Stratus Properties Inc. Reports Second-Quarter 2021 Results

Stratus Properties Inc. (NASDAQ: STRS), a diversified real estate company with holdings, interests and operations focused in the Austin, Texas area and other select, fast-growing markets in Texas, today reported second-quarter 2021 results.

Highlights and Recent Developments:

  • Net loss attributable to common stockholders totaled $10.2 million, $1.23 per share, in second-quarter 2021, compared to net income of $4.1 million, $0.50 per share, in second-quarter 2020. The second-quarter 2020 results include $15.0 million ($10.9 million to net income attributable to common stockholders or $1.32 per share) in income from earnest money forfeited by Ryman Hospitality Properties, Inc. (Ryman) in May 2020 upon its termination of the agreements to purchase Block 21.
  • Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) totaled $(4.4) million in second-quarter 2021, compared to $12.3 million in second-quarter 2020. Second-quarter 2020 EBITDA includes the Block 21 earnest money discussed above. For a reconciliation of net (loss) income attributable to common stockholders to EBITDA, see the supplemental schedule, “EBITDA,” on page VI.
  • Sold one Amarra Drive Phase III lot for $0.6 million during second-quarter 2021.
  • During the second quarter of 2021, Stratus began site work on The Saint June, a 182-unit multi-family project within the Amarra subdivision in Barton Creek. In June 2021, Stratus entered into a construction loan to finance approximately 55 percent of the estimated $55 million cost of The Saint June. In July 2021, an unrelated equity investor acquired a 65.87 percent interest in The Saint June partnership for $16.3 million and Stratus began construction on The Saint June.
  • In June 2021, Stratus entered into a $24.5 million loan, which matures in June 2026, to refinance the Jones Crossing project, an H-E-B, LP (H-E-B) grocery-anchored, mixed-use development located in College Station, Texas, to improve loan terms and take advantage of the low-interest-rate market. In April 2021, Stratus entered into an amendment to The Santal loan to extend the maturity date to October 2024 and reduce the floor of the variable interest rate.
  • In August 2021, Stratus announced new development plans for Magnolia Place, an H-E-B grocery shadow-anchored, mixed-use project in Magnolia, Texas, and entered into a $14.8 million construction loan to complete financing for the first phase of development of the project.
  • Stratus’ W Austin Hotel has remained open during the COVID-19 pandemic, and while the pandemic continues to negatively impact the hospitality industry, the W Austin Hotel continued to see improvement in some of its key metrics during second-quarter 2021.

William H. Armstrong III, Chairman, President and Chief Executive Officer, stated, “Our markets across the board experienced improvement and growth in the second quarter, as the hotel, travel and entertainment industries continued to ramp up. We took action early in the pandemic to position ourselves to weather its potential impact, and as a result of this hard work, Stratus experienced steady improvement during the second quarter and is moving forward with exciting development plans.

“The demand for residential properties remains strong in our markets, currently exceeding available supply, and we are pleased to have under way the development of sustainably designed residential projects such as The Saint June and Holden Hills. We also have great opportunities with the residential components of Magnolia Place, Lantana Place, Kingwood Place, Jones Crossing and with our remaining land in Lakeway. Although the pandemic is still affecting the retail industry, our retail projects performed well during the quarter, and all of our tenants were open. We believe that our proven strategy will continue to allow us to respond quickly to market conditions while evaluating new opportunities to continue to strengthen our portfolio.”

Summary Financial Results

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

(In Thousands, Except Per Share Amounts) (Unaudited)

Revenues

 

 

 

Real Estate Operations

$

780

 

 

$

1,897

 

 

 

$

7,405

 

 

 

$

14,237

 

 

Leasing Operations

 

5,454

 

 

 

5,934

 

 

 

 

10,851

 

 

 

 

11,893

 

 

Hotel

 

3,963

 

 

 

1,046

 

 

 

 

6,113

 

 

 

 

7,005

 

 

Entertainment

 

1,658

 

 

 

289

 

 

 

 

2,267

 

 

 

 

4,459

 

 

Corporate, eliminations and other

 

(279

)

 

 

(235

)

 

 

 

(545

)

 

 

 

(529

)

 

Total consolidated revenue

$

11,576

 

 

$

8,931

 

 

 

$

26,091

 

 

 

$

37,065

 

 

Operating (loss) income

 

 

 

 

 

 

 

 

 

 

Real Estate Operations

$

(770

)

 

$

(46

)

 

 

$

1,466

 

 

 

$

2,053

 

 

Leasing Operations

 

1,234

 

 

 

(174

)

a

 

 

25,470

 

b

 

 

650

 

a

Hotel

 

