Stratus Properties Inc. (NASDAQ: STRS), a diversified real
estate company with holdings, interests and operations in the
Austin, Texas area and other select markets in Texas, today
reported second-quarter 2022 results.
Highlights and Recent
Developments:
- As a result of its strategic planning process, Stratus’
Board of Directors (Board) has approved returning $50.0 million
cash to shareholders, subject to obtaining required consents
from Comerica Bank. This return of capital could be in the form of
share repurchases, dividends or a combination. After streamlining
Stratus’ business through the sale of Block 21, the Board has
decided to continue Stratus’ successful development program, with
Stratus’ proven team focusing on pure residential and
residential-focused mixed-use projects in Austin and other select
markets in Texas.
- On May 31, 2022, Stratus completed the previously announced
sale of Block 21, a mixed-use development in downtown
Austin, Texas, that contains the W Austin Hotel and office, retail
and entertainment space, to Ryman Hospitality Properties, Inc.
(Ryman) for $260.0 million, subject to certain adjustments.
Stratus’ net proceeds of cash and restricted cash totaled $112.3
million. As a result of the sale, Stratus recorded a pre-tax gain
on the sale of $119.7 million ($94.1 million net of taxes) in
second-quarter 2022 included in net income (loss) from discontinued
operations.
- Stratus’ total stockholders’ equity increased to $262.4
million at June 30, 2022, from $158.1 million at December 31, 2021,
and $98.9 million at December 31, 2020, primarily as a result of
gains realized on Stratus’ sales of Block 21, The Santal and The
Saint Mary.
- Net income attributable to common stockholders totaled
$96.6 million, $11.53 per diluted share, in second-quarter 2022,
compared to a net loss attributable to common stockholders of $10.2
million, $1.23 per diluted share, in second-quarter 2021.
Second-quarter 2022 results include net income from discontinued
operations, including a gain on the sale of Block 21, of $95.9
million, compared to a net loss from discontinued operations of
$5.9 million in second-quarter 2021.
- Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) totaled $1.5 million in second-quarter
2022, compared to $(4.5) million in second-quarter 2021. For a
reconciliation of income (loss) from continuing operations to
EBITDA, see the supplemental schedule, “Reconciliation of Non-GAAP
Measure EBITDA,” on page VI.
- Stratus continues construction on The Saint June, a
182-unit luxury garden-style multi-family project within the Amarra
development in Barton Creek; Magnolia Place, an H-E-B
grocery shadow-anchored, mixed-use project in Magnolia, Texas; and
the last 12 Amarra Villas homes.
- In July 2022, Stratus entered into a $56.8 million construction
loan to provide financing for the construction of The Saint
George, a 316-unit luxury wrap-style, multi-family project in
north-central Austin. Stratus began construction on the project in
third-quarter 2022.
- Stratus’ three stabilized mixed-use projects anchored or
shadow-anchored by H-E-B grocery stores, Kingwood Place, West
Killeen Market and Jones Crossing, continue to perform
well and generate revenue. Stratus is exploring a potential sale or
refinancing of these three retail properties.
William H. Armstrong III, Chairman of the Board and Chief
Executive Officer of Stratus, stated, “I am proud to share
that the Stratus team’s execution has resulted in a 165 percent
increase in shareholders’ equity to $262.4 million at June 30,
2022, from $98.9 million at December 31, 2020. The recent quarters
have marked a significant inflection point for Stratus, with
several key developments for our shareholders. We successfully
closed the sale of Block 21; raised a total of $33.4 million of
third-party equity capital and entered into a $56.8 million
construction loan with Comerica Bank for The Saint George; and
continued to make good progress on several of the projects in our
pipeline, including The Saint June, Holden Hills, The Annie B and
The Saint Julia. We also recently closed on the sale of 28 acres of
undeveloped residential land at Magnolia Place for $3.2 million in
the third quarter.
