b.~~Excludes 78 thousand shares~~Table of ~~common stock associated with RSUs and stock options that were anti-dilutive as a result of the net loss.~~Contents

3. ~~RELATED PARTY TRANSACTIONS~~LIMITED PARTNERSHIPS

Stratus, through its subsidiaries, is a partner in the following limited partnerships: The Saint George Apartments, L.P., Stratus Block 150, L.P., The Saint June, L.P., Stratus Kingwood Place, L.P. and The Saint Mary, L.P. In June 2018, The Saint Mary, L.P., a Texas limited partnership and a subsidiary of Stratus, completed a series of financing transactions to develop The Saint Mary, a 240-unit luxury, garden-style apartment project in the Circle C community in Austin, Texas. The financing transactions included a $26.0 million construction loan with Texas Capital Bank, National Association and an $8.0 million private placement. As one of the participants in the private placement offering, LCHM Holdings, LLC (LCHM), a related party as a result of its greater than 5 percent beneficial ownership of Stratus’ common stock, purchased limited partnership interests representing a 6.1 percent equity interest in The Saint Mary, L.P. ReferFor additional information regarding Stratus' partnerships, refer to Note 2 ofin the Stratus ~~2020~~2021 Form ~~10-K for further discussion.~~

~~The Saint Mary, L.P. sold The Saint Mary property in January 2021. In connection with the sale, The Saint Mary, L.P. distributed $1.8 million to LCHM. Refer to Note 4 for further discussion.~~10-K.

Stratus ~~Kingwood Place,~~Block 150, L.P. In ~~August 2018, Stratus Kingwood Place, L.P., a Texas~~the first quarter of 2022, pursuant to the limited partnership ~~and a subsidiary~~agreement, wholly owned subsidiaries of Stratus ~~(the Kingwood,~~contributed an additional $1.4 million in cash to Stratus Block 150, L.P.~~), completed a $10.7 million private placement, approximately $7 million~~ No additional capital contributions are required to be made by the partners. As of which, combined with a $6.75 million loan from Comerica Bank, was used to purchase a 54-acre tract of land located in Kingwood, Texas for $13.5 million, for the development of Kingwood Place, a H-E-B, L.P.-anchored, mixed-use development project (Kingwood Place). As one of the participantsMarch 31, 2022, Stratus holds, in the ~~private placement offering, LCHM purchased limited partnership interests initially representing an 8.8~~aggregate, a 31.0 percent indirect controlling equity interest in Stratus Block 150, L.P. As of March 31, 2022, JBM Trust, a related party to Stratus, holds a 5.9 percent equity interest in ~~the Kingwood,~~Stratus Block 150, L.P. ~~Refer~~For additional information regarding Stratus' related parties, including JBM Trust, refer to ~~Note~~Notes 1 and 2 ofin the Stratus ~~2020~~2021 Form ~~10-K for further discussion.~~10-K.

Accounting for Limited Partnerships.Stratus has performed evaluations and concluded that The Saint ~~Mary,~~George Apartments, L.P., Stratus Block 150, L.P., The Saint June, L.P., Stratus Kingwood, L.P. and ~~the Kingwood,~~The Saint Mary, L.P. are variable interest entities and that Stratus is the primary beneficiary. Accordingly, the partnerships’ results are consolidated in Stratus’ financial statements. Stratus will continue to evaluate which entity is the primary beneficiary of ~~The Saint Mary, L.P. and the Kingwood, L.P.~~these partnerships in accordance with applicable accounting guidance. ~~The Saint Mary, L.P. and the Kingwood, L.P.’s results are consolidated in Stratus’ financial statements.~~

Stratus’ consolidated balance sheets include the following assets and liabilities of the partnerships (in thousands):


	March 31, 2022		December 31, 2021
Assets:
Cash and cash equivalents	$	8,504	$	7,432
Restricted cash	5,170		11,809
Real estate under development	72,776		62,692
Land available for development	7,702		7,641
Real estate held for investment	31,417		31,399
Other assets	3,159		3,160
Total assets	128,728		124,133
Liabilities:
Accounts payable and accrued liabilities	9,894		6,661

Debt	46,334		46,096
Total liabilities	56,228		52,757
Net assets	$	72,500	$	71,376

4. ASSET SALES

Block 21 Pending Sale - Discontinued Operations. Block 21 is Stratus’ wholly owned mixed-use real estate property in downtown Austin, Texas. Block 21 contains the 251-room W Austin Hotel and is home to Austin City Limits Live at the Moody Theater, a 2,750-seat entertainment venue that serves as the location for the filming of Austin City Limits, the longest running music series in American television history. Block 21 also includes Class A office space, retail space and the 3TEN ACL Live entertainment venue and business.

In December 2019, Stratus announced that it had agreed to sell Block 21 to Ryman Hospitality Properties, Inc. (Ryman) for $275.0 million. Ryman deposited $15.0 million in earnest money to secure its performance under the agreements governing the sales. In May 2020, Ryman delivered a termination letter, which was agreed to and accepted by Stratus, terminating the agreements to sell Block 21 and authorizing the release of Ryman’s $15.0 million in earnest money to Stratus, which Stratus recorded as operating income in 2020.

In October 2021, Stratus entered into new agreements to sell Block 21 to Ryman for $260.0 million. The purchase price includes Ryman’s assumption of approximately $137 million of existing Block 21 mortgage debt and is subject to an expected downward adjustment of $5.0 million. The remainder of the purchase price will be paid in cash. The transaction is expected to close prior to June 1, 2022, but remains subject to the timely satisfaction or waiver of various closing conditions, including the consent of the loan servicer to the purchaser’s assumption of the existing mortgage loan; the consent of the hotel operator, an affiliate of Marriott, to the purchaser’s assumption of the hotel operating agreement; the absence of a material adverse effect; and other customary closing conditions. The Block 21 purchase agreement will terminate if all conditions to closing are not satisfied or waived by the parties. Ryman has deposited $5.0 million in earnest money to secure its performance under the agreements governing the sale. Of the total purchase price, $6.9 million will be held in escrow for 12 months after the closing, subject to a longer retention period with respect to any required reserve for pending claims.

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~~Stratus’~~In accordance with accounting guidance, Stratus reported the results of operations of Block 21 as discontinued operations in the consolidated ~~balance sheets include~~statements of comprehensive income because the ~~following~~disposal represents a strategic shift that had a major effect on operations, and presented the assets and liabilities of ~~the Kingwood, L.P. (in thousands). The assets and liabilities of The Saint Mary (primarily the real estate held for investment and the related debt) are presented~~Block 21 as held for sale - discontinued operations in ~~Stratus'~~the consolidated balance sheets asfor all periods presented. Block 21 did not have any other comprehensive income and Stratus' consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations.

The carrying amounts of Block 21's major classes of assets and liabilities in the consolidated balance sheets follow (in thousands):


	March 31, 2022		December 31, 2021
Assets:
Cash and cash equivalents	$	9,509	$	9,172
Restricted casha	17,942		18,444
Real estate held for investment, net	120,634		120,452
Other assets	3,087		2,985
Total assets	$	151,172	$	151,053
Liabilities:
Accounts payable and accrued liabilities, including taxes	$	4,268	$	6,200
Debtb	136,054		136,684
Other liabilities	9,395		10,213
Total liabilities	$	149,717	$	153,097

a.Most restricted cash would be received by Ryman upon the closing of the sale.

b.In 2016, Stratus completed the refinancing of the W Austin Hotel & Residences. Goldman Sachs Mortgage Company provided a $150.0 million, ten-year, non-recourse term loan with a fixed interest rate of 5.58 percent per annum and payable monthly based on a 30-year amortization. Balances include net reductions for unamortized debt issuance costs of $0.5 million at March 31, 2022, and $0.6 million at December 31, ~~2020.~~

March 31, 2021 December 31, 2020
Assets:
Cash and cash equivalents $ 437 $ 745
Real estate under development 2,380 2,380
Land available for development 8,155 8,143
Real estate held for investment 31,810 31,962
Other assets 2,060 2,195
Total assets 44,842 45,425
Liabilities:
Accounts payable and accrued liabilities 669 850
Debt 31,469 31,215
Total liabilities 32,138 32,065
Net assets $ 12,704 $ 13,360

~~Other Transactions.~~ Stratus has an arrangement with Austin Retail Partners for services provided by a consultant of Austin Retail Partners who is the son of Stratus' President and Chief Executive Officer. Payments to Austin Retail Partners for the consultant's consulting services and expense reimbursements totaled $37 thousand in first-quarter 2021 and $39 thousand in first-quarter 2020.2021.

Block 21’s results of operations in the consolidated statements of comprehensive income consists of the following (in thousands):

~~4. DISPOSITIONS~~


	Three Months Ended March 31,
	2022			2021
Revenues:a
Hotel	$	5,871		$	2,118
Entertainment	5,340			608
Leasing operations and other	726			414
Total revenue	11,937			3,140
Cost of sales:
Hotel	4,743			2,901
Entertainment	4,139			1,279
Leasing operations and other	471			337
Depreciation	—		b	1,416
Total cost of sales	9,353			5,933
General and administrative expenses	100			220

Operating income (loss)	2,484			(3,013)
Interest expense, net	(1,945)			(1,979)

(Provision for) benefit from income taxes	(164)			2,484
Net income (loss)	$	375		$	(2,508)

a.In accordance with accounting guidance, amounts are net of eliminations of intercompany sales totaling $321 thousand in first-quarter 2022 and $262 thousand in first-quarter 2021.

b.In accordance with accounting guidance, depreciation is not recognized subsequent to classification as assets held for sale, which occurred in the fourth quarter of 2021.

Capital expenditures associated with discontinued operations totaled $182 thousand in first-quarter 2022 and $107 thousand in first-quarter 2021.

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The Oaks at Lakeway. In 2017, Stratus sold The Oaks at Lakeway to FHF I Oaks at Lakeway, LLC for $114.0 million in cash. The Oaks at Lakeway is an H-E-B, L.P.-anchored retail project located in Lakeway, Texas. The parties entered into three master lease agreements at closing: (1) one covering unleased in-line retail space, with a 5-year term (the In-line Master Lease), (2) one covering the hotel pad with a 99-year term (the Hotel Master Lease) and (3) one covering four unleased pad sites, three of which have 10-year terms, and one of which has a 15-year term (the Pad Site Master Lease). For additional information, refer to Note 9 in the Stratus 2021 Form 10-K under the heading “Deferred Gain on Sale of The Oaks at Lakeway.”

