Q1 2025, **$200 thousand** of a previously deferred gain from The Oaks at Lakeway sale was recognized due to a sub-lease, with the remaining deferred gain at **$1.5 million** as of March 31, 2025[28](index=28&type=chunk) - In Q1 2024, Stratus sold two Amarra Villas homes for **$7.6 million** and 47 acres of undeveloped land at Magnolia Place for **$14.5 million**, which led to the repayment of an **$8.8 million** construction loan[29](index=29&type=chunk) [5. FAIR VALUE MEASUREMENTS](index=9&type=section&id=5.%20FAIR%20VALUE%20MEASUREMENTS) Fair Value of Interest Rate Caps | Metric | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----- | :------------------------- | :-------------------------- | | Carrying Value (Interest rate caps) | $11 | $19 | | Fair Value (Interest rate caps) | $11 | $19 | - Stratus Kingwood Place, L.P. entered into a **$33.0 million** interest rate cap in November 2024, and College Station 1892 Properties, L.L.C. entered into a **$24.0 million** interest rate cap in March 2025[32](index=32&type=chunk) - Interest rate caps are derivative instruments not qualifying for hedge accounting, with fair values measured using market observable inputs (**Level 2**)[33](index=33&type=chunk) [6. DEBT AND EQUITY](index=10&type=section&id=6.%20DEBT%20AND%20EQUITY) Debt Summary | Debt Type | March 31, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------- | :------------------------- | :-------------------------- | | Comerica Bank revolving credit facility | $4,000 | $0 | | Kingwood Place loan | $32,453 | $32,408 | | Lantana Place loan | $29,400 | $25,509 | | Jones Crossing loan | $23,554 | $22,428 | | The Annie B land loan | $11,950 | $12,568 | | Construction loans | $104,719 | $105,309 | | Amarra Villas credit facility | $1,662 | $1,631 | | Total debt | $207,838 | $194,853 | - The Comerica Bank revolving credit facility was amended in March 2025, extending its maturity date to **March 27, 2027**, and lowering the interest rate[39](index=39&type=chunk) - In January 2025, the Lantana Place construction loan was refinanced with a **$29.8 million** term loan, generating approximately **$3.0 million** in net cash proceeds[41](index=41&type=chunk) - In Q1 2025, Stratus acquired **20,694 shares** of its common stock for **$0.4 million** under its **$5.0 million** share repurchase program, with **$3.0 million** remaining available[47](index=47&type=chunk) [7. PROFIT PARTICIPATION INCENTIVE PLAN AND LONG-TERM INCENTIVE PLAN](index=12&type=section&id=7.%20PROFIT%20PARTICIPATION%20INCENTIVE%20PLAN%20AND%20LONG-TERM%20INCENTIVE%20PLAN) - The Profit Participation Incentive Plan (PPIP) and Long-Term Incentive Plan (LTIP) provide economic incentives tied to the success of designated development projects[48](index=48&type=chunk) PPIP and LTIP Costs | Cost Type | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :-------- | :------------------------------------------ | :------------------------------------------ | | Charged to general and administrative expense | $68 | $83 | | Capitalized to project development costs | $8 | $111 | | Total PPIP and LTIP costs | $76 | $194 | - The accrued liability for the PPIP and LTIP totaled **$1.9 million** at both March 31, 2025, and December 31, 2024[51](index=51&type=chunk) [8. INCOME TAXES](index=13&type=section&id=8.%20INCOME%20TAXES) - Stratus has a **full valuation allowance** against its U.S. Federal net deferred tax assets as of both March 31, 2025, and December 31, 2024[52](index=52&type=chunk) - The consolidated effective income tax rate was **(1)% for Q1 2025** and **3% for Q1 2024**, primarily due to state income taxes, noncontrolling interests, the valuation allowance, and executive compensation limitation[54](index=54&type=chunk) [9. BUSINESS SEGMENTS](index=13&type=section&id=9.%20BUSINESS%20SEGMENTS) - Stratus operates in two reportable segments: **Real Estate Operations** (entitlement, development, and sale of properties) and **Leasing Operations** (leasing developed retail, mixed-use, and multi-family properties)[55](index=55&type=chunk) Segment Revenues | Segment | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :------ | :------------------------------------------ | :------------------------------------------ | | Real Estate Operations Revenue | $25 | $22,123 | | Leasing Operations Revenue | $5,018 | $4,384 | | Total Revenues | $5,043 | $26,507 | Segment Profit (Loss) | Segment | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :------ | :------------------------------------------ | :------------------------------------------ | | Real Estate Operations Segment (loss) profit | $(1,502) | $6,801 | | Leasing Operations Segment profit | $1,958 | $1,349 | | Total Segment (loss) profit | $456 | $8,150 | Segment Assets | Segment | March 31, 2025 (Thousands) | March 31, 2024 (Thousands) | | :------ | :------------------------- | :------------------------- | | Real Estate Operations | $371,355 | $329,062 | | Leasing Operations | $151,950 | $160,759 | | Corporate and other | $11,276 | $19,696 | | Total assets | $534,581 | $509,517 | [10. SUBSEQUENT EVENTS](index=15&type=section&id=10.%20SUBSEQUENT%20EVENTS) - A water leak occurred at The Saint George multi-family project in April 2025, with estimated remediation and repair costs of **$1.9 million**[62](index=62&type=chunk) - Costs to The Saint George Apartments, L.P., after insurance and general contractor coverage, are currently estimated to be **less than $1 million**[62](index=62&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, business strategy, and capital resources for the quarter ended March 31, 2025 [OVERVIEW](index=16&type=section&id=OVERVIEW) - Stratus is a residential and retail-focused real estate company with headquarters in Austin, Texas, engaged in entitlement, development, management, leasing, and sale of properties[65](index=65&type=chunk) - The company's development portfolio consists of approximately **1,500 acres** of commercial, multi-family, and single-family residential projects under development or held for future use[65](index=65&type=chunk) [BUSINESS STRATEGY](index=16&type=section&id=BUSINESS%20STRATEGY) - Stratus' primary business objective is to create stockholder value by developing and enhancing properties for sale or lease, focusing on residential and residential-centric mixed-use projects in Austin and other select Texas markets[67](index=67&type=chunk) - The company utilizes project-level debt and third-party equity capital through joint ventures, with potential returns increasing above its relative equity interest as negotiated hurdles are achieved[69](index=69&type=chunk) - As of March 31, 2025, Stratus had repurchased **$2.0 million** of its shares under a new **$5.0 million** share repurchase program approved in November 2023[68](index=68&type=chunk)[77](index=77&type=chunk) - Consolidated cash totaled **$12.0 million** and **$34.5 million** was available under the revolving credit facility as of March 31, 2025[73](index=73&type=chunk) - In Q4 2024 and Q1 2025, Stratus refinanced several project loans (The Saint June, Kingwood Place, Lantana Place, Jones Crossing) at lower interest rates, generating additional cash proceeds[75](index=75&type=chunk) - A contract was entered into to sell the West Killeen Market retail property for **$13.3 million**, expected to generate approximately **$7.7 million** in pre-tax net cash proceeds[77](index=77&type=chunk) [OVERVIEW OF FINANCIAL RESULTS](index=19&type=section&id=OVERVIEW%20OF%20FINANCIAL%20RESULTS) Financial Results Summary | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Total revenues | $5,043 | $26,507 | | Net (loss) income attributable to common stockholders | $(2,875) | $4,552 | | Diluted net (loss) income per share | $(0.36) | $0.56 | - The **$22.1 million decrease** in Real Estate Operations revenue in Q1 2025 was due to no property sales, compared to **$14.5 million** from Magnolia Place land and **$7.6 million** from Amarra Villas homes in Q1 2024[83](index=83&type=chunk) - Leasing Operations revenue increased by **$634 thousand** in Q1 2025, mainly from The Saint June's lease-up, partially offset by the sale of Magnolia Place – Retail[83](index=83&type=chunk) [RECENT DEVELOPMENT ACTIVITIES](index=19&type=section&id=RECENT%20DEVELOPMENT%20ACTIVITIES) [Recent Residential Activities](index=19&type=section&id=Recent%20Residential%20Activities) - Amarra Villas has three completed homes in inventory, with the last two homes expected to be completed in Q2 2025; **five homes remain available for sale** as of May 9, 2025[87](index=87&type=chunk) - The Saint June, a 182-unit multi-family project, **completed its lease-up** during 2024[88](index=88&type=chunk) - Construction on Holden Hills Phase 1 road and utility infrastructure is expected to be completed in Q2 2025, with home building/site sales anticipated in **late 2025**[90](index=90&type=chunk) - Holden Hills Phase 2 development plans are being adjusted for a **significant increase in development density** due to the ETJ Law[92](index=92&type=chunk) - The Saint George, a 316-unit multi-family project, had its first units available for occupancy in April 2025 and is expected to be completed in **Q2 2025**[94](index=94&type=chunk) [Recent Commercial Activities](index=21&type=section&id=Recent%20Commercial%20Activities) - Holden Hills Phase 2 commercial component plans are being adjusted due to the ETJ process[102](index=102&type=chunk) - West Killeen Market is under contract for sale for **$13.3 million**, expected to close in Q2 2025, generating approximately **$7.7 million** in pre-tax net cash proceeds[103](index=103&type=chunk) - As of March 31, 2025, Jones Crossing had signed leases for **substantially all** of its 154,092 square feet of completed retail space, and Lantana Place had signed leases for **substantially all** of its 99,377 square feet of retail space[103](index=103&type=chunk) [Potential Development Projects and