SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark one)


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

For the quarterly period ended March 31, ~~2022~~2023


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

(Exact name of registrant as specified in its charter)


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

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

On ~~April 29, 2022,~~May 10, 2023, there were 7,955,217 issued and outstanding ~~8,273,268~~ shares of the registrant’s common stock, par value $0.01 per share.

Item 1. Financial Statements.

STRATUS PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(In Thousands, Except Per Share Amounts)

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

The accompanying Notes to Consolidated Financial Statements (Unaudited), which include information regarding noncash transactions, are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Continued)


	Stockholders’ Equity
								Common Stock Held in Treasury			Total
	Common Stock			Capital in Excess of Par Value		Retained Earnings (Accumulated Deficit)							Noncontrolling Interests in Subsidiaries
	Number of Shares	At Par Value						Number of Shares	At Cost						Total Equity
Balance at December 31, 2022	9,439	$	94	$	195,773	$	41,452	1,448	$	(30,071)	$	207,248	$	64,825	$	272,073
Exercised and vested stock-based awards	40	—		—		—		—	—		—		—		—
Director fees paid in shares of common stock	—	—		6		—		—	—		6		—		6
Stock-based compensation	—	—		529		—		—	—		529		—		529
Tender of shares for stock-based awards	—	—		—		—		11	(216)		(216)		—		(216)
Common stock repurchases	—	—		—		—		44	(894)		(894)		—		(894)
Contributions from noncontrolling interests	—	—		—		—		—	—		—		40,000		40,000
Total comprehensive loss	—	—		—		(5,801)		—	—		(5,801)		(472)		(6,273)
Balance at March 31, 2023	9,479	$	94	$	196,308	$	35,651	1,503	$	(31,181)	$	200,872	$	104,353	$	305,225

Stockholders’ Equity
Common Stock
Held in Treasury Total
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, 2021 9,388 $ 94 $ 188,759 $ (8,963) 1,143 $ (21,753) $ 158,137 $ 50,476 $ 208,613
Exercised and vested stock-based awards 39 — — — — — — — —
Stock-based compensation — — 212 — — — 212 — 212
Tender of shares for stock-based awards — — — — 11 (452) (452) — (452)
Total comprehensive income (loss) — — — 2,272 — — 2,272 (85) 2,187
Balance at March 31, 2022 9,427 $ 94 $ 188,971 $ (6,691) 1,154 $ (22,205) $ 160,169 $ 50,391 $ 210,560

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 — — — — — — — —
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


	Stockholders’ Equity
								Common Stock Held in Treasury			Total
	Common Stock			Capital in Excess of Par Value		Retained Earnings (Accumulated Deficit)							Noncontrolling Interests in Subsidiaries
	Number of Shares	At Par Value						Number of Shares	At Cost						Total Equity
Balance at December 31, 2021	9,388	$	94	$	188,759	$	(8,963)	1,143	$	(21,753)	$	158,137	$	50,476	$	208,613
Exercised and vested stock-based awards	39	—		—		—		—	—		—		—		—
Stock-based compensation	—	—		212		—		—	—		212		—		212
Tender of shares for stock-based awards	—	—		—		—		11	(452)		(452)		—		(452)
Total comprehensive income (loss)	—	—		—		2,272		—	—		2,272		(85)		2,187
Balance at March 31, 2022	9,427	$	94	$	188,971	$	(6,691)	1,154	$	(22,205)	$	160,169	$	50,391	$	210,560

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The unaudited condensed consolidated financial statements and the accompanying notes are prepared in accordance with generally accepted accounting principles (GAAP) in the United States ~~(GAAP)~~(U.S.) and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, ~~2021,~~2022, included in Stratus Properties Inc.’s (Stratus) Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (Stratus ~~2021~~2022 Form 10-K) filed with the ~~United States (U.S.)~~U.S. Securities and Exchange ~~Commission.~~Commission on March 31, 2023. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported and consist of normal recurring adjustments. ~~Operating~~The results of operations for ~~the first quarter of 2022~~any interim period are not necessarily indicative of the results ~~that may be expected~~of operations for ~~the year ending December 31, 2022.~~any other future interim period or for a full fiscal year. Refer to Note 4 for a discussion of Stratus' discontinued operations.

Related Party Transactions. ~~During~~Through the first quarter of 2022, Stratus had an arrangement with Whitefish Partners, LLC (Whitefish Partners), formerly known as Austin Retail Partners, LLC, for services provided by a consultant of Whitefish Partners who is the son of Stratus' President and Chief Executive Officer. Payments to Whitefish Partners for the ~~consultant's~~consultant’s consulting services and expense reimbursements totaled ~~$173~~$185 thousand infor first-quarter 2022, which included $20 thousand as an annual incentive award for 2021 and ~~$37~~a $135 thousand ~~in first-quarter 2021. The first quarter of 2022 included a~~ cash payment under Stratus’ Profit Participation Incentive Plan (PPIP). As of March 31, 2022, the consultant has one outstanding award under the PPIP. In addition, during first-quarter 2022, the Compensation Committee of Stratus' Board of Directors (the Compensation Committee) approved an award to be granted to the consultant under the PPIP related to another development project. Refer to Note 7 for discussion of the PPIP. In April 2022, Stratus hired the consultant as an employee at ~~the same~~an annual salary ~~as his compensation under the contract with Whitefish Partners.~~of $100 thousand. As an employee, he is eligible for the same health and retirement benefits provided to all Stratus ~~employees.~~employees and is also eligible for annual incentive awards and for awards under the PPIP and the Long-Term Incentive Plan (LTIP). In first-quarter 2023, he received $22 thousand as an annual incentive award for 2022, and his annual salary was increased to $120 thousand. As of March 31, 2023, the employee has two outstanding awards under the PPIP. The liability associated with these awards at March 31, 2023 is not significant to the consolidated financial statements. Refer to Note 7 for discussion of the PPIP and LTIP. For additional information regarding Stratus' related parties, including LCHM Holdings, LLC and JBM Trust, refer to Notes 1, 2 and 4 in the Stratus 2022 Form 10-K.

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2. EARNINGS PER SHARE

Stratus’ basic net (loss) income per share of common stock was calculated by dividing the net (loss) incomeattributable to common stockholders by the weighted-average shares of common stock outstanding during the period. A reconciliation of net (loss) income and weighted-average shares of common stock outstanding for purposes of calculating diluted net (loss) income per share (in thousands, except per share amounts) follows:

Three Months Ended
March 31,
2022 2021
Income from continuing operations $ 1,812 $ 18,174
Net income (loss) from discontinued operations 375 (2,508)
Net income 2,187 15,666
Net loss (income) attributable to noncontrolling interests in subsidiaries 85 (6,722)
Net income attributable to Stratus common stockholders $ 2,272 $ 8,944
Basic weighted-average shares of common stock outstanding 8,251 8,223
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs)a
104 50
Diluted weighted-average shares of common stock outstanding 8,355 8,273
Basic net income (loss) per share attributable to common stockholders
Continuing operations $ 0.23 $ 1.39
Discontinued operations 0.05 (0.30)
$ 0.28 $ 1.09
Diluted net income (loss) per share attributable to common stockholders
Continuing operations $ 0.23 $ 1.38
Discontinued operations 0.04 (0.30)
$ 0.27 $ 1.08


	Three Months Ended
	March 31,
	2023		2022
Net (loss) income from continuing operations	$	(6,273)	$	1,812
Net income from discontinued operations	—		375
Net (loss) income and total comprehensive (loss) income	(6,273)		2,187
Total comprehensive loss attributable to noncontrolling interests	472		85
Net (loss) income and total comprehensive (loss) income attributable to common stockholders	$	(5,801)	$	2,272

Basic weighted-average shares of common stock outstanding	8,224		8,251
Add shares issuable upon vesting of dilutive restricted stock units (RSUs) a	—		104
Diluted weighted-average shares of common stock outstanding	8,224		8,355

Basic net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.71)	$	0.23
Discontinued operations	—		0.05
	$	(0.71)	$	0.28

Diluted net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.71)	$	0.23
Discontinued operations	—		0.04
	$	(0.71)	$	0.27

a.~~Excludes 4~~For the three months ended March 31, 2023, excludes 295 thousand shares of common stock ~~for~~associated with RSUs that were anti-dilutive as a result of the net loss. For the three months ended March 31, 2022, ~~and 16~~excludes 4 thousand shares of common stock ~~for the three months ended March 31, 2021,~~ associated with RSUs that were anti-dilutive.

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3. LIMITED PARTNERSHIPS

Stratus has entered into strategic partnerships for certain development projects. Stratus, through its subsidiaries, is a partner in the following limited partnerships: The Saint George Apartments, L.P. (10.0 percent indirect equity interest), Stratus Block 150, L.P. (31.0 percent indirect equity interest), The Saint June, L.P. (34.13 percent indirect equity interest), Holden Hills, L.P. (50.0 percent indirect equity interest) and Stratus Kingwood Place, L.P. ~~and The Saint Mary, L.P.~~(60.0 percent indirect equity interest). For additional information regarding Stratus' partnerships, refer to ~~Note~~Notes 2 and 4 in the Stratus ~~2021~~2022 Form 10-K.

~~Stratus Block 150,~~Holden Hills, L.P. In first-quarter 2023, Holden Hills, L.P. (the Holden Hills partnership), a Texas limited partnership and subsidiary of Stratus, was formed for the development of Holden Hills, Stratus’ final large residential development within the Barton Creek community in Austin, Texas, consisting of 495 acres and designed to feature 475 unique residences (Holden Hills Project). The Holden Hills partnership is governed by a limited partnership agreement between a wholly owned subsidiary of Stratus as Class A limited partner and an unaffiliated equity investor as Class B limited partner, and another wholly owned subsidiary of Stratus which serves as general partner. The partners made the following initial capital contributions to the Holden Hills partnership: (i) Stratus contributed the Holden Hills land and related personal property at an agreed value of $70.0 million and (ii) The Class B limited partner contributed $40.0 million in cash. Immediately following the Class B limited partner's initial capital contribution, $30.0 million of cash was distributed by the Holden Hills partnership to Stratus. Further, the Holden Hills partnership reimbursed Stratus for certain initial project costs and closing costs of approximately $5.8 million. As a result of these transactions, Stratus holds, indirectly through its wholly owned subsidiaries, a 50.0 percent equity capital interest in the Holden Hills partnership, and the Class B limited partner holds the remaining 50.0 percent equity capital interest in the Holden Hills partnership. Stratus’ potential returns on its equity investment in

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the Holden Hills partnership may increase above its relative equity interest as negotiated return hurdles are achieved. Stratus consolidates the Holden Hills limited partnership; therefore, its contribution of the Holden Hills land and related personal property was recorded at historical cost and the contribution from the Class B limited partner was accounted for as a noncontrolling interest.

In addition to each partner’s initial capital contribution, upon the call of the general partner from time to time, Stratus is obligated to make capital contributions up to an additional $10.0 million, and the Class B limited partner is also obligated to make capital contributions up to an additional $10.0 million.

Stratus has the authority to manage the day-to-day operations of the Holden Hills partnership, subject to approval rights of the Class B limited partner for specified “major decisions,” including project and operating budgets, the business plan and amendments thereto; sales, leases or transfers of any portion of the Holden Hills project to any partner, affiliate of any partner, or to any unaffiliated third party other than as contemplated in the business plan; incurring any debt, mortgage or guaranty; capital calls in excess of those previously agreed upon; admitting a new partner; and certain transfers of direct or indirect interests in the Holden Hills partnership. The business plan includes rights of first ~~quarter~~refusal in favor of ~~2022, pursuant~~the Class B limited partner for sale of the luxury residence sites to be developed in distinct communities or “pods” to a third party. A “deadlock” may be declared by any partner if any limited partner does not approve any two major decisions proposed by the general partner within any 12-month period. Prior to the third anniversary of the effective date of the limited partnership agreement, ~~wholly~~a buy-sell provision can be triggered only if there is a deadlock. On or after the third anniversary, any partner can initiate a buy-sell at any time by written notice to the other partner, specifying the buyout price.

Stratus has entered into a development agreement with the Holden Hills partnership pursuant to which the Holden Hills partnership will construct certain street, drainage, water, sidewalk, electric and gas improvements in order to extend the Tecoma Circle roadway on Section N land owned ~~subsidiaries~~by Stratus from its current terminus to Southwest Parkway, estimated to cost approximately $14.7 million (the Tecoma Improvements), and Stratus will reimburse the partnership for 60 percent of the costs. The Tecoma Improvements will enable access and provide utilities necessary for the development of both Holden Hills and Section N.

The Holden Hills partnership has agreed to pay Stratus ~~contributed~~a development management fee of 4.00 percent of certain construction costs for Phase I of the project, and an ~~additional $1.4 million~~asset management fee of $150 thousand per year starting 15 months after construction starts on the project payable from available cash flow after debt service.

Also in ~~cash~~first-quarter 2023, the Holden Hills partnership entered into a loan agreement with Comerica Bank to ~~Stratus Block 150, L.P. No additional capital contributions are required~~finance the development of Phase I of the project. Refer to ~~be made by~~Note 6 for discussion of the partners. As of March 31, 2022, Stratus holds, in the 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 Stratus Block 150, L.P. For additional information regarding Stratus' related parties, including JBM Trust, refer to Notes 1 and 2 in the Stratus 2021 Form 10-K.loan agreement.

Accounting for Limited Partnerships.Stratus has performed evaluations and concluded that The Saint George Apartments, L.P., Stratus Block 150, L.P., The Saint June, L.P., Stratus Kingwood, L.P. and ~~The Saint Mary,~~Holden Hills, 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~~re-evaluate which entity is the primary beneficiary of these partnerships in accordance with applicable accounting guidance.