Stratus’ Board of Directors has approved returning $50.0
million cash to shareholders, in the form of share repurchases,
dividends or a combination of both, subject to obtaining required
consents from Comerica Bank. The Block 21 sale has allowed us to
streamline our business and focus on pure residential and
residential-focused mixed-use properties in Austin and other select
Texas locations, where residential demand remains strong. The Board
has also decided to continue Stratus’ successful development
program, which has proven to maximize value for our
shareholders.
Our team’s knowledge, dedication, experience and
relationships in our Texas markets continue to provide the
foundation for Stratus to execute on our strategy and position us
to take advantage of future opportunities.”
Results of Stratus’ Strategic Planning
Process
As a result of its strategic planning process, Stratus’ Board
has approved returning $50.0 million cash to shareholders, subject
to obtaining required consents from Comerica Bank. This return of
capital could be in the form of share repurchases, dividends or a
combination. After streamlining Stratus’ business through the sale
of Block 21, the Board has decided to continue Stratus’ successful
development program, with Stratus’ proven team focusing on pure
residential and residential-focused mixed-use projects in Austin
and other select markets in Texas. Stratus plans to continue to
develop properties using project-level debt and third-party equity
capital, with Stratus receiving development management fees and
asset management fees, and with potential returns to Stratus
increasing above its relative equity interest in each project as
negotiated return hurdles are achieved. Stratus expects to reduce
its reliance on its revolving credit facility and retain sufficient
cash to operate its business, taking into account risks associated
with changing market conditions.
Stratus is exploring a potential sale or refinancing of Kingwood
Place, Jones Crossing and West Killeen Market, as previously
disclosed, and is also pursuing other projects, which may produce
additional cash to return to shareholders, subject to market
conditions and obtaining any required consents. Stratus has
undeveloped properties currently undergoing active planning,
including its two large projects Holden Hills and Section N.
Stratus will re-evaluate its strategy as development progresses on
these and other projects in its pipeline, and as market conditions
stabilize.
Summary Financial
Results
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
(In Thousands, Except Per Share
Amounts) (Unaudited)
Revenues
Real Estate Operations
$
7,927
$
773
$
7,950
$
7,333
Leasing Operations
3,200
4,863
6,280
9,681
Corporate, eliminations and other
(2
)
(5
)
(6
)
(9
)
Total consolidated revenue
$
11,125
$
5,631
$
14,224
$
17,005
Operating income
(loss)
Real Estate Operations
$
2,471
$
(807
)
$
1,103
$
1,329
Leasing Operations
1,465
1,139
7,521
a
25,292
b
Corporate, eliminations and otherc
(3,441
)
(6,212
)
(6,608
)
(10,518
)
Total consolidated operating income
(loss)
$
495
$
(5,880
)
$
2,016
$
16,103
Net income (loss) from continuing
operations
$
532
$
(4,306
)
$
2,344
$
13,868
Net income (loss) from discontinued
operations
$
95,925
d
$
(5,898
)
$
96,300
d
$
(8,406
)
Net loss (income) attributable to
noncontrolling interests in subsidiariese
$
164
$
41
$
249
$
(6,681
)
Net income (loss) attributable to common
stockholders
$
96,621
$
(10,163
)
$
98,893
$
(1,219
)
Basic net income (loss) per share:
Continuing operations
$
0.09
$
(0.52
)
$
0.31
$
0.87
Discontinued operations
11.59
(0.71
)
11.66
(1.02
)
$
11.68
$
(1.23
)
$
11.97
$
(0.15
)
Diluted net income (loss) per share:
Continuing operations
$
0.09
$
(0.52
)
$
0.31
$
0.87
Discontinued operations
11.44
(0.71
)
11.51
(1.02
)
$
11.53
$
(1.23
)
$
11.82
$
(0.15
)
EBITDA
$
1,457
$
(4,483
)
$
3,855
$
19,024
Capital expenditures and purchases and
development of real estate properties
$
20,078
$
3,759
$
39,666
$
7,257
Weighted-average shares of common stock
outstanding:
Basic
8,273
8,235
8,262
8,229
Diluted
8,383
8,235
8,369
8,229
- Includes a $4.8 million pre-tax gain recognized on the reversal
of accruals for costs to lease and construct buildings under a
master lease arrangement that Stratus entered into in connection
with its sale of The Oaks at Lakeway in 2017.