Pipeline](index=22&type=section&id=Potential%20Development%20Projects%20and%20Pipeline) - Future development projects (The Annie B, Holden Hills Phase 2, The Saint Julia, Lakeway, College Station multi-family) will require **significant additional capital**, to be pursued through project-level debt and third-party equity[105](index=105&type=chunk) - There is uncertainty regarding final development plans and successful execution due to the nature and cost of approval/development processes and market demand[105](index=105&type=chunk) [Market Conditions](index=22&type=section&id=Market%20Conditions) - The real estate industry is experiencing **elevated construction and labor costs**, supply chain constraints, labor shortages, higher borrowing costs, and tightening bank credit[106](index=106&type=chunk) - The Federal Reserve lowered interest rates by **100 basis points** cumulatively between September and December 2024, but inflation remains above the 2% target[106](index=106&type=chunk) - Changes to U.S. tariffs and trade policies in Q1 2025 introduce uncertainties, potentially leading to **higher costs, limited capital availability, and lower demand**[106](index=106&type=chunk)[170](index=170&type=chunk) [RESULTS OF OPERATIONS](index=22&type=section&id=RESULTS%20OF%20OPERATIONS) [Real Estate Operations](index=23&type=section&id=Real%20Estate%20Operations) Real Estate Operations Summary | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Total revenues | $25 | $22,123 | | Cost of real estate sold | $0 | $(13,949) | | Operating (loss) income | $(1,502) | $6,801 | - **No developed or undeveloped property sales** occurred in Q1 2025, compared to sales of two Amarra Villas homes (**$7.6 million**) and 47 acres of Magnolia Place land (**$14.5 million**) in Q1 2024[114](index=114&type=chunk)[115](index=115&type=chunk) [Leasing Operations](index=24&type=section&id=Leasing%20Operations) Leasing Operations Summary | Metric | Three Months Ended March 31, 2025 (Thousands) | Three Months Ended March 31, 2024 (Thousands) | | :----- | :------------------------------------------ | :------------------------------------------ | | Rental revenue | $5,018 | $4,384 | | Operating income | $1,958 | $1,349 | - The increase in rental revenue was primarily due to increased revenue from The Saint June, which completed its lease-up in 2024, partially offset by a decrease in revenue from Magnolia Place – Retail, which was sold in Q3 2024[117](index=117&type=chunk) [Non-Operating Results](index=25&type=section&id=Non-Operating%20Results) - Interest costs (before capitalized interest) decreased to **$3.8 million** in Q1 2025 from **$4.0 million** in Q1 2024, primarily due to lower interest rates; all interest costs were capitalized[119](index=119&type=chunk)[120](index=120&type=chunk) - Provision for income taxes was **$30 thousand** in Q1 2025 and **$102 thousand** in Q1 2024[121](index=121&type=chunk) [CAPITAL RESOURCES AND LIQUIDITY](index=25&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) [Comparison of Cash Flows for the Three Months Ended March 31, 2025 and 2024](index=25&type=section&id=Comparison%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031,%202025%20and%202024) - Operating cash flow shifted from providing **$6.5 million** in Q1 2024 to using **$(13.5) million** in Q1 2025, primarily due to the absence of property sales[124](index=124&type=chunk) - Investing activities used **$4.7 million** in Q1 2025, down from **$8.4 million** in Q1 2024, mainly due to lower capital expenditures for The Saint George[125](index=125&type=chunk) - Financing activities provided **$10.0 million** in Q1 2025, compared to using **$(9.1) million** in Q1 2024, driven by **$4.0 million** in Comerica Bank revolving credit facility borrowings and **$9.1 million** net borrowings on project/term loans[126](index=126&type=chunk) [Revolving Credit Facility and Other Financing Arrangements](index=26&type=section&id=Revolving%20Credit%20Facility%20and%20Other%20Financing%20Arrangements) - As of March 31, 2025, Stratus had **$12.0 million** in cash and cash equivalents, **$1.0 million** in restricted cash, and **$34.5 million** available under its revolving credit facility[131](index=131&type=chunk) - Total debt increased to **$210.0 million** at March 31, 2025, from **$196.7 million** at December 31, 2024[132](index=132&type=chunk) - The Comerica Bank revolving credit facility was amended in March 2025, extending maturity to **March 27, 2027**, and lowering the interest rate[133](index=133&type=chunk) - Stratus made a **$1.5 million** operating loan to Stratus Block 150, L.P. in Q1 2025, bringing the total outstanding to **$7.2 million**[134](index=134&type=chunk) - Stratus was in **compliance with all financial covenants** as of March 31, 2025[140](index=140&type=chunk) [Debt Maturities and Other Contractual Obligations](index=29&type=section&id=Debt%20Maturities%20and%20Other%20Contractual%20Obligations) Debt Maturities | Year | Amount (Thousands) | | :--- | :----------------- | | 2025 | $49,227 | | 2026 | $70,309 | | 2027 | $37,365 | | 2028 | $24,385 | | 2029 | $28,757 | | Thereafter | $0 | | Total | $210,043 | Weighted-Average Interest Rates | Loan Type | Weighted-Average Interest Rate (March 31, 2025) | Weighted-Average Interest Rate (March 31, 2024) | | :-------- | :-------------------------------------------- | :-------------------------------------------- | | Comerica Bank revolving credit facility | 7.42% | —% | | Kingwood Place loan | 6.12% | 8.20% | | Lantana Place loan | 6.71% | 7.74% | | Jones Crossing loan | 6.26% | 7.70% | | The Annie B land loan | 7.45% | 8.41% | | The Saint George construction loan | 6.79% | 7.73% | | The Saint June construction loan | 6.71% | 8.19% | | Holden Hills Phase 1 construction loan | 7.44% | 8.39% | | West Killeen Market | 7.07% | 8.09% | | Amarra Villas credit facility | 6.70% | 8.39% | - Firm commitments totaled approximately **$8.3 million** at March 31, 2025, primarily related to construction of The Saint George and Holden Hills Phase 1[148](index=148&type=chunk) - Stratus anticipates making a **$370 thousand** capital contribution to The Saint George partnership and up to **$2.1 million** in operating loans to Stratus Block 150, L.P. over the next 12 months[148](index=148&type=chunk) - The company projects sufficient liquidity for the next 12 months through **$12.0 million** cash, **$34.5 million** revolving credit facility availability, and expected property sales (e.g., West Killeen Market for **$13.3 million**)[149](index=149&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=31&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) - There have been **no changes** in critical accounting estimates from those discussed in the 2024 Form 10-K[154](index=154&type=chunk) [RECENT ACCOUNTING STANDARDS](index=31&type=section&id=RECENT%20ACCOUNTING%20STANDARDS) - ASU No. 2024-03, requiring disaggregated disclosure of certain income statement expenses, is effective for fiscal years beginning after December 15, 2026, and Stratus is assessing its impact[156](index=156&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=31&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) - The company engages in off-balance sheet arrangements in the ordinary course of business, with further details available in "Capital Resources and Liquidity" and the 2024 Form 10-K[158](index=158&type=chunk) [CAUTIONARY STATEMENT](index=31&type=section&id=CAUTIONARY%20STATEMENT) - The report contains **forward-looking statements** about future performance, including projections on inflation, interest rates, property sales, debt, and development projects[160](index=160&type=chunk) - Actual results may differ materially from forward-looking statements due to factors such as business strategy implementation, cost increases, market conditions, debt compliance, and regulatory changes[163](index=163&type=chunk) - The company is not permitted to repurchase common stock over **$1.0 million** or pay dividends without Comerica Bank's prior written consent, which was obtained for the current share repurchase program[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable for this reporting period - This item is **not applicable** for the current reporting period[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's principal officers concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal controls - Disclosure controls and procedures were **effective** as of March 31, 2025[167](index=167&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended March 31, 2025[168](index=168&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=Part%20II.%20Other%20Information) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The company highlights risks from changes in U.S. tariffs and trade policies, which could increase costs and negatively impact real estate demand - Changes in U.S. tariffs and trade policies could adversely affect the business by **disrupting supply chains**, increasing construction costs (e.g., steel, lumber), and creating uncertainty for project pricing and projections[170](index=170&type=chunk) - These changes could also lead to **higher inflation, interest rates, slower economic growth, or recession**, impacting capital availability, real estate demand, and project profitability[170](index=170&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered equity sales and details Q1 2025 common stock repurchases under its existing program - **No unregistered sales** of equity securities occurred during the three months ended March 31, 2025[171](index=171&type=chunk) Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares Remaining Available | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------- | | January 1 - January 31, 2025 | 17,025 | $19.80 | $3,072,888 | | February 1 - February 28, 2025 | 3,669 | $19.69 | $3,000,635 | | March 1 - March 31, 2025 | — | — | $3,000,635 | | Total (Q1 2025) | 20,694 | $19.78 | $3,000,635 | - As of March 31, 2025, **$3.0 million** remains available for repurchases under the **$5.0 million** share repurchase program[172](index=172&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025[173](index=173&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, providing transparency into the company's legal and financial arrangements - The report includes various exhibits such as the Second Amended and Restated Revolving Promissory Note, Loan Agreements, and Certifications of Principal Executive and Financial Officers[174](index=174&type=chunk)[175](index=175&type=chunk) [Signature](index=36&type=section&id=Signature) The report was duly signed on behalf of the company by its Chief Financial Officer on May 15, 2025 - The report was signed by Erin D. Pickens, Senior Vice President and Chief Financial Officer, on **May 15, 2025**[179](index=179&type=chunk)