The cash and cash equivalents held at these limited partnerships are subject to restrictions on distribution to the parent company pursuant to the individual partnership loan agreements.

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Stratus’ consolidated balance sheets include the following assets and liabilities of the partnerships, net of intercompany balances, which are eliminated (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023 a		December 31, 2022
Assets:
Assets: b						Assets: b
Cash and cash equivalents	Cash and cash equivalents	$	8,504	$	7,432	Cash and cash equivalents	$	5,897	$	7,744
Restricted cash		5,170		11,809
Real estate under development	Real estate under development	72,776		62,692		Real estate under development	140,252		107,968
Land available for development	Land available for development	7,702		7,641		Land available for development	3,927		3,927
Real estate held for investment	Real estate held for investment	31,417		31,399		Real estate held for investment	31,494		31,415
Other assets	Other assets	3,159		3,160		Other assets	5,885		4,503
Total assets	Total assets	128,728		124,133		Total assets	187,455		155,557
Liabilities:
Liabilities: c						Liabilities: c
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	9,894		6,661		Accounts payable and accrued liabilities	10,987		12,247

Debt	Debt	46,334		46,096		Debt	62,702		55,305
Total liabilities	Total liabilities	56,228		52,757		Total liabilities	73,689		67,552
Net assets	Net assets	$	72,500	$	71,376	Net assets	$	113,766	$	88,005

a.Includes the assets and liabilities of the Holden Hills partnership, which was formed in January 2023.

b.Substantially all of the assets are available to settle obligations only of the partnerships.

c.All of the debt is guaranteed by Stratus until certain conditions are met in the individual partnership loan agreements. The creditors for the remaining liabilities do not have recourse to the general credit of Stratus.

4. ASSET SALES

Block 21 ~~Pending Sale~~ - Discontinued Operations. Block 21 iswas Stratus’ wholly owned mixed-use real estate property in downtown Austin, ~~Texas. Block 21 contains~~Texas containing 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,~~venue. On May 31, 2022, Stratus completed the previously announced ~~that it had agreed to sell~~sale of Block 21 to Ryman Hospitality Properties, Inc. (Ryman) for ~~$275.0 million. Ryman deposited $15.0~~$260.0 million, ~~in earnest money~~subject 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~~certain purchase price ~~includes~~adjustments, and including Ryman’s assumption of ~~approximately $137~~$136.2 million of existing ~~Block 21~~ mortgage debt, ~~and is subject to an expected downward adjustment of $5.0 million. The~~with 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~~Stratus’ net proceeds 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;cash 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~~restricted cash totaled $112.3 million ~~in earnest money to secure its performance under the agreements governing the sale. Of the total purchase price,~~(including $6.9 million ~~will~~of post-closing escrow amounts to 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.~~

~~Table~~claims). Stratus recorded a pre-tax gain on the sale of ~~Contents~~$119.7 million in second-quarter 2022.

In accordance with accounting guidance, Stratus reported the results of operations of Block 21 as discontinued operations in the consolidated ~~statements~~statement of comprehensive income for first-quarter 2022 because the disposal represents a strategic shift that had a major effect on ~~operations, and presented the assets and liabilities of Block 21 as held for sale - discontinued operations in the consolidated balance sheets for all periods presented.~~operations. 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~~

Table 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, 2021.Contents

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

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)


	Three Months Ended
	March 31,
	2022
Revenues: a
Hotel	$	5,871
Entertainment	5,340
Leasing operations and other	726
Total revenue	11,937
Cost of sales:
Hotel	4,743
Entertainment	4,139
Leasing operations and other	471
Depreciation b	—
Total cost of sales	9,353
General and administrative expenses	100
Operating income	2,484
Interest expense, net	(1,945)
Provision for income taxes	(164)
Net income from discontinued operations	$	375

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

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.~~2022.

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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~~$560 thousand 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~~first-quarter 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~~$74 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 in the amount of $3.3 million at March 31, ~~2022, compared with $4.8~~2023 and $3.5 million at December 31, ~~2021.~~2022. The reduction in the deferred gain balance primarily reflects ~~master lease~~Pad Site Master Lease payments. The remaining deferred gain balance is expected to be reduced primarily by future ~~master lease~~Pad Site 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~~Table of the outstanding construction loan, the sale generated net proceeds of approximately $34 million. 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 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.

The Saint Mary had rental revenue of $0.1 million in first-quarter 2021 prior to the 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, 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.Contents

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					March 31, 2023				December 31, 2022
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value

Liabilities:	Liabilities:									Liabilities:
Debt	Debt	$	121,446	$	122,747	$	106,648	$	108,091	Debt	$	128,336	$	130,075	$	122,765	$	124,575

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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 AND EQUITY

The components of Stratus' debt follow (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Comerica Bank credit facility		$	10,000	$	—
Comerica Bank revolving credit facility						Comerica Bank revolving credit facility	$	—	$	—
Jones Crossing loan	Jones Crossing loan	24,067		24,042		Jones Crossing loan	23,938		24,143
The Annie B land loan	The Annie B land loan	13,877		13,847		The Annie B land loan	13,933		13,969
New Caney land loan	New Caney land loan	4,262		4,496		New Caney land loan	—		4,047
Paycheck Protection Program loan		38		156
Construction loans:	Construction loans:					Construction loans:
Kingwood Place	Kingwood Place	32,457		32,249		Kingwood Place	27,768		27,507

Lantana Place	Lantana Place	21,997		22,098		Lantana Place	21,787		21,782
The Saint June						The Saint June	21,001		13,829
Magnolia Place	Magnolia Place	6,542		2,077		Magnolia Place	7,174		6,816
West Killeen Market	West Killeen Market	6,040		6,078		West Killeen Market	5,289		5,306
Amarra Villas credit facility		2,166		1,605

Total debta		$	121,446	$	106,648
Amarra Villas revolving credit facility						Amarra Villas revolving credit facility	7,446		5,366
Total debt a b						Total debt a b	$	128,336	$	122,765

a.Includes net reductions for unamortized debt issuance costs of ~~$1.1~~$1.0 million at March 31, ~~2022,~~2023, and ~~$1.2~~$1.1 million at December 31, ~~2021. Total debt does~~2022.

b.The Saint George and Holden Hills construction loans did not ~~include debt associated with Block 21, which is reflected in liabilities held for sale. Refer to Note 4 for further discussion.~~have outstanding balances at March 31, 2023 or December 31, 2022 (for The Saint George construction loan).

Comerica Bank revolving credit facility. As of March 31, ~~2022, Stratus~~2023, Status had ~~$49.7~~$42.7 million available under ~~its $60.0 million~~the Comerica Bank revolving credit ~~facility, with letters~~facility. Letters of credit, totaling ~~$347 thousand committed against~~$11.0 million, have been issued under the ~~credit facility. In April 2022, Stratus borrowed $20.0 million on the~~revolving credit facility, ~~of which~~and secure the ~~majority~~company’s obligation to build certain roads and utilities facilities benefiting Holden Hills and Section N. In March 2023, Stratus entered into a modification 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~~revolving credit facility, which extended the maturity date of the ~~Comerica Bank~~revolving credit facility ~~from September~~to March 27, ~~2022, to December 26, 2022, increase~~2025, and increased the ~~letter~~floor of ~~credit sublimit from $7.5 million to $11.5 million and change~~ the facility’s benchmark rate, ~~from the London Interbank Offered Rate (LIBOR) to~~ the Bloomberg Short-Term Bank Yield Index (BSBY) Rate. ~~Advances~~As amended, advances under the revolving credit facility ~~now~~ bear interest at the one-month BSBY Rate (with a floor of ~~0.0~~0.50 percent) plus ~~4.0~~4.00 percent.

Jones Crossing loan. The Jones Crossing loan requires a debt service coverage ratio (DSCR) of 1.15 to 1.00 measured quarterly beginning with the quarter ending September 30, 2022. If the DSCR falls below 1.15 to 1.00, a “Cash Sweep Period” (as defined in the Jones Crossing loan) results, which limits Stratus’ ability to receive cash from its Jones Crossing subsidiary. The DSCR fell below 1.15 to 1.00 in each of fourth-quarter 2022 and first-quarter 2023, and the Jones Crossing subsidiary made principal payments of $231 thousand and $1.7 million in February

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2023 and May 2023, respectively, to bring the DSCR back above 1.15 to 1.00 and a Cash Sweep Period did not occur.

The Annie B land loan. In February 2023, Stratus Block 150, L.P. entered into a modification agreement that extended the maturity date of The Annie B land loan to March 1, 2024, and changed the interest rate to the BSBY Rate (with a floor of 0.50 percent) plus 3.00 percent. In connection with the modification agreement, Stratus Block 150, LP, escrowed an interest reserve of $0.6 million with the lender.

New Caney land loan. In 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 New Caney land loan was repaid.

The Saint June construction loan. In January 2023, The Saint June construction loan was amended to ~~convert~~change the ~~benchmark~~interest rate ~~from LIBOR~~for the loan to ~~the~~Term Secured Overnight Financing Rate (SOFR)~~. The loan now bears interest at SOFR~~with a floor of 0.75 percent plus ~~3.0~~2.85 percent, subject to ~~the applicable margin adjustment.~~a 3.50 percent floor.

~~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, which was signed into law on March 27, 2020. The PPP loan matured and the remaining balance was repaid by Stratus on April 15, 2022. Of the original loan amount, $3.7 million was forgiven in August 2021.

~~Lantana~~Magnolia Place construction loan.In ~~January 2022, Stratus entered into an amendment to~~May 2023, the ~~Lantana~~Magnolia Place construction loan was amended to ~~extend~~change the ~~date through which Stratus can request advances under~~interest rate for the loan ~~through December 31, 2022.~~to Term SOFR with a floor of 0.00 percent plus 3.36 percent, subject to a 3.50 percent floor.

Amarra Villas revolving credit facility. In March ~~2022,~~2023, Stratus ~~subsidiaries and~~made a $2.2 million principal payment on the Amarra Villas revolving credit facility upon the closing of a sale of one of the Amarra Villas homes.

Holden Hills construction loan. In first-quarter 2023, the Holden Hills partnership entered into a loan agreement with Comerica Bank ~~agreed~~ to ~~an extension~~finance the development of Phase I of the Holden Hills project.

The loan agreement provides for a senior secured construction loan in the aggregate principal amount of the least of (i) $26.1 million, (ii) 23 percent of the total development costs for Phase I or (iii) the amount that would result in a maximum loan-to-value ratio of 28 percent. The loan has a maturity date of February 8, 2026. Advances under the loan bear interest at the one-month BSBY Rate (with a floor of 0.50 percent), plus 3.00 percent. Payments of interest only on the loan are due monthly until the maturity date with the outstanding principal due at maturity. The Holden Hills partnership may prepay all or any portion of the loan without premium or penalty. Amounts repaid under the loan may not be reborrowed.

The loan is secured by the Holden Hills project, including the land related to ~~June 19, 2022,~~both Phase I and Phase II, and the Phase I improvements. After completion of construction of Phase I, the Holden Hills partnership may sell and obtain releases of the liens on single-family platted home sites, individual pods or the Phase II land, subject to specified conditions, and upon payment to the lender of specified amounts related to the parcel to be released. The Holden Hills partnership is not permitted to make distributions to its partners, including Stratus, while ~~they negotiate~~the loan is outstanding. The Holden Hills partnership must apply all Municipal Utility District (MUD) reimbursements it receives and is entitled to retain as payments of principal on the loan.

Stratus has entered into a ~~modification~~guaranty for the benefit of ~~this facility.~~the lender pursuant to which Stratus has guaranteed the payment of the loan and the completion of Phase I, including the Tecoma Improvements (which benefit both the Holden Hills Project and Section N). Stratus is also liable for customary carve-out obligations and an environmental indemnity. Stratus must maintain, on a consolidated basis, a net asset value not less than $125.0 million, and a debt-to-gross-asset value not more than 50 percent (in each case as defined in the guaranty).

For additional information regarding Stratus' debt, refer to Note 6 in the Stratus ~~2021~~2022 Form 10-K.

Interest Expense and Capitalization. Interest costs (before capitalized interest) totaled $2.4 million in first-quarter 2023 and $1.1 million in first-quarter ~~2022 and $2.3 million in first-quarter 2021.~~2022. Stratus' capitalized interest totaled $2.4 million in first-quarter 2023 and $1.1 million in first-quarter ~~2022 and $1.3 million in first-quarter 2021.~~2022. Capitalized interest is primarily related to development activities at Barton Creek (primarily Holden Hills, Section N and The ~~Annie B,~~Saint June), The Saint George and ~~Magnolia Place.~~The Annie B for both periods presented.

Equity. The Comerica Bank revolving credit facility, Amarra Villas revolving credit facility, The Annie B land loan, The Saint George construction loan, Kingwood Place construction loan and Holden Hills construction loan require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend payments. On September 1, 2022, after receiving written consent from Comerica Bank, Stratus’ Board of Directors (Board) declared a special cash dividend of $4.67 per share (totaling $40.0 million) on Stratus’ common stock,

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which was paid on September 29, 2022 to shareholders of record as of September 19, 2022. Accrued liabilities included $1.1 million as of March 31, 2023, and $1.3 million as of December 31, 2022, representing dividends accrued for unvested RSUs in accordance with the terms of the awards. The accrued dividends are paid to the holders of the RSUs as the RSUs vest. In 2022, with written consent from Comerica Bank, Stratus’ Board also approved a share repurchase program, which authorizes repurchases of up to $10.0 million of Stratus’ common stock. The repurchase program authorizes Stratus, in management’s discretion, to repurchase shares from time to time, subject to market conditions and other factors. In first-quarter 2023, Stratus acquired 43,624 shares of its common stock under the share repurchase program for a total cost of $0.9 million at an average price of $20.49 per share. Through May 10, 2023, Stratus has acquired 359,553 shares of its common stock for a total cost of $9.2 million at an average price of $25.64 per share, and $0.8 million remains available for repurchases under the program.