- Includes a $22.9 million pre-tax gain on the January 2021 sale
of The Saint Mary.
- Includes consolidated general and administrative expenses and
eliminations of intersegment amounts. The decreases in 2022 from
the comparable prior-year periods are primarily the result of $3.3
million incurred in second-quarter 2021 and $4.4 million incurred
for the first six months of 2021 for consulting, legal and public
relation costs for Stratus’ successful proxy contest and the real
estate investment trust exploration process.
- Includes a $119.7 million pre-tax gain ($94.1 million net of
taxes) on the May 2022 sale of Block 21.
- Represents noncontrolling interest partners' share in the
results of the consolidated projects in which they participate. For
the first six months of 2021, $6.7 million relates to the gain from
the sale of The Saint Mary allocated to noncontrolling interest
owners.
Continuing Operations
The increase in revenue and operating income from the Real
Estate Operations segment in second-quarter 2022, compared to
second-quarter 2021, reflects the second-quarter 2022 sales of an
Amarra Villas home for $2.4 million and the following undeveloped
properties: (i) a six-acre multi-family tract of land in Amarra
Drive for $2.5 million, (ii) a completed pad site at Magnolia Place
for $2.3 million and (iii) a tract of land in Austin, Texas for
$0.6 million. In August 2022, Stratus sold 28 acres of undeveloped
residential land for $3.2 million at Magnolia Place.
The decrease in revenue from the Leasing Operations
segment in second-quarter 2022, compared to second-quarter 2021,
primarily reflects the sale of The Santal in December 2021, partly
offset by increased revenue at Lantana Place. The Santal had rental
revenue of $2.3 million in second-quarter 2021. Operating income in
the segment increased due to lower rental cost of sales and
depreciation, primarily as a result of the sale of The Santal.
Discontinued Operations - Sale of Block
21
On May 31, 2022, Stratus completed the previously announced sale
of Block 21 to Ryman for $260.0 million, subject to certain
purchase price adjustments, and including Ryman’s assumption of
$136.2 million of existing mortgage debt, with the remainder paid
in cash. Stratus’ net proceeds of cash and restricted cash totaled
$112.3 million (including $6.9 million of post-closing escrow
amounts to be held for 12 months after the closing, subject to a
longer retention period with respect to any required reserve for
pending claims). Stratus recorded a pre-tax gain on the sale of
$119.7 million ($94.1 million net of taxes) in second-quarter 2022
included in net income (loss) from discontinued operations.
Debt and Liquidity
At June 30, 2022, consolidated debt totaled $114.6 million and
consolidated cash totaled $102.4 million, compared with
consolidated debt of $106.6 million and consolidated cash of $24.2
million at December 31, 2021. Consolidated debt at December 31,
2021, excluded the Block 21 loan of approximately $137 million,
which was presented in liabilities held for sale - discontinued
operations. Using proceeds from the sale of Block 21, Stratus
repaid the outstanding amount under its $60.0 million Comerica Bank
credit facility prior to June 30, 2022. As of June 30, 2022,
Stratus had $49.0 million available under the credit facility.
Letters of credit, totaling $11.0 million, have been issued under
the credit facility, and secure Stratus’ obligation to build
certain roads and utilities facilities benefiting Holden Hills and
Section N.
In July 2022, a Stratus subsidiary entered into a $56.8 million
loan with Comerica Bank to provide financing for the construction
of The Saint George multi-family project. The construction loan has
a maturity date of July 19, 2026, with two options to extend the
maturity for an additional 12 months, subject to satisfying
specified conditions. In connection with closing the construction
financing, Stratus made an additional capital contribution of $1.7
million, and the unaffiliated Class B limited partner made an
additional capital contribution of $15.0 million, bringing Stratus’
total capital contributions to $3.7 million and the Class B limited
partner’s total capital contributions to $33.4 million.