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Stratus Properties reported a net loss in Q1 2025 due to decreased revenue, while progressing on key development projects and strategic financial initiatives [First-Quarter 2025 Highlights](index=1&type=section&id=First-Quarter%202025%20Highlights) Stratus Properties reported a net loss of $2.9 million in Q1 2025, reversing prior-year net income, driven by a significant revenue decrease Key Financial Metrics (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Revenues** | $5.0 million | $26.5 million | | **Net (Loss) Income to Common Stockholders** | $(2.9) million | $4.6 million | | **Diluted (Loss) Income Per Share** | $(0.36) | $0.56 | | **EBITDA** | $(2.3) million | $5.2 million | - The revenue decline was primarily due to the absence of major land and home sales in Q1 2025, partially offset by increased revenue from the **Leasing Operations** segment, notably from The Saint June property[4](index=4&type=chunk) - As of March 31, 2025, the company held **$12.0 million in cash** and had **$34.5 million available** under its revolving credit facility[4](index=4&type=chunk) - Stratus contracted to sell West Killeen Market for **$13.3 million**, expected to close in Q2 2025 and generate approximately **$7.7 million of pre-tax net cash proceeds**[4](index=4&type=chunk) - The company refinanced project loans at Lantana Place and Jones Crossing, raising approximately **$4.2 million in additional cash proceeds**, and extended its revolving credit facility maturity to **2027** at a lower interest rate[4](index=4&type=chunk) [CEO Commentary and Strategic Progress](index=2&type=section&id=CEO%20Commentary%20and%20Strategic%20Progress) The CEO highlighted strategic progress, nearing completion of key projects, developing Holden Hills, and maintaining a pipeline of multi-family projects - Construction on The Saint George multi-family project and the last two Amarra Villas homes is expected to be completed in **Q2 2025**[5](index=5&type=chunk) - The company is focusing on the development of **Holden Hills Phase 1** (495-acre residential) and planning for **Holden Hills Phase 2** (570-acre mixed-use development)[5](index=5&type=chunk) - A pipeline of multi-family development projects, including The Annie B, Lakeway, and College Station, are ready for development subject to market conditions and financing[5](index=5&type=chunk) [Detailed Financial Analysis](index=2&type=section&id=Detailed%20Financial%20Analysis) This section provides a detailed analysis of the company's operational results, debt and liquidity, and share repurchase program [Results of Operations](index=2&type=section&id=Results%20of%20Operations) Quarterly performance varied significantly, with Real Estate Operations revenue declining sharply and Leasing Operations revenue growing due to segment-specific activities - The decrease in Real Estate Operations revenue is attributed to the sales of **47 acres of undeveloped land** at Magnolia Place for **$14.5 million** and **two Amarra Villas homes** for **$7.6 million** in Q1 2024, with no such sales in Q1 2025[8](index=8&type=chunk)[9](index=9&type=chunk) - The increase in Leasing Operations revenue primarily reflects higher income from The Saint June, which was in the process of leasing up in Q1 2024[9](index=9&type=chunk) [Debt and Liquidity](index=3&type=section&id=Debt%20and%20Liquidity) The company's liquidity shifted, with cash decreasing and consolidated debt rising, yet maintaining capital access and continuing development spending Balance Sheet Items (in millions) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $12.0 million | $20.2 million | | **Consolidated debt** | $207.8 million | $194.9 million | - As of March 31, 2025, Stratus had **$34.5 million available** under its revolving credit facility[11](index=11&type=chunk) - Capital expenditures and real estate development costs totaled **$11.7 million** in Q1 2025, down from **$17.1 million** in Q1 2024, primarily related to Holden Hills Phase 1 and The Saint George[12](index=12&type=chunk) [Share Repurchase Program](index=3&type=section&id=Share%20Repurchase%20Program) Stratus continued its share repurchase program, buying back over 20,000 shares in Q1 2025, with $3.0 million remaining available under the authorization - In Q1 2025, Stratus repurchased **20,694 shares** of its common stock for **$0.4 million** at an average price of **$19.78 per share**[13](index=13&type=chunk) - Through May 9, 2025, total repurchases under the current program amounted to **83,380 shares** for **$2.0 million**, with **$3.0 million remaining available**[13](index=13&type=chunk) [Business Segments](index=9&type=section&id=Business%20Segments) This section outlines Stratus's two primary business segments, Real Estate Operations and Leasing Operations, and their respective financial performances [Overview of Business Segments](index=9&type=section&id=Overview%20of%20Business%20Segments) Stratus operates through Real Estate Operations, focusing on property development and sales, and Leasing Operations, managing income-producing leased properties - The **Real Estate Operations** segment includes properties under development for sale, such as Holden Hills, Amarra Villas, and The Saint George[32](index=32&type=chunk)[33](index=33&type=chunk) - The **Leasing Operations** segment comprises income-producing properties held for investment, including The Saint June, West Killeen Market, and the retail portions of Lantana Place and Jones Crossing[32](index=32&type=chunk)[34](index=34&type=chunk) [Segment Financial Performance](index=10&type=section&id=Segment%20Financial%20Performance) In Q1 2025, Real Estate Operations reported a loss due to lack of sales, while Leasing Operations saw profit growth from stronger leasing revenue Segment Performance (Q1 2025) (in thousands) | Segment Performance (Q1 2025) | Real Estate Operations | Leasing Operations | | :--- | :--- | :--- | | **Revenue** | $25 thousand | $5,018 thousand | | **Segment (Loss) Profit** | $(1,502) thousand | $1,958 thousand | Segment Performance (Q1 2024) (in thousands) | Segment Performance (Q1 2024) | Real Estate Operations | Leasing Operations | | :--- | :--- | :--- | | **Revenue** | $22,123 thousand | $4,384 thousand | | **Segment Profit** | $6,801 thousand | $1,349 thousand | Total Assets by Segment (in millions) | Total Assets by Segment | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | **Real Estate Operations** | $371.4 million | $329.1 million | | **Leasing Operations** | $152.0 million | $160.8 million | [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's consolidated statements of comprehensive (loss) income, balance sheets, and cash flows for the reporting period [Consolidated Statements of Comprehensive (Loss) Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) For Q1 2025, Stratus reported a significant revenue decline, resulting in an operating loss and net loss per diluted share, reversing prior-year income Consolidated Statements of Comprehensive (Loss) Income (in thousands) | Income Statement (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenues** | $5,043 | $26,507 | | **Operating (Loss) Income** | $(3,595) | $3,685 | | **Net (Loss) Income** | $(3,757) | $3,697 | | **Diluted (Loss) Income Per Share** | $(0.36) | $0.56 | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets slightly increased, primarily in real estate, while liabilities and debt rose, decreasing stockholders' equity Consolidated Balance Sheets (in thousands) | Balance Sheet (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $12,006 | $20,178 | | **Total Assets** | $534,581 | $532,606 | | **Debt** | $207,838 | $194,853 | | **Total Liabilities** | $241,998 | $235,039 | | **Total Stockholders' Equity** | $191,459 | $194,705 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, the company experienced a net cash outflow from operating activities, with financing activities partially offsetting cash used in investing Consolidated Statements of Cash Flows (in thousands) | Cash Flows (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash (used in) provided by operating activities** | $(13,495) | $6,547 | | **Net cash used in investing activities** | $(4,693) | $(8,392) | | **Net cash provided by (used in) financing activities** | $9,991 | $(9,059) | | **Net decrease in cash** | $(8,197) | $(10,904) | [Non-GAAP Financial Measures](index=12&type=section&id=Non-GAAP%20Financial%20Measures) This section provides a reconciliation of the company's non-GAAP financial measure, EBITDA [Reconciliation of EBITDA](index=12&type=section&id=Reconciliation%20of%20EBITDA) The company's EBITDA, a non-GAAP measure, was negative $2.3 million in Q1 2025, a significant decline from the positive $5.2 million in Q1 2024 EBITDA Reconciliation (in thousands) | EBITDA Reconciliation (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net (loss) income** | $(3,757) | $3,697 | | Depreciation and amortization | $1,394 | $1,401 | | Provision for income taxes | $30 | $102 | | **EBITDA** | **$(2,333)** | **$5,200** |