7. PROFIT PARTICIPATION INCENTIVE PLAN AND LONG-TERM INCENTIVE PLAN

In July 2018, the Compensation Committee ~~unanimously~~ adopted the PPIP. In February 2023, the Committee approved the LTIP, which amends and restates the PPIP, ~~which provides~~and is effective for participation interests awarded under development projects on or after its effective date. As of March 31, 2023, there were not yet any participation interests awarded under the LTIP. Outstanding participation interests granted under the PPIP will continue to be governed by the terms of the prior PPIP. The PPIP and LTIP provide participants with economic incentives tied to the success of the development projects designated by the ~~Compensation~~ Committee as approved projects under the ~~PPIP.~~PPIP and LTIP. 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~~Notes 1 and 8 of the Stratus ~~2021~~2022 Form 10-K for further discussion.

The sale of The Saint Mary in January 2021 was a capital transaction under the 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~~2022 and the remaining ~~accrued liability under the PPIP related to Lantana Place totaled~~ $3.7 million ~~at March 31, 2022, and is expected to be~~was settled in RSUs with a three-year vesting period awarded to eligible participants ~~in the first half~~during second-quarter 2022 following stockholder approval of ~~2022.~~Stratus’ new stock incentive plan.

The sale of The Santal in December 2021 was a capital transaction under the PPIP. ~~During February 2022,~~The profit pool was $6.7 million, of which $5.0 million was paid in cash to eligible participants ~~subject to the PPIP’s~~during February 2022. The PPIP contains limits on cash compensation paid to certain ~~officers. Amounts~~officers and amounts due ~~under the PPIP~~ above the limits are converted to an equivalent number of RSUs with a one-year vesting period. ~~The~~Of the remaining ~~accrued liability under the PPIP related to The Santal totaled $1.7~~amount, $1.6 million ~~at March 31, 2022, and is expected to be~~was settled in RSUs awarded to ~~eligible participants~~one participant during second-quarter 2022 following stockholder approval of Stratus’ new stock incentive plan.

During first-quarter 2022, the Compensation Committee designated The Saint June as an approved project under the PPIP, and the awards were granted in ~~the first half of~~August 2022.

Under the terms of the PPIP and LTIP, the number of RSUs granted in connection with settlement of approved projects is determined by reference to the 12-month trailing average stock price for the year the project reaches a payment event, whereas the grant date fair value of the RSUs for accounting purposes is based on the grant date closing price. For the RSUs awarded in connection with Lantana Place and The Santal, the aggregate grant date value was $2.1 million greater than the accrued liability for the two projects as a result of this different valuation methodology. During second-quarter 2022, Stratus transferred the $5.3 million accrued liability balance under the PPIP for Lantana Place and The Santal that was settled in RSUs to capital in excess of par value and is amortizing the $2.1 million excess of the grant-date value over the accrued liability with a charge to general and administrative expenses and a credit to capital in excess of par value over the three-year or one-year vesting periods of the related RSUs.

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A summary of PPIP costs follows (in thousands):


		Three Months Ended March 31,
			2022		2021			Three Months Ended
								March 31,
								2023		2022
Charged to general and administrative expense	Charged to general and administrative expense		$	15	$	495	Charged to general and administrative expense	$	148	$	15
Capitalized to project development costs	Capitalized to project development costs		51		224		Capitalized to project development costs	110		51
Total PPIP costs	Total PPIP costs		$	66	$	719	Total PPIP costs	$	258	$	66

The accrued liability for the PPIP totaled ~~$7.9~~$3.2 million at March 31, ~~2022,~~2023, and ~~$15.2~~$3.0 million at December 31, ~~2021~~2022 (included in other liabilities).

8. INCOME TAXES

Stratus’ accounting policy for and other information regarding its income taxes are further described in Notes 1 and 7 in the Stratus ~~2021~~2022 Form 10-K.

Stratus ~~had~~has a full valuation allowance against its U.S. Federal net deferred tax assets ~~(net~~as of both March 31, 2023 and December 31, 2022. Stratus has recorded a deferred tax ~~liabilities)~~asset totaling ~~$11.3 million~~$38 thousand at both March 31, ~~2022~~2023 and ~~$12.4 million at~~ December 31, ~~2021. Stratus' deferred tax assets had valuation allowances totaling $6.5 million at March 31,~~ 2022 ~~and $6.4 million at December 31, 2021. Management has concluded that the pending sale of Block 21 is sufficient positive evidence~~related 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.state income taxes.

In evaluating the recoverability of the remaining deferred tax assets, management considered available positive and negative evidence, giving greater weight to the 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.

~~Table of Contents~~During 2023, Stratus expects to incur current state income taxes in addition to U.S. Federal current income taxes primarily associated with taxable income generated from cash received in the Holden Hills transaction.

The difference between Stratus' consolidated effective income tax rate of (23) percent for first-quarter 2023 and the U.S. Federal statutory income tax rate of 21 percent was primarily attributable to state income taxes, noncontrolling interests in subsidiaries, the presence of a valuation allowance against its U.S. Federal net deferred tax assets as of March 31, 2023, and the executive compensation limitation. The difference between Stratus' consolidated effective income tax rate of (20) percent infor 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 first-quarter 2022.

On August 16, 2022, the ~~first quarter~~Inflation Reduction Act of 2022 (the IR Act) was enacted in the United States. Among other provisions, the IR Act imposes a new 1 percent excise tax on the fair market value of net corporate stock repurchases made by covered corporations, effective for tax years beginning after December 31, 2022. ~~The difference between Stratus'~~Stratus is assessing the potential impacts of the IR Act but does not expect the IR Act to have a material impact on its 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 noncontrolling interests in subsidiaries, the presence of a full valuation allowance against certain U.S. Federal deferred tax assets as of March 31, 2021, and the Texas state margin tax.financial statements.

9. BUSINESS SEGMENTS

As a result of the ~~pending~~ sale of Block 21, Stratus has 2two operating segments: Real Estate Operations and Leasing Operations. Block 21, which encompassed Stratus’ ~~hotel~~Hotel and ~~entertainment~~Entertainment segments, along with some leasing operations, is ~~reflected~~presented 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;~~Community, which includes Section N, Holden Hills, Amarra multi-family and commercial land, Amarra Villas, The Saint June, Amarra Drive lots and other vacant land; the Circle C community; the Lantana community, ~~including~~which includes a portion of Lantana Place planned for a multi-family phase now known as The Saint ~~Julia,~~Julia; The Saint George; and the 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~~(land for future phases of retail and multi-family development and retail pad sites at Jones ~~Crossing and vacant pad sites); in Killeen, Texas (one vacant pad site at West Killeen Market)~~Crossing); and in Magnolia, Texas ~~(Magnolia~~(land for a future phase of retail development and for future multi-family use and retail pad

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sites at Magnolia Place), Kingwood, Texas ~~(land for future multi-family development, for which a sale is pending, and a vacant~~(a retail pad site) and New Caney, Texas (New Caney), each located in the greater Houston area.

The Leasing Operations segment is comprised of Stratus’ real estate assets ~~both residential and commercial,~~held for investment that are leased or available for lease and includes retail space at West Killeen Market, Lantana Place, Kingwood Place and the completed ~~portion~~portions of Jones ~~Crossing. The segment also included The Saint Mary until its sale in January 2021~~Crossing and ~~The Santal until its sale in December 2021.~~Magnolia Place and retail pad sites subject to ground leases at Lantana Place, Kingwood Place and Jones Crossing.

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,
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


	Three Months Ended
	March 31,
	2023		2022
Real Estate Operations:
Developed property sales	$	2,493	$	—
Undeveloped property sales	—		—
Commissions and other	—		19
	2,493		19
Leasing Operations:
Rental revenue	3,309		3,080
	3,309		3,080

Total revenues from contracts with customers	$	5,802	$	3,099

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Financial Information by Business Segment. ~~The following~~Summarized financial information by segment ~~information was prepared~~for the three months ended March 31, 2023, based on ~~the same basis as~~ Stratus’ ~~consolidated~~internal financial ~~statements~~reporting system utilized by its chief operating decision maker, follows (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


	Real Estate Operations a		Leasing Operations		Corporate, Eliminations and Other b		Total
Revenues:
Unaffiliated customers	$	2,493	$	3,309	$	—	$	5,802
Cost of sales, excluding depreciation	(4,487)		(1,261)		—		(5,748)
Depreciation and amortization	(27)		(906)		5		(928)
General and administrative expenses	—		—		(4,719)		(4,719)
Operating (loss) income	$	(2,021)	$	1,142	$	(4,714)	$	(5,593)
Capital expenditures and purchases and development of real estate properties	$	9,027	$	10,006	$	—	$	19,033
Total assets at March 31, 2023 c	307,571		109,136		63,012		479,719

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~~Corporate, eliminations and other includes cash, cash equivalents and restricted cash 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.$57.0 million.

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Summarized financial information by segment for the three months ended March 31, 2022, based on Stratus’ internal financial reporting system utilized by its chief operating decision maker, follows (in thousands):


	Real Estate Operations a		Leasing Operations		Corporate, Eliminations and Other b		Total
Revenues:
Unaffiliated customers	$	19	$	3,080	$	—	$	3,099
Intersegment	4		—		(4)		—
Cost of sales, excluding depreciation	(1,366)		(984)		—		(2,350)
Depreciation and amortization	(25)		(852)		4		(873)
General and administrative expenses	—		—		(3,167)		(3,167)
Gain on sale of assets c	—		4,812		—		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 d	254,212		106,652		183,904		544,768

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 a pre-tax gain recognized on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that Stratus entered into in connection with its sale of The Oaks at Lakeway in 2017. Refer to Note 4 under the heading “The Oaks at Lakeway” for further discussion.

e.d.~~Includes~~Corporate, eliminations and other includes $151.2 million of 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~~cash, cash equivalents and restricted cash 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.~~$15.8 million.

10. SUBSEQUENT EVENTS

Stratus evaluated events after March 31, ~~2022,~~2023, 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, ~~2021 (2021~~2022 (2022 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 ~~2021~~2022 Form 10-K for further discussion). 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, leasing and sale of ~~commercial, and~~ multi-family and single-family residential and commercial real estate properties ~~and real estate leasing~~ in the Austin, Texas area and other select ~~fast-growing~~ markets in Texas. ~~We generate revenues and cash flows from the sale of~~In addition to our developed properties, ~~and the lease~~we have a development portfolio that consists of ~~our retail, mixed-use~~approximately 1,600 acres of commercial and multi-family ~~properties.~~and single-family residential projects under development or undeveloped land held for future use. Refer to Note 9 for 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 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~~successful 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, when available, an increase in the ~~increased~~ value of the property or from lower interest rates, or ~~in connection with holding them~~ for ~~lease once the properties have been completed~~other reasons. We are focused on pure residential and ~~stabilized.~~

~~We believe that~~residential-centric mixed-use projects in Austin and other select ~~fast-growing~~ markets in Texas, which we believe continue to be attractive locations. ~~Many~~Refer to “Business Strategy” in MD&A in our 2022 Form 10-K for a discussion of the evolution of our ~~developments~~strategy during 2022.

We do not currently have any material commitments to contribute additional cash to our joint venture projects or wholly owned development projects other than the potential additional $10.0 million of capital that we may be required to contribute to our Holden Hills limited partnership and our share (related to Section N) of the cost of the Tecoma Improvements discussed below under “Recent Development Activities – Current Residential Activities – Barton Creek – Holden Hills.” However, our development plans for future projects require significant additional capital. Our investment strategy focuses on projects that we believe will provide attractive long-term returns, while limiting our financial risk. We plan to continue to develop properties using project-level debt and third-party equity capital through joint ventures in which we receive development management fees and asset management fees, with our potential returns increasing above our relative equity interest in each project as negotiated return hurdles are achieved.

We expect to reduce our reliance on our revolving credit facility and retain sufficient cash to operate our business, taking into account risks associated with changing market conditions and the variability in ~~locations where development approvals have historically been subject~~cash flows from our business. Our main sources of revenue and cash flow are expected to ~~regulatory constraints,~~be sales of our properties to third parties or distributions from joint ventures, the timing of and proceeds from which ~~has made it~~are difficult to ~~obtain or change entitlements. Most~~predict and depend on market conditions and other factors. We also generate cash flow from rental income in our leasing operations and from development and asset management fees received from our properties. Due to the nature of our ~~Austin properties, which are located in desirable areas with significant regulatory constraints, are entitled~~development-focused business, we do not expect to generate sufficient recurring cash flow to cover our general and ~~have utility capacity for full buildout. As a result,~~administrative expenses each period. However, we believe that ~~through strategic planning, development~~the unique nature 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. However, we have increasingly relied on project-level equity financinglocation of our ~~subsidiaries. We have formed~~assets, and ~~expect~~our team’s ability to ~~continue to pursue strategic relationships as part of our overall strategy for particular~~execute successfully on development projects, will provide us with positive cash flows and ~~may enter into similar equity financing arrangements~~net income over time, as evidenced by our recent sales of The Saint Mary, The Santal and Block 21 in 2021 and 2022 and the ~~future. See Note 3 for further discussion.~~distribution from the Holden Hills partnership in 2023. Further, we believe our investment strategy, current

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~~As described in this report~~liquidity and inpipeline of projects provide us with many years of opportunities to increase long-term value for 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 outstanding project loan, generated net proceeds of approximately $74 million. In January 2021, one of our subsidiaries sold The Saint Mary multi-family property for $60.0 million of which we received approximately $21.9 million after closing costs, payment of the construction loan, reserves for remaining costs of the partnership and distributions to noncontrolling interest owners. Net proceeds of the sales were used to pay down the balance of our $60.0 million Comerica Bank credit facility and for other corporate purposes.stockholders.