The In-Line Master Lease expired in February 2022 and the Hotel Master Lease was terminated in November 2020. As such, Stratus has no further obligations under these two master leases. With respect to the Pad Site Master Lease, Stratus has leased the one pad site with a 15-year term, reducing the monthly rent payment net of rent collections for this pad site to approximately $2,500. Stratus may assign this lease to the purchaser and terminate the obligation under the Pad Site Master Lease for this pad site with a payment of $560,000 to the purchaser. The lease term for the remaining three unleased pad sites under the Pad Site Master Lease expires in February 2027. To the extent leases are executed for the remaining three unleased pad sites, tenants open for business, and the leases are then assigned to the purchaser, the master lease obligation could be reduced further.

In the first quarter of 2022, Stratus reassessed its plans with respect to construction of the remaining buildings on the three remaining unleased pad sites and determined that, rather than execute leases and build the buildings, it is less costly to continue to pay the monthly rent (approximately $77 thousand per month) pursuant to the Pad Site Master Lease until the lease expires in February 2027. In connection with this determination, Stratus reversed an accrual of costs to lease and construct these buildings, resulting in recognition of an additional $4.8 million of gain in first-quarter 2022. A contract liability of $4.3 million is presented as a deferred gain in the consolidated balance sheets at March 31, 2022, compared with $4.8 million at December 31, 2021. The reduction in the deferred gain balance primarily reflects master lease payments. The remaining deferred gain balance is expected to be reduced primarily by future master lease payments.

The Saint Mary. In January 2021, The Saint Mary, L.P. sold The Saint Mary for $60.0 million. After closing costs and payment of the outstanding construction loan, the sale generated net proceeds of approximately $34 million. ~~After~~In first-quarter 2021, after establishing a reserve for remaining costs of the partnership, Stratus received $20.9 million from the subsidiary in connection with the sale and $12.9 million of the net proceeds were distributed to the noncontrolling interest owners. Stratus recognized a pre-tax gain on the sale of $22.9 million ($16.2 million net of noncontrolling interests) in ~~the first quarter of~~first-quarter 2021. Stratus also recognized a $63 thousand loss on extinguishment of debt in first-quarter 2021 related to the repayment of The Saint Mary construction loan.

Stratus reported the assets and liabilities of The Saint Mary as held for sale in its December 31, 2020, consolidated balance sheet. The carrying amounts of the major classes of assets and liabilities for The Saint Mary as of December 31, 2020, follow (in thousands):

~~Assets:~~

~~Real estate held for investment, net~~

~~36,341~~

~~Other assets~~

~~175~~

~~Total assets held for sale~~

~~36,516~~

~~Liabilities:~~

~~Accrued liabilities~~

~~Debt~~

~~25,319~~

~~Other liabilities~~

~~220~~

~~Total liabilities held for sale~~

~~25,607~~

The Saint Mary had rental revenue of $0.1 million in first-quarter 2021 prior to the ~~sale and $0.7 million in first-quarter 2020.~~sale. Interest expense, net of capitalized amounts, related to The Saint Mary construction loan was less than $0.1 million in first-quarter 2021.

Kingwood Place Pending Land Sale. In September 2021, ~~and $0.3 million in first-quarter 2020.~~

Stratus entered into a contract to sell the multi-family tract of land at Kingwood Place, which was planned for approximately 275 multi-family units, for $5.5 million. The sale, if consummated, is expected to close by mid-2022.

5. FAIR VALUE MEASUREMENTS

Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

The carrying value for certain Stratus financial instruments (i.e., cash and cash equivalents, restricted cash, accounts payable and accrued liabilities) approximates fair value because of their short-term nature and generally negligible credit losses.

A summary of the carrying amount and fair value of Stratus' debt follows (in thousands):


	March 31, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value



Liabilities:
Debt	$	121,446	$	122,747	$	106,648	$	108,091

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~~A summary of the carrying amount and fair value of Stratus' other financial instruments follows (in thousands):~~

March 31, 2021 December 31, 2020
Carrying
Value Fair
Value Carrying
Value Fair
Value
Liabilities:
Debt $ 339,213 $ 342,214 $ 351,055 $ 354,380

~~Debt.~~ Stratus' debt is recorded at cost and is not actively traded. Fair value is estimated based on discounted future expected cash flows at estimated current market interest rates. Accordingly, Stratus' debt is classified within Level 2 of the fair value hierarchy. The fair value of debt does not represent the amounts that will ultimately be paid upon the maturities of the loans.

6. DEBT

The components of Stratus' debt ~~are as follows~~follow (in thousands):

March 31, 2021 December 31, 2020
Block 21 loan $ 138,417 $ 139,013
The Santal loan 74,439 74,343
Comerica Bank credit facility 34,077 43,304
New Caney land loan 4,485 4,949
Paycheck Protection Program (PPP) loan 3,987 3,987
Construction loans:
Kingwood Place 31,469 31,215
Jones Crossing 22,370 22,377
Lantana Place 21,926 24,051
West Killeen Market 6,674 6,707
Amarra Villas credit facility 1,369 1,109
Total debta
$ 339,213 $ 351,055


	March 31, 2022		December 31, 2021




Comerica Bank credit facility	$	10,000	$	—
Jones Crossing loan	24,067		24,042
The Annie B land loan	13,877		13,847
New Caney land loan	4,262		4,496
Paycheck Protection Program loan	38		156
Construction loans:
Kingwood Place	32,457		32,249

Lantana Place	21,997		22,098
Magnolia Place	6,542		2,077
West Killeen Market	6,040		6,078
Amarra Villas credit facility	2,166		1,605

Total debta	$	121,446	$	106,648

a.Includes net reductions for unamortized debt issuance costs of ~~$1.9~~$1.1 million at March 31, ~~2021,~~2022, and ~~$2.2~~$1.2 million at December 31, ~~2020.~~2021. Total debt does not include debt associated with Block 21, which is reflected in liabilities held for sale. Refer to Note 4 for further discussion.

Comerica Bank credit facility.As of March 31, ~~2021,~~2022, Stratus had ~~$25.8~~$49.7 million available under its $60.0 million Comerica Bank credit facility, with ~~a $150 thousand letter~~letters of credit totaling $347 thousand committed against the credit facility. In April 2022, Stratus borrowed $20.0 million on the credit facility, of which the majority of the funds were used to make a U.S. Federal tax payment for Stratus’ 2021 tax liability. In May 2022, Stratus and Comerica Bank entered into an amendment to extend the maturity date of the Comerica Bank credit facility from September 27, 2022, to December 26, 2022, increase the letter of credit sublimit from $7.5 million to $11.5 million and change the benchmark rate from the London Interbank Offered Rate (LIBOR) to the Bloomberg Short-Term Bank Yield Index (BSBY) Rate. Advances under the credit facility now bear interest at the one-month BSBY Rate (with a floor of 0.0 percent) plus 4.0 percent.

New Caney land loan. In ~~January 2021,~~March 2022, Stratus extended the maturity of the loan for an additional 12 months to March 8, 2023, which required a principal payment of $0.2 million and will require a second principal payment of $0.2 million in September 2022. Stratus also entered into an amendment to the Lantana Place construction loan in which Stratus' Lantana Place subsidiary was granted a waiver of the debt service coverage ratio covenant until September 30, 2021, at which point the ratio is measured by reference to the three-month period then ended, and subsequently builds each quarter until measured by reference to the 12-month period ending June 30, 2022, and then on a trailing 12-month period for each quarter thereafter. As part of the January 2021 amendment, Stratus repaid $2.0 million in principal on the Lantana Place construction loan.

~~In March 2021, Stratus exercised its option to extend the~~ New Caney land loan ~~for an additional 12 months~~to convert the benchmark rate from ~~March 8, 2021,~~LIBOR to ~~March 8, 2022, which required a principal payment of $0.5 million.~~the Secured Overnight Financing Rate (SOFR). The loan now bears interest at SOFR plus 3.0 percent, subject to the applicable margin adjustment.

In April 2021, Stratus entered into an amendment to The Santal loan to (i) extend the maturity date from October 5, 2022, to October 5, 2024 (and remove two options to extend the maturity date for an additional 12 months); (ii) revise the interest rate from LIBOR (or, if applicable, a replacement rate) plus 2.85 percent, with a 4.80 percent floor, to LIBOR (or, if applicable, a replacement rate) plus 3.25 percent, with a 3.40 percent floor; (iii) eliminate the requirement that Stratus' Santal subsidiary make minimum amortization payments beginning in November 2022; (iv) extend the period during which The Santal loan may not be prepaid from April 2020 to June 2022; and (v) revise certain events or circumstances that would qualify as an event of default or violate the prohibition on conveyances under the applicable provisions.

PPP loan.

In April 2020, Stratus received a $4.0 million loan under the Paycheck Protection Program (PPP loan) of the Coronavirus Aid, Relief, and Economic Security Act, ~~(the CARES Act),~~ which was signed into law on March 27, 2020. The PPP loan ~~accrues interest at one percent~~matured and ~~will mature~~the remaining balance was repaid by Stratus on April 15, ~~2022, except for~~2022. Of the ~~portion that may be forgiven. The proceeds from the~~original loan were to be used to retain workers and maintain payroll or make mortgage interest payments, lease payments and utility payments. Stratus intends to apply for forgiveness of its PPP loan prior to the June 2021 deadline; however, no assurance of full forgiveness can be provided.

~~Table of Contents~~amount, $3.7 million was forgiven in August 2021.

Lantana Place construction loan. In January 2022, Stratus entered into an amendment to the Lantana Place construction loan to extend the date through which Stratus can request advances under the loan through December 31, 2022.

Amarra Villas credit facility.In March 2022, Stratus subsidiaries and Comerica Bank agreed to an extension of the maturity date to June 19, 2022, while they negotiate a modification of this facility.

For additional information regarding Stratus' debt, refer to Note 6 in the Stratus ~~2020~~2021 Form 10-K.