[Part I](index=3&type=section&id=Part%20I) [Business and Properties](index=3&type=section&id=Items%201.%20and%202.%20Business%20and%20Properties) Stratus Properties Inc. is a real estate company focused on residential and retail properties primarily in the Austin, Texas area, generating revenue from property sales, leasing, and management fees across Real Estate Operations and Leasing Operations segments, while navigating challenging market conditions. [Overview](index=3&type=section&id=Overview) Stratus Properties is a real estate company primarily engaged in the development, management, leasing, and sale of multi-family, single-family, and commercial properties in and around Austin, Texas, with recent major transactions including property sales, a joint venture, a special dividend, and share repurchases, all while maintaining its development pipeline and liquidity despite high interest rates. - The company is primarily a **residential and retail-focused real estate developer** in the Austin, Texas area and other select Texas markets[16](index=16&type=chunk) - Key transactions over the last three years include the sale of five Amarra Villas homes for **$18.9 million** and 47 acres at Magnolia Place for **$14.5 million** in 2024; a joint venture formation for the Holden Hills project generating **$35.8 million** in 2023; and the sale of Block 21 for **$112.3 million** in net proceeds in 2022[19](index=19&type=chunk) - Following the Block 21 sale, the Board declared a **special cash dividend of $4.67 per share ($40.0 million total)** in September 2022 and authorized share repurchase programs[18](index=18&type=chunk) - As of December 31, 2024, the company had **$20.2 million in cash** and **$39.0 million available** under its revolving credit facility, with no amounts drawn[21](index=21&type=chunk) - In late 2024 and early 2025, Stratus amended or refinanced loans for The Saint June, Kingwood Place, Lantana Place, and Jones Crossing at lower interest rates, generating approximately **$7.7 million in additional cash proceeds**[23](index=23&type=chunk)[24](index=24&type=chunk) [Operations](index=4&type=section&id=Operations) The company's operations are divided into Real Estate Operations, which contributed 64% of 2024 revenue and manages 1,517 acres for development, and Leasing Operations, which accounted for 36% of 2024 revenue from leasing commercial and multi-family properties with average retail rentals of $22.52 per square foot. Revenue Contribution by Segment | Segment | 2024 Revenue % | 2023 Revenue % | | :--- | :--- | :--- | | Real Estate Operations | 64% | 15% | | Leasing Operations | 36% | 85% | Real Estate Development Portfolio (Acreage as of Dec 31, 2024) | Category | Single Family | Multi-family | Commercial | Total | | :--- | :--- | :--- | :--- | :--- | | Acreage Under Development | 502 | 4 | — | 506 | | Undeveloped Acreage | 12 | 326 | 673 | 1,011 | | **Total Acreage** | **514** | **330** | **673** | **1,517** | - The Leasing Operations segment's principal properties include Jones Crossing, Kingwood Place, Lantana Place, West Killeen Market, and The Saint June[44](index=44&type=chunk) - Average retail rental rates increased to **$22.52 per square foot** as of December 31, 2024, from $22.29 a year prior; **73%** of leased retail square footage has lease expirations beyond 2029[41](index=41&type=chunk) [Properties](index=7&type=section&id=Properties) Stratus' property portfolio is concentrated in the Austin, Texas area, particularly within the Barton Creek community, with key developments including Amarra Villas, The Saint June, and the large-scale Holden Hills project, which is leveraging the new ETJ Law for potential density increases, alongside other projects like The Saint George and recent sales at Magnolia Place. - The Barton Creek community is a major focus, containing Amarra Drive lots, Amarra Villas (20-unit luxury development), The Saint June (182-unit multi-family), and the Holden Hills project[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - The Holden Hills project is split into Phase 1 (495-acre residential, in a JV) and Phase 2 (570-acre mixed-use); the company has removed this land from Austin's extraterritorial jurisdiction (ETJ) under a new state law, which is expected to streamline permitting and increase development density[50](index=50&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - The Saint George, a **316-unit multi-family project** in north central Austin, is under construction and expected to be completed in the first half of 2025[64](index=64&type=chunk) - In 2024, the company sold 47 acres of undeveloped land at Magnolia Place for **$14.5 million** and the Magnolia Place – Retail phase for **$8.9 million**[66](index=66&type=chunk)[67](index=67&type=chunk) [Human Capital and Sustainability](index=13&type=section&id=Human%20Capital%20and%20Sustainability) Stratus values its 34 non-unionized full-time employees and is a member of the U.S. Green Building Council, emphasizing sustainable development with a history of LEED-certified projects and green features in current and planned communities. - As of December 31, 2024, the company had **34 full-time employees**, none of whom are represented by a union[82](index=82&type=chunk) - Stratus is a member of the U.S. Green Building Council and focuses on sustainable development, with projects like Block 21 achieving LEED Silver certification and Holden Hills Phase 1 being designed with a focus on health, wellness, and sustainability[83](index=83&type=chunk) [Risk Factors](index=14&type=page&id=Item%201A.%20Risk%20Factors) The company faces a range of risks related to its business, debt, operations, and stock ownership, including strategic execution, capital access, market concentration, interest rate sensitivity, restrictive debt covenants, project delays, regulatory challenges (like the ETJ Law litigation), competition, and stock liquidity. [Risks Relating to our Business and Industry](index=14&type=section&id=Risks%20Relating%20to%20our%20Business%20and%20Industry) Stratus's success is not guaranteed and depends on executing its development plans amid challenging market conditions like high inflation and interest rates, which increase costs and can delay projects, with operations heavily concentrated in the Austin, Texas residential market, making it vulnerable to local economic downturns and difficulties in securing capital for future projects, while joint ventures introduce additional risks. - The company's business is sensitive to inflation, higher borrowing costs, tightened credit, and increased construction costs, which have adversely impacted project profitability and timelines[89](index=89&type=chunk) - Operations are heavily concentrated in the Austin, Texas area and focused on residential projects, creating vulnerability to local economic conditions and weakening in the Austin residential market[96](index=96&type=chunk)[98](index=98&type=chunk) - The capital-intensive nature of the industry means the company may not be able to raise additional debt or equity for future projects on acceptable terms, if at all[99](index=99&type=chunk) - Investments through joint ventures involve risks such as partners taking contrary actions, having inconsistent goals, or defaulting on financial obligations[102](index=102&type=chunk) [Risks Relating to our Indebtedness](index=20&type=section&id=Risks%20Relating%20to%20our%20Indebtedness) The company has significant variable-rate debt totaling $194.9 million as of year-end 2024, exposing it to interest rate fluctuations and requiring a substantial portion of cash flow for service payments, which limits funds for other corporate purposes and increases vulnerability to adverse economic conditions, while loan agreements contain restrictive covenants that could lead to default if not complied with. - As of December 31, 2024, total outstanding debt was **$194.9 million**, with principal payments of **$48.9 million** and estimated interest payments of **$12.9 million** due in 2025[112](index=112&type=chunk) - All consolidated debt as of year-end 2024 was **variable-rate**, making the company susceptible to increased interest costs if market rates rise[91](index=91&type=chunk)[112](index=112&type=chunk) - Debt agreements contain restrictive covenants that limit Stratus's ability to borrow additional money, pay dividends, repurchase equity, sell assets, or engage in mergers[115](index=115&type=chunk)[119](index=119&type=chunk) [Risks Relating to Real Estate Operations](index=22&type=section&id=Risks%20Relating%20to%20Real%20Estate%20Operations) The real estate industry's cyclical nature poses a significant risk, with development projects facing delays and cost overruns due to financing, permits, and labor issues, while ongoing litigation challenging the ETJ Law creates uncertainty for the Holden Hills development, and large holdings of undeveloped land are subject to value deterioration if demand weakens, further complicated by intensive regulatory approval processes and environmental regulations. - Development projects are subject to numerous risks including inability to obtain permits, financing challenges, cost overruns, and contractor defaults[121](index=121&type=chunk)[123](index=123&type=chunk) - Litigation challenging the Texas ETJ Law creates uncertainty for the Holden Hills Phases 1 and 2 projects; if the law is invalidated, it could make development more complex and costly, while if upheld, it could streamline the process and increase density[124](index=124&type=chunk)[125](index=125&type=chunk) - Real estate is an illiquid asset, and the company may not be able to sell properties at advantageous times or prices, potentially leading to losses or impairment charges[128](index=128&type=chunk) - Operations are subject to extensive regulatory approval processes and environmental laws, which can cause delays, increase costs, or prevent development entirely[130](index=130&type=chunk)[132](index=132&type=chunk) [Risks Relating to Leasing Operations](index=25&type=section&id=Risks%20Relating%20to%20Leasing%20Operations) The company's leasing operations face risks of being unable to achieve or sustain satisfactory occupancy and rental rates for both its retail and multi-family properties due to market oversupply, competition, economic conditions affecting tenants' ability to pay rent, and the ongoing threat of online shopping to brick-and-mortar retail, while short lease terms for multi-family properties make rental revenues sensitive to market declines. - Achieving satisfactory occupancy and rental rates is challenged by market oversupply, competition, and potential declines in market rental rates[136](index=136&type=chunk)[138](index=138&type=chunk) - Retail tenants face competition from online shopping, which could impact their ability to meet lease obligations[137](index=137&type=chunk) - Multi-family leases are typically for **12 months**, making rental revenues sensitive to short-term declines in market rents[139](index=139&type=chunk) [Cybersecurity](index=28&type=page&id=Item%201C.