~~As previously mentioned,~~Given challenging market conditions discussed in more detail below, we are currently focused on successfully completing our projects under construction, managing our capital expenditures, advancing other projects through the ~~sale~~planning, designing and entitlement process, maximizing cash flow from stabilized assets, controlling costs as much as possible in this inflationary environment, and continuing to source third-party equity capital. We have undeveloped properties currently undergoing active planning. Refer to “Recent Development Activities” below and Items 1. and 2. “Business and Properties” in our 2022 Form 10-K for a discussion of ~~Block 21 is expected to close prior to June 1, 2022, but remains subject~~these projects. While uncertainty in the market, primarily due to the ~~timely satisfaction or waiver~~increasing costs of ~~various closing conditions. If completed,~~construction materials and labor, rising interest rates and recent disruptions in the ~~sale~~banking industry due to some highly-publicized bank failures, is currently causing a pause in some sales processes and the start of ~~Block 21~~new development projects, we believe there continues to exist strong demand for residential and residential-centric mixed use projects in Austin and the other markets in Texas where we operate, combined with limited supply. We will ~~result~~re-evaluate our strategy as development progresses on the projects in ~~substantial additional cash proceeds of approximately $115 million pre-tax~~our pipeline and ~~$90 million after-tax (before prorations, but including post-closing escrow amounts).~~as market conditions stabilize.

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, and of our long-term business strategy. Potential uses of proceeds may include a combination of further deleveraging, returning cash to shareholders and reinvesting in our project pipeline. We expect to provide additional information after the Block 21 transaction is concluded and our Board and management have had the opportunity to assess market conditions and the capital requirements for our development pipeline.

OVERVIEW OF FINANCIAL RESULTS

~~OVERVIEW OF FINANCIAL RESULTS FOR FIRST-QUARTER 2022~~

~~As a result~~Sources of ~~the pending sale of Block 21, we have two operating segments: Real Estate Operations~~Revenue and Leasing Operations. Block 21, which encompassed our hotel and entertainment segments, 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.Income

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~~residential-centric mixed-use properties. We may sell or lease the real estate we develop, depending on market conditions. ~~Real estate~~Multi-family and retail rental properties that we develop ~~and then lease becomes part of~~are reclassified to our Leasing ~~Operations.~~Operations segment when construction is completed and they are ready for occupancy. 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 multi-family ~~projects~~properties that we developed. We may also generate income from the sale of our leased properties, depending on market conditions.

Summary Financial Results for the First Quarter of 2023

Our revenues totaled $5.8 million in first-quarter 2023 compared with $3.1 million in first-quarter ~~2022, compared with $11.4 million infirst-quarter 2021.~~2022. The ~~decrease~~increase in revenues in first-quarter ~~2022,~~2023, compared tofirst-quarter ~~2021,~~2022, is primarily a result of the sale of one Amarra Villas home in first-quarter 2023. Revenue in our Leasing Operations segment increased $0.2 million to $3.3 million in first-quarter 2023 compared with first-quarter 2022, primarily reflecting revenue from Magnolia Place, which had no ~~real estate sales occurring~~rental revenue in first-quarter 2022, ~~because of a decrease in available inventory of developed properties in our Real Estate Operations segment~~ and ~~a decrease in leasing~~increased revenue ~~as a result of the sales of The Saint Mary and The Santal multi-family projects in 2021.~~at Kingwood Place. Refer to "Results of Operations" below for further discussion of the results of operations of our segments.

Our net loss attributable to common stockholders totaled $5.8 million, or $0.71 per diluted share in first-quarter 2023, compared to net income attributable to common stockholders ~~totaled~~of $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.~~2022. 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~~we entered into in connection with ~~its~~our sale of The Oaks at Lakeway in 2017. Refer to Note 4 under the heading “The Oaks at Lakeway” for ~~additional~~further 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.

Sale of Block 21 in May 2022

On May 31, 2022, we completed the previously announced sale of Block 21 to Ryman Hospitality Properties, Inc. (Ryman) for $260.0 million, subject to certain purchase price adjustments, and including Ryman’s assumption of $136.2 million of existing mortgage debt, with the remainder paid in cash. Our net proceeds of cash and restricted cash totaled $112.3 million (including $6.9 million of post-closing escrow amounts to be held for 12 months after the closing, subject to a longer retention period with respect to any required reserve for pending claims). We recorded a pre-tax gain on the sale of $119.7 million in second-quarter 2022. Block 21 was our wholly owned mixed-use real estate property in downtown Austin, Texas, containing the 251-room W Austin Hotel, Austin City Limits Live at the Moody Theater, a 2,750-seat entertainment venue, Class A office space, retail space and the 3TEN ACL Live

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entertainment venue. The sale of Block 21 eliminated 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 first-quarter 2022 presented in the consolidated financial statements included in this Form 10-Q. Refer to Note 4 for further discussion.

RECENT DEVELOPMENT ACTIVITIES

Current Residential Activities

~~Barton Creek~~

~~In first-quarter~~The discussion below focuses on our recent significant residential activity. For a description of our properties containing additional information, refer to Items 1. and 2. “Business and Properties” in our 2022 ~~we sold no residential units or lots. As of March 31, 2022, two developed Amarra Drive Phase III lots remained unsold.~~Form 10-K.

Barton Creek

Amarra Villas. The Villas at Amarra Drive (Amarra Villas) project is a 20-unit development in ~~the~~ Barton ~~Creek community for which~~Creek. In first-quarter 2023, we completed ~~construction of the first seven homes during 2017~~ and ~~2018. We~~ sold one home for $2.5 million. Construction on the last ~~two completed homes in 2019. We began construction on the next two Amarra Villas homes during the first quarter of 2020, which are expected~~ten units continues to ~~be completed in mid-2022. In 2021, we began construction of one additional home~~progress, and ~~in March 2022, we began construction on another two homes. As~~as of May ~~13, 2022, two homes were~~10, 2023, one home was under contract to sell ~~(one which we began construction on in 2020~~ and ~~one which we began construction on in 2021). As of May 13, 2022, a total of 11 units (3 of which are under construction and 8 of which construction has not started)~~nine homes remain available for ~~sale of the initial 20-unit project.~~sale.

The Saint June. 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~~are expected to be ready for occupancy in June ~~are currently~~2023, and the project is expected to be completed in ~~fourth-quarter 2022 with completion of the project expected in first-quarter~~third-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~~Hills. Our final large residential development within the Barton Creek community, ~~consisting~~Holden Hills, consists of 495 acres and the community is designed to feature 475 unique residences to be developed in ~~multiple~~two phases with a focus on health and wellness, sustainability and energy conservation. Phases I and II of the Holden Hills development plan encompass the development of the home sites. Phase I is expected to consist of 337 luxury residence sites to be developed in nine distinct communities or “pods,” and 12 single-family platted home sites or “estate lots,” and includes related amenities and infrastructure. Phase I also includes the Tecoma Improvements, described below. Phase II is expected to consist of 63 luxury residence sites to be developed in five pods, and 63 single-family platted estate lots, and includes related amenities and infrastructure. The luxury residences are expected to range in size from 2,000 square feet to 4,600 square feet. The estate lots are expected to range in size from 0.9 acres to 2.7 acres.

We ~~currently expect~~entered into a limited partnership agreement with a third-party equity investor for this project in January 2023, and in February 2023 obtained construction financing for Phase I of the project and commenced infrastructure construction. We contributed to ~~secure final permits~~the joint venture the Holden Hills land and related personal property at an agreed value of $70.0 million and our 50.0 percent partner contributed $40.0 million in cash. Immediately thereafter, the Holden Hills partnership distributed $30 million of cash to ~~start~~us. Further, the Holden Hills partnership reimbursed us for certain initial project costs and closing costs of approximately $5.8 million. We consolidate the Holden Hills limited partnership, and the contribution from our partner was accounted for as a noncontrolling interest. Refer to Notes 3 and 6 for further discussion.

We and the equity investor have agreed to contribute up to an additional $10 million each to the partnership if called upon by the general partner. The initial and potential additional equity contributions are projected to constitute a sufficient amount of equity capital to develop both Phase I and Phase II of the Holden Hills project. The partnership anticipates securing additional debt financing for the development of Phase II. The construction ~~in September 2022. Subject to obtaining financing and other market conditions, we currently~~of homes on the pods or estate lots would require additional capital. We 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.~~in late 2024. Accordingly, our current projections anticipate that we could ~~begin closing sales of certain~~start building homes and/or selling home sites in ~~Holden Hills in~~ late ~~2024.~~2024 or 2025. We may sell the developed ~~home sites,~~pods and estate lots or may elect to build and sell, or build and lease, homes on some or all of the ~~home sites,~~pods and estate lots, depending on financing and market conditions. Pods and estate lots may also be acquired from the Holden Hills partnership by a limited partner for further development under procedures approved by the partners.

We entered into a development agreement with the Holden Hills partnership (Development Agreement) that provides that, as part of Phase I, the Holden Hills partnership will construct certain street, drainage, water, sidewalk, electric and gas improvements in order to extend the Tecoma Circle roadway on Section N land owned by us from its current terminus to Southwest Parkway, estimated to cost approximately $14.7 million (the Tecoma

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Improvements). The Tecoma Improvements will enable access and provide utilities necessary for the development of both Holden Hills and Section N. Pursuant to the Development Agreement, we will reimburse the Holden Hills partnership for 60 percent of the costs of the Tecoma Improvements. We have posted standby letters of credit with the City of Austin under our revolving credit facility with Comerica Bank totaling approximately $11 million as fiscal security for completion of certain infrastructure improvements benefiting the Holden Hills project and has agreed to leave such fiscal security in place until the improvements are completed.

The Holden Hills partnership is expected to be eligible to be reimbursed in the future by Travis County Municipal Utility Districts (MUD) for a portion of costs of the Tecoma Improvements and also for a portion of costs related only to the Holden Hills project, with such MUD reimbursements currently estimated to be up to a maximum of $6.4 million for the Tecoma Improvements and $8.0 million for only the Holden Hills project. The Holden Hills partnership has agreed to deliver to us 60 percent of any MUD reimbursements for Tecoma Improvement costs paid directly by us, when such reimbursements are received by the partnership. The amount and timing of MUD reimbursements depends upon, among other factors, the amount and timing of actual costs incurred, the MUD having a sufficient tax base within its district to issue bonds and obtaining the necessary state approval for the sale of the bonds. Accordingly, the amount and timing of the receipt of MUD reimbursements is uncertain.

Section N. Using ~~a conceptual approach~~an entitlement strategy 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~~community adjacent to Holden Hills. We are designing a dense, mid-rise, mixed-use project, with extensive multi-family and retail components, coupled with limited office, entertainment and hospitality uses, surrounded by an extensive outdoor recreational and greenspace ~~amenity, resulting~~amenities, which are expected to result in a significant ~~potential~~ increase in development density as compared to our prior plans.

~~The Annie B~~

In September 2021, we purchased the land and announced plans for The Annie B, a proposed luxury high-rise rental project in downtown Austin to be developed as a 400-foot tower, consisting of approximately 420,000 square feet with approximately 300 luxury multi-family units for lease and 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~~fourth-quarter 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~~We entered into a construction loan for ~~the~~this project and ~~obtaining the entitlement and permit approvals, we~~began construction in third-quarter 2022. 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~~The Annie B

In third-quarter 2021, we purchased the land and ~~Other Residential~~announced plans for The Annie B, a proposed luxury high-rise rental project in downtown Austin to be developed as a 400-foot tower, consisting of approximately 420,000 square feet with 316 luxury multi-family units. We continue to work to finalize our development plans with a goal of beginning construction in late 2023 or 2024, subject to obtaining financing and other market conditions.

The Saint Julia

We have advanced development plans for ~~the~~The Saint Julia, a 306-unit multi-family ~~component~~project that is part 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,~~Austin. We currently do not expect to begin construction ~~in third-quarter 2022 with expected completion in mid-2024. The multi-family component is now known as~~prior to 2024, and The Saint Julia project remains subject to financing and ~~is expected to consist of 306 units.~~

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Other Residential

~~We are evaluating~~In October 2022, we entered into a ~~sale of a portion~~contract to sell approximately 11 acres planned for 275 multi-family units in Magnolia Place for $4.3 million, which is currently expected to close by mid-2024. Upon the anticipated closing of the ~~land~~sale, we would have 18 acres planned for ~~the single-family and~~up to 600 multi-family ~~residential components of Magnolia Place, an H-E-B, L.P (H-E-B) grocery shadow-anchored, mixed-use project~~units remaining in Magnolia ~~Texas.~~ Place.

We ~~also~~ continue to evaluate options for the 21-acre 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~~ We are also evaluating options for a multi-family ~~tract of~~project on our remaining 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,~~Lakeway, Texas. ~~If consummated, the sale is expected to close in third-quarter 2022.~~

Current Commercial Activities

The discussion below focuses on our recent significant commercial activity. For ~~further discussion~~a description of our ~~multi-family and single-family residential~~ properties containing additional information, refer to ~~MD&A and the related sections in~~ Items 1. and 2. “Business and Properties” in our ~~2021~~2022 Form 10-K.