Interest Expense and Capitalization. Interest costs (before capitalized interest) totaled ~~$4.3~~$1.1 million in first-quarter ~~2021~~2022 and ~~$5.2~~$2.3 million in first-quarter ~~2020.~~2021. Stratus' capitalized interest totaled $1.1 million in first-quarter 2022 and $1.3 million in ~~both~~ first-quarter ~~2021 and first-quarter 2020,~~2021. Capitalized interest is primarily related to development activities at Barton ~~Creek.~~Creek, The Annie B, The Saint George and Magnolia Place.

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7. PROFIT PARTICIPATION INCENTIVE PLAN

In July 2018, the Compensation Committee ~~of Stratus' Board of Directors (the Committee)~~ unanimously adopted the ~~Stratus Profit Participation Incentive Plan (the Plan),~~PPIP, which provides participants with economic incentives tied to the success of the development projects designated by the Compensation Committee as approved projects under the ~~Plan.~~PPIP. Estimates related to the awards may change over time as a result of differences between projected and actual development progress and costs, market conditions and the timing of capital transactions or valuation events. During the first quarter of 2022, the Compensation Committee designated The Saint June as an approved project under the PPIP although no awards for this project were granted as of March 31, 2022. Refer to Note 8 of the Stratus ~~2020~~2021 Form 10-K for further discussion.

During first-quarter 2021, Stratus added $0.2 million to project development costs and charged $0.5 million to general and administrative expense related to the Plan. In March 2021, Stratus granted 53,411 stock-settled RSUs with a grant-date value of $1.5 million, based on Stratus' stock price on the date of issuance, under the Plan for West Killeen Market, which reached a valuation event under the Plan in October 2020. Stratus transferred the $1.2 million accrued liability balance under the Plan for West Killeen Market to capital in excess of par value and will amortize the $0.3 million balance of the grant date value with a charge to general and administrative expenses and a credit to capital in excess of par value over the three-year vesting period of the RSUs. The sale of The Saint Mary in January 2021 was a capital transaction under the ~~Plan.~~PPIP. During February 2022, $2.1 million was paid in cash to eligible participants.

In September 2021, Lantana Place reached a valuation event under the PPIP. The profit pool was $3.9 million, of which $0.2 million was paid in cash during February 2022. The remaining accrued liability under the ~~Plan~~PPIP related to ~~The Saint Mary project~~Lantana Place totaled ~~$2.2~~$3.7 million at March 31, ~~2021,~~2022, and is expected to be settled in RSUs awarded to eligible participants in the first half of 2022.

The sale of The Santal in December 2021 was a capital transaction under the PPIP. During February 2022, $5.0 million was paid in cash to eligible participants, ~~no later than~~subject to the PPIP’s limits on cash compensation paid to certain officers. Amounts due under the PPIP above the limits are converted to an equivalent number of RSUs with a one-year vesting period. The remaining accrued liability under the PPIP related to The Santal totaled $1.7 million at March ~~15,~~31, 2022, and is expected to be settled in RSUs awarded to eligible participants in the first half of 2022.

~~During first-quarter 2020, Stratus recorded a $49 thousand reduction to the accrued liability for the Plan~~A summary of ~~which $4 thousand reduced project development~~PPIP costs ~~and $45 thousand reduced general administrative expenses.~~ follows (in thousands):


	Three Months Ended March 31,
		2022		2021


Charged to general and administrative expense		$	15	$	495
Capitalized to project development costs		51		224
Total PPIP costs		$	66	$	719

The accrued liability for the ~~Plan~~PPIP totaled ~~$5.7~~$7.9 million at March 31, ~~2021,~~2022, and ~~$6.2~~$15.2 million at December 31, ~~2020~~2021 (included in other liabilities). ~~As of March 31, 2021, 0 amounts had been paid in cash to participants under the Plan.~~

8. INCOME TAXES

Stratus’ accounting policy for and other information regarding its income taxes isare further described in Notes 1 and 7 in the Stratus ~~2020~~2021 Form 10-K.

Stratus had deferred tax assets (net of deferred tax ~~liabilities and valuation allowances)~~liabilities) totaling ~~$44 thousand~~$11.3 million at March 31, ~~2021~~2022, and $12.4 million at December 31, ~~2020.~~2021. Stratus' deferred tax assets had valuation allowances totaling ~~$11.9~~$6.5 million at March 31, ~~2021,~~2022, and ~~$10.7~~$6.4 million at December 31, ~~2020.~~ 2021. Management has concluded that the pending sale of Block 21 is sufficient positive evidence to support the ability to realize certain deferred tax assets expected to be realized from the sale, which resulted in Stratus recording a $4.2 million non-cash tax credit in the fourth quarter of 2021 to reduce the related valuation allowance. Stratus continues to maintain a valuation allowance on its remaining deferred tax assets.

In evaluating the recoverability of the remaining deferred tax assets, management considered available positive and negative evidence, giving greater weight to the ~~recent current cumulative losses and~~ uncertainty regarding projected future financial results. Upon a change in facts and circumstances, management may conclude that sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance in the future, which would favorably impact Stratus' results of operations. Stratus’ future results of operations may be negatively impacted by an inability to realize a tax benefit for future tax losses or for items that will generate additional deferred tax assets that are not more likely than not to be realized.

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The difference between Stratus' consolidated effective income tax rate of 1(20) percent ~~for~~in first-quarter 2022 and the U.S. Federal statutory income tax rate of 21 percent was primarily attributable to the release of a reserve on uncertain tax positions related to the 2015 through 2017 U.S. Federal tax audit, which was closed in the first ~~three months~~quarter of 2022. The difference between Stratus' consolidated effective income tax rate of 13 percent in first-quarter 2021 and the U.S. Federal statutory income tax rate of 21 percent was primarily attributable to ~~a forecasted taxable loss for 2021,~~ noncontrolling interests in subsidiaries, the presence of a full valuation allowance against certain U.S. Federal deferred tax assets ~~and the Texas state margin tax. The difference between Stratus' consolidated effective income tax rate~~as of 54 percent for the first three months of 2020 and the U.S. Federal statutory income tax rate of 21 percent, was primarily attributable to the CARES Act, which allowed Stratus to carryback losses to 2017 when the U.S. corporate tax rate was 35 percent, among other impacts, resulting in a first-quarter 2020 tax benefit of $1.3 million,March 31, 2021, and the Texas state margin tax.

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9. BUSINESS SEGMENTS

As a result of the pending sale of Block 21, Stratus has 42 operating segments: Real Estate Operations and Leasing ~~Operations, Hotel~~Operations. Block 21, which encompassed Stratus’ hotel and ~~Entertainment.~~entertainment segments, along with some leasing operations, is reflected as discontinued operations.

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; the Lantana community, including a portion of Lantana Place planned for a ~~future~~ multi-family ~~phase;~~phase now known as The Saint Julia, and ~~one condominium unit at~~ the ~~W Austin Residences in Block 21, which was sold in February 2021)~~land for The Saint George and 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 ~~(vacant~~(one vacant pad ~~sites~~site at West Killeen Market); and in Magnolia, Texas (Magnolia Place), Kingwood, Texas (land for future multi-family development, for which a sale is pending, and a vacant pad ~~sites)~~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 ~~The Santal,~~ West Killeen Market, ~~office and retail space at Block 21 and completed portions of~~ Lantana Place, Kingwood Place and the completed portion of Jones ~~Crossing and Kingwood Place.~~Crossing. The segment also included The Saint Mary ~~was included in Leasing Operations~~ until ~~it was sold~~its sale in January 2021 ~~(see Notes 3~~ and ~~4 for further discussion).~~

The ~~Hotel segment includes the W Austin Hotel located at Block 21~~Santal until its sale 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.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.

Revenues from Contracts with Customers. Stratus' revenues from contracts with customers follow (in thousands):

Three Months Ended March 31,
2021 2020
Real Estate Operations:
Developed property sales $ 4,040 $ 12,308
Undeveloped property sales 2,500 0
Commissions and other 81 28
6,621 12,336
Leasing Operations:
Rental revenue 5,167 5,732
Hotel:
Rooms, food and beverage 1,760 5,075
Other 358 836
2,118 5,911
Entertainment:
Event revenue 595 3,558
Other 14 597
609 4,155
Total revenues from contracts with customers $ 14,515 $ 28,134

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~~Financial Information by Business Segment.~~ ~~The following segment information 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 March 31, 2021:
Revenues:
Unaffiliated customers $ 6,621 $ 5,167 $ 2,118 $ 609 $ 0 $ 14,515
Intersegment 4 230 32 0 (266) 0
Cost of sales, excluding depreciation 4,333 2,381 2,902 1,425 (111) 10,930
Depreciation 56 1,711 880 401 (46) 3,002
General and administrative expenses 0 0 0 0 4,544 4,544
Gain on sale of assets 0 (22,931) c 0 0 0 (22,931)
Operating income (loss) $ 2,236 $ 24,236 $ (1,632) $ (1,217) $ (4,653) $ 18,970
Capital expenditures and purchases and development of real estate properties $ 2,489 $ 919 $ 72 $ 18 $ 0 $ 3,498
Total assets at March 31, 2021 161,471 195,234 91,191 32,787 21,188 501,871

Three Months Ended March 31, 2020:
Revenues:
Unaffiliated customers $ 12,336 $ 5,732 $ 5,911 $ 4,155 $ 0 $ 28,134
Intersegment 4 227 48 15 (294) 0
Cost of sales, excluding depreciation 10,182

3,088 5,908 3,226 (70) 22,334
Depreciation 59 2,047 1,105 d 483 d (61) 3,633
General and administrative expenses 0 0 0 0 2,815 2,815
Operating income (loss) $ 2,099 $ 824 $ (1,054) $ 461 $ (2,978) $ (648)
Capital expenditures and purchases and development of real estate properties $ 6,222 $ 2,283 $ 27 $ 18 $ 0 $ 8,550
Total assets at March 31, 2020 160,691 235,734 e 96,484 42,639 23,390 558,938

a.~~Includes sales commissions and other revenues together with related expenses.~~

b.~~Includes consolidated general and administrative expenses and eliminations of intersegment amounts.~~

c.~~Represents the gain on the January 2021 sale of The Saint Mary.~~

d.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.

e.~~Includes assets held for sale at The Saint Mary, which totaled $37.1 million at March 31, 2020.~~