%20Cybersecurity) Stratus has implemented a cybersecurity risk management program based on the NIST Cybersecurity Framework, with oversight from the Audit Committee and day-to-day management by an internal IT Steering Committee and IT Security Team, and while incidents have occurred, none have had a material effect to date. - The company's cybersecurity program is based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)[148](index=148&type=chunk) - Oversight is provided by the Board's Audit Committee, which receives reports from the Chief Financial Officer[150](index=150&type=chunk)[152](index=152&type=chunk) - An IT Steering Committee of senior management and an IT Security Team are responsible for managing cybersecurity risks and responding to incidents[153](index=153&type=chunk)[154](index=154&type=chunk) - To date, no cybersecurity threats or incidents have materially affected the company's business, operations, or financial condition[149](index=149&type=chunk) [Information About Our Executive Officers](index=29&type=page&id=Information%20About%20Our%20Executive%20Officers) The company's executive officers include William H. Armstrong III, Chairman, President, and CEO since 1992, and Erin D. Pickens, Senior Vice President and Chief Financial Officer since 2009. Executive Officers (as of March 21, 2025) | Name | Age | Position or Office | | :--- | :--- | :--- | | William H. Armstrong III | 60 | Chairman of the Board, President and Chief Executive Officer | | Erin D. Pickens | 63 | Senior Vice President and Chief Financial Officer | [Part II](index=31&type=section&id=Part%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Stratus's common stock trades on NASDAQ under "STRS," with its ability to pay dividends restricted by debt agreements, though special dividends were paid in 2017 and 2022, and the company completed a $10.0 million share repurchase program in October 2023, followed by a new $5.0 million program with $3.0 million remaining as of March 21, 2025, during which 62,686 shares were repurchased in Q4 2024. - The company's common stock trades on The Nasdaq Stock Market under the symbol "**STRS**"[165](index=165&type=chunk) - The ability to pay dividends or repurchase shares is restricted by debt covenants with Comerica Bank, requiring prior written consent[166](index=166&type=chunk)[167](index=167&type=chunk) - A **$10.0 million** share repurchase program was completed in October 2023; a new **$5.0 million** program was authorized in November 2023, with **$3.0 million** remaining as of March 21, 2025[167](index=167&type=chunk)[171](index=171&type=chunk) Issuer Purchases of Equity Securities (Q4 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares That May Yet Be Purchased | | :--- | :--- | :--- | :--- | | Oct 2024 | — | $ — | $5,000,000 | | Nov 2024 | 52,767 | $25.33 | $3,663,598 | | Dec 2024 | 9,919 | $25.58 | $3,409,906 | | **Total** | **62,686** | **—** | **$3,409,906** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=32&type=section&id=Items%207.%20and%207A.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20and%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section provides management's perspective on the company's financial condition and results of operations, detailing a business strategy focused on developing and monetizing properties in Texas, primarily through project-level debt and joint ventures, which led to a significant revenue increase to $54.2 million in 2024 and a net income of $2.0 million, with management confident in sufficient liquidity for the next 12 months. [Business Strategy](index=32&type=section&id=Business%20Strategy) The company's primary objective is to create stockholder value by developing properties for sale or lease, focusing on residential and residential-centric mixed-use projects in Austin and other select Texas markets, utilizing project-level debt and third-party equity from joint ventures to earn fees and limit risk, while maintaining liquidity and potentially returning capital to stockholders. - The primary business objective is to create value by developing properties and then selling or holding them for lease based on favorable market conditions[176](index=176&type=chunk) - The company plans to continue developing properties using project-level debt and third-party equity through joint ventures, earning management fees and potential preferred returns[178](index=178&type=chunk) - Capital may be returned to stockholders via special dividends or share repurchases, as demonstrated in 2017, 2022, and 2023[177](index=177&type=chunk) [Overview of Financial Results for 2024](index=35&type=section&id=Overview%20of%20Financial%20Results%20for%202024) For fiscal year 2024, total revenues significantly increased to $54.2 million from $17.3 million in 2023, primarily driven by a $32.3 million increase in Real Estate Operations from property sales and a $4.6 million increase in Leasing Operations, resulting in a net income attributable to common stockholders of $2.0 million ($0.24 per diluted share), a substantial improvement from a $14.8 million net loss in 2023, despite increased multi-family supply and dropping rental rates in the Austin market. Financial Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | $54.2 million | $17.3 million | | Net Income (Loss) to Common Stockholders | $2.0 million | $(14.8) million | | Diluted EPS | $0.24 | $(1.85) | - The revenue increase in 2024 was primarily due to sales of five Amarra Villas homes (**$18.9 million**), 47 acres at Magnolia Place (**$14.5 million**), and one Amarra Drive lot (**$1.4 million**)[191](index=191&type=chunk) - In the Austin-Round Rock multi-family market in 2024, supply grew by **10.3%**, causing rental rates to drop by **6.9%**, while occupancy remained high at **92.8%**[196](index=196&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) The company's operating loss narrowed significantly to $2.2 million in 2024 from $16.9 million in 2023, driven by a turnaround in Real Estate Operations to a $4.7 million operating income from $34.9 million in property sales revenue, and an increase in Leasing Operations operating income to $8.1 million from higher rental revenue and a $1.6 million gain on sale, while general and administrative expenses remained stable and interest costs increased to $15.7 million due to higher rates and debt balances. Operating Income (Loss) by Segment (in thousands) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Real Estate Operations | $4,727 | $(7,219) | | Leasing Operations | $8,070 | $5,440 | | General & administrative expenses | $(14,952) | $(15,167) | | **Total Operating Loss** | **$(2,155)** | **$(16,946)** | - Real Estate Operations revenue surged to **$34.9 million** in 2024 from $2.6 million in 2023, primarily from sales of developed and undeveloped properties[235](index=235&type=chunk) - Leasing Operations rental revenue increased to **$19.3 million** in 2024 from $14.7 million in 2023, mainly reflecting a full year of operations from The Saint June[239](index=239&type=chunk) - A pre-tax gain of **$1.6 million** was recognized in Q3 2024 from the sale of Magnolia Place – Retail[241](index=241&type=chunk) [Capital Resources and Liquidity](index=45&type=section&id=Capital%20Resources%20and%20Liquidity) As of December 31, 2024, Stratus had $20.2 million in cash and $39.0 million available under its revolving credit facility, with total debt increasing to $196.7 million, while cash used in operating activities decreased significantly to $5.8 million, and the company made operating loans and capital contributions to joint ventures, recently refinancing several project loans to extend maturities and lower interest rates, with management confident in compliance with all financial covenants and sufficient liquidity for the next 12 months. Liquidity Position (as of Dec 31, 2024) | Metric | Amount | | :--- | :--- | | Cash and cash equivalents | $20.2 million | | Availability under revolving credit facility | $39.0 million | | Total Debt (principal) | $196.7 million | - Cash used in operating activities totaled **$5.8 million** in 2024, a significant decrease from $51.3 million used in 2023[248](index=248&type=chunk) - The company made operating loans to The Annie B project (**$3.5 million** in 2024) and The Saint June project (**$424 thousand** in 2024) to support debt service and other costs[256](index=256&type=chunk)[257](index=257&type=chunk) - The company was in compliance with all financial covenants as of December 31, 2024[268](index=268&type=chunk) [Debt Maturities and Other Contractual Obligations](index=49&type=section&id=Debt%20Maturities%20and%20Other%20Contractual%20Obligations) As of December 31, 2024, the company has total debt maturities of $50.2 million in 2025, $88.3 million in 2026, and $58.2 