Purchases and development of real estate properties (included in
operating cash flows) and capital expenditures (included in
investing cash flows) totaled $39.7 million for the first six
months of 2022, primarily related to the development of The Saint
June, Magnolia Place and Barton Creek properties, including Amarra
Villas, compared with $7.3 million for the first six months of
2021, primarily related to the development of Barton Creek
properties, including Amarra Villas, Lantana Place and Magnolia
Place.
----------------------------------------------
Conference Call
Information
Stratus will conduct an investor conference call to discuss its
unaudited second-quarter 2022 financial and operating results
today, August 15, 2022, 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 29,
2022, by dialing (877) 344-7529 for domestic access and by dialing
+1 (412) 317-0088 for international access. Please use replay ID:
1725319. The replay will also be available on Stratus’ website at
stratusproperties.com until August 29,
2022.
__________________________
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, future cash flows and liquidity, 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
inflation and interest rate changes, future capital expenditures
and financing plans, possible joint ventures, partnerships, or
other strategic relationships, other plans and objectives of
management for future operations and development projects, and
future cash returns to shareholders, including any share
repurchases and/or dividend payments. The words “anticipate,”
“may,” “can,” “plan,” “believe,” “potential,” “estimate,” “expect,”
“project,” "target," “intend,” “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 debt agreements, Stratus is not
permitted to repurchase its common stock in excess of $1.0 million
or pay dividends on its common stock without Comerica Bank’s prior
written consent. The declaration of dividends or decision to
repurchase Stratus’ common stock is at the discretion of Stratus’
Board, subject to restrictions under Stratus’ Comerica Bank debt
agreements, 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,
the ongoing COVID-19 pandemic and any future major public health
crisis, increases in inflation and interest rates, supply chain
constraints, declines in the market value of Stratus’ assets,
increases in operating and construction costs, including real
estate taxes and the cost of building materials and labor, 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 collect
anticipated rental payments and close projected asset sales, the
availability and terms of financing for development projects and
other corporate purposes, Stratus’ ability to enter into and
maintain joint ventures, partnerships, or other strategic
relationships, including risks associated with such joint ventures,
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, including as a result of
the war in Ukraine, reductions in discretionary spending by
consumers and businesses, competition from other real estate
developers, 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, the failure to attract customers or
tenants for its developments or such customers’ or tenants’ failure
to satisfy their purchase commitments or leasing obligations,
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- and
climate-related risks, loss of key personnel, environmental and
litigation risks, 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,
2021, and Quarterly Report on Form 10-Q for the quarter ended June
30, 2022, each filed with the Securities Exchange Commission
(SEC).