	Three Months Ended March 31,
		2022		2021
Real Estate Operations:
Developed property sales		$	—	$	4,040
Undeveloped property sales		—		2,500
Commissions and other		19		16
		19		6,556
Leasing Operations:
Rental revenue		3,080		4,818
		3,080		4,818











Total revenues from contracts with customers		$	3,099	$	11,374

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Financial Information by Business Segment. The following segment information 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 March 31, 2022:
Revenues:
Unaffiliated customers	$	19	$	3,080		$	—		$	3,099
Intersegment	4		—			(4)			—
Cost of sales, excluding depreciation	1,366		984			—			2,350
Depreciation	25		852			(4)			873

General and administrative expenses	—		—			3,167		c	3,167


Gain on sale of assets	—		(4,812)		d	—			(4,812)
Operating (loss) income	$	(1,368)	$	6,056		$	(3,167)		$	1,521

Capital expenditures and purchases and development of real estate properties	$	4,864	$	14,542		$	182		$	19,588

Total assets at March 31, 2022	254,212		106,652			183,904		e	544,768




Three Months Ended March 31, 2021:
Revenues:
Unaffiliated customers	$	6,556	$	4,818		$	—		$	11,374
Intersegment	4		—			(4)			—
Cost of sales, excluding depreciation	4,360		2,052			—			6,412
Depreciation	64		1,544			(22)			1,586
General and administrative expenses	—		—			4,324			4,324

Gain on sale of assets	—		(22,931)		f	—			(22,931)
Operating income (loss)	$	2,136	$	24,153		$	(4,306)		$	21,983
Capital expenditures and purchases and development of real estate properties	$	2,489	$	902		$	107		$	3,498
Total assets at March 31, 2021	161,488		180,758		g	159,625		e	501,871

a.Includes sales commissions and other revenues together with related expenses.

b.Includes consolidated general and administrative expenses and eliminations of intersegment amounts.

c.The decrease in first-quarter 2022, compared to first-quarter 2021, is primarily the result of $0.8 million incurred in first-quarter 2021 for consulting, legal and public relation costs for Stratus' successful proxy contest and the real estate investment trust exploration process as well as a $0.5 million decrease in employee incentive compensation costs associated with the PPIP.

d.Represents a 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.

e.Includes assets held for sale associated with discontinued operations at Block 21, which totaled $151.2 million at March 31, 2022, and $140.5 million at March 31, 2021.

f.Represents the gain on the January 2021 sale of The Saint Mary.

g.Includes $68.5 million of assets held for sale related to The Santal, which was sold in the fourth quarter of 2021.

10. SUBSEQUENT EVENTS

Stratus evaluated events after March 31, 2022, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us,” “our” and "Stratus" refer to Stratus Properties Inc. and all entities owned or controlled by Stratus Properties Inc. You should read the following discussion in conjunction with our consolidated financial statements and accompanying notes, related MD&A and discussion of our business and properties included in our Annual Report on Form 10-K for the year ended December 31, ~~2020 (2020~~2021 (2021 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission (SEC) and the unaudited consolidated financial statements and accompanying notes included in this Form 10-Q. The results of operations reported and summarized below are not necessarily indicative of future operating results, and future results could differ materially from those anticipated in forward-looking statements (refer to “Cautionary Statement” and Part II, Item 1A. “Risk Factors” herein and Part I, Item 1A. “Risk Factors” of our ~~2020~~2021 Form 10-K for further discussion). In particular, the impacts of the COVID-19 pandemic continue to affect our operations. As a result, our performance during this interim period, as well as future interim periods while the COVID-19 pandemic is ongoing, will not be comparable to past performance or indicative of future performance. We expect continued uncertainty in our business and the global economy as a result of the duration and intensity of the COVID-19 pandemic and its related effects. All subsequent references to “Notes” refer to Notes to Consolidated Financial Statements (Unaudited) located in Part I, Item 1. “Financial Statements” herein, unless otherwise stated.

OVERVIEW

We are a diversified real estate company with headquarters in Austin, Texas. We are engaged primarily in the acquisition, entitlement, development, management and sale of commercial, and multi-family and single-family residential real estate properties, and real estate leasing ~~and the operation of hotel and entertainment businesses located~~ in the Austin, Texas area, and other select, fast-growing markets in Texas. We generate revenues and cash flows from the sale of our developed properties ~~rental income from~~and the lease of our ~~leased properties~~retail, mixed-use and ~~from our hotel and entertainment operations.~~multi-family properties. Refer to Note 9 for ~~further~~ discussion of our operating segments and “Business Strategy” below for a discussion of our business strategy.

Block 21 is our wholly owned mixed-use real estate property located on a two-acre city block in downtown Austin that contains the W Austin Hotel, consisting of a 251-room luxury hotel, and office, retail and entertainment space. In October 2021, we entered into new agreements to sell Block 21 to Ryman Hospitality Properties, Inc. (Ryman) for $260.0 million, subject to an expected downward adjustment of $5.0 million. The transaction is expected to close prior to June 1, 2022, but remains subject to the timely satisfaction or waiver of various closing conditions. The sale of Block 21 would eliminate our Hotel and Entertainment segments. As a result, our hotel and entertainment operations, as well as the leasing operations associated with Block 21, are reported as discontinued operations for all periods presented in the financial statements included in this Form 10-Q. Refer to "Results of Operations - Discontinued Operations" and Note 4 for further discussion.

BUSINESS STRATEGY

Our portfolio consists of approximately 1,700 acres of undeveloped acreage and acreage under development for commercial and multi-family and single-family residential projects, as well as several completed commercial and residential projects. ~~Our W Austin Hotel and our ACL Live and 3TEN ACL Live entertainment venues are located in downtown Austin at our Block 21 property and are central to the city's world-renowned, vibrant music scene.~~

Our primary business objective is to create value for stockholders by methodically developing and enhancing the value of our properties and then selling them or holding them for lease. Our full cycle development program of acquiring properties, securing and maintaining development entitlements, developing and stabilizing properties, and selling them or holding them as part of our leasing operations is a key element of our strategy. We may also seek to refinance properties, in order to benefit from the increased value of the property, from lower interest rates or in connection with holding them for ~~other reasons.~~lease once the properties have been completed and stabilized.

We believe that Austin and other select, fast-growing markets in Texas continue to be attractive locations. Many of our developments are in locations where development approvals have historically been subject to regulatory constraints, which has made it difficult to obtain or change entitlements. ~~Our~~Most of our Austin properties, which are located in desirable areas with significant regulatory constraints, are entitled and have utility capacity for full buildout. As a result, we believe that through strategic planning, development and marketing, we can maximize and fully realize their value.

Our development plans require significant additional capital, which we may pursue through joint ventures or other arrangements. Our business strategy requires us to rely on cash flow from operations and debt financing as our primary sources of funding for our liquidity needs. WeHowever, we have ~~also, from time to time,~~increasingly relied on project-level equity financing of our subsidiaries. We have formed and expect to continue to pursue strategic relationships as part of our overall strategy for particular development projects and may enter into ~~other~~ similar equity financing arrangements in the future.

~~In January 2021, we sold The Saint Mary, a 240-unit luxury garden-style apartment project in the Circle C community,~~ See Note 3 for $60.0 million. After closing costs and payment of the outstanding construction loan, the sale generated net proceeds of approximately $34 million. After establishing a reserve for remaining costs of the partnership, we received $20.9 million from the subsidiary in connection with the sale and $12.9 million of the net proceeds were distributed to the noncontrolling interest owners. We recognized a gain on the sale of $22.9 million ($16.2 million net of noncontrolling interests) in the first quarter of 2021.

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Our Board of Directors (Board) has authorized an in-depth exploration of a conversion from a C-Corporation to a real estate investment trust (REIT). We have engaged financial, tax, accounting and legal advisors, and the Board will closely monitor and evaluate the findings to ultimately determine if conversion to a REIT is in the best interest of our stockholders. If the Board determines to move forward, we expect the conversion would occur no earlier than 2022. We believe that the REIT conversion would require consent from our major lenders and amendments to our major debt agreements, among other third-party consents. We also expect to seek stockholder approval to implement provisions in our organizational documents consistent with a public REIT structure, if the Board ultimately determines that a REIT conversion is in stockholders’ best interests.

~~OVERVIEW OF THE IMPACTS OF THE COVID-19 PANDEMIC~~

Since January 2020, the COVID-19 pandemic has caused substantial disruption in international and U.S. economies and markets. The World Health Organization designated the COVID-19 outbreak a pandemic in mid-March 2020. The impacts of the pandemic are expected to continue during 2021 but are anticipated to lessen through the year. The pandemic has resulted in government restrictions of various degrees and effective at various times, resulting in limitations on normal daily activities for individuals and capacity restrictions and, in some cases, closures for many businesses. Effective March 10, 2021, the Governor of Texas issued an executive order lifting the mask mandate in Texas and increasing the capacity of all businesses and facilities in the state to 100 percent. Businesses in Texas may still limit capacity or implement additional safety protocols at their own discretion. While we are ramping up our hotel and entertainment operations, we will continue to increase capacity gradually and safely and in compliance with all applicable regulations. We are optimistic about a post-pandemic recovery. We are encouraged by indications that the vaccines have been effective and believe they will help increase consumer confidence and deliver a resurgence in travel and live entertainment.

~~Impacts on our Business~~

The COVID-19 pandemic has had, and is expected to continue to have, a significant adverse impact on our business and operations, particularly on the hotel and entertainment segments which were adversely impacted beginning late in the first quarter of 2020 and to date in 2021, and are expected to continue to be adversely impacted during 2021, although the impacts are anticipated to lessen through the year. For example, while the hotel has remained open throughout the pandemic, average occupancy in the first quarter of 2021 was 21 percent, compared to 50 percent in the first quarter of 2020. However, the average occupancy in the first quarter of 2021 was higher than the average occupancy in the fourth quarter of 2020, which was 13 percent. Our entertainment venues, ACL Live and 3TEN ACL Live, hosted a limited number of events with restricted capacity during first-quarter 2021. Our team continues to create innovative programming at our entertainment venues, and we currently expect to see improved results as schedules are filled and capacity increases over time. The extent to which the adverse impacts of the pandemic continue depends on numerous evolving factors that we cannot predict. Moreover, even as travel advisories and restrictions are lifted, travel and entertainment demand may remain weak for a significant length of time, and attractions and events that previously brought visitors and artists to the city of Austin may not proceed or may proceed with limited capacity.