(776

)

 

 

(1,652

)

 

 

 

(2,408

)

 

 

 

(2,706

)

 

Entertainment

 

(359

)

 

 

(1,420

)

 

 

 

(1,576

)

 

 

 

(959

)

 

Corporate, eliminations and other

 

(6,530

)

 

 

11,778

 

c

 

 

(11,183

)

 

 

 

8,800

 

c

Total consolidated operating (loss) income

$

(7,201

)

 

$

8,486

 

 

 

$

11,769

 

 

 

$

7,838

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to common stockholders

$

(10,163

)

 

$

4,134

 

 

 

$

(1,219

)

 

 

$

3,064

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net (loss) income per share

$

(1.23

)

 

$

0.50

 

 

 

$

(0.15

)

 

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

$

(4,405

)

 

$

12,325

 

a, c

 

$

10,783

 

b

 

$

16,285

 

a, c

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures and purchases and development of real estate properties

$

3,759

 

 

$

4,502

 

 

 

$

7,257

 

 

 

$

13,052

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted-average shares of common stock outstanding

 

8,235

 

 

 

8,228

 

 

 

 

8,229

 

 

 

 

8,230

 

 

 
  1. Includes a $1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.
  2. Includes a $22.9 million gain on the January 2021 sale of The Saint Mary, a 240-unit luxury garden-style apartment project in the Circle C community.
  3. Includes $15.0 million in income from earnest money received as a result of Ryman's termination of the agreements to purchase Block 21.

The decrease in revenue and increase in operating loss from the Real Estate Operations segment in second-quarter 2021, compared to second-quarter 2020, primarily reflects a decrease in the number of lots sold during second-quarter 2021 as available inventory decreased. During second-quarter 2021, Stratus sold one Amarra Drive Phase III lot for $0.6 million. As of June 30, 2021, Stratus had only two unsold developed Amarra Drive Phase III lots.

The decrease in revenue from the Leasing Operations segment in second-quarter 2021, compared to second-quarter 2020, primarily reflects the sale of The Saint Mary in first-quarter 2021. The Saint Mary had rental revenue of $0.7 million in second-quarter 2020. The increase in operating income in second-quarter 2021, compared to second-quarter 2020, is primarily because of a charge recognized in second-quarter 2020 totaling $1.4 million for estimated uncollectible rents receivable and unrealizable deferred costs. Despite the pandemic, Stratus has retained substantially all of its pre-pandemic retail tenants, added new tenants, and all of its tenants are currently paying rent per their leases, as well as monthly payments pursuant to previously disclosed base rent deferral arrangements if applicable.

The increase in revenue and decrease in operating loss from the Hotel segment in second-quarter 2021, compared to second-quarter 2020, is primarily a result of higher room reservations and food and beverage sales as the impacts of the COVID-19 pandemic lessened during second-quarter 2021. Revenue per available room (RevPAR), which is calculated by dividing total room revenue by the average total rooms available, was $95 in second-quarter 2021, compared to $29 in second-quarter 2020. The 33 percent average occupancy rate in the second quarter of 2021 was higher than the 12 percent average occupancy rate in the second quarter of 2020 and the 21 percent average occupancy rate in the first quarter of 2021.

The increase in revenue and decrease in operating loss from the Entertainment segment in second-quarter 2021, compared to second-quarter 2020, primarily reflect an increase in the number of events hosted at ACL Live and 3TEN ACL Live as the impacts of the COVID-19 pandemic lessened during second-quarter 2021.

General and administrative expenses, included in corporate, eliminations and other, increased to $6.4 million in second-quarter 2021, compared to $3.1 million in second-quarter 2020, primarily reflecting increases in consulting, legal and public relations costs incurred in connection with Stratus’ successful proxy contest and the ongoing real estate investment trust (REIT) exploration process.

Stratus’ Board of Directors (Board) has authorized an in-depth exploration of a conversion from a C-Corporation to a REIT. If the Board determines to move forward, Stratus expects the conversion would occur no earlier than 2022. At this time, Stratus believes that the REIT conversion would require consent from its major lenders and amendments to its major debt agreements, among other third-party consents. If the Board ultimately determines that a REIT conversion is in shareholders’ best interests, the REIT conversion will be submitted to a shareholder vote.

Debt and Liquidity

At June 30, 2021, consolidated debt totaled $352.1 million and consolidated cash totaled $15.3 million, compared with consolidated debt of $351.1 million and consolidated cash of $12.4 million at December 31, 2020. As of June 30, 2021, Stratus had $14.3 million available under its $60.0 million Comerica Bank credit facility, with a $150 thousand letter of credit committed against the credit facility.