~~Current Commercial Activities~~

Magnolia Place

~~In August 2021, we began construction on the first phase of development~~The retail component of Magnolia Place, our H-E-B ~~grocery~~ shadow-anchored ~~mixed-use~~retail project in Magnolia, ~~Texas. Magnolia Place~~Texas, is currently planned to consist of 4up to four retail buildings totaling approximately ~~35,000~~34,000 square feet 5and up to nine retail pad sites to be sold or ground ~~leased, 194 single-family lots and approximately 500 multi-family units.~~leased. The first phase of development consists of 2two retail buildings totaling ~~18,987~~ 18,582

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square feet, all 5 pad sites, and the road, utility and drainage infrastructure necessary to support the entire development. ~~The first two retail buildings~~Except for a storm water drainage pond and certain City of Magnolia water supply upgrades, which are expected to be ~~available for occupancy~~completed by the end of 2023, the first phase of development was completed 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~~2022, and the two retail buildings were turned over to ~~open in fourth-quarter 2022.~~

~~Lantana Place~~

our retail tenants to begin their finish-out process. As of March 31, ~~2022,~~2023, we had signed leases for ~~approximately 85 percent of~~all the retail space ~~at Lantana Place, including~~in the ~~anchor tenant, Moviehouse & Eatery, and~~first phase of development. We sold two retail pad sites in 2022 for a ~~ground~~total of $3.4 million, leaving up to seven additional pad sites available for 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.~~or sale.

~~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 H-E-B grocery store, and we have signed ground leases on four of the retail pads. One pad site remains available for lease. As of March 31, 2022, we had signed leases for approximately 85 percent of the retail space, including the H-E-B grocery store. We are exploring a potential sale or refinancing of Kingwood Place.

Jones Crossing

Jones Crossing, our H-E-B shadow-anchored mixed-use project in College Station, Texas, the location of Texas A&M University, has additional commercial development potential of approximately 104,750 square feet of commercial space.

Other Commercial

We also own and operate the following stabilized retail projects that we developed:

•West Killeen Market is our H-E-B shadow-anchored retail project in West Killeen, Texas, near Fort Hood. As of March 31, ~~2022,~~2023, we had signed leases for approximately 74 percent of the 44,493-square-foot retail space.

•At Jones Crossing, as of March 31, 2023, we had signed leases for substantially all of the completed retail space, atincluding the ~~first phase of Jones Crossing. Jones Crossing~~H-E-B grocery store, totaling 154,117 square feet, and a ground lease on one retail pad site. Four retail pad sites remain available for lease.

•Lantana Place is our ~~H-E-B-anchored,~~ mixed-use development project within the Lantana community south of Barton Creek in ~~College Station,~~Austin, Texas. ~~We are exploring a potential sale or refinancing of Jones Crossing.~~

~~West Killeen Market~~

As of March 31, ~~2022,~~2023, we had signed leases for approximately 7090 percent of the 99,379-square-foot retail space, including the anchor tenant, Moviehouse & Eatery, and a ground lease for an AC Hotel by Marriott that opened in November 2021.

•Kingwood Place is our H-E-B-anchored, mixed-use development project in Kingwood, Texas (in the greater Houston area). We have constructed 151,855 square feet of retail space at Kingwood Place, including an H-E-B grocery store, and as of March 31, 2023, we had signed leases for approximately 96 percent of the retail space, ~~at West Killeen Market, our retail project located in Killeen, Texas, shadow-anchored by an adjacent~~including the H-E-B grocery store. ~~Only one unsold~~We have also signed ground leases on four of the retail pad sites. One retail pad site remains ~~at West Killeen Market. We are exploring a potential sale or refinancing of West Killeen Market.~~

available for lease.

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

Potential Development Projects and Pipeline

Our development plans for ~~the~~The Annie B, ~~Holden Hills,~~ Section N and The Saint Julia will require significant additional capital, which we currently intend to pursue through ~~bank~~project-level debt and third-party equity capital arrangements through joint ventures in which we receive development management fees and weasset management fees and with our potential returns increasing above our relative equity interest in each project as negotiated return hurdles are ~~negotiating a loan for The Saint George project.~~achieved. We anticipate seeking additional debt to finance the development of Phase II of Holden Hills. We are also pursuing other development projects. These potential development projects and projects in our pipeline could require extensive additional permitting and will be dependent on market conditions and financing. Because of the nature and cost of the approval and development

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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.

~~Supply Chain Disruptions~~Market Conditions

~~Supply~~During 2022, the U.S. economy experienced steep rises in inflation and interest rates. Refer to “Debt Maturities and Other Contractual Obligations” below for further discussion about the increase in interest rates. Our industry has been experiencing construction and labor cost increases, supply chain ~~disruptions impacting~~constraints, labor shortages, higher borrowing costs and tightening bank credit. These factors are having an adverse impact on the projected profitability of our ~~industry~~new projects, have ~~begun to delay some of our~~delayed projects under construction and ~~may impact~~ the ~~timing~~commencement of construction on new projects, have adversely impacted our ability to raise equity capital on ~~which~~attractive terms in our desired time frame, and have adversely impacted our ability to sell some properties at attractive prices in our desired time frame. To manage these risks, we ~~plan to start construction in the future. Our~~go through extensive pricing exercises culminating with competitive bids from reputable contractors ~~have experienced delays~~based on ~~our projects primarily related to delivery of certain residential electrical components~~final plans and laminated structural wood materials. We understand that suppliers are taking actions to 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 our projects under construction, that may change in the future.specifications. Because we typically engage third-party general contractors to construct our projects on a fixed-price or guaranteed maximum price basis, our exposure to cost increases on

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projects under construction is limited; however, ~~supply constraints~~rising costs and delays in delivery of materials may increase the risk of default by contractors and subcontractors. In addition, because all of our debt is subject to variable interest rates, we are experiencing increased borrowing costs, ~~of or delay future projects.~~ and our developed properties are experiencing increased operating costs due to inflation. Refer to ~~“Risk Factors” included in~~ Part ~~II,~~I, Item 1A. ~~herein.~~“Risk Factors” of our 2022 Form 10-K.

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 numerous factors affecting our business activities as described herein and in our ~~2021~~2022 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~~our operating ~~segment.~~segments. Corporate, eliminations and other ~~includes~~include consolidated general and administrative expenses, which primarily consist of employee compensation and other costs described herein.

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

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


	Three Months Ended
	March 31,
	2023		2022
Operating (loss) income:
Real Estate Operations a	$	(2,021)	$	(1,368)
Leasing Operations b	1,142		6,056
Corporate, eliminations and other c	(4,714)		(3,167)
Operating (loss) income	$	(5,593)	$	1,521
Interest expense, net	$	—	$	(15)
Net (loss) income from continuing operations	$	(6,273)	$	1,812
Net income from discontinued operations	$	—	$	375
Net (loss) income attributable to common stockholders	$	(5,801)	$	2,272

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

b.~~Includes~~First-quarter 2022 includes a $4.8 million pre-tax gain recognized on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that ~~Stratus~~we entered into in connection with ~~its~~our sale of The Oaks at Lakeway in 2017. Refer to Note 4 under the heading “The Oaks at Lakeway” for ~~additional~~further discussion.

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

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 two operating segments: Real Estate Operations and Leasing Operations (refer to Note 9). The following is a discussion of our operating results by segment.

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Real Estate Operations

The following table summarizes our Real Estate Operations results (in thousands):


		Three Months Ended March 31,						Three Months Ended
					March 31,
			2022			2021				2023		2022
Revenues:	Revenues:								Revenues:
Developed property sales	Developed property sales		$	—		$	4,040		Developed property sales	$	2,493	$	—
Undeveloped property sales	Undeveloped property sales		—			2,500			Undeveloped property sales	—		—
Commissions and other	Commissions and other		23			20			Commissions and other	—		23
Total revenues	Total revenues		23			6,560			Total revenues	2,493		23
Cost of sales, including depreciation	Cost of sales, including depreciation		1,391			4,424			Cost of sales, including depreciation	(4,514)		(1,391)

Operating (loss) income			$	(1,368)		$	2,136
Operating loss									Operating loss	$	(2,021)	$	(1,368)

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


		Three Months Ended March 31,											Three Months Ended March 31,
		2022					2021						2023					2022
		Lots/Units	Revenues		Average Cost Per Lot/Unit		Lots/Units	Revenues		Average Cost Per Lot/Unit			Homes	Revenues		Average Cost Per Home		Homes	Revenues		Average Cost Per Home
Barton Creek	Barton Creek											Barton Creek

Amarra Drive:	Amarra Drive:											Amarra Drive:

Phase III lots		—	$	—	$	—	2	$	1,640	$	332

W Austin Residences at Block 21:
Condominium unit		—	—		—		1	2,400		1,721
Amarra Villas homes												Amarra Villas homes	1	$	2,493	$	2,172	—	$	—	$	—
Total Residential	Total Residential	—	$	—			3	$	4,040			Total Residential	1	$	2,493			—	$	—

The ~~decrease~~increase in revenues infrom developed property sales for first-quarter ~~2022,~~2023, compared to first-quarter ~~2021,~~2022, reflects the sale of one Amarra Villas home compared to no sales in first-quarter ~~2022, as available inventory of developed properties in our Real Estate Operations segment is limited.~~2022.

~~Undeveloped Property Sales.~~ ~~In first-quarter 2021, we sold a five-acre multi-family tract of land in Amarra Drive for $2.5 million.~~

Real Estate Cost of ~~Sales.~~Sales and Depreciation. Cost of sales includes costs of property sold, project operating and marketing expenses and allocated overhead ~~costs, partly offset by reductions for certain municipal utility district (MUD) reimbursements.~~costs. Cost of sales ~~decreased~~increased to $4.5 million in first-quarter 2023 compared to $1.4 million in first-quarter 2022, ~~from $4.4 million~~primarily reflecting the sale of one Amarra Villas home in first-quarter ~~2021, primarily reflecting~~2023 while the absence of sales in first-quarter ~~2022.~~2022 resulted in no cost of property sold.

The following table summarizes our Leasing Operations results (in thousands):
Three Months Ended March 31,
2022 2021
Rental revenue $ 3,080 $ 4,818
Rental cost of sales, excluding depreciation 984 2,052
Depreciation 852 1,544
Gain on sale of assets (4,812) (22,931)
Operating income $ 6,056 $ 24,153


	Three Months Ended
	March 31,
	2023		2022
Rental revenue	$	3,309	$	3,080
Rental cost of sales, excluding depreciation	(1,261)		(984)
Depreciation	(906)		(852)
Gain on sale of assets	—		4,812
Operating income	$	1,142	$	6,056

Rental Revenue. ~~Rental~~In first-quarter 2023, rental revenue primarily ~~includes~~included revenue from Lantana Place, Kingwood Place, Jones Crossing, West Killeen Market and Magnolia Place. In first-quarter 2022, rental revenue primarily included revenue from Lantana Place, Jones Crossing, Kingwood Place and West Killeen ~~Market, and until their sales in December 2021 and January 2021, respectively, our multi-family projects~~Market. The ~~Santal and The Saint Mary. The decrease~~increase in rental revenue in first-quarter ~~2022,~~2023, compared with first-quarter ~~2021,~~2022, primarily reflects ~~the sale of The Santal~~revenue from Magnolia Place, which had no rental revenue in ~~December 2021, partly offset by~~first-quarter 2022, and increased revenue at ~~Lantana~~Kingwood Place. ~~The Santal had rental revenue of $2.2 million in first-quarter 2021.~~

Rental Cost of Sales and Depreciation. Rental cost of sales and depreciation expense ~~decreased~~increased in first-quarter ~~2022,~~2023 compared with ~~the~~ first-quarter ~~2021,~~2022, primarily as a result of The Saint June and Magnolia Place, both of which had no operating expenses in first-quarter 2022, and costs of landscaping repairs and replacements at retail properties following the ~~sale of The Santal.~~Texas winter storm in February 2023.

Gain on Sale of Assets. In ~~the first quarter of~~first-quarter 2022, we recognized a gain on the reversal of accruals for costs to lease and construct buildings under a master lease arrangement that ~~Stratus~~we entered into in connection with ~~its~~our sale of The Oaks at Lakeway in 2017. Refer to Note 4 under the heading “The Oaks at Lakeway” for further discussion.

Corporate, Eliminations and Other

Corporate, eliminations and other (refer to Note 9) includes consolidated general and administrative expenses, which primarily consist of employee compensation and other costs. Consolidated general and administrative expenses ~~decreased~~increased to $4.7 million in first-quarter 2023 compared to $3.2 million in first-quarter 2022 ~~from $4.3 million in first-quarter 2021,~~ primarily ~~reflecting $0.8 million incurred in first-quarter 2021 for consulting, legal and public relation~~as a result of higher compensation costs for ~~Stratus' successful proxy contest and the real estate investment trust exploration process~~salary increases, estimated cash incentive awards for 2023, as well as ~~a $0.5 million decrease~~restricted stock units (RSUs) granted in ~~employee incentive compensation costs associated~~second-quarter 2022 in connection with the Profit Participation Incentive ~~Plan.~~Plan (PPIP) payouts for Lantana Place and The Santal. Fees related to a new consulting arrangement in 2023 to help raise third-party equity capital and office rent, which was eliminated in consolidation prior to the sale of Block 21, also contributed to the increase.

Non-Operating Results

Interest Expense, Net. Interest costs (before capitalized interest) totaled $2.4 million in first-quarter 2023 compared with $1.1 million in first-quarter ~~2022 compared with $2.3 million in first-quarter 2021.~~2022. Interest costs in first-quarter ~~2022~~2023 were ~~lower,~~higher, compared to first-quarter ~~2021,~~2022, primarily reflecting ~~reductions~~rising interest rates as well as an increase in average debt ~~balances,~~balances. As of March 31, 2023, all of our debt was variable-rate debt, and for all of such debt, the interest rates have increased over the past year, including for first-quarter 2023, and may continue to rise in the ~~lower outstanding balance on the Comerica Bank credit facility and the repayment of The Santal loan.~~future if prevailing market interest rates continue to climb.