The Austin market, as well as the other Texas markets where we operate, continue to rebound from pandemic lows. Our residential properties have been positively impacted by home-centric trends resulting from the pandemic and from the increased attractiveness of Austin, Texas as a desirable place to live. For example, we have sold almost all of our single-family lot inventory at Barton Creek at attractive prices. However, with increased demand and construction activity in our markets, we have also experienced cost increases in certain construction materials, particularly lumber. We continue to actively manage and monitor these costs. In addition, the ongoing trend toward online shopping has accelerated during the COVID-19 pandemic. We have been adjusting to these retail trends by incorporating more multi-family residential space and more food and beverage and entertainment space into our development plans.

Despite the COVID-19 pandemic, we have continued to advance our land planning, engineering and permitting activities. In the first quarter of 2021, we completed site clearing on The Saint June, a 182-unit multi-family project in Barton Creek. In April 2021, we announced development plans for Holden Hills, a new residential development formerly known as Section KLO, in the Barton Creek community. The project consists of 495 acres and the community is designed to feature 475 unique residences to be developed in multiple phases with a focus on sustainability and energy conservation.

further discussion.

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As ~~a result~~described in this report and in our 2021 Form 10-K, in December 2021, one of our wholly owned subsidiaries sold The Santal multi-family property for $152.0 million, which after closing costs and payment of the ~~COVID-19 pandemic, and beginning in April 2020, we agreed, generally, to 90-day base rent deferrals with a majority~~outstanding project loan, generated net proceeds of approximately $74 million. In January 2021, one of our ~~retail leasing tenants,~~subsidiaries sold The Saint Mary multi-family property for $60.0 million of which had closed or were operating at significantly reduced capacities. Rent deferrals with our retail tenants resulted in a reduction of scheduled base rent collections of 10 percent during the period from April through December 2020. The deferred rents are scheduled to be collected over a 12-month or 24-month period that started in January 2021. During the first quarter of 2021, we began collecting these rent deferrals and as of March 31, 2021, all of our retail tenants that were open prior to the pandemic had reopened, although some were still operating at reduced capacity. Further, despite the pandemic, we have added new tenants and all of our tenants are currently paying rent per their leases, as well as monthly payments pursuant to the base rent deferral arrangements. At our multi-family properties, we have granted rent deferral accommodations on a case-by-case basis, with no material decline in rent collections or occupancy.

~~Our previously disclosed transaction to sell Block 21 for $275~~received approximately $21.9 million ~~was terminated by the purchaser in May 2020 as a result~~after closing costs, payment of the ~~negative impact on capital markets~~construction loan, reserves for remaining costs of the partnership and distributions to noncontrolling interest owners. Net proceeds of the ~~overall economic environment caused by~~sales were used to pay down the COVID-19 pandemic. Because the pandemic is unprecedented in recent history, and its severity, duration and future economic consequences are difficult to predict, we cannot predict its future impact on the company with any certainty.

At this time, we are focusing on taking action to maintain liquidity and control costs; closing on asset sales in our real estate operations segment; closely monitoring our income-producing properties and continuing to lease up certain properties; regularly communicating with our lenders and investor groups; advancing our land planning, engineering and permitting activities; and evaluating refinance opportunities for our larger, stabilized assets to take advantagebalance of historic low interest rates. As previously discussed, we are also moving forward to complete the financing for The Saint June, and to secure financing for our Holden Hills and Magnolia Place developments. Further, we are considering a refinancing of our Jones Crossing construction loan.

~~Impacts on our Liquidity and Capital Resources~~

~~As of March 31, 2021, we had $25.8 million available under~~ our $60.0 million Comerica Bank credit facility with a $150 thousand letter of credit committed against the credit facility. During the pandemic we have proactively engaged with our project lenders in connection with formulating rent deferral arrangementsand for our tenants, receiving waivers of and amendments to certain financial covenants for specific project loans and extending maturity dates on project loans with near-term maturities. See Note 6 for further discussion.other corporate purposes.

~~With respect to our~~As previously mentioned, the sale of Block 21 ~~loan, Stratus~~is expected to close prior to June 1, 2022, but remains subject to the timely satisfaction or waiver of various closing conditions. If completed, the sale of Block 21 ~~LLC, our wholly owned subsidiary that owns~~will result in substantial additional cash proceeds of approximately $115 million pre-tax and $90 million after-tax (before prorations, but including post-closing escrow amounts).

Our Board of Directors (Board) and management team are engaged in a strategic planning process, which includes consideration of the uses of proceeds from sales in 2021 and the pending sale of Block 21, ~~(the Block 21 subsidiary) continues~~and of our long-term business strategy. Potential uses of proceeds may include a combination of further deleveraging, returning cash to ~~not meet the quarterly debt service coverage ratio test resulting~~shareholders and reinvesting in ~~a "Trigger Period," which is not a default but restricts~~ our ~~ability~~project pipeline. We expect to ~~receive cash distributions from the project. Although~~provide additional information after the Block 21 ~~loan agreement~~transaction is ~~a non-recourse loan, we may contribute cash~~concluded and our Board and management have had the opportunity to our Block 21 subsidiary in order to prevent our Block 21 subsidiary from defaulting under the Block 21 loan agreement. Additionally, under our subsidiary’s hotel operating agreement, the hotel operator has and may continue to request funds from us if it reasonably determines that such funds are required in order to fund the operation of the hotel and specified reserves. Pursuant to such provisions, we contributed $6.3 million during 2020 and $5.0 million during first-quarter 2021, and based on current projections, we expect to make additional contributions of approximately $12 million through early 2022.

We project that we will be able to meet our debt service and other cash obligations for at least the next 12 months. Our projections are based on many detailed and complex underlying assumptions, including (1) that operating income for our Block 21 businesses will gradually ramp up to a break-even point in the first half of 2021 and that Block 21 will generate sufficient cash to cover debt service by early 2022, (2) that current conditions in our leasing operations will not deteriorate materially and that our anchor tenant at Lantana Place will renew its lease on terms acceptable to us, (3) that we close on projected asset sales in our real estate operations segment, including certain land sales at our mixed-use properties, on anticipated terms, and (4) that we are able to secure anticipated financing for certain development projects. No assurances can be given that the results anticipated by our projections will occur. See Note 6 and “Capital Resources and Liquidity” below for further discussion.

~~We are continuing to closely monitor health and~~assess market conditions and ~~are prepared to make further adjustments to~~the capital requirements for our ~~business strategy if and when appropriate.~~development pipeline.

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OVERVIEW OF FINANCIAL RESULTS FOR FIRST-QUARTER ~~2021~~

2022

~~Our net income attributable to common stockholders totaled $8.9 million, or $1.08 per share, in first-quarter 2021, compared with~~As a ~~net loss of $1.1 million, or $0.13 per share, infirst-quarter 2020. Our net income attributable to common stockholders in first-quarter 2021, compared to the net loss in first-quarter 2020, was primarily the~~ result of the ~~$22.9 million gain on the~~pending sale of ~~The Saint Mary in January 2021 ($16.2 million net of noncontrolling interests), partially offset by~~Block 21, we have two operating ~~losses from~~segments: Real Estate Operations and Leasing Operations. Block 21, which encompassed our hotel and entertainment segments, ~~caused by~~along with some leasing operations, is reflected as discontinued operations. We operate primarily in Austin, Texas and in other select, fast-growing markets in Texas.

Our Real Estate Operations encompass our activities associated with our acquisition, entitlement, development, and sale of real estate. The current focus of our real estate operations is multi-family and single-family residential properties and retail and mixed-use properties. We may sell or lease the ~~pandemic~~real estate we develop, depending on market conditions. Real estate that we develop and then lease becomes part of our Leasing Operations. Revenue in our Real Estate Operations may be generated from the sale of properties that are developed, undeveloped or under development, depending on market conditions. Developed property sales can include an individual tract of land that has been developed and permitted for residential use or a developed lot with a residence already built on it. In addition to our developed properties, we have a development portfolio that consists of approximately 1,700 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use.

Revenue in our Leasing Operations is generated from the lease of space at retail and mixed-use properties that we developed and the lease of residences in the ~~first quarter~~multi-family projects that we developed. We also generate income from the sale of ~~2021.~~our leased properties, depending on market conditions.

Our revenues totaled ~~$14.5~~$3.1 million in first-quarter ~~2021,~~2022, compared with ~~$28.1~~$11.4 million in first-quarter ~~2020.~~2021. The decrease in revenues in first-quarter ~~2021,~~2022, compared to first-quarter ~~2020,~~2021, is primarily ~~reflects decreases~~a result of no real estate sales occurring in ~~revenue from our hotel and entertainment segments caused by the pandemic and from~~first-quarter 2022 because of a decrease in ~~the number~~available inventory of developed ~~residential lots~~properties in our Real Estate Operations segment and ~~homes sold~~a decrease in leasing revenue as ~~available inventory decreased. See~~a result of the sales of The Saint Mary and The Santal multi-family projects in 2021. Refer to "Results of Operations" below for further discussion of our segments.

~~UPDATE ON PROJECT AND~~

Our net income attributable to common stockholders totaled $2.3 million, or $0.27 per diluted share in first-quarter 2022, compared to $8.9 million, or $1.08 per diluted share, in first-quarter 2021. Our results for first-quarter 2022 included 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. Refer to Note 4 under the heading “The Oaks at Lakeway” for additional discussion. Net income attributable to common stockholders in first-quarter 2021 included a $22.9 million pre-tax gain ($16.2 million net of noncontrolling interests) on the January 2021 sale of The Saint Mary, a 240-unit luxury garden-style multi-family project in the Circle C community, partially offset by a $2.5 million net loss from discontinued operations as our hotel and entertainment operations were impacted by the COVID-19 pandemic.

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RECENT DEVELOPMENT ACTIVITIES

Current Residential ~~Activities.~~Activities

Barton Creek

In first-quarter ~~2021,~~2022, we sold two Amarra Drive Phase III lots, a five-acre multi-family tract of land in Amarra Drive and our last remaining condominium unit at the W Austin Residences for a total of $6.5 million. For further discussion, see "Results of Operations — Real Estate Operations."no residential units or lots. As of March 31, ~~2021, three~~2022, two developed Amarra Drive Phase III lots remained ~~unsold, one of which was under contract and subsequently sold in April 2021 for $0.6 million.~~unsold.