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 income (loss) from continuing operations 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 INCOME (LOSS) (Unaudited)
(In Thousands, Except Per Share
Amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
Revenues:
Real estate operations
$
7,925
$
768
$
7,944
$
7,324
Leasing operations
3,200
4,863
6,280
9,681
Total revenues
11,125
5,631
14,224
17,005
Cost of sales:
Real estate operations
5,432
1,532
6,798
5,892
Leasing operations
870
2,192
1,854
4,244
Depreciation
884
1,566
1,757
3,152
Total cost of sales
7,186
5,290
10,409
13,288
General and administrative expensesa
3,444
6,221
6,611
10,545
Gain on sale of assets
—
—
(4,812
)b
(22,931
)c
Total
10,630
11,511
12,208
902
Operating income (loss)
495
(5,880
)
2,016
16,103
Interest expense, net
—
(779
)
(15
)
(1,835
)
Loss on extinguishment of debt
—
(163
)
—
(226
)
Other income, net
80
1
86
4
Income (loss) before income taxes and
equity in unconsolidated affiliates' loss
575
(6,821
)
2,087
14,046
(Provision for) benefit from income
taxes
(41
)
2,522
261
(169
)
Equity in unconsolidated affiliates'
loss
(2
)
(7
)
(4
)
(9
)
Net income (loss) from continuing
operations
532
(4,306
)
2,344
13,868
Net income (loss) from discontinued
operations
95,925
d
(5,898
)
96,300
d
(8,406
)
Net income (loss) and total comprehensive
income (loss)
96,457
(10,204
)
98,644
5,462
Total comprehensive loss (income)
attributable to noncontrolling interestse
164
41
249
(6,681
)
Net income (loss) and total comprehensive
income (loss) attributable to common stockholders
$
96,621
$
(10,163
)
$
98,893
$
(1,219
)
Basic net income (loss) per share
attributable to common stockholders:
Continuing operations
$
0.09
$
(0.52
)
$
0.31
$
0.87
Discontinued operations
11.59
(0.71
)
11.66
(1.02
)
$
11.68
$
(1.23
)
$
11.97
$
(0.15
)
Diluted net income (loss) per share
attributable to common stockholders:
Continuing operations
$
0.09
$
(0.52
)
$
0.31
$
0.87
Discontinued operations
11.44
(0.71
)
11.51
(1.02
)
$
11.53
$
(1.23
)
$
11.82
$
(0.15
)
Weighted-average shares of common stock
outstanding:
Basic
8,273
8,235
8,262
8,229
Diluted
8,383
8,235
8,369
8,229
- The decreases in 2022 from the comparable prior-year periods
are primarily the result of $3.3 million incurred in second-quarter
2021 and $4.4 million incurred for the first six months of 2021 for
consulting, legal and public relation costs for Stratus' successful
proxy contest and the real estate investment trust (REIT)
exploration process.
- Represents a pre-tax gain recognized on the reversal of
accruals for costs to lease and construct buildings under a master
lease arrangement that Stratus entered into in connection with its
sale of The Oaks at Lakeway in 2017.
- Represents the pre-tax gain on the January 2021 sale of The
Saint Mary.
- Includes a $119.7 million pre-tax gain ($94.1 million net of
taxes) on the May 2022 sale of Block 21.
- Represents noncontrolling interest partners' share in the
results of the consolidated projects in which they participate. For
the first six months of 2021, $6.7 million relates to the gain from
the sale of The Saint Mary allocated to noncontrolling interest
owners.
STRATUS PROPERTIES
INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
June 30, 2022
December 31, 2021
ASSETS
Cash and cash equivalents
$
102,372
a
$
24,229
Restricted cash
8,162
18,294
Real estate held for sale
1,773
1,773
Real estate under development
212,421
181,224
Land available for development
45,174
40,659
Real estate held for investment, net
88,935
90,284
Lease right-of-use assets
10,350
10,487
Deferred tax assets
177
6,009
Other assets
15,296
17,214
Assets held for sale - discontinued
operations
—
151,053
Total assets
$
484,660
$
541,226
LIABILITIES AND EQUITY
Liabilities:
Accounts payable
$
15,680
$
14,118
Accrued liabilities, including taxes
18,261
22,069
Debt
114,591
106,648
Lease liabilities
14,206
13,986
Deferred gain
4,055
4,801
Other liabilities
5,211
b
17,894
Liabilities held for sale - discontinued
operations
—
153,097
Total liabilities
172,004
332,613
Commitments and contingencies
Equity:
Stockholders' equity:
Common stock
94
94
Capital in excess of par value of common
stock
194,610
188,759
Retained earnings (accumulated
deficit)
89,930
(8,963
)
Common stock held in treasury
(22,205
)
(21,753
)
Total stockholders' equity
262,429
158,137
Noncontrolling interests in
subsidiaries
50,227
50,476
Total equity
312,656
208,613
Total liabilities and equity
$
484,660
$
541,226
- Increase primarily reflects the proceeds received from the May
2022 sale of Block 21.