million in 2027, all with variable interest rates, and projects it will meet its debt service and other cash obligations for at least the next 12 months, supported by cash, credit facility availability, and expected cash flows, while also having approximately $10 million in firm construction commitments. Debt Maturities by Year (Principal, in thousands, as of Dec 31, 2024) | Year | Amount | | :--- | :--- | | 2025 | $50,181 | | 2026 | $88,301 | | 2027 | $58,183 | | 2028 | $— | | 2029 | $— | | Thereafter | $— | | **Total** | **$196,665** | - Estimated interest payments for 2025 are approximately **$12.9 million**[277](index=277&type=chunk) - The company had firm construction commitments of approximately **$10 million** at year-end 2024, primarily for Holden Hills Phase 1 and The Saint George[278](index=278&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for fiscal years 2024 and 2023, including Management's Annual Report on Internal Control Over Financial Reporting, which concluded controls were effective, and the Independent Registered Public Accounting Firm's unqualified opinion, encompassing the Consolidated Balance Sheets, Statements of Comprehensive Income (Loss), Statements of Cash Flows, Statements of Equity, and detailed Notes. [Consolidated Financial Statements](index=57&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position and performance, with total assets increasing to $532.6 million in 2024 from $517.8 million in 2023, total liabilities growing to $235.0 million from $223.2 million, and a shift from a net loss of $16.5 million in 2023 to a net loss of $1.9 million in 2024, resulting in net income attributable to common stockholders of $2.0 million, while cash decreased by $11.3 million, ending the year with $21.2 million. Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $532,606 | $517,766 | | Total Liabilities | $235,039 | $223,161 | | Total Stockholders' Equity | $194,705 | $191,479 | | Total Equity | $297,567 | $294,605 | Consolidated Income Statement Highlights (in thousands) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | $54,183 | $17,270 | | Operating Loss | $(2,155) | $(16,946) | | Net Loss | $(1,908) | $(16,493) | | Net Income (Loss) Attributable to Common Stockholders | $1,956 | $(14,807) | [Notes to Consolidated Financial Statements](index=61&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies and financial statement line items, covering business and consolidation principles, extensive details on limited partnership and joint venture structures, a breakdown of real estate assets, recent asset sales, a comprehensive summary of all debt facilities including terms and covenants, income taxes, equity transactions, stock-based compensation plans, and various commitments and contingencies. - Stratus consolidates several limited partnerships (Holden Hills, The Saint George, The Annie B, The Saint June, Kingwood Place) as Variable Interest Entities (VIEs) for which it is the primary beneficiary[348](index=348&type=chunk)[373](index=373&type=chunk) - Total net real estate assets increased to **$486.6 million** at year-end 2024 from $459.6 million in 2023, with the largest component being 'Real estate under development' at **$274.1 million**[378](index=378&type=chunk) - Note 6 provides a detailed breakdown of the company's **$194.9 million in debt**, outlining terms, maturity dates, interest rates, and covenants for each facility, including the main revolving credit facility and various project-specific construction and land loans[392](index=392&type=chunk) - The company maintains a Profit Participation Incentive Plan (PPIP) and a Long-Term Incentive Plan (LTIP) to provide economic incentives to key employees tied to the success of designated development projects; the accrued liability for these plans was **$1.9 million** at year-end 2024[441](index=441&type=chunk)[447](index=447&type=chunk) [Controls and Procedures](index=87&type=page&id=Item%209A.%20Controls%20and%20Procedures) Based on an evaluation by the Chief Executive Officer and Chief Financial Officer, the company concluded that its disclosure controls and procedures were effective as of December 31, 2024, with no material changes to internal control over financial reporting during the fourth quarter of 2024. - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2024[471](index=471&type=chunk) [Other Information](index=87&type=page&id=Item%209B.%20Other%20Information) This section reports on significant events, including the amendment of the Comerica Bank revolving credit facility effective March 25, 2025, extending its maturity to March 27, 2027, and lowering the interest rate, and the entry into new three-year Severance and Change of Control Agreements with the CEO and CFO, effective April 1, 2025. - Effective March 25, 2025, the Comerica Bank revolving credit facility was amended to extend the maturity to **March 2027** and lower the interest rate[474](index=474&type=chunk)[475](index=475&type=chunk) - New Severance and Change of Control Agreements were entered into with the CEO and CFO, effective April 1, 2025, for a term through **March 31, 2028**[478](index=478&type=chunk) [Part III](index=89&type=section&id=Part%20III) [Directors, Executive Officers and Corporate Governance](index=89&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required for this item, including details on directors and corporate governance, will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference, with executive officer information presented in Part I of this report. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[485](index=485&type=chunk) [Executive Compensation](index=89&type=section&id=Item%2011.%20Executive%20Compensation) The information regarding executive compensation required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[486](index=486&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=89&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information regarding security ownership required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[487](index=487&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=89&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information regarding related party transactions and director independence required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[488](index=488&type=chunk) [Principal Accounting Fees and Services](index=89&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information regarding principal accounting fees and services required for this item will be provided in the company's definitive proxy statement for its 2025 annual meeting of stockholders and is incorporated by reference. - Information required by this item is incorporated by reference from the registrant's definitive proxy statement for its 2025 annual meeting of stockholders[489](index=489&type=chunk) [Part IV](index=89&type=section&id=Part%20IV) [Exhibits, Financial Statement Schedules](index=89&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section indicates that the consolidated financial statements are included in Part II, Item 8, and provides a comprehensive list of all exhibits filed with the Form 10-K, including agreements, corporate governance documents, loan modifications, and certifications, many of which are incorporated by reference from previous filings. - This item lists all exhibits filed with the Form 10-K, including loan agreements, corporate bylaws, and executive compensation plans[492](index=492&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk)

Financial Performance - Net income attributable to common stockholders for the year ended December 31, 2024, was $2.0 million, or $0.24 per diluted share, compared to a net loss of $14.8 million, or $1.85 per diluted share, in 2023[4] - Total revenues for 2024 were $54.2 million, a significant increase from $17.3 million in 2023, driven by sales of five Amarra Villas homes for $18.9 million and 47 acres of undeveloped land for $14.5 million[4] - EBITDA for 2024 was $4.1 million, compared to a loss of $10.7 million in 2023, indicating a substantial improvement in operational performance[4] - The net loss for 2024 was $1.908 million, a substantial improvement from a net loss of $16.493 million in 2023, reflecting a reduction of approximately 88%[30] - The company reported a total comprehensive loss attributable to common stockholders of $1.908 million in 2024, compared to a loss of $14.807 million in 2023[26] - The net loss before income taxes for 2024 was $1,466,000, a substantial improvement compared to a net loss of $15,034,000 in 2023[39] Revenue Growth - Total revenues for 2024 reached $54.183 million, a significant increase from $17.270 million in 2023, representing a growth of approximately 213%[26] - Real Estate Operations generated revenues of $34.887 million in 2024, compared to $2.551 million in 2023, indicating a growth of over 1,267%[26] - Revenue from unaffiliated customers for 2024 was $54,183,000, a significant increase from $17,270,000 in 2023, representing a growth of approximately 213%[37] Assets and Equity - Stratus had $20.2 million in cash and cash equivalents as of December 31, 2024, with no amounts drawn on its revolving credit facility, and $39.0 million available under the facility[4] - Total assets increased to $532.606 million in 2024, up from $517.766 million in 2023, marking a growth of about 2.4%[28] - Stratus' total stockholders' equity increased to $194.7 million at December 31, 2024, compared to $191.5 million in 2023, indicating a strengthening balance sheet[14] - The after-tax Net Asset Value (NAV) was $330.5 million, or $40.38 per share, as of December 31, 2024, up from $321.7 million, or $39.40 per share, in 2023[14] Debt and Liabilities - Consolidated debt increased to $194.9 million as of December 31, 2024, from $175.2 million in 2023, primarily due to project construction loans[10] - Total liabilities increased to $235 million in 2024 from $223.2 million in 2023, reflecting a rise of approximately 5.5%[53] - Stratus' debt increased to $194.853 million in 2024 from $175.168 million in 2023, representing an increase of about 11.3%[28] Capital Expenditures - Capital expenditures for the development of real estate properties totaled $58.7 million in 2024, down from $90.4 million in 2023, reflecting a strategic focus on key projects[13] - Capital expenditures for real estate properties in 2024 amounted to $58,661,000, down from $90,413,000 in 2023, indicating a reduction of about 35%[39] Share Repurchase and Stock Performance - The company repurchased 83,380 shares of its common stock for a total cost of $2.0 million under its share repurchase program, with $3.0 million remaining available for future repurchases[4] Operational Highlights - The company completed the lease-up of The Saint June, a 182-unit luxury multi-family project, in 2024, contributing to revenue growth[4] - Segment profit for Real Estate Operations in 2024 was $4,727,000, while Leasing Operations reported a profit of $8,070,000, leading to a total segment profit of $12,797,000[37] - The gain on the sale of assets in 2024 was $1,626,000, contributing positively to the overall financial performance[37] - General and administrative expenses for 2024 were $14,952,000, slightly lower than $15,167,000 in 2023, indicating cost management efforts[37]