The Villas at Amarra Drive (Amarra Villas) project is a 20-unit development in the Barton Creek community for which we completed construction of the first seven homes during 2017 and 2018. We sold the last two completed homes in 2019. We began construction ofon the next two Amarra Villas homes during the first quarter of 2020, which are expected to be completed in ~~mid-2021.~~mid-2022. In 2021, we began construction of one additional home and in March 2022, we began construction on another two homes. As of May ~~10, 2021, one home was~~13, 2022, two homes were under contract ~~and a contract had been signed~~ to sell ~~one home on~~(one which we began construction on in ~~second-quarter 2021.~~2020 and one which we began construction on in 2021). As of May ~~10, 2021,~~13, 2022, a total of 11 units (1(3 of which isare under construction and 108 of which construction has not started) remain available for sale of the initial 20-unit project.

In third-quarter 2021, we began construction on The Saint June, a 182-unit luxury garden-style multi-family project within the Amarra development. The Saint June is expected to be comprised of multiple buildings featuring one, two and three bedroom units for lease with amenities that include a resort-style clubhouse, fitness center, pool and extensive green space. The first units of The Saint June are currently expected to be completed in fourth-quarter 2022 with completion of the project expected in first-quarter 2023. This project is being built consistent with our sustainability, wellness and conservation goals.

We continue to progress the development plans for Holden Hills, our final large residential development within the Barton Creek community consisting of 495 acres and designed to feature 475 unique residences to be developed in multiple phases with a focus on health and wellness, sustainability and energy conservation. We currently expect to secure final permits to start construction in September 2022. Subject to obtaining financing and other market conditions, we currently expect to complete site work for Phase I, including the construction of road, utility, drainage and other required infrastructure, approximately 17 months from the issuance of our final permits. Accordingly, our current projections anticipate that we could begin closing sales of certain home sites in Holden Hills in late 2024. We may sell the developed home sites, or may elect to build and sell, or build and lease, homes on some or all of the home sites, depending on financing and market conditions.

Using a conceptual approach similar to that used for Holden Hills, we continue to progress the development plans for Section N, our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community. If successful, this new project would be designed as a dense, mid-rise, mixed-use project surrounded by an extensive greenspace amenity, resulting in a significant potential increase in development density, as compared to our prior plans.

The ~~Santal,~~Annie B

In September 2021, we purchased the land and announced plans for The Annie B, a ~~garden-style~~proposed luxury ~~apartment complex~~high-rise rental project in downtown Austin to be developed as a 400-foot tower, consisting of ~~448~~approximately 420,000 square feet with approximately 300 luxury multi-family units ~~in Section N in the Barton Creek community, is fully leased~~for lease and ~~stabilized.~~ground level retail. We currently expect to finalize development plans, secure development financing and begin construction by late 2022 or early 2023. This project will be built consistent with our sustainability, wellness and conservation goals.

The Saint George

In December 2021, we purchased the land for The Saint George, a proposed 316-unit luxury wrap-style multi-family project to be constructed in north-central Austin. While we continue the planning for the project and obtaining the entitlement and permit approvals, we currently expect to begin construction in the second quarter of 2022 and to achieve substantial completion by mid-2024. We are negotiating a construction loan for the project.

Lantana Multi-Family, Kingwood Place and Other Residential

We have advanced development plans for the multi-family component of Lantana Place, a partially developed, mixed-use development project located south of Barton Creek in Austin, and, subject to securing an acceptable capital structure and other market conditions, currently expect to begin construction in third-quarter 2022 with expected completion in mid-2024. The multi-family component is now known as The Saint Julia and is expected to consist of 306 units.

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We are evaluating a sale of a portion of the land for the single-family and multi-family residential components of Magnolia Place, an H-E-B, L.P (H-E-B) grocery shadow-anchored, mixed-use project in Magnolia, Texas. We also continue to evaluate options for the multi-family component of Jones Crossing, an H-E-B grocery anchored, mixed-use development located in College Station, Texas.

In September 2021, we entered into a contract to sell a multi-family tract of land currently planned for approximately 275 multi-family units for $5.5 million at Kingwood Place, an H-E-B grocery anchored, mixed-use project in Kingwood, Texas. If consummated, the sale is expected to close in third-quarter 2022.

For further discussion of our multi-family and single-family residential properties, ~~see~~refer to MD&A and the related sections in Items 1. and 2. “Business and Properties” in our ~~2020~~2021 Form 10-K.

Current Commercial ~~Activities.~~Activities

Magnolia Place

In August 2021, we began construction on the first phase of development of Magnolia Place, our H-E-B grocery shadow-anchored, mixed-use project in Magnolia, Texas. 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 consists of 2 retail buildings totaling 18,987 square feet, all 5 pad sites, and the road, utility and drainage infrastructure necessary to support the entire development. The first two retail buildings are expected to be available for occupancy in third-quarter 2022. In mid-2021, H-E-B began construction on its 95,000-square-foot grocery store on an adjoining 18-acre site owned by H-E-B, which is expected to open in fourth-quarter 2022.

Lantana Place

As of March 31, 2022, we had signed leases for approximately 85 percent of the retail space at Lantana Place, including the anchor tenant, Moviehouse & Eatery, and a ground lease for an AC Hotel by Marriott. Lantana Place is our partially developed, mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas.

Kingwood Place

Kingwood Place is our H-E-B-anchored, mixed-use development project in Kingwood, Texas (in the greater Houston area). We have constructed approximately 152,000 square feet of retail space at Kingwood Place, including an ~~HEB~~H-E-B grocery store, and we have signed ground leases on ~~two~~four of the retail pads. ~~Three~~One pad ~~sites remain~~site remains available for lease. As of March 31, ~~2021,~~2022, we had signed leases for approximately 85 percent of the retail space, including the ~~HEB~~H-E-B grocery store. We ~~continue to advance the~~are exploring a potential ~~multi-family project at~~sale or refinancing of Kingwood ~~Place, which is currently planned for approximately 275 units.~~Place.

Lantana Place is a partially developed, mixed-use development project located in southwest Austin. As of March 31, 2021, we had signed leases for approximately 85 percent of the retail space in the first phase, including the anchor tenant, Moviehouse & Eatery (Moviehouse). In July 2020, we entered into a new six-month lease agreement with Moviehouse in which rent is based on a percentage of Moviehouse's revenue. The new lease was amended in December 2020 to extend the term through June 30, 2021. We are currently in discussions with Moviehouse to extend this lease. We also have a ground lease for an AC Hotel by Marriott. Construction of the hotel began in May 2019 and is expected to be completed in June 2021. We rezoned a portion of the Lantana property for a potential multi-family development of up to 320 units.

Jones Crossing

As of March 31, ~~2021,~~2022, we had signed leases for substantially all of the retail space at the first phase of Jones Crossing. Jones Crossing ~~an HEB-anchored,~~is our H-E-B-anchored, mixed-use ~~development located~~project in College Station, ~~Texas, and~~Texas. We are exploring a potential sale or refinancing of Jones Crossing.

West Killeen Market

As of March 31, 2022, we had signed leases for approximately 70 percent of the retail space at West Killeen Market, our retail project located in Killeen, Texas, shadow-anchored by an adjacent ~~HEB~~H-E-B grocery store. ~~Block 21's Class A leasable office space was approximately 60 percent leased as~~Only one unsold pad site remains at West Killeen Market. We are exploring a potential sale or refinancing of March 31, 2021, including 9,000 square feet occupied by our corporate office, and the retail space was substantially fully leased as of March 31, 2021. Currently, we are considering a refinance of the Jones Crossing construction loan to improve loan terms and take advantage of the low-interest rate market.

~~Table of Contents~~

West Killeen Market.

For further discussion of our commercial properties, ~~see~~refer to MD&A and the related sections in Items 1. and 2. “Business and Properties” in our ~~2020~~2021 Form 10-K.

Potential Development Projects ~~in Planning.~~

~~We are advancing the planning~~ and ~~permitting process for development of future phases of Barton Creek, including Holden Hills, a new residential development formerly known as Section KLO, and commercial and multi-family Section N.~~Pipeline

Our development plans for the Annie B, Holden Hills, ~~our final residential development within the Barton Creek community, consists of 495 acres~~Section N and ~~the community is designed~~The Saint Julia will require significant additional capital, which we currently intend to ~~feature 475 unique residences to be developed in multiple phases with a focus on sustainability~~pursue through bank debt and ~~energy conservation. The city of Austin~~third-party equity capital arrangements, and Travis County approved initial subdivision permit applications for Holden Hills in October 2019 and the engineering for roads and utilities for the initial phase has been completed. We anticipate securing final permits in the second or third quarter of 2021. We currently expect to complete site work for phase one, including the construction of road, utility, drainage and other required infrastructure, approximately 17 months from the issuance of the final permits. Accordingly, our projections anticipate that we would begin sales in Holden Hills in late 2022 or early 2023. Phases one and two of the Holden Hills development plan encompass the development of the home sites. We may sell the developed home sites, or may elect to build and sell, or build and lease, homes on some or all of the home sites, depending on financing and market conditions.