Capitalized interest totaled $2.4 million in first-quarter 2023 compared to $1.1 million in first-quarter ~~2022 compared to $1.3 million in first-quarter 2021.~~2022. Capitalized interest is primarily related to development activities at Barton Creek (primarily Holden Hills, Section N and The ~~Annie B,~~Saint June), The Saint George and ~~Magnolia Place.~~The Annie B for both periods presented.

~~Loss on Extinguishment of Debt.~~ ~~We recorded a $63 thousand loss on extinguishment of debt in first-quarter 2021 associated with the repayment of The Saint Mary construction loan upon the sale of the property.~~

(Provision for) Benefit from ~~(Provision for)~~ Income Taxes. We recorded a provision for income taxes of $1.2 million in first-quarter 2023 compared to a benefit from income taxes of $0.3 million in first-quarter ~~2022, compared to a provision for income taxes of $2.7 million in first-quarter 2021.~~2022. Refer to Note 8 for further discussion of income taxes.

Net Income from Discontinued Operations. As a result of the sale of Block 21 in May 2022, we did not have any net income from discontinued operations in first-quarter 2023 compared to $0.4 million in first-quarter 2022.

Total Comprehensive Loss ~~(Income)~~ Attributable to Noncontrolling Interests in Subsidiaries. Our partners' share of losses ~~(income)~~ totaled $0.5 million in first-quarter 2023 compared to $0.1 million in first-quarter ~~2022, compared to $(6.7) million in first-quarter 2021. In first-quarter 2021, our partners were allocated $6.7 million of the gain from the sale of The Saint Mary.~~

~~Discontinued Operations~~

~~Hotel Revenue.~~ Hotel revenue primarily includes revenue from W Austin Hotel room reservations and food and beverage sales. Hotel revenues were $5.9 million in first-quarter 2022 and $2.1 million in first-quarter 2021. The increase in Hotel revenues in first-quarter 2022, compared to first-quarter 2021, is primarily a result of higher room reservations and food and beverage sales as the impacts of the COVID-19 pandemic had a significant impact on first-quarter 2021 results. First-quarter 2022 Hotel revenue was approximately 70 percent of pre-pandemic Hotel revenue in first-quarter 2019. Revenue per available room (RevPAR), which is calculated by dividing total room revenue by the average total rooms available, was $165 in first-quarter 2022, compared with $51 in first-quarter 2021.

~~Entertainment Revenue.~~ Entertainment revenue primarily reflects the results of operations for ACL Live, including ticket sales, revenue from private events, sponsorships, personal seat license sales and suite sales, and sales of concessions and merchandise. Entertainment revenue also reflects revenues associated with events hosted at 3TEN ACL Live. Revenues from the Entertainment segment vary from period to period as a result of factors such as the price of tickets and number of tickets sold, as well as the number and type of events hosted at ACL Live and 3TEN ACL Live. Entertainment revenues totaled $5.3 million in first-quarter 2022 and $0.6 million in first-quarter 2021. The increase in entertainment revenue primarily reflects an increase in the number of events hosted at ACL Live and 3TEN ACL Live as the impacts of the COVID-19 pandemic had a significant impact on first-quarter 2021 results. First-quarter 2022 Entertainment revenue was approximately 10 percent greater than pre-pandemic Entertainment revenue in first-quarter 2019. As of August 2021, ACL Live and 3TEN ACL Live are operating at full capacity.2022.

~~Certain key operating statistics specific to the concert and event hosting industry are included below to provide additional information regarding our ACL Live and 3TEN ACL Live operating performance.~~

Three Months Ended March 31,
2022 2021
ACL Live
Events:
Events hosted 48 28
Estimated attendance 53,882 3,416
Ticketing:
Number of tickets sold 54,947 3,710
Gross value of tickets sold (in thousands) $ 2,964 $ 373
3TEN ACL Live
Events:
Events hosted 44 22
Estimated attendance 7,100 1,828
Ticketing:
Number of tickets sold 3,413 114
Gross value of tickets sold (in thousands) $ 99 $ 3

CAPITAL RESOURCES AND LIQUIDITY

Volatility in the real estate market, including the markets in which we operate, can impact the timing of and proceeds received from sales of our properties, which may cause uneven cash flows from period to period. However, we believe that the unique nature and location of our assets will provide us positive cash flows over time.

Comparison of Cash Flows for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022

Operating Activities. Cash used in operating activities totaled $18.4 million in first-quarter 2023, compared with $18.1 million in first-quarter ~~2022, compared with $10.4 million infirst-quarter 2021.~~2022. Expenditures for purchases and development of real estate properties totaled $9.0 million in first-quarter 2023 and $4.9 million in first-quarter 2022, ~~and $2.5 million infirst-quarter 2021,~~both primarily related to development of our Barton Creek properties, particularly Amarra Villas and, to a lesser extent, Holden Hills. The cash ~~outflows~~outflow resulting from the decrease in accounts payable, accrued liabilities and other in first-quarter ~~2022~~2023 and first-quarter ~~2021~~2022 are primarily related to the timing of property tax payments. The cash outflow resulting from the increase in other assets in first-quarter 2022 is primarily related to a $4.0 million deposit that we delivered to the ~~city~~City of Austin to secure our obligation to construct certain subdivision improvements related to the Holden Hills project.

Investing Activities. Cash ~~(used in) provided by~~used in investing activities totaled ~~$(14.9)~~$10.2 million in first-quarter ~~2022~~2023 and ~~$58.2~~$14.9 million infirst-quarter ~~2021.~~2022. Capital expenditures totaled $10.0 million in first-quarter 2023, primarily for The Saint June and The Saint George, and $14.7 million in first-quarter 2022, primarily for The Saint June and Magnolia ~~Place projects, and $1.0 million infirst-quarter 2021, primarily for the Magnolia Place and Lantana Place projects.~~Place.

In~~first-quarter 2021, we received proceeds, net of closing costs, from the sale of The Saint Mary of $59.5 million.~~

Financing Activities. Cash provided by ~~(used in)~~ financing activities totaled $42.7 million in first-quarter 2023 and $13.5 million in first-quarter ~~2022~~2022. In first-quarter 2023, we had no net borrowings on the Comerica Bank revolving credit facility, compared with net borrowings of $10.0 million in first-quarter 2022. In first-quarter 2023, net borrowings on project and ~~$(50.8)~~term loans totaled $5.1 million, in~~first-quarter 2021.~~primarily reflecting borrowings on The Saint June construction loan and the Amarra Villas revolving credit facility, partially offset by the payoff of the New Caney land loan. In first-quarter 2022 net borrowings on the Comerica Bank credit facility totaled $10.0 million, compared with net repayments of $9.2 million in first-quarter 2021, primarily using proceeds from the sale of The Saint Mary. In first-quarter 2022, net borrowings on other project and term loans totaled $3.9 million, primarily reflecting borrowings on the Magnolia Place construction loan. ~~In first-quarter 2021, net repayments on other project and term loans totaled $28.3 million, primarily reflecting the repayment of The Saint Mary construction loan.~~ Refer to ~~“Credit~~“Revolving Credit Facility and Other Financing ~~Arrangements~~Arrangements” and ~~Liquidity Outlook”~~“Debt Maturities and Other Contractual Obligations” below for a discussion of our outstanding debt at March 31, ~~2022.~~2023.

In first-quarter ~~2021,~~2023, we ~~paid distributions to~~received a contribution from a noncontrolling interest ~~owners~~owner of ~~$13.1~~$40.0 million, ~~primarily~~ related to the ~~sale of The Saint Mary.~~Holden Hills partnership.

On September 1, 2022, after receiving written consent from Comerica Bank, our Board declared a special cash dividend of $4.67 per share (totaling $40.0 million) on our common stock, which was paid on September 29, 2022 to shareholders of record as of September 19, 2022. During first-quarter 2023, $0.2 million of accrued dividends for unvested RSUs were paid to the holders upon the vesting of the RSUs, leaving $1.1 million of dividends accrued for unvested RSUs presented in accrued liabilities as of March 31, 2023. The remaining accrued dividends will be paid

to the holders of the RSUs as the RSUs vest. In 2022, with written consent from Comerica Bank, our Board also approved a share repurchase program, which authorizes repurchases of up to $10.0 million of our common stock, which replaced our prior share repurchase program. The repurchase program authorizes us, in management’s discretion, to repurchase shares from time to time, subject to market conditions and other factors. As of March 31, 2023, we had repurchased 338,324 shares of our common stock for a total of $8.8 million at an average price of $25.88. Through May 10, 2023, we have acquired 359,553 shares of our common stock for a total cost of $9.2 million at an average price of $25.64 per share, and $0.8 million remains available for repurchases under the program.

The timing, price and number of shares that may be repurchased under the program will be based on market conditions, applicable securities laws and other factors considered by management. Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market, in privately negotiated transactions or by other means in accordance with securities laws. The share repurchase program does not obligate us to repurchase any specific amount of shares, does not have an expiration date, and may be suspended, modified or discontinued at any time without prior notice.

Revolving Credit Facility and Other Financing Arrangements ~~and Liquidity Outlook~~

AtAs of March 31, ~~2022,~~2023, we had $50.9 million in cash and cash equivalents and restricted cash of $8.9 million, and no amount was borrowed under our revolving credit facility. Of the $50.9 million in consolidated cash and cash equivalents at March 31, 2023, $5.9 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements. We have taken steps to obtain Federal Deposit Insurance Corporation (FDIC) protection for much of our deposits; however, we typically have some cash balances on deposit with banks in excess of FDIC insured limits. Any loss of uninsured deposits could have a material adverse effect on our future financial condition, liquidity and operations. As of March 31, 2023, $46.9 million was invested in a FDIC insured cash sweep platform.

As of March 31, 2023, we had total debt of ~~$122.5~~$129.4 million based on the principal amounts outstanding compared with ~~$107.9~~$123.9 million at December 31, ~~2021. Consolidated debt at both dates excluded~~2022. As of March 31, 2023, the ~~Block 21 loan of approximately $137 million. Our~~maximum amount that could be borrowed under the Comerica Bank revolving credit facility ~~which is comprised~~was $53.7 million, resulting in availability of ~~a $60.0~~$42.7 million, ~~revolving line of credit, had $49.7 million available at March 31, 2022,~~ net of letters of credit totaling ~~$347 thousand committed against~~$11.0 million issued under the ~~credit facility. In April 2022, we borrowed $20.0 million on the~~revolving credit facility ~~of which the majority of the funds were used~~ to ~~make a U.S. Federal tax payment for~~secure our ~~2021 tax liability.~~obligation to build certain roads and utilities facilities benefiting Holden Hills and Section N. Refer to “Debt Maturities and Other Contractual Obligations” below for a table illustrating the timing of principal payments due on our outstanding debt as of March 31, ~~2022.~~2023.

In March 2023, we entered into a modification of the revolving credit facility, which extended the maturity date to March 27, 2025 and increased the floor of the facility’s benchmark rate. As amended, advances under the revolving credit facility bear interest at the one-month BSBY Rate (with a floor of 0.50 percent) plus 4.00 percent. Refer to Note 6 for additional discussion.

In January 2023, The Saint June construction loan interest terms were modified. In February 2023, The Annie B land loan’s maturity was extended to March 1, 2024 and the interest terms were modified. Also in February 2023, our subsidiary Holden Hills, L.P. entered into a $26.1 million construction loan with Comerica Bank due February 8, 2026 to finance the development of Phase I of the Holden Hills project. In March 2023, we repaid the $4.1 million New Caney land loan. In May 2023, the Magnolia Place construction loan interest terms were modified. Refer to Note 6 for further discussion.

Our debt agreements require compliance with specified financial covenants. Refer to Note 6 and MD&A in our ~~2021~~2022 Form 10-K for a discussion of the financial covenants in our debt agreements. As of March 31, ~~2022,~~2023, we were in compliance with all of our financial covenants; however, ~~for each quarter since second-quarter 2020~~ our ~~Block 21 subsidiary~~Jones Crossing project did not pass the debt service coverage ratio ~~financial~~(DSCR) test under the ~~Block 21~~Jones Crossing loan. The DSCR under the Jones Crossing loan ~~which, though~~is not a financial ~~covenant, caused~~covenant; however, to avoid a “Cash Sweep Period,” as defined in the ~~Block 21 subsidiary~~loan agreement, we made a $1.7 million principal payment on the Jones Crossing loan in May 2023 to ~~enter into~~restore the DSCR to the required threshold. Based on our current estimates of Jones Crossing operating income and interest rates, we believe additional principal payments in the aggregate of up to approximately $2.3 million over the next 12 months are likely to be required to maintain the DSCR and avoid a ~~“Trigger Period” as discussed below.~~Cash Sweep Period.

Stratus’ and its subsidiaries’ debt arrangements contain significant limitations that may restrict Stratus’ and its subsidiaries’ ability to, among other things: borrow additional money or issue guarantees; pay dividends, repurchase equity or make other distributions to equityholders; make loans, advances or other investments; create liens on

assets; sell assets; enter into sale-leaseback transactions; enter into transactions with affiliates; permit a change of ~~control;~~control or change in management; sell all or substantially all of its assets; and engage in mergers, consolidations or other business combinations. Our Comerica Bank revolving credit facility, ~~and~~Amarra Villas revolving credit facility, The Annie B land loan, The Saint George construction loan, Kingwood Place construction loan and Holden Hills construction loan require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend ~~payments.~~payments, which was obtained in 2022 in connection with the special cash dividend and share repurchase program. Any future declaration of dividends or decision to repurchase our common stock is at the discretion of our Board, subject to restrictions under our Comerica Bank debt agreements, and will depend on our financial results, cash requirements, projected compliance with covenants in our debt agreements, outlook and other factors deemed relevant by our Board. Our future debt agreements, future refinancings of or amendments to existing debt agreements or other future agreements may restrict our ability to declare dividends or repurchase shares.