In April 2021, Stratus entered into an amendment to The Santal loan to, among other items, extend the maturity date from October 5, 2022, to October 5, 2024, and reduce the floor of the variable interest rate.

In June 2021, Stratus entered into a $24.5 million loan, which matures in June 2026, to refinance the Jones Crossing project to improve loan terms and take advantage of the low-interest-rate market. Of the proceeds from this new loan, $22.2 million was used to repay in full all outstanding indebtedness under the original construction loan.

In June 2021, Stratus also entered into a construction loan to finance approximately 55 percent of the estimated $55 million cost of The Saint June. Available borrowings under the loan total the least of (i) $30.3 million, (ii) 60 percent of the total construction costs, or (iii) 55 percent of the as-stabilized appraised value of the property. As of June 30, 2021, no amounts were outstanding under this loan, which matures in October 2024. On July 1, 2021, an unrelated equity investor contributed $16.3 million to The Saint June partnership for a 65.87 percent interest. Stratus has a 34.13 percent interest in partnership following its contribution of land, development to date and cash.

In August 2021, Stratus entered into a $14.8 million, three-year construction loan to finance the first phase of development of Magnolia Place. The remaining estimated costs for the first phase of development are being funded by equity contributed by Stratus. Magnolia Place is currently planned to consist of 4 retail buildings totaling approximately 35,000 square feet, 5 retail pad sites to be sold or ground leased, 194 single-family lots and approximately 500 multi-family units. The first phase of development is expected to consist of 2 retail buildings totaling approximately 19,000 square feet, all 5 pad sites, and the road, utility and drainage infrastructure necessary to support the entire development. Stratus continues to evaluate a sale of the single-family component. H-E-B recently began construction on its 95,000-square-foot grocery store on an adjoining 18-acre site owned by H-E-B.

Purchases and development of real estate properties (included in operating cash flows) and capital expenditures (included in investing cash flows) totaled $7.3 million for the first six months of 2021, primarily related to the development of Barton Creek properties, including Amarra Villas, and the Lantana Place and Magnolia Place projects, compared with $13.1 million for the first six months of 2020, primarily related to the development of Kingwood Place, Lantana Place, Jones Crossing and Barton Creek properties.

Stratus projects that it will be able to meet its debt service and other cash obligations for at least the next 12 months. Stratus’ projections are based on many detailed and complex underlying assumptions, including (1) that Stratus’ Block 21 businesses will generate positive operating income in the second half of 2021 and that Block 21 will generate sufficient cash to cover debt service by early 2022, (2) that current conditions in Stratus’ leasing operations will not deteriorate materially, (3) that Stratus closes on projected asset sales in its real estate operations segment, including certain land sales at its mixed-use properties, on anticipated terms, (4) that Stratus is able to secure anticipated financing for certain development projects, and (5) that Stratus can repay, extend or refinance debt coming due in the next 12 months, including loans at Amarra Villas, West Killeen Market and New Caney. No assurances can be given that the results anticipated by Stratus’ projections will occur.

Conference Call Information

Stratus will conduct an investor conference call to discuss its unaudited second-quarter 2021 financial and operating results today, August 16, 2021, at 11:00 a.m. Eastern Time. The public is invited to listen to the conference call by dialing (877) 418-4843 for domestic access and +1 (412) 902-6766 for international access. A replay of the conference call will be available until August 30, 2021, by dialing (877) 344-7529 for domestic access and by dialing +1 (412) 317-0088 for international access. Please use replay ID: 10158939. The replay will also be available on Stratus' website at stratusproperties.com until August 30, 2021.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND REGULATION G DISCLOSURE.

This press release 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 the impacts of the COVID-19 pandemic, Stratus’ ability to meet its future debt service and other cash obligations, Stratus' ability to ramp-up operations at Block 21 according to its currently anticipated timeline, Stratus' ability to open and hold events at its venues, Stratus' ability to collect rents timely, future cash flows and liquidity, Stratus’ ability to comply with or obtain waivers of financial and other covenants in debt agreements, Stratus’ ongoing in-depth exploration of conversion to a REIT, potential steps necessary prior to conversion to a REIT, the potential timing of any REIT conversion, Stratus’ expectations about the Austin and Texas real estate markets, the planning, financing, development, construction, completion and stabilization of Stratus’ development projects, plans to sell, recapitalize, or refinance properties, future operational and financial performance, municipal utility district reimbursements for infrastructure costs, regulatory matters, leasing activities, tax rates, the impact of interest rate changes, future capital expenditures and financing plans, possible joint ventures, partnerships, or other strategic relationships, Stratus’ projections with respect to its obligations under the master lease agreements entered into in connection with the 2017 sale of The Oaks at Lakeway, other plans and objectives of management for future operations and development projects, and future dividend payments and share repurchases. The words “anticipates,” “may,” “can,” “plans,” “believes,” “potential,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be” and any similar expressions and/or statements are intended to identify those assertions as forward-looking statements.