~~Using a conceptual approach similar to that used for Holden Hills,~~ we are negotiating a loan for The Saint George project. We are also evaluating a redesign of Section N, our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community. If successful, this new project would be designed as a dense, mid-rise, mixed-use project surrounded by an extensive greenspace amenity, resulting in a significant potential increase inpursuing other development ~~density, as compared to our prior plans.~~

projects. These potential development projects and projects in our pipeline require extensive additional permitting and will be dependent on market conditions and financing. Because of the nature and cost of the approval and development

Table of Contents

process and uncertainty regarding market demand for a particular use, there is uncertainty regarding the nature of the final development plans and whether we will be able to successfully execute the plans. ~~In addition, our development plans for Holden Hills and Section N will require significant capital, which we currently intend to pursue through bank debt and third-party equity capital arrangements.~~

We are planning to proceed, subject to financing, with the first phase of development of Magnolia Place, a mixed-use project in Magnolia, Texas, currently planned for 18,410 square feet of commercial space, 9 pad sites, 194 single-family lots and 495 multi-family units. Magnolia Place will be shadow-anchored by a 95,000-square-foot HEB grocery store to be constructed by HEB on an adjoining 18-acre site owned by HEB, with a targeted opening date in May 2022. We have targeted the commencement of construction on Magnolia Place for June 2021, and are in the process of negotiating financing and terms with lenders and HEB. We are also evaluating a sale of the land for the single-family residential component of Magnolia Place.Supply Chain Disruptions

~~In March 2021,~~Supply chain disruptions impacting our industry have begun to delay some of our projects under construction, and may impact the timing of projects on which we ~~completed site clearing on The Saint June, a 182-unit multi-family project within the Amarra subdivision. We expect~~plan to ~~begin project~~start construction in the ~~second quarter~~future. Our contractors have experienced delays on our projects primarily related to delivery of ~~2021, subject~~certain residential electrical components and laminated structural wood materials. We understand that suppliers are taking actions to ~~completion~~try to mitigate the delays; however, their efforts may not be successful. While these constraints have not had a material impact on the expected timing or cost of ~~financing.~~our projects under construction, that may change in the future. Because we engage third-party general contractors to construct our projects on a fixed-price or guaranteed maximum price basis, our exposure to cost increases on projects under construction is limited; however, supply constraints may increase our costs of or delay future projects. Refer to “Risk Factors” included in Part II, Item 1A. herein.

RESULTS OF OPERATIONS

We are continually evaluating the development and sale potential of our properties and will continue to consider opportunities to enter into transactions involving our properties, including possible sales, joint ventures or other arrangements. As a result, and because of ~~the COVID-19 pandemic and~~ numerous ~~other~~ factors affecting our business activities as described herein and in our ~~2020~~2021 Form 10-K, our past operating results are not necessarily indicative of our future results. We use operating income or loss to measure the performance of each operating segment. Corporate, eliminations and other includes consolidated general and administrative expenses, which primarily consist of employee compensation and other ~~costs.~~costs described herein.

~~Table of Contents~~

The following table summarizes our operating results for the first quarters of ~~2021~~2022 and ~~2020~~2021 (in thousands):

Three Months Ended March 31,
2021 2020
Operating income (loss):
Real Estate Operationsa
$ 2,236 $ 2,099

Leasing Operations 24,236 b 824
Hotel (1,632) (1,054)
Entertainment (1,217) 461
Corporate, eliminations and otherc
(4,653) (2,978)
Operating income (loss) $ 18,970 $ (648)
Interest expense, net $ (3,035) $ (3,915)
Net (income) loss attributable to noncontrolling interests in subsidiaries $ (6,722) $ 1,077
Net income (loss) attributable to common stockholders $ 8,944 $ (1,070)


	Three Months Ended March 31,

		2022			2021
Operating (loss) income:
Real Estate Operationsa		$	(1,368)		$	2,136
Leasing Operations		6,056		b	24,153		c


Corporate, eliminations and otherd		(3,167)			(4,306)
Operating income		$	1,521		$	21,983
Interest expense, net		$	(15)		$	(1,056)
Net income from continuing operations		$	1,812		$	18,174
Net income (loss) from discontinued operations		$	375		$	(2,508)


Net income attributable to common stockholders		$	2,272		$	8,944

a.Includes sales commissions and other revenues together with related expenses.

b.Includes a $4.8 million 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. Refer to Note 4 under the heading “The Oaks at Lakeway” for additional discussion.

c.Includes a $22.9 million gain on the January 2021 sale of The Saint Mary.

c.d.Includes consolidated general and administrative expenses and eliminations of intersegment amounts.

As a result of the pending sale of Block 21, we currently have ~~four~~two operating segments: Real Estate Operations and Leasing Operations ~~Hotel and Entertainment~~ (refer to Note 9). The following is a discussion of our operating results by segment.

Table of Contents

Real Estate Operations

The following table summarizes our Real Estate Operations results ~~for the first quarters of 2021 and 2020~~ (in thousands):


		Three Months Ended March 31,						Three Months Ended March 31,

			2021		2020				2022		2021
Revenues:	Revenues:						Revenues:
Developed property sales	Developed property sales		$	4,040	$	12,308	Developed property sales		$	—	$	4,040
Undeveloped property sales	Undeveloped property sales		2,500		—		Undeveloped property sales		—		2,500
Commissions and other	Commissions and other		85		32		Commissions and other		23		20
Total revenues	Total revenues		6,625		12,340		Total revenues		23		6,560
Cost of sales, including depreciation	Cost of sales, including depreciation		4,389		10,241		Cost of sales, including depreciation		1,391		4,424

Operating income			$	2,236	$	2,099

Operating (loss) income							Operating (loss) income		$	(1,368)	$	2,136

Developed Property Sales. The following table summarizes our developed property sales (dollars in thousands):


		Three Months Ended March 31,											Three Months Ended March 31,
		2021					2020						2022					2021
		Lots/Units	Revenues		Average Cost Per Lot/Unit		Lots/Homes	Revenues		Average Cost Per Lot/Home			Lots/Units	Revenues		Average Cost Per Lot/Unit		Lots/Units	Revenues		Average Cost Per Lot/Unit
Barton Creek	Barton Creek											Barton Creek

Amarra Drive:	Amarra Drive:											Amarra Drive:

Phase II lots		—	$	—	$	—	2	$	1,190	$	208

Phase III lots	Phase III lots	2	1,640		332		6	3,940		314		Phase III lots	—	$	—	$	—	2	$	1,640	$	332
Homes built on Phase III lots		—	—		—		2	7,178		3,273

W Austin Residences at Block 21:	W Austin Residences at Block 21:											W Austin Residences at Block 21:
Condominium Unit		1	2,400		1,721		—	—		—
Condominium unit												Condominium unit	—	—		—		1	2,400		1,721
Total Residential	Total Residential	3	$	4,040			10	$	12,308			Total Residential	—	$	—			3	$	4,040


Delaware						72-1211572
(State or other jurisdiction of						(I.R.S. Employer Identification No.)
incorporation or organization)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	STRS	The NASDAQ Stock Market
~~Series D Participating Cumulative Preferred Stock Purchase Rights~~	~~STRS~~	~~The NASDAQ Stock Market~~


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐


STRATUS PROPERTIES INC.
TABLE OF CONTENTS


			Page

Part I. Financial Information			2

Item 1. Financial Statements			2

Consolidated Balance Sheets (Unaudited)			2

Consolidated Statements of Comprehensive Income ~~(Loss)~~ (Unaudited)			3

Consolidated Statements of Cash Flows (Unaudited)			4

Consolidated Statements of Equity (Unaudited)			5

Notes to Consolidated Financial Statements (Unaudited)			6

Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations			1314

Item 3. Quantitative and Qualitative Disclosures About Market Risk			2625

Item 4. Controls and Procedures			2625

Part II. Other Information			2625

Item 1A. Risk Factors			2625

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			26

Item 5. Other Information			26

Item 6. Exhibits			2726

Signature			S-1


		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	12,560	$	12,434	Cash and cash equivalents	$	12,273	$	24,229
Restricted cash	Restricted cash	18,682		21,749		Restricted cash	10,859		18,294
Real estate held for sale	Real estate held for sale	2,000		4,204		Real estate held for sale	1,773		1,773
Real estate under development	Real estate under development	110,464		98,137		Real estate under development	206,191		181,224
Land available for development	Land available for development	43,555		53,432		Land available for development	34,816		40,659
Real estate held for investment, net	Real estate held for investment, net	283,899		286,529		Real estate held for investment, net	89,760		90,284

Lease right-of-use assets	Lease right-of-use assets	10,784		10,871		Lease right-of-use assets	10,460		10,487

Deferred tax assets						Deferred tax assets	4,843		6,009
Other assets	Other assets	19,927		20,144		Other assets	22,621		17,214
Assets held for sale - The Saint Mary		0		36,516
Assets held for sale - discontinued operations						Assets held for sale - discontinued operations	151,172		151,053
Total assets	Total assets	$	501,871	$	544,016	Total assets	$	544,768	$	541,226

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Accounts payable	Accounts payable	$	8,659	$	8,047	Accounts payable	$	14,573	$	14,118

Accrued liabilities, including taxes	Accrued liabilities, including taxes	5,477		12,868		Accrued liabilities, including taxes	19,682		22,069
Debt	Debt	339,213		351,055		Debt	121,446		106,648
Lease liabilities	Lease liabilities	13,467		13,269		Lease liabilities	14,135		13,986
Deferred gain	Deferred gain	5,936		6,173		Deferred gain	4,274		4,801
Other liabilities	Other liabilities	15,585		17,233		Other liabilities	10,381		17,894
Liabilities held for sale - The Saint Mary		0		25,607
Liabilities held for sale - discontinued operations						Liabilities held for sale - discontinued operations	149,717		153,097
Total liabilities	Total liabilities	388,337		434,252		Total liabilities	334,208		332,613

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0

Equity:	Equity:					Equity:
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:

Common stock	Common stock	94		94		Common stock	94		94
Capital in excess of par value of common stock	Capital in excess of par value of common stock	188,121		186,777		Capital in excess of par value of common stock	188,971		188,759
Accumulated deficit	Accumulated deficit	(57,413)		(66,357)		Accumulated deficit	(6,691)		(8,963)

Common stock held in treasury	Common stock held in treasury	(21,753)		(21,600)		Common stock held in treasury	(22,205)		(21,753)
Total stockholders’ equity	Total stockholders’ equity	109,049		98,914		Total stockholders’ equity	160,169		158,137
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	4,485		10,850		Noncontrolling interests in subsidiaries	50,391		50,476
Total equity	Total equity	113,534		109,764		Total equity	210,560		208,613
Total liabilities and equity	Total liabilities and equity	$	501,871	$	544,016	Total liabilities and equity	$	544,768	$	541,226


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		Three Months Ended						Three Months Ended
		March 31,						March 31,
			2021		2020				2022		2021
Revenues:	Revenues:						Revenues:
Real estate operations	Real estate operations		$	6,621	$	12,336	Real estate operations		$	19	$	6,556
Leasing operations	Leasing operations		5,167		5,732		Leasing operations		3,080		4,818
Hotel			2,118		5,911
Entertainment			609		4,155