Our project loans are generally secured by all or substantially all of the assets of the projects, and our Comerica Bank revolving credit facility is secured by substantially all of our assets other than those encumbered by separate project financing. In addition, we are typically required to guarantee all or part of the payment of our project loans, in some cases until certain development milestones and/or financial conditions are met, except for the Jones Crossing loan guaranty, which is generally limited to non-recourse carve-out obligations. We were released as guarantor under the Lantana Place construction loan guaranty in 2022. Refer to Note 6 to our consolidated financial statements in our 2022 Form 10-K for additional discussion.

Our construction loans typically permit advances only in accordance with budgeted allocations and subject to specified conditions, and require lender consent for changes to plans and specifications exceeding specified amounts. If the lender deems undisbursed proceeds insufficient to meet costs of completing the project, the lender may decline to make additional advances until the borrower deposits with the lender sufficient additional funds to cover the deficiency the lender deems to exist. The inability to satisfy a condition to receive advances for a specified time period after lender’s refusal, or the failure to complete a project by a specified completion date, may be an event of default, subject to exceptions for force majeure.

Debt Maturities and Other Contractual Obligations

The following table summarizes our debt maturities based on the principal amounts outstanding as of March 31, 2023 (in thousands):



	2023		2024		2025		2026		2027		Thereafter		Total
Comerica Bank revolving credit facility a	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Jones Crossing loan b	—		—		—		24,269				—		24,269
The Annie B land loan c	—		14,000		—		—		—		—		14,000
Construction loans:
Kingwood Place d	27,850		—		—		—		—		—		27,850
Lantana Place	101		260		284		304		20,931		—		21,880
The Saint June	—		21,278		—		—		—		—		21,278
West Killeen Market	46		66		5,186		—		—		—		5,298
Magnolia Place	—		7,341		—		—		—		—		7,341
Amarra Villas revolving credit facility	—		7,446		—		—		—		—		7,446
Total e	$	27,997	$	50,391	$	5,470	$	24,573	$	20,931	$	—	$	129,362

a.In first-quarter 2023, we entered into a modification of the revolving credit facility, which extended the maturity date of the revolving credit facility to March 27, 2025. Refer to Note 6 for further information.

b.In May 2023, we made a $1.7 million principal payment to bring the DSCR back above 1.15 to 1.00 to avoid a Cash Sweep Period.

c.In first-quarter 2023, we extended the maturity date of this loan to March 1, 2024.

d.The maturity date is December 6, 2023. We have the option to extend the maturity date for one additional 12-month period, subject to certain debt service coverage conditions; we project that we will meet the conditions and expect to exercise the option to extend the maturity.

e.The ~~Block 21 loan agreement, which is excluded from consolidated debt~~Saint George and presented within liabilities held for sale, is secured by the Block 21 assets and contains financial tests that we must meet in order to avoid a “Trigger Period." Specifically, we must maintain (i) a net worth in excess of $125 million and (ii) liquid assets having a market value ofHolden Hills construction loans did not have outstanding balances at least $10 million, each as defined in the Block 21 loan agreement. Additionally, our Block 21 subsidiary must maintain a trailing-12-month debt service coverage ratio, tested quarterly, as defined in the Block 21 loan agreement. If any of these financial tests are not met, a “Trigger Period”, which is not a default, results. As a result of the pandemic, our Block 21 subsidiary has not met the debt service coverage ratio test each quarter beginning with the June 30, 2020, test date, resulting in a "Trigger Period." During a "Trigger Period," any cash generated from the Block 21 project in excess of amounts necessary to fund loan obligations, budgeted operating expenses and specified reserves would not be available to be distributed to us until after we meet a higher debt service coverage ratio requirement for two consecutive quarters.March 31, 2023.

~~Although~~The following table summarizes the ~~Block 21~~weighted-average interest rate of each loan, ~~agreement is a non-recourse~~all of which have variable rates, for the periods presented:


	Three Months Ended
	March 31,
	2023		2022 a
Comerica Bank revolving credit facility b	—	%	5.00	%
Jones Crossing loan	6.73		2.42
The Annie B land loan	7.44		3.50
New Caney land loan c	—		3.11
Construction loans:
Kingwood Place	7.15		2.65
Lantana Place	6.93		3.00
The Saint June d	7.29		—
West Killeen Market	7.24		3.00
Magnolia Place	7.79		3.50
Amarra Villas revolving credit facility	7.45		3.16

a.At March 31, 2022, we had an outstanding balance of $38 thousand for the loan ~~we may contribute cash to our Block 21 subsidiary in order to prevent our Block 21 subsidiary from defaulting~~ under the ~~Block 21~~Paycheck Protection Program (PPP loan). The PPP loan ~~agreement. Additionally, under our Block 21 subsidiary's hotel operating agreement,~~bore interest at 1.00 percent. The PPP loan matured and the ~~hotel operator may, and has, requested funds from us when it reasonably determines that such funds are required in order to fund~~remaining balance was repaid on April 15, 2022.

b.We did not have an outstanding balance during first-quarter 2023. At March 31, 2023, the ~~operation of~~interest rate for the ~~hotel and specified reserves. Pursuant to such provisions,~~revolving credit facility was 8.67 percent.

c.In March 2023, we ~~contributed $13.7 million in 2021, $2.5 million in~~repaid this loan.

d.We did not have an outstanding balance during first-quarter ~~2022 and, depending on the timing of the sale of Block 21, we expect additional contributions to total as much as $0.6 million in second-quarter~~ 2022.

Other than as discussed above and in our financial statements for the quarter ended March 31, 2023, there have been no material changes in our contractual obligations related to Amarra Villas, Magnolia Place, The Saint June, The Saint George and the first phase of Holden Hills since December 31, 2022. Refer to MD&A in our 2022 Form 10-K for further information regarding our contractual obligations.

We project that we will be able to meet our debt service and other cash obligations for at least the next 12 months. ~~In May 2022,~~For our development projects with firm commitments, we ~~entered into an amendment with Comerica Bank~~have construction loans, as well as remaining equity capital allocated to ~~extend~~ the ~~maturity date~~projects to fund the projected cash outlays for these projects over the next 12 months except for 60 percent of the ~~Comerica Bank credit facility from September 27, 2022,~~costs of the Tecoma Improvements for which we have agreed to ~~December 26, 2022. We are in discussions with the lender to remove Holden Hills from the collateral pool for the facility, finance~~reimburse the Holden Hills ~~project~~limited partnership. Refer to "Recent Development Activities – Current Residential Activities – Barton Creek – Holden Hills” above for further discussion of the Tecoma Improvements. As of March 31, 2023, our expected cash requirements to fund our firm commitments have not changed significantly from the amounts reported in our 2022 Form 10-K.

Our stabilized commercial properties (West Killeen Market, Jones Crossing, Lantana Place and Kingwood Place) are projected to generate positive cash flow after debt service over the next 12 months. For other projected pre-development costs, much of which are discretionary, and for our costs of the Tecoma Improvements and projected general and administrative expenses, we have cash on hand and availability under ~~a separate loan agreement and enter into a revised~~our revolving credit facility ~~with a lower borrowing limit secured by~~(which was recently extended to March 27, 2025, as stated above) in amounts expected to be sufficient to fund these cash requirements for the ~~remaining collateral under the facility.~~ next 12 months.

We expect to ~~be able to~~successfully extend the maturities or refinance ~~all~~our debt that matures in the next 12 months. For future potential significant development projects, we would not plan to enter into commitments to incur material costs for the projects until we obtain what we project to be adequate financing to cover anticipated cash outlays. As discussed under “Business Strategy” above, our main source of revenue and cash flow is expected to come from sales of our ~~loans prior~~properties to ~~their maturity dates.~~third parties or distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors. We also generate cash flow from rental

revenue in our leasing operations and from development and asset management fees received from our properties. Due to the nature of our development-focused business, we do not expect to generate sufficient recurring cash flow to cover our general and administrative expenses each period. However, we believe that the unique nature and location of our assets, and our team’s ability to execute successfully on development projects, will provide us with positive cash flows and net income over time. No assurances can be given that the results anticipated by our projections will occur. Refer to Note 6 in this report and in our 2022 Form 10-K and “Risk Factors” included in Part I, Item 1A. ~~and Note 6 in~~of our ~~2021~~2022 Form ~~10-K.~~10-K for further discussion.

Our ability to meet our cash obligations over the longer term ~~including our significant debt maturities in 2023,~~ will depend on our future operating and financial performance and cash flows, including our ability to sell or lease properties profitably and extend or refinance debt as it becomes due, which is subject to economic, financial, competitive and other factors beyond our ~~control, including risks related to the COVID-19 pandemic.~~control.

~~DEBT MATURITIES AND OTHER CONTRACTUAL OBLIGATIONS~~

2022 2023 2024 2025 2026 Total
Comerica Bank credit facilitya
$ 10,000 $ — $ — $ — $ — $ 10,000
Jones Crossing loan — — — — 24,500 24,500
The Annie B land loan — 14,000 — — — 14,000
New Caney land loan — 4,275 — — — 4,275
PPP loan 38 — — — — 38
Construction loans:
Kingwood Placeb
32,586 — — — — 32,586
Lantana Place 604 21,454 — — — 22,058
West Killeen Market 6,052 — — — — 6,052
Magnolia Place — — 6,827 — — 6,827
Amarra Villas credit facility 2,166 — — — — 2,166
Total $ 51,446 $ 39,729 $ 6,827 $ — $ 24,500 $ 122,502

a.In May 2022, we entered into an amendment to extend the maturity date of the $60.0 million Comerica Bank credit facility from September 27, 2022, to December 26, 2022, pending completion of our discussions with the lender to amend the facility in connection with the financing of Holden Hills as discussed elsewhere in this report.

b.Matures December 6, 2022. We have the option to extend the maturity date for two additional 12-month periods, subject to certain debt service coverage conditions, which we expect to meet for the first extension period after an approximate $5.1 million paydown upon the closing of the pending sale of the multi-family tract.

CRITICAL ACCOUNTING ESTIMATES

There have been no changes in our critical accounting estimates from those discussed in our ~~2021~~2022 Form 10-K.

NEW ACCOUNTING STANDARDS

No new accounting ~~standards in 2022~~pronouncements adopted or issued by the Financial Accounting Standards Board had or may have ~~had~~ a material impact on ~~us.~~our consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

~~There have been no material changes~~In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, generally referred to as off-balance sheet arrangements. For additional information regarding these types of activities, refer to the discussion about our firm commitments in “Liquidity Outlook” above and Note 9 to our consolidated financial statements in our ~~off-balance sheet arrangements since December 31, 2021. Refer to Note 9 in our 2021~~2022 Form ~~10-K for further information.~~10-K.

CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q contains forward-looking statements in which we discuss factors we believe may affect our future performance. Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations related to ~~whether~~the impact of inflation and ~~when the sale of Block 21 will be completed, our estimated gain~~interest rate changes, supply chain constraints and ~~net cash proceeds from the sale of Block 21 and potential uses of such proceeds, potential results of our Board and management’s strategic planning process, the impacts of the COVID-19 pandemic,~~tightening bank credit, our ability to meet our future debt service and other cash obligations, future cash flows and liquidity, our expectations about the Austin and Texas real estate markets, the planning, financing, development, construction, completion and stabilization of our development projects, plans to sell, recapitalize, or refinance properties, future operational and financial performance, MUD reimbursements for infrastructure costs, regulatory matters, leasing activities, tax rates, ~~the impact of inflation and interest rate changes,~~ future capital expenditures and financing plans, possible joint ventures, partnerships, or other strategic relationships, other plans and objectives of management for future operations and development projects, the impacts of any major public health crisis, and future ~~dividend payments~~cash returns to stockholders, including the timing and amount of repurchases under our share ~~repurchases.~~repurchase program. The words “anticipate,” “may,” “can,” “plan,” “believe,” “potential,” “estimate,” “expect,” “project,” "target," “intend,” “likely,” “will,” “should,” “to be” and any similar expressions and/or statements are intended to identify those assertions as forward-looking statements.

Under our Comerica Bank ~~credit facility,~~debt agreements, we are not permitted to repurchase our common stock in excess of $1.0 million or pay dividends on our common stock without Comerica Bank's prior written ~~consent. The~~consent, which was obtained in connection with the special cash dividend and share repurchase program. Any future declaration of dividends or decision to repurchase our common stock is at the discretion of our Board, subject to restrictions under our Comerica Bank ~~credit facility,~~debt agreements, and will depend on our financial results, cash requirements, projected compliance with covenants in our debt agreements, outlook and other factors deemed relevant by ~~the~~our Board. Our future debt agreements, future refinancings of or amendments to existing debt agreements or other future agreements may restrict our ability to declare dividends or repurchase shares.