Under Stratus’ Comerica Bank credit facility, Stratus is not permitted to pay dividends on common stock without Comerica Bank’s prior written consent. The declaration of dividends is at the discretion of Stratus’ Board, subject to restrictions under Stratus’ Comerica Bank credit facility, and will depend on Stratus’ financial results, cash requirements, projected compliance with covenants in its debt agreements, outlook and other factors deemed relevant by the Board.

Stratus cautions readers that forward-looking statements are not guarantees of future performance, and its actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements. Important factors that can cause Stratus’ actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, evolving risks relative to the COVID-19 pandemic (including the recent resurgences related to the spread of COVID-19 variants) and its economic effects, Stratus’ ability to pay or refinance its debt or comply with or obtain waivers of financial and other covenants in debt agreements and to meet other cash obligations, Stratus’ ability to ramp up operations at Block 21, collect anticipated rental payments and close projected asset sales, the availability and terms of financing for development projects and other corporate purposes, the implementation, operational, financing and tax complexities to be evaluated and addressed before Stratus' Board decides whether to recommend a REIT conversion to shareholders, the ability of Stratus to qualify as a REIT, which involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended, Stratus’ ability to complete the steps that must be taken in order to convert to a REIT and the timing thereof, the potential costs of converting to and operating as a REIT, whether Stratus’ Board will determine that conversion to a REIT is in the best interests of Stratus’ shareholders, whether shareholders will approve changes to Stratus’ organizational documents consistent with a public REIT structure, Stratus’ ability to enter into and maintain joint ventures, partnerships, or other strategic relationships, Stratus’ ability to implement its business strategy successfully, including its ability to develop, construct and sell or lease properties on terms its Board considers acceptable, market conditions or corporate developments that could preclude, impair or delay any opportunities with respect to plans to sell, recapitalize or refinance properties, Stratus’ ability to obtain various entitlements and permits, a decrease in the demand for real estate in select markets in Texas where Stratus operates, changes in economic, market and business conditions, reductions in discretionary spending by consumers and businesses, competition from other real estate developers, hotel operators and/or entertainment venue operators and promoters, Stratus' ability to hold events and increase attendance at its venues, challenges associated with booking events and selling tickets and event cancellations at Stratus’ entertainment venues, which may result in refunds to customers, the termination of sales contracts or letters of intent because of, among other factors, the failure of one or more closing conditions or market changes, Stratus’ ability to secure qualifying tenants for the space subject to the master lease agreements entered into in connection with the 2017 sale of The Oaks at Lakeway and to assign such leases to the purchaser and remove the corresponding property from the master leases, the failure to attract customers or tenants for its developments or such customers’ or tenants’ failure to satisfy their purchase commitments or leasing obligations, increases in interest rates and the phase out of the London Interbank Offered Rate, declines in the market value of Stratus’ assets, increases in operating costs, including real estate taxes and the cost of building materials and labor, changes in external perception of the W Austin Hotel, unanticipated issues experienced by the third-party operator of the W Austin Hotel, changes in consumer preferences, industry risks, changes in laws, regulations or the regulatory environment affecting the development of real estate, opposition from special interest groups or local governments with respect to development projects, weather-related risks, loss of key personnel, cybersecurity incidents and other factors described in more detail under the heading “Risk Factors” in Stratus’ Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (SEC).

Stratus can provide no assurance as to when, if at all, it will convert to a REIT. Stratus can give no assurance that its Board will approve a conversion to a REIT, even if there are no impediments to such conversion. Stratus’ exploration of a potential REIT conversion may divert management's attention from traditional business concerns. If Stratus determines to convert to a REIT, Stratus cannot give assurance that it will qualify or remain qualified as a REIT.

This press release also includes EBITDA, which is not recognized under U.S. generally accepted accounting principles (GAAP). Stratus believes this measure can be helpful to investors in evaluating its business. EBITDA is a financial measure frequently used by securities analysts, lenders and others to evaluate Stratus' recurring operating performance. EBITDA is intended to be a performance measure that should not be regarded as more meaningful than a GAAP measure. Other companies may calculate EBITDA differently. As required by SEC Regulation G, a reconciliation of Stratus' net (loss) income attributable to common stockholders to EBITDA is included in the supplemental schedule of this press release.