Total revenues	Total revenues		14,515		28,134		Total revenues		3,099		11,374
Cost of sales:	Cost of sales:						Cost of sales:
Real estate operations	Real estate operations		4,344		10,255		Real estate operations		1,366		4,360
Leasing operations	Leasing operations		2,377		3,082		Leasing operations		984		2,052
Hotel			2,902		5,899
Entertainment			1,307		3,098

Depreciation	Depreciation		3,002		3,633		Depreciation		873		1,586
Total cost of sales	Total cost of sales		13,932		25,967		Total cost of sales		3,223		7,998
General and administrative expenses	General and administrative expenses		4,544		2,815		General and administrative expenses		3,167		4,324

Gain on sale of assets	Gain on sale of assets		(22,931)		0		Gain on sale of assets		(4,812)		(22,931)
Total	Total		(4,455)		28,782		Total		1,578		(10,609)
Operating income (loss)			18,970		(648)
Operating income							Operating income		1,521		21,983
Interest expense, net	Interest expense, net		(3,035)		(3,915)		Interest expense, net		(15)		(1,056)
Loss on extinguishment of debt							Loss on extinguishment of debt		—		(63)

Loss on interest rate derivative instruments			0		(121)
Loss on early extinguishment of debt			(63)		0
Other income, net	Other income, net		3		19		Other income, net		6		3
Income (loss) before income taxes and equity in unconsolidated affiliates' loss			15,875		(4,665)
(Provision for) benefit from income taxes			(207)		2,518
Income before income taxes and equity in unconsolidated affiliates' loss							Income before income taxes and equity in unconsolidated affiliates' loss		1,512		20,867
Benefit from (provision for) income taxes							Benefit from (provision for) income taxes		302		(2,691)
Equity in unconsolidated affiliates' loss	Equity in unconsolidated affiliates' loss		(2)		0		Equity in unconsolidated affiliates' loss		(2)		(2)
Net income from continuing operations							Net income from continuing operations		1,812		18,174
Net income (loss) from discontinued operations							Net income (loss) from discontinued operations		375		(2,508)
Net income and total comprehensive income							Net income and total comprehensive income		2,187		15,666
Total comprehensive loss (income) attributable to noncontrolling interests							Total comprehensive loss (income) attributable to noncontrolling interests		85		(6,722)
Net income and total comprehensive income attributable to common stockholders							Net income and total comprehensive income attributable to common stockholders		$	2,272	$	8,944

Basic net income (loss) per share attributable to common stockholders:							Basic net income (loss) per share attributable to common stockholders:
Continuing operations							Continuing operations		$	0.23	$	1.39
Discontinued operations							Discontinued operations		0.05		(0.30)
									$	0.28	$	1.09

Net income (loss) and total comprehensive income (loss)			15,666		(2,147)
Total comprehensive (income) loss attributable to noncontrolling interests in subsidiaries			(6,722)		1,077
Net income (loss) and total comprehensive income (loss) attributable to common stockholders			$	8,944	$	(1,070)

Net income (loss) per share attributable to common stockholders:
Diluted net income (loss) per share attributable to common stockholders:							Diluted net income (loss) per share attributable to common stockholders:
Continuing operations							Continuing operations		$	0.23	$	1.38
Discontinued operations							Discontinued operations		0.04		(0.30)
									$	0.27	$	1.08

Basic			$	1.09	$	(0.13)

Diluted			$	1.08	$	(0.13)

Weighted-average common shares outstanding:
Weighted-average shares of common stock outstanding:							Weighted-average shares of common stock outstanding:
Basic	Basic		8,223		8,200		Basic		8,251		8,223
Diluted	Diluted		8,273		8,200		Diluted		8,355		8,273


	Stockholders’ Equity
									Common Stock Held in Treasury				Total Stockholders' Equity
	Common Stock			Capital in Excess of Par Value		Accum-ulated Deficit									Noncontrolling Interests in Subsidiaries
	Number of Shares	At Par Value						Number of Shares		At Cost								Total Equity
Balance at December 31, 2020	9,358	$	94	$	186,777	$	(66,357)		1,137		$	(21,600)	$	98,914		$	10,850		$	109,764


Exercised and vested stock-based awards	19	—		0		—			—		—		0			—			0
Stock-based compensation	—	—		182		—			—		—		182			—			182
Grant of restricted stock units under the Profit Participation Incentive Plan	—	—		1,162		—			—		—		1,162			—			1,162


Tender of shares for stock-based awards	—	—		—		—			6		(153)		(153)			—			(153)
Distributions to noncontrolling interests	—	—		—		—			—		—		—			(13,087)			(13,087)
Total comprehensive income	—	—		—		8,944			—		—		8,944			6,722			15,666
Balance at March 31, 2021	9,377	$	94	$	188,121	$	(57,413)		1,143		$	(21,753)	$	109,049		$	4,485		$	113,534


Balance at December 31, 2019		9,330	$	93	$	186,082	$	(43,567)	1,133	$	(21,509)	$	121,099	$	12,983	$	134,082
Balance at December 31, 2020																		Balance at December 31, 2020	9,358	$	94	$	186,777	$	(66,357)	1,137	$	(21,600)	$	98,914	$	10,850	$	109,764

Exercised and vested stock-based awards	Exercised and vested stock-based awards	17	—		0		—		—	—		0		—		0		Exercised and vested stock-based awards	19	—		—		—		—	—		—		—		—

Stock-based compensation	Stock-based compensation	—	—		162		—		—	—		162		—		162		Stock-based compensation	—	—		182		—		—	—		182		—		182

Grant of restricted stock units under the Profit Participation Incentive Plan																		Grant of restricted stock units under the Profit Participation Incentive Plan	—	—		1,162		—		—	—		1,162		—		1,162
Tender of shares for stock-based awards	Tender of shares for stock-based awards	—	—		—		—		4	(91)		(91)		—		(91)		Tender of shares for stock-based awards	—	—		—		—		6	(153)		(153)		—		(153)
Distributions to noncontrolling interests																		Distributions to noncontrolling interests	—	—		—		—		—	—		—		(13,087)		(13,087)

Total comprehensive loss		—	—		—		(1,070)		—	—		(1,070)		(1,077)		(2,147)
Balance at March 31, 2020		9,347	$	93	$	186,244	$	(44,637)	1,137	$	(21,600)	$	120,100	$	11,906	$	132,006
Total comprehensive income																		Total comprehensive income	—	—		—		8,944		—	—		8,944		6,722		15,666
Balance at March 31, 2021																		Balance at March 31, 2021	9,377	$	94	$	188,121	$	(57,413)	1,143	$	(21,753)	$	109,049	$	4,485	$	113,534


	March 31, 2021		December 31, 2020
Assets:
Cash and cash equivalents	$	437	$	745

Real estate under development	2,380		2,380
Land available for development	8,155		8,143
Real estate held for investment	31,810		31,962
Other assets	2,060		2,195
Total assets	44,842		45,425
Liabilities:
Accounts payable and accrued liabilities	669		850

Debt	31,469		31,215
Total liabilities	32,138		32,065
Net assets	$	12,704	$	13,360


	March 31, 2021		December 31, 2020
Block 21 loan	$	138,417	$	139,013


The Santal loan	74,439		74,343
Comerica Bank credit facility	34,077		43,304
New Caney land loan	4,485		4,949

Paycheck Protection Program (PPP) loan	3,987		3,987
Construction loans:
Kingwood Place	31,469		31,215

Jones Crossing	22,370		22,377
Lantana Place	21,926		24,051
West Killeen Market	6,674		6,707
Amarra Villas credit facility	1,369		1,109
Total debta	$	339,213	$	351,055



Three Months Ended March 31, 2020:
Revenues:
Unaffiliated customers	$	12,336	$	5,732		$	5,911		$	4,155		$	0	$	28,134
Intersegment	4		227			48			15			(294)		0
Cost of sales, excluding depreciation	10,182		3,088			5,908			3,226			(70)		22,334
Depreciation	59		2,047			1,105		d	483		d	(61)		3,633

General and administrative expenses	0		0			0			0			2,815		2,815

Operating income (loss)	$	2,099	$	824		$	(1,054)		$	461		$	(2,978)	$	(648)
Capital expenditures and purchases and development of real estate properties	$	6,222	$	2,283		$	27		$	18		$	0	$	8,550
Total assets at March 31, 2020	160,691		235,734		e	96,484			42,639			23,390		558,938


		2021		2022		2023		2024		2025		Thereafter		Total			2022		2023		2024		2025		2026		Total

Block 21 loan		$	1,839	$	2,613	$	2,765	$	2,905	$	3,094	$	125,872	$	139,088

The Santal loana		—		75,000		—		—		—		—		75,000
Comerica Bank credit facility		—		34,077		—		—		—		—		34,077

Comerica Bank credit facilitya																Comerica Bank credit facilitya	$	10,000	$	—	$	—	$	—	$	—	$	10,000

Jones Crossing loan																Jones Crossing loan	—		—		—		—		24,500		24,500
The Annie B land loan																The Annie B land loan	—		14,000		—		—		—		14,000
New Caney land loan	New Caney land loan	—		4,500		—		—		—		—		4,500		New Caney land loan	—		4,275		—		—		—		4,275
PPP loan	PPP loan	—		3,987		—		—		—		—		3,987		PPP loan	38		—		—		—		—		38

Construction loans:	Construction loans:															Construction loans:
Kingwood Placeb	Kingwood Placeb	—		31,791		—		—		—		—		31,791		Kingwood Placeb	32,586		—		—		—		—		32,586

Jones Crossing		293		409		21,878		—		—		—		22,580

Lantana Place	Lantana Place	604		830		20,610		—		—		—		22,044		Lantana Place	604		21,454		—		—		—		22,058
West Killeen Market	West Killeen Market	126		6,597		—		—		—		—		6,723		West Killeen Market	6,052		—		—		—		—		6,052
Magnolia Place																Magnolia Place	—		—		6,827		—		—		6,827
Amarra Villas credit facility	Amarra Villas credit facility	—		1,369		—		—		—		—		1,369		Amarra Villas credit facility	2,166		—		—		—		—		2,166

Total	Total	$	2,862	$	161,173	$	45,253	$	2,905	$	3,094	$	125,872	$	341,159	Total	$	51,446	$	39,729	$	6,827	$	—	$	24,500	$	122,502