- Decrease primarily reflects the reduction in liabilities
associated with Stratus’ Profit Participation Incentive Plan (PPIP)
as certain PPIP awards have been paid out in cash or restricted
stock units to eligible participants.
STRATUS PROPERTIES
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
(In Thousands)
Six Months Ended
June 30,
2022
2021
Cash flow from operating activities:
Net income
$
98,644
$
5,462
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation
1,757
5,926
Cost of real estate sold
3,599
3,341
Gain on sale of discontinued
operations
(119,695
)
—
Gain on sale of assets
(4,812
)
(22,931
)
Loss on extinguishment of debt
—
226
Debt issuance cost amortization and
stock-based compensation
1,107
969
Equity in unconsolidated affiliates'
loss
4
9
Deferred income taxes
5,832
—
Purchases and development of real estate
properties
(12,091
)
(4,879
)
Decrease (increase) in other assets
3,112
(1,309
)
Decrease in accounts payable, accrued
liabilities and other
(21,098
)
(1,804
)
Net cash used in operating activities
(43,641
)
(14,990
)
Cash flow from investing activities:
Proceeds from sale of discontinued
operations
105,813
—
Proceeds from sale of assets
—
59,488
Capital expenditures
(27,575
)
(2,378
)
Payments on master lease obligations
(418
)
(643
)
Other, net
—
37
Net cash provided by investing
activities
77,820
56,504
Cash flow from financing activities:
Borrowings from credit facility
30,000
29,000
Payments on credit facility
(30,000
)
(26,778
)
Borrowings from project loans
12,455
25,355
Payments on project and term loans
(5,582
)
(52,040
)
Stock-based awards net payments
(452
)
(157
)
Distributions to noncontrolling
interests
—
(13,087
)
Financing costs
(205
)
(1,106
)
Net cash provided by (used in) financing
activities
6,216
(38,813
)
Net increase in cash, cash equivalents and
restricted cash
40,395
2,701
Cash, cash equivalents and restricted cash
at beginning of year
70,139
34,183
Cash, cash equivalents and restricted cash
at end of period
$
110,534
$
36,884
STRATUS PROPERTIES INC. BUSINESS
SEGMENTS
As a result of the sale of Block 21, Stratus currently has two
operating segments: Real Estate Operations and Leasing Operations.
Block 21, which encompassed Stratus’ hotel and entertainment
segments, along with some leasing operations, is reflected as
discontinued operations through its sale in May 2022.
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 Section N, Holden Hills, Amarra multi-family and
commercial land, Amara Villas, The Saint June and other vacant land
in the Barton Creek community; the Circle C community; the Lantana
community, including a portion of Lantana Place planned for a
multi-family phase now known as The Saint Julia; The Saint George;
and the land for The Annie B); 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 (one
vacant pad site at West Killeen Market, for which a sale is
pending); and in Magnolia, Texas (Magnolia Place), Kingwood, Texas
(land for future multi-family development, for which a sale is
pending, and a vacant pad site) 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 West Killeen Market, Lantana
Place, Kingwood Place and the completed portion of Jones Crossing.
The segment also included The Saint Mary until its sale in January
2021 and The Santal until its sale in December 2021.