Investors are cautioned that many of the assumptions upon which Stratus' forward-looking statements are based are likely to change after the date the forward-looking statements are made. Further, Stratus may make changes to its business plans that could affect its results. Stratus cautions investors that it undertakes no obligation to update any forward-looking statements, which speak only as of the date made, notwithstanding any changes in its assumptions, business plans, actual experience, or other changes.

A copy of this release is available on Stratus' website, stratusproperties.com.

 

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(In Thousands, Except Per Share Amounts)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2021

 

2020

 

2021

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

Real estate operations

$

775

 

 

$

1,893

 

 

$

7,396

 

 

$

14,229

 

 

Leasing operations

 

5,208

 

 

 

5,718

 

 

 

10,375

 

 

 

11,450

 

 

Hotel

 

3,935

 

 

 

1,030

 

 

 

6,053

 

 

 

6,941

 

 

Entertainment

 

1,658

 

 

 

290

 

 

 

2,267

 

 

 

4,445

 

 

Total revenues

 

11,576

 

 

 

8,931

 

 

 

26,091

 

 

 

37,065

 

 

Cost of sales:

 

 

 

 

 

 

 

 

Real estate operations

 

1,635

 

 

 

1,921

 

 

 

5,979

 

 

 

12,176

 

 

Leasing operations

 

2,399

 

 

 

4,070

 

a

 

4,776

 

 

 

7,152

 

a

Hotel

 

3,862

 

 

 

1,766

 

 

 

6,764

 

 

 

7,665

 

 

Entertainment

 

1,558

 

 

 

1,208

 

 

 

2,865

 

 

 

4,306

 

 

Depreciation

 

2,924

 

 

 

3,377

 

 

 

5,926

 

 

 

7,010

 

 

Total cost of sales

 

12,378

 

 

 

12,342

 

 

 

26,310

 

 

 

38,309

 

 

General and administrative expenses

 

6,399

 

b

 

3,103

 

 

 

10,943

 

b

 

5,918

 

 

Income from forfeited earnest money

 

 

 

 

(15,000

)

c

 

 

 

 

(15,000

)

c

Gain on sale of assets

 

 

 

 

 

 

 

(22,931

)

d

 

 

 

Total

 

18,777

 

 

 

445

 

 

 

14,322

 

 

 

29,227

 

 

Operating (loss) income

 

(7,201

)

 

 

8,486

 

 

 

11,769

 

 

 

7,838

 

 

Interest expense, net

 

(2,772

)

 

 

(3,666

)

 

 

(5,807

)

 

 

(7,581

)

 

Loss on early extinguishment of debt

 

(163

)

 

 

 

 

 

(226

)

 

 

 

 

Other income, net

 

1

 

 

 

131

 

 

 

4

 

 

 

29

 

 

(Loss) income before income taxes and equity in unconsolidated affiliates' loss

 

(10,135

)

 

 

4,951

 

 

 

5,740

 

 

 

286

 

 

(Provision for) benefit from income taxes

 

(62

)

 

 

(1,148

)

 

 

(269

)

 

 

1,370

 

 

Equity in unconsolidated affiliates' loss

 

(7

)

 

 

 

 

 

(9

)

 

 

 

 

Net (loss) income and total comprehensive (loss) income

 

(10,204

)

 

 

3,803

 

 

 

5,462

 

 

 

1,656

 

 

Total comprehensive loss (income) attributable to noncontrolling interests in subsidiariese

 

41

 

 

 

331

 

 

 

(6,681

)

 

 

1,408

 

 

Net (loss) income and total comprehensive (loss) income attributable to common stockholders

$

(10,163

)

 

$

4,134

 

 

$

(1,219

)

 

$

3,064

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net (loss) income per share attributable to common stockholders

$

(1.23

)

 

$

0.50

 

 

$

(0.15

)

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

8,235

 

 

 

8,210

 

 

 

8,229

 

 

 

8,205

 

 

Diluted

 

8,235

 

 

 

8,228

 

 

 

8,229

 

 

 

8,230

 

 

 
  1. Includes a $1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.
  2. Increase primarily reflects increases in consulting, legal and public relation costs incurred in connection with Stratus' successful proxy contest and the ongoing real estate investment trust (REIT) exploration process.
  3. Represents income from earnest money received as a result of Ryman Hospitality Properties, Inc.'s (Ryman's) termination of the agreements to purchase Block 21.
  4. Represents the gain on the January 2021 sale of The Saint Mary.
  5. Represents noncontrolling interest partners' share in the results of the consolidated projects that they participate in, primarily The Saint Mary. Of the amount for the six months ended June 30, 2020, $573 thousand relates to losses incurred prior to 2020.
 