Financial Performance - Net loss attributable to common stockholders was $0.4 million, or $0.05 per diluted share, in Q3 2024, a significant improvement from a net loss of $2.8 million, or $0.36 per diluted share, in Q3 2023[2] - Revenues for Q3 2024 were $8.9 million, up from $3.7 million in Q3 2023, primarily due to the sale of one Amarra Villas home for $4.0 million and increased rental revenue from The Saint June[3] - For the first nine months of 2024, revenues totaled $43.9 million compared to $13.0 million in the same period of 2023, driven by the sale of approximately 47 acres of undeveloped land for $14.5 million and four Amarra Villas homes for $15.2 million[3] - The company reported an operating loss of $1.519 million for Q3 2024, an improvement from a loss of $3.329 million in Q3 2023[31] - Net loss attributable to common stockholders for Q3 2024 was $364,000, compared to a net loss of $2.844 million in Q3 2023[31] - Net loss for the third quarter of 2024 was $495,000, a significant improvement from a net loss of $14.8 million in the same period of 2023[35] - Operating cash flow improved to a net cash used of $2.4 million, compared to $39.3 million in the third quarter of 2023[35] - EBITDA for the first nine months of 2024 was $3.9 million, a recovery from $(9.9) million in the same period of 2023[6] - EBITDA for the third quarter of 2024 was $3.88 million, compared to a negative EBITDA of $9.92 million in the same period of 2023[49] Assets and Liabilities - Total assets increased to $523.180 million as of September 30, 2024, up from $517.766 million at the end of 2023[33] - Debt levels rose to $181.540 million as of September 30, 2024, compared to $175.168 million at the end of 2023[33] - Cash and cash equivalents decreased to $19.638 million from $31.397 million at the end of 2023[33] - As of September 30, 2024, Stratus had $19.6 million in cash and cash equivalents and $39.6 million available under its revolving credit facility[5] Real Estate Operations - Real estate operations generated revenues of $3.971 million in Q3 2024, compared to $2.551 million in Q3 2023, marking a 56% increase[31] - Total revenues for the Real Estate Operations segment were $3.97 million, while the Leasing Operations segment generated $4.92 million, totaling $8.89 million in revenues[41] - Operating loss for the Real Estate Operations segment was $1.42 million, while the Leasing Operations segment reported an operating income of $3.25 million[41] - Stratus completed property sales totaling $38.6 million in the first nine months of 2024, with a notable average sales price increase for Amarra Villas homes compared to the prior year[8] - The occupancy rate at The Saint June was approximately 97% as of November 8, 2024, indicating strong demand for the luxury multi-family project[7] Capital Expenditures and Investments - Capital expenditures for the third quarter of 2024 amounted to $6.61 million for Real Estate Operations and $6.82 million for Leasing Operations, totaling $13.43 million[41] - Stratus is currently developing real estate valued at $261.212 million, slightly up from $260.642 million at the end of 2023[33] Share Repurchase and Financing - A new share repurchase program was approved, allowing for repurchases of up to $5.0 million of common stock, following the completion of a previous $10.0 million program[18] - The company has a share repurchase program of $5.0 million, subject to restrictions under its Comerica Bank debt agreements[24] - Stratus is exploring refinancing options for several construction loans, anticipating tighter spreads and potential additional proceeds[17] Legislative and Legal Considerations - The company anticipates potential impacts from Texas Senate Bill 2038 and ongoing litigation, which may affect future operations and development projects[25]

Financial Performance - Revenues for Q1 2024 totaled $26.5 million, a significant increase from $5.8 million in Q1 2023, driven by sales of approximately 47 acres of undeveloped land for $14.5 million and two homes for $7.6 million[84]. - Net income attributable to common stockholders in Q1 2024 was $4.6 million, or $0.56 per diluted share, compared to a net loss of $5.8 million, or $0.73 per diluted share, in Q1 2023[85]. - In Q1 2024, the company reported operating income of $3.685 million, a significant improvement from a loss of $5.593 million in Q1 2023[111]. - Total revenues for Real Estate Operations in Q1 2024 reached $22.123 million, compared to $2.493 million in Q1 2023, driven by developed and undeveloped property sales[113]. - Rental revenue in Q1 2024 was $4.384 million, up from $3.309 million in Q1 2023, primarily due to new leases and revenue from The Saint June[116]. - Operating cash flow increased to $6.5 million in Q1 2024 from a cash outflow of $18.4 million in Q1 2023, primarily due to property sales[125]. Development Projects - The company has a development portfolio of approximately 1,600 acres of commercial and residential projects under development or undeveloped land held for future use[70]. - The Saint June multi-family project achieved approximately 90% lease-up as of May 10, 2024, with the first units available for occupancy in July 2023[89]. - The Saint George project is expected to achieve substantial completion by Q3 2024, with 316 luxury units under development[95]. - The company plans to continue developing properties using project-level debt and third-party equity capital through joint ventures, aiming for attractive long-term returns[74]. - The ETJ Law, effective September 1, 2023, may streamline the development permitting process for the Holden Hills and Section N projects, potentially increasing development density[94]. Cash and Debt Management - As of March 31, 2024, consolidated cash totaled $20.7 million, with $39.6 million available under the revolving credit facility, net of $13.3 million in letters of credit[78]. - The company anticipates seeking additional capital through project-level debt and third-party equity capital arrangements for its development projects[104]. - Total debt as of March 31, 2024, was $170.1 million, down from $177.4 million at December 31, 2023[134]. - The company had $20.7 million in cash and cash equivalents as of March 31, 2024, with no borrowings under the revolving credit facility[133]. - Total debt maturities amount to $170.1 million as of March 31, 2024, with significant amounts due in 2024 ($67.1 million) and 2026 ($62.9 million)[144]. - The company plans to extend or refinance debt maturing in the next 12 months and will not incur material costs for new projects until adequate financing is secured[150]. Interest and Expenses - Interest expense in Q1 2024 totaled $4.0 million, an increase from $2.4 million in Q1 2023, reflecting higher interest rates and increased average debt balances[120]. - The weighted-average interest rate for the Jones Crossing loan increased to 7.70% in Q1 2024 from 6.73% in Q1 2023, while The Annie B land loan rose to 8.41% from 7.44%[147]. - The company recorded a provision for income taxes of $0.1 million in Q1 2024, down from $1.2 million in Q1 2023[121]. - Cash used in investing activities decreased to $8.4 million in Q1 2024 from $10.2 million in Q1 2023, with capital expenditures of $8.1 million primarily for The Saint George[126]. - Cash used in financing activities totaled $9.1 million in Q1 2024, compared to cash provided of $42.7 million in Q1 2023[127]. Future Outlook and Challenges - The company expects to generate approximately $7.2 million of pre-tax net cash proceeds from the sale of West Killeen Market, contracted for $12.8 million, expected to close in Q2 2024[80]. - Market conditions have been challenging due to inflation, higher borrowing costs, and supply chain constraints, impacting project profitability and timelines[105]. - The company does not expect to generate sufficient recurring cash flow to cover general and administrative expenses each period due to its development-focused business model[151]. - Future financial performance will depend on the ability to sell or lease properties profitably and extend or refinance debt as it becomes due[152]. Shareholder and Compliance Matters - A new share repurchase program was approved in November 2023, authorizing repurchases of up to $5.0 million of common stock[132]. - The company was in compliance with all financial covenants as of March 31, 2024[140]. - The company is subject to restrictions under its Comerica Bank debt agreements, limiting stock repurchases and dividend payments without prior consent[164].