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
Corporate, Eliminations and
Otherb
Total
Three Months Ended June 30, 2022:
Revenues:
Unaffiliated customers
$
7,925
$
3,200
$
—
$
11,125
Intersegment
2
—
(2
)
—
Cost of sales, excluding depreciation
5,432
870
—
6,302
Depreciation
24
865
(5
)
884
General and administrative expenses
—
—
3,444
c
3,444
Operating income (loss)
$
2,471
$
1,465
$
(3,441
)
$
495
Capital expenditures and purchases and
development of real estate properties
$
7,227
$
12,820
$
31
$
20,078
Total assets at June 30, 2022
265,929
106,020
112,711
d
484,660
Three Months Ended June 30, 2021:
Revenues:
Unaffiliated customers
$
768
$
4,863
$
—
$
5,631
Intersegment
5
—
(5
)
—
Cost of sales, excluding depreciation
1,532
2,192
—
3,724
Depreciation
48
1,532
(14
)
1,566
General and administrative expenses
—
—
6,221
6,221
Operating (loss) income
$
(807
)
$
1,139
$
(6,212
)
$
(5,880
)
Capital expenditures and purchases and
development of real estate properties
$
2,390
$
1,211
$
158
$
3,759
Total assets at June 30, 2021
165,624
180,428
e
164,289
f
510,341
Six Months Ended June 30, 2022:
Revenues:
Unaffiliated customers
$
7,944
$
6,280
$
—
$
14,224
Intersegment
6
—
(6
)
—
Cost of sales, excluding depreciation
6,798
1,854
—
8,652
Depreciation
49
1,717
(9
)
1,757
General and administrative expenses
—
—
6,611
c
6,611
Gain on sale of assets
—
(4,812
)
g
—
(4,812
)
Operating income (loss)
$
1,103
$
7,521
$
(6,608
)
$
2,016
Capital expenditures and purchases and
development of real estate properties
$
12,091
$
27,362
$
213
$
39,666
Six Months Ended June 30, 2021:
Revenues:
Unaffiliated customers
$
7,324
$
9,681
$
—
$
17,005
Intersegment
9
—
(9
)
—
Cost of sales, excluding depreciation
5,892
4,244
—
10,136
Depreciation
112
3,076
(36
)
3,152
General and administrative expenses
—
—
10,545
10,545
Gain on sale of assets
—
(22,931
)
h
—
(22,931
)
Operating income (loss)
$
1,329
$
25,292
$
(10,518
)
$
16,103
Capital expenditures and purchases and
development of real estate properties
$
4,879
$
2,113
$
265
$
7,257
- Includes sales commissions and other revenues together with
related expenses.
- Includes consolidated general and administrative expenses and
eliminations of intersegment amounts.
- The decreases in 2022 from the comparable prior-year periods
are primarily the result of $3.3 million incurred in second-quarter
2021 and $4.4 million incurred for the first six months of 2021 for
consulting, legal and public relation costs for Stratus’ successful
proxy contest and the REIT exploration process.
- Includes $102.3 million of cash and cash equivalents, primarily
received from the May 2022 sale of Block 21.
- Includes $67.9 million of assets held for sale related to the
December 2021 sale of The Santal.
- Includes $144.2 million of assets held for sale associated with
discontinued operations at Block 21.
- Represents a pre-tax gain recognized on the reversal of
accruals for costs to lease and construct buildings under a master
lease arrangement that Stratus entered into in connection with its
sale of The Oaks at Lakeway in 2017.
- Represents the pre-tax gain on the January 2021 sale of The
Saint Mary.
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 income
(loss) from continuing operations 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
income (loss) from continuing operations to EBITDA follows (in
thousands).
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Net income (loss) from continuing
operations
$
532
$
(4,306
)
$
2,344
a
$
13,868
b
Depreciation
884
1,566
1,757
3,152
Interest expense, net
—
779
15
1,835
Provision for (benefit from) income
taxes
41
(2,522
)
(261
)
169
EBITDAc
$
1,457
$
(4,483
)
$
3,855
$
19,024
- Includes a $4.8 million pre-tax gain recognized on the reversal
of accruals for costs to lease and construct buildings under a
master lease arrangement that Stratus entered into in connection
with its sale of The Oaks at Lakeway in 2017.
- Includes a pre-tax gain on the January 2021 sale of The Saint
Mary of $22.9 million ($16.2 million net of noncontrolling
interests).
- The impact of accounting for the Block 21 sale as discontinued
operations reduced EBITDA by $122.8 million in second-quarter 2022,
less than $0.1 million in second-quarter 2021 and $125.2 million
for the first six months of 2022, and increased EBITDA by $1.6
million for the first six months of 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220813005021/en/
Financial and Media Contact: William H. Armstrong III
(512) 478-5788
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