STRATUS PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Thousands)

 

 

June 30,

2021

 

December 31,

2020

 

ASSETS

 

 

 

 

Cash and cash equivalents

$

15,272

 

 

$

12,434

 

 

Restricted cash

 

21,612

 

 

 

21,749

 

 

Real estate held for sale

 

1,773

 

 

 

4,204

 

 

Real estate under development

 

113,694

 

 

 

98,137

 

 

Land available for development

 

43,670

 

 

 

53,432

 

 

Real estate held for investment, net

 

281,573

 

 

 

286,529

 

 

Lease right-of-use assets

 

10,740

 

 

 

10,871

 

 

Other assets

 

22,007

 

 

 

20,144

 

 

Assets held for sale - The Saint Mary

 

 

 

 

36,516

 

 

Total assets

$

510,341

 

 

$

544,016

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

$

9,920

 

 

$

8,047

 

 

Accrued liabilities, including taxes

 

7,491

 

 

 

12,868

 

 

Debt

 

352,096

 

 

 

351,055

 

 

Lease liabilities

 

13,709

 

 

 

13,269

 

 

Deferred gain

 

5,596

 

 

 

6,173

 

 

Other liabilities

 

17,997

 

 

 

17,233

 

 

Liabilities held for sale - The Saint Mary

 

 

 

 

25,607

 

 

Total liabilities

 

406,809

 

 

 

434,252

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock

 

94

 

 

 

94

 

 

Capital in excess of par value of common stock

 

188,323

 

 

 

186,777

 

 

Accumulated deficit

 

(67,576

)

 

 

(66,357

)

 

Common stock held in treasury

 

(21,753

)

 

 

(21,600

)

 

Total stockholders' equity

 

99,088

 

 

 

98,914

 

 

Noncontrolling interests in subsidiaries

 

4,444

 

 

 

10,850

 

 

Total equity

 

103,532

 

 

 

109,764

 

 

Total liabilities and equity

$

510,341

 

 

$

544,016

 

 

 

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Thousands)

 

 

Six Months Ended

 

 

June 30,

 

 

2021

 

2020

 

Cash flow from operating activities:

 

 

 

 

Net income

$

5,462

 

 

$

1,656

 

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

Depreciation

 

5,926

 

 

 

7,010

 

 

Cost of real estate sold

 

3,341

 

 

 

8,732

 

 

Gain on sale of assets

 

(22,931

)

 

 

 

 

Loss on early extinguishment of debt

 

226

 

 

 

 

 

Amortization of debt issuance costs and stock-based compensation

 

969

 

 

 

1,095

 

 

Equity in unconsolidated affiliates' loss

 

9

 

 

 

 

 

Deferred income taxes

 

 

 

 

2,731

 

 

Purchases and development of real estate properties

 

(4,879

)

 

 

(8,655

)

 

Increase in deposits

 

358

 

 

 

46

 

 

(Increase) decrease in other assets

 

(1,309

)

 

 

1,215

 

 

Decrease in accounts payable, accrued liabilities and other

 

(2,162

)

 

 

(8,385

)

 

Net cash (used in) provided by operating activities

 

(14,990

)

 

 

5,445

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

Capital expenditures

 

(2,378

)

 

 

(4,397

)

 

Proceeds from sale of assets

 

59,488

 

 

 

 

 

Payments on master lease obligations

 

(643

)

 

 

(691

)

 

Other, net

 

37

 

 

 

 

 

Net cash provided by (used in) investing activities

 

56,504

 

 

 

(5,088

)

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

Borrowings from credit facility

 

29,000

 

 

 

12,800

 

 

Payments on credit facility

 

(26,778

)

 

 

(21,304

)

 

Borrowings from project loans

 

25,355

 

 

 

11,926

 

 

Payments on project and term loans

 

(52,040

)

 

 

(6,976

)

 

Cash dividend paid for stock-based awards

 

(4

)

 

 

(8

)

 

Stock-based awards net payments

 

(153

)

 

 

(91

)

 

Distributions to noncontrolling interests

 

(13,087

)

 

 

 

 

Financing costs

 

(1,106

)

 

 

(423

)

 

Net cash used in financing activities

 

(38,813

)

 

 

(4,076

)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

2,701

 

 

 

(3,719

)

 

Cash, cash equivalents and restricted cash at beginning of year

 

34,183

 

 

 

38,591

 

 

Cash, cash equivalents and restricted cash at end of period

$

36,884

 

 

$

34,872

 

 

 

STRATUS PROPERTIES INC.

BUSINESS SEGMENTS

Stratus currently has four operating segments: Real Estate Operations, Leasing Operations, Hotel and Entertainment.