Financial Performance - Net income attributable to common stockholders was $4.6 million, or $0.56 per diluted share, in Q1 2024, compared to a net loss of $(5.8) million, or $(0.73) per diluted share, in Q1 2023[4]. - Revenues for Q1 2024 were $26.5 million, a significant increase from $5.8 million in Q1 2023, primarily due to the sale of approximately 47 acres at Magnolia Place for $14.5 million[4][8]. - EBITDA for Q1 2024 totaled $5.2 million, compared to $(4.2) million in Q1 2023, indicating a strong recovery in operational performance[4]. - Operating income for the first quarter of 2024 was $3,685,000, compared to an operating loss of $5,593,000 in the first quarter of 2023, indicating a turnaround in performance[22]. - Net income attributable to common stockholders for Q1 2024 was $4,552,000, compared to a net loss of $5,801,000 in Q1 2023, reflecting a positive shift in profitability[22]. - Basic net income per share attributable to common stockholders was $0.57 for Q1 2024, compared to a loss of $0.73 per share in Q1 2023[22]. Cash and Assets - Stratus had $20.7 million in cash and cash equivalents as of March 31, 2024, down from $31.4 million at December 31, 2023, with no amounts drawn on its revolving credit facility[10]. - Cash and cash equivalents decreased to $20,741,000 as of March 31, 2024, down from $31,397,000 at the end of 2023[24]. - Total assets as of March 31, 2024, were $509,517,000, a slight decrease from $517,766,000 at the end of 2023[24]. Debt and Liabilities - Consolidated debt decreased to $168.2 million as of March 31, 2024, from $175.2 million at December 31, 2023[10]. - Total liabilities decreased to $209,673,000 as of March 31, 2024, from $223,161,000 at the end of 2023, reflecting a reduction in financial obligations[24]. Real Estate Operations - The Real Estate Operations segment generated revenues of $22,123,000 in Q1 2024, compared to $2,493,000 in Q1 2023, marking a growth of 786%[32]. - Capital expenditures and purchases for real estate properties totaled $17.1 million in Q1 2024, compared to $19.0 million in Q1 2023[13]. - Capital expenditures and purchases for real estate properties totaled $17,098,000 in Q1 2024, compared to $19,033,000 in Q1 2023[34]. - The company signed leases for approximately 90% of the units at The Saint June, a 182-unit luxury multi-family project completed in Q4 2023[4]. - Stratus is under contract to sell West Killeen Market for $12.8 million, expected to close in Q2 2024, which will generate approximately $7.2 million of pre-tax net cash proceeds[6]. - The company continues construction on The Saint George and the last six Amarra Villas homes, indicating ongoing development efforts[5]. - Stratus plans to explore the sale of additional retail properties, including Lantana Place – Retail and Magnolia Place – Retail, as part of its strategic initiatives[6].

Financial Performance - In 2023, the formation of a joint venture for the 495-acre Holden Hills residential project resulted in a cash distribution of $35.8 million[19]. - The sale of the mixed-use property Block 21 in 2022 generated net cash proceeds of $112.3 million and a pre-tax gain of $119.7 million[19]. - Revenue from the Real Estate Operations segment accounted for 15% of total revenue in 2023, down from 66% in 2022, primarily due to significant sales of undeveloped properties in 2022[29]. - Revenue from the Leasing Operations segment accounted for 85% of total revenue in 2023, up from 34% in 2022, driven by new leases and the commencement of operations at Magnolia Place and The Saint June[39]. - As of December 31, 2023, consolidated cash and cash equivalents totaled $31.4 million, with an additional $40.5 million available under the revolving credit facility[21]. - The company raised a total of $101.3 million in third-party equity capital for development projects over the last three fiscal years[19]. - The company has approximately 1,600 acres of commercial and residential projects under development or undeveloped land held for future use[18]. - As of December 31, 2023, the company's outstanding debt totaled $175.2 million, with cash and cash equivalents at $31.4 million[107]. - Principal payments due on outstanding debt during 2024 total $68.0 million, with estimated interest payments of approximately $13.6 million[107]. Development Projects - The Saint George, a 316-unit luxury multi-family project, is expected to be completed by the third quarter of 2024[35]. - The company plans to continue its development program focusing on residential and residential-centric mixed-use projects in Texas[20]. - The company anticipates starting construction on the Holden Hills project in 2025, pending development plan revisions[51]. - The Annie B project is planned as a 400-foot tower with approximately 420,000 square feet and 316 luxury multi-family units, with construction commencement dependent on market conditions[59]. - The New Caney project is expected to include approximately 145,000 square feet of retail services and 275 multi-family units, with construction not planned before 2025[68]. - The company has a development portfolio of approximately 1,600 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use[18]. - The company is pursuing rezoning of approximately 216 undeveloped acres from commercial to multi-family, which could enhance future development potential[37]. - The ETJ Law, effective September 1, 2023, is expected to streamline the development permitting process for Holden Hills and Section N, potentially increasing development density[53]. Leasing Operations - Average retail rentals increased to $22.29 per square foot as of December 31, 2023, from $20.27 per square foot a year earlier, representing a growth of 10.05%[40]. - Scheduled expirations of leased retail square footage as of December 31, 2023, indicate 2% in 2024, 0% in 2025, 1% in 2026, 4% in 2027, 8% in 2028, and 85% thereafter[40]. - As of December 31, 2023, signed leases for substantially all retail space at Lantana Place, including anchor tenant Moviehouse & Eatery[57]. - The Saint June project achieved approximately 75% lease signings for its 182 units as of March 25, 2024, with construction completed in Q4 2023[49]. - The Magnolia Place project consists of two fully-leased retail buildings and potential development of approximately 11 acres planned for 275 multi-family units[63]. - Kingwood Place includes 151,877 square feet of retail lease space, with signed leases for substantially all retail space as of December 31, 2023[65]. - West Killeen Market has signed leases for approximately 74% of the retail space as of December 31, 2023[67]. Market Conditions and Risks - The company has faced challenging market conditions due to high interest rates, tightened bank credit, and high inflation, which have adversely impacted projected profitability and project timelines[86]. - The company is vulnerable to concentration risks as operations are primarily located in the Austin, Texas area, which may expose it to negative changes in local economic conditions[92]. - The company relies on third-party project-level equity financing and may face difficulties raising additional capital on acceptable terms due to high costs of debt and equity capital[94]. - Strategic relationships with key tenants are crucial for the company's business, and any deterioration in these relationships could lead to higher vacancy rates and reduced cash flow[95]. - The company is exposed to risks from joint ventures, including potential conflicts with partners and financial obligations that may require additional funding[97]. - Adverse weather conditions and geopolitical instability in Texas markets could negatively impact business operations and financial results[99]. - Rising inflation and interest rates have adversely affected the real estate industry, with continued impacts expected in 2024 and beyond[115]. - The company maintains insurance coverage, but certain catastrophic losses may be uninsurable, potentially leading to significant financial impacts[101]. - Cybersecurity incidents pose risks to the company's operations, with past incidents not resulting in material loss but future threats evolving[104]. Employee and Sustainability Focus - The company has a total of 33 full-time employees as of December 31, 2023, and emphasizes the importance of human capital management and employee well-being[79]. - The company has made significant investments in sustainability, including projects recognized for sustainable practices and partnerships with organizations like the U.S. Green Building Council[80].