The Real Estate Operations segment is comprised of Stratus’ real estate assets (developed for sale, under development and available for development), which consists of its properties in Austin, Texas (including the Barton Creek community; the Circle C community; and the Lantana community, including a portion of Lantana Place planned for a future multi-family phase); in Lakeway, Texas, located in the greater Austin area (Lakeway); in College Station, Texas (a portion of Jones Crossing and vacant pad sites); in Killeen, Texas (vacant pad sites at West Killeen Market); and in Magnolia, Texas (Magnolia Place), Kingwood, Texas (land for future multi-family development and vacant pad sites) and New Caney, Texas (New Caney), located in the greater Houston area.

The Leasing Operations segment is comprised of Stratus’ real estate assets, both residential and commercial, that are leased or available for lease and includes The Santal, West Killeen Market, office and retail space at Block 21 and completed portions of Lantana Place, Jones Crossing and Kingwood Place.

The Hotel segment includes the W Austin Hotel located at Block 21 in downtown Austin, Texas.

The Entertainment segment includes ACL Live, a live music and entertainment venue, and 3TEN ACL Live, both located at Block 21. In addition to hosting concerts and private events, ACL Live is the home of Austin City Limits, the longest running music series in American television history.

Stratus uses operating income or loss to measure the performance of each segment. General and administrative expenses, which primarily consist of employee salaries, wages and other costs, are managed on a consolidated basis and are not allocated to Stratus’ operating segments. The following segment information reflects management determinations that may not be indicative of what the actual financial performance of each segment would be if it were an independent entity.

Segment information presented below was prepared on the same basis as Stratus’ consolidated financial statements (in thousands).

 

 

Real Estate

Operationsa

 

Leasing

Operations

 

Hotel

 

Entertainment

 

Corporate,

Eliminations

and Otherb

 

Total

Three Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated customers

$

775

 

 

$

5,208

 

$

3,935

 

 

$

1,658

 

 

$

 

 

$

11,576

 

Intersegment

 

5

 

 

 

246

 

 

28

 

 

 

 

 

 

(279

)

 

 

 

Cost of sales, excluding depreciation

 

1,503

 

 

 

2,528

 

 

3,862

 

 

 

1,670

 

 

 

(109

)

 

 

9,454

 

Depreciation

 

47

 

 

 

1,692

 

 

877

 

 

 

347

 

 

 

(39

)

 

 

2,924

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

6,399

 

c

 

6,399

 

Operating (loss) income

$

(770

)

 

$

1,234

 

$

(776

)

 

$

(359

)

 

$

(6,530

)

 

$

(7,201

)

Capital expenditures and purchases and development of real estate properties

$

2,390

 

 

$

1,216

 

$

143

 

 

$

10

 

 

$

 

 

$

3,759

 

Total assets at June 30, 2021

 

165,607

 

 

 

194,696

 

 

91,878

 

 

 

33,884

 

 

 

24,276

 

 

 

510,341

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated customers

$

1,893

 

 

$

5,718

 

 

$

1,030

 

 

$

290

 

 

$

 

 

$

8,931

 

Intersegment

 

4

 

 

 

216

 

 

 

16

 

 

 

(1

)

 

 

(235

)

 

 

 

Cost of sales, excluding depreciation

 

1,886

 

 

 

4,074

 

d

 

1,767

 

e

 

1,305

 

 

 

(67

)

 

 

8,965

 

Depreciation

 

57

 

 

 

2,034

 

 

 

931

 

 

 

404

 

 

 

(49

)

 

 

3,377

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

3,103

 

 

 

3,103

 

Income from forfeited earnest money

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,000

)

f

 

(15,000

)

Operating (loss) income

$

(46

)

 

$

(174

)

 

$

(1,652

)

 

$

(1,420

)

 

$

11,778

 

 

$

8,486

 

Capital expenditures and purchases and development of real estate properties

$

2,433

 

 

$

1,682

 

 

$

283

 

 

$

104

 

 

$

 

 

$

4,502

 

Total assets at June 30, 2020

 

163,900

 

 

 

233,268

 

g

 

94,359

 

 

 

36,784

 

 

 

23,394

 

 

 

551,705

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated customers

$

7,396

 

$

10,375

 

 

$

6,053

 

 

$

2,267

 

 

$

 

 

$

26,091

 

Intersegment

 

9

 

 

476

 

 

 

60

 

 

 

 

 

 

(545

)

 

 

 

Cost of sales, excluding depreciation

 

5,836

 

 

4,909

 

 

 

6,764

 

 

 

3,095

 

 

 

(220

)

 

 

20,384

 

Depreciation

 

103

 

 

3,403

 

 

 

1,757

 

 

 

748

 

 

 

(85

)

 

 

5,926

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

10,943

 

c

 

10,943

 

Gain on sale of assets

 

 

 

(22,931

)

h

 

 

 

 

 

 

 

 

 

 

(22,931

)

Operating income (loss)

$

1,466

 

$

25,470

 

 

$

(2,408

)

 

$

(1,576

)

 

$

(11,183

)

 

$

11,769

 

Capital expenditures and purchases and development of real estate properties

$

4,879

 

$

2,135

 

 

$

215

 

 

$

28

 

 

$

 

 

$

7,257

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated customers

$

14,229

 

$

11,450

 

 

$

6,941

 

 

$

4,445

 

 

$

 

 

 

$

37,065

 

Intersegment

 

8

 

 

443

 

 

 

64

 

 

 

14

 

 

 

(529

)

 

 

 

 

Cost of sales, excluding depreciation

 

12,068

 

 

7,162

d

 

 

7,675

 

e

 

4,531

 

 

 

(137

)

 

 

 

31,299

 

Depreciation

 

116

 

 

4,081

 

 

 

2,036

 

i

 

887

 

i

 

(110

)

 

 

 

7,010

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

5,918

 

 

 

 

5,918

 

Income from forfeited earnest money

 

 

 

 

 

 

 

 

 

 

 

 

(15,000

)

f

 

 

(15,000

)

Operating income (loss)

$

2,053

 

$

650

 

 

$

(2,706

)

 

$

(959

)

 

$

8,800

 

 

 

$

7,838

 

Capital expenditures and purchases and development of real estate properties

$

8,655

 

$

3,965

 

 

$

310

 

 

$

122

 

 

$

 

 

 

$

13,052

 

 
  1. Includes sales commissions and other revenues together with related expenses.
  2. Includes consolidated general and administrative expenses and eliminations of intersegment amounts.
  3. The increases from the comparable prior year periods are primarily the result of increased consulting, legal and public relation costs for Stratus' successful proxy contest and the ongoing REIT exploration process totaling $3.3 million and $4.4 million in second-quarter 2021 and for the first six months of 2021, respectively.
  4. Includes a $1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.
  5. Includes a $0.8 million credit related to a business interruption insurance claim filed as a result of water and smoke damage in the W Austin Hotel in January 2018.
  6. Represents income from earnest money received as a result of Ryman's termination of the agreements to purchase Block 21.
  7. Includes assets held for sale at The Saint Mary, which totaled $36.6 million at June 30, 2020.
  8. Represents the gain on the January 2021 sale of The Saint Mary.
  9. Includes a $202 thousand adjustment in the Hotel segment and an $89 thousand adjustment in the Entertainment segment for the period in December 2019 when the hotel and entertainment venues were held for sale and, therefore, not depreciated.

RECONCILIATION OF NON-GAAP MEASURE

EBITDA

EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-GAAP (generally accepted accounting principles in the U.S.) financial measure that is frequently used by securities analysts, investors, lenders and others to evaluate companies' recurring operating performance, including, among other things, profitability before the effect of financing and similar decisions. Because securities analysts, investors, lenders and others use EBITDA, management believes that Stratus' presentation of EBITDA affords them greater transparency in assessing its financial performance. This information differs from net (loss) income attributable to common stockholders determined in accordance with GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with GAAP. EBITDA may not be comparable to similarly titled measures reported by other companies, as different companies may calculate such measures differently. Management strongly encourages investors to review Stratus' consolidated financial statements and publicly filed reports in their entirety. A reconciliation of Stratus' net (loss) income attributable to common stockholders to EBITDA follows (in thousands).

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

 

Net (loss) income attributable to common stockholders

$

(10,163

)

 

$

4,134

a

$

(1,219

)

b

$

3,064

 

a

Depreciation

 

2,924

 

 

 

3,377

 

 

5,926

 

 

 

7,010

 

 

Interest expense, net

 

2,772

 

 

 

3,666

 

 

5,807

 

 

 

7,581

 

 

Provision for (benefit from) income taxes

 

62

 

 

 

1,148

 

 

269

 

 

 

(1,370

)

 

EBITDA

$

(4,405

)

 

$

12,325

 

$

10,783

 

 

$

16,285

 

 

 
  1. Includes $15.0 million in income from earnest money received as a result of Ryman's termination of the agreements to purchase Block 21 and a $1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.
  2. Includes a gain on the sale of The Saint Mary of $22.9 million ($16.2 million net of noncontrolling interests).

 

Contacts

Financial and Media Contact:

William H. Armstrong III

(512) 478-5788

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