We caution readers that forward-looking statements are not guarantees of future performance, and our actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, ~~the occurrence of any event, change~~our ability to implement our business strategy successfully, including our ability to develop, construct and sell or ~~other circumstance that could delay the closing of the sale of Block 21, or result in the termination of the agreements to sell Block 21, the results of~~lease properties on terms our Board ~~and management’s strategic planning process, the ongoing COVID-19 pandemic and any future major public health crisis,~~considers

acceptable, increases in ~~inflation~~operating and ~~interest rates, supply chain disruptions, declines in the market value of our assets, increases in operating~~construction costs, including real estate taxes and the cost of building materials and labor, increases in inflation and interest rates, supply chain constraints, tightening bank credit, defaults by contractors and subcontractors, declines in the market value of our ~~ability~~assets, market conditions or corporate developments that could preclude, impair or delay any opportunities with respect to ~~pay~~plans to sell, recapitalize or refinance ~~our~~properties, a decrease in the demand for real estate in select markets in Texas where we operate, particularly in Austin, changes in economic, market, tax and business conditions, including as a result of the war in Ukraine, potential U.S. or local economic downturn or recession or failure of the U.S. Congress to raise the statutory debt or comply with or obtain waivers of financial and other covenants in debt agreements and to meet other cash obligations, our ability to collect anticipated rental payments and close projected asset sales,limit, the availability and terms of financing for development projects and other corporate purposes, the failure of any bank in which we deposit our funds, any major public health crisis, our ability to collect anticipated rental payments and close projected asset sales, loss of key personnel, our ability to enter into and maintain joint ventures, partnerships, or other strategic relationships, including risks associated with such joint ventures, our ability to ~~implement our business strategy successfully, including our ability to develop, construct and sell or lease properties on terms our Board~~

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, they have concluded that our disclosure controls and procedures were effective as of March 31, ~~2022.~~2023.

(b) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, ~~2022,~~2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 1A. Risk Factors.

~~We are supplementing the~~There have been no material changes to our risk factors ~~described under~~ during the three-month period ended March 31, 2023. For additional information on risk factors, refer to Part I,1, Item 1A. “Risk Factors” of our ~~2021~~2022 Form ~~10-K~~ ~~with the risk factor set forth below, which should be read in conjunction with the risk factors and other disclosures in this report and in our~~ ~~2021~~ ~~Form 10-K~~.10-K.

~~Supply chain constraints may further delay completion of our projects under construction, may impact the timing of projects we plan to start in the future, and may increase our costs.~~

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

~~Item 5.~~ ~~Other Information~~.

As previously reported, on March 9, 2022, C. Donald Whitmire, Jr., Stratus’ principal accounting officer, informed Stratus of his intention to retire effective June 30, 2022. On May 12, 2022, Stratus’ Board appointed Erin D. Pickens as Stratus’ principal accounting officer, effective upon Mr. Whitmire’s retirement on June 30, 2022. Ms. Pickens will continue to serve as Stratus’ Senior Vice President and Chief Financial Officer. Ms. Pickens’ employment information and compensatory arrangements are incorporated herein by reference as set forth in Stratus’ ~~2021 Form 10-Kunder the heading "Information About Our Executive Officers"~~ ~~and~~ ~~Definitive Proxy Statement on Schedule 14A filed with the SEC on April 8, 2022~~, ~~under the heading "Executive Officer Compensation~~."

On May 13, 2022, Stratus and certain of its wholly-owned subsidiaries, Stratus Properties Operating Co., L.P., a Delaware limited partnership, Circle C Land, L.P., a Texas limited partnership, Austin 290 Properties, Inc., a Texas corporation, The Villas at Amarra Drive, L.L.C., a Texas limited liability company, and Stratus Lakeway Center, L.L.C., a Texas limited liability company (collectively with Stratus, the Borrowers), as borrowers, and Comerica Bank (Comerica), as lender, entered into the Third Modification Agreement (the Third Modification) and Amended and Restated Revolving Promissory Note (the Amended Note and collectively with the Third Modification, the Modification Documents), which amend that certain Loan Agreement and Revolving Promissory Note, respectively, each dated June 29, 2018, by and between Borrowers, another two of Stratus’ wholly-owned subsidiaries, 210 Lavaca Holdings, L.L.C., a Texas limited liability company, and Magnolia East 149, L.L.C., a Texas limited liability company (the Released Borrowers), and Comerica (the Original Loan Documents). The Original Loan Documents were previously amended by that certain Modification Agreement, effective April 14, 2020, and that certain ~~Second Modification Agreement, effective June 12, 2020,~~ ~~each by and between Borrowers, the Released Borrowers and Comerica (as amended, the Loan Documents). The Loan Documents provide for a $60.0 million secured revolving credit facility.~~2023.

The ~~Modification Documents amend~~following table provides a summary of repurchases of shares of our common stock by our company and any “affiliated purchaser” as defined by the ~~Loan Documents~~SEC during the three months ended March 31, 2023, and the approximate dollar value of shares that may yet be purchased pursuant to ~~(i) extend the maturity date~~our share repurchase program as of ~~the credit facility from~~March 31, 2023:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs a	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs a
January 1, 2023 through January 31, 2023	—	$	—	—	$	2,135,797
February 1, 2023 through February 28, 2023	6,406	$	21.91	6,406	$	1,995,565
March 1, 2023 through March 31, 2023	37,218	$	20.25	37,218	$	1,242,755
Total	43,624	$	20.49	43,624	$	1,242,755

a.On September ~~27,~~2, 2022, we announced that our Board approved a share repurchase program authorizing repurchases of up to ~~December 26, 2022, (ii) increase the letter~~$10.0 million of ~~credit sublimit from $7.5 million to $11.5 million, (iii) effect the removal~~our common stock. The timing, price and number of the Released Borrowers’ property from the collateral pool for the facility and (iv) change the benchmark rate from the London Interbank Offered Rate to the Bloomberg Short-Term Bank Yield Index (BSBY) Rate. Advancesshares that may be repurchased under the ~~credit facility now bear interest at the one-month BSBY Rate (with a floor of 0.0 percent) plus 4.0 percent.~~

open market, in privately negotiated transactions or by other means in accordance with securities laws. The ~~foregoing description of the Modification Documents~~ share repurchase program does not ~~purport~~obligate us to repurchase any specific amount of shares, does not have an expiration date, and may be ~~complete~~suspended, modified or discontinued at any time without prior notice. The new program replaces our prior share repurchase program. Through May 10, 2023, we have acquired 359,553 shares of our common stock for a total cost of $9.2 million at an average price of $25.64 per share, and ~~is qualified in its entirety by reference to~~$0.8 million remains available for repurchases under the ~~full text~~ ~~of the Amended Note and the Third Modification, respectively, copies of which are attached hereto as Exhibits 10.2 and 10.5, and are incorporated herein by reference.~~program.

Item 6. Exhibits.

Incorporated by Reference

Exhibit
Number

Exhibit Title

Filed with this Form 10-Q

Form

File No.

Date Filed

2.1

Agreement of Sale and Purchase, dated February 15, 2017, between Stratus Lakeway Center, LLC and FHF I Oaks at Lakeway, LLC.

8-K

001-37716

2/21/2017

2.2

Agreement of Sale and Purchase, dated October 26, 2021 between Stratus Block 21, L.L.C. and Ryman Hospitality Properties, Inc.

10-K

001-37716

3/31/2022

~~Incorporated by Reference~~

Exhibit
Number

~~Exhibit Title~~

~~Filed with this Form 10-Q~~

~~Form~~

~~File No.~~

~~Date Filed~~

2.3

Membership Interest Purchase Agreement, dated October 26, 2021 between Stratus Block 21 Investments, L.P. and Ryman Hospitality Properties, Inc.

10-K

001-37716

3/31/2022

2.4

Agreement of Sale and Purchase, by and between Santal, L.L.C., as seller, and BG-QR GP, LLC, as purchaser, dated as of September 20, 2021.

10-Q

001-37716

11/15/2021

2.5

First Amendment to Agreement of Sale and Purchase, by and between Santal, L.L.C., as seller, and BG-QR GP, LLC, as purchaser, effective as of October 13, 2021.

10-Q

001-37716

11/15/2021

2.6

Second Amendment to Agreement of Sale and Purchase, by and between Santal, L.L.C., as seller, and Berkshire Multifamily Income Realty-OP, L.P., as purchaser, dated as of November 3, 2021.

10-Q

001-37716

11/15/2021

3.1

Composite Certificate of Incorporation of Stratus Properties Inc.

~~8-A/A~~

~~001-37716~~

~~8/13/2021~~

3.2

Second Amended and Restated By-Laws of Stratus Properties Inc., as amended effective August 3, 2017.

10-Q

001-37716

8/9/2017

4.1

Investor Rights Agreement by and between Stratus Properties Inc. and Moffett Holdings, LLC dated as of March 15, 2012.

8-K

000-19989

3/20/2012

4.2

Assignment and Assumption Agreement by and among Moffett Holdings, LLC, LCHM Holdings, LLC and Stratus Properties Inc., dated as of March 3, 2014.

13D

005-42652

3/5/2014

10.1

~~Loan~~Fifth Modification Agreement by and between Stratus Properties Inc., certain of its subsidiaries and Comerica Bank, ~~dated~~effective as of ~~June 29, 2018.~~March 10, 2023.

~~8-K~~10-K

001-37716

~~7/5/2018~~3/31/2023

10.2

~~Amended and Restated Revolving Promissory Note~~Interest Rate Index Replacement Agreement dated January 3, 2023 with respect to the Loan Agreement by and ~~between Stratus Properties Inc.~~among The Saint June, L.P., ~~certain~~as borrower, Texas Capital Bank, National Association, as administrative agent, and each of ~~its subsidiaries and Comerica Bank,~~the lenders party thereto, dated ~~as of May 13, 2022.~~

XJune 2, 2021.

10-K

001-37716

3/31/2023

10.3

~~Modification~~Construction Loan Agreement by and between ~~Stratus Properties Inc.~~Holden Hills, L.P., ~~certain of its subsidiaries~~as borrower, and Comerica Bank, ~~effective~~ as ~~of April 14, 2020.~~lender, dated February 8, 2023.

8-K

001-37716

~~4/17/2020~~2/14/2023

10.4

~~Second Modification Agreement~~Installment Note by and between ~~Stratus Properties Inc., certain of its subsidiaries~~Holden Hills, L.P. and Comerica Bank ~~effective as of June 12, 2020.~~dated February 8, 2023.

8-K

001-37716

~~6/15/2020~~2/14/2023

10.5

~~Third Modification Agreement~~Guaranty by ~~and between~~ Stratus Properties Inc.~~, certain~~ for the benefit of ~~its subsidiaries and~~ Comerica Bank ~~effective as of May 13, 2022.~~

~~10.6~~

dated February 8, 2023 with respect to the Construction Loan Agreement by and between ~~Lantana Place, L.L.C.~~Holden Hills, L.P., as borrower, and ~~Southside~~Comerica Bank, as lender, dated ~~April 28, 2017.~~February 8, 2023.

8-K

001-37716

~~5/3/2017~~2/14/2023

~~10.7~~10.6†

~~Promissory Note~~Amended and Restated Limited Partnership Agreement of Holden Hills, L.P. entered into by and ~~between Lantana Place,~~among Holden Hills GP, L.L.C., Stratus Properties Operating Co., L.P., and ~~Southside Bank dated April 28, 2017.~~Bartoni, LLC.

10-K

001-37716

3/31/~~2022~~2023

~~10.8~~

~~First Amendment to Construction Loan Agreement by and between Lantana Place, L.L.C., as borrower, and Southside Bank, as lender, dated December 13, 2017.~~

~~10-K~~

~~001-37716~~

~~3/16/2018~~

~~10.9~~

~~Loan Modification Agreement by and between Lantana Place, L.L.C., as borrower, and Southside Bank, as lender, effective as of June 19, 2020.~~

~~10-Q~~

~~001-37716~~

~~6/25/2020~~

Incorporated by Reference

Exhibit
Number

Exhibit Title

Filed with this Form 10-Q

Form

File No.

Date Filed

~~10.10~~10.7†

~~Second Modification~~Development Agreement ~~by and between Lantana Place, L.L.C. and Southside Bank,~~ effective as of January ~~4, 2021.~~31, 2023, between Stratus Properties Operating Co., L.P. and Holden Hills, L.P.

10-K

001-37716

3/~~15/2020~~31/2023

~~10.11~~10.8*

~~Loan Modification Agreement by and between Lantana Place, L.L.C. and Southside Bank, effective as of January 13, 2022.~~

~~10-K~~

~~001-37716~~

~~3/31/2022~~

~~10.12~~

~~Guaranty Agreement by~~ Stratus Properties Inc. ~~in favor~~Long-Term Incentive Plan and Form of ~~Southside Bank dated April 28, 2017.~~

~~10-K~~

~~001-37716~~

~~3/31/2022~~

~~10.13~~†

Amended and Restated Limited Partnership Agreement of Stratus Block 150, L.P. entered into by and among The Stratus Block 150 GP, L.L.C., Stratus Properties Operating Co., L.P., and several Class B Limited Partners.

~~10-Q~~

~~001-37716~~

~~11/15/2021~~

~~10.14~~†

~~First Amendment to the Amended and Restated Limited Partnership Agreement of Stratus Block 150, L.P.~~Award Notice.

10.15*

~~Severance and Change of Control Agreement between Stratus Properties Inc. and William H. Armstrong III, effective April 1, 2022.~~

~~10-K~~

~~001-37716~~

~~3/31/2022~~

10.16*

~~Severance and Change of Control Agreement between Stratus Properties Inc. and Erin D. Pickens, effective April 1, 2022.~~

~~10-K~~

~~001-37716~~

~~3/31/2022~~

10.17*10.9*

Stratus Properties Inc. ~~2022 Stock~~Executive Annual Incentive ~~Plan.~~Plan (effective January 2023).

~~8-K~~

~~001-37716~~

~~5/13/2022~~

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

101.INS

XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase.

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

* Indicates management contract or compensatory plan or arrangement.

† Certain identified information has been excluded from this exhibit because it is both not material and is the type that the registrant customarily and actually treats as private or confidential.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

STRATUS PROPERTIES INC.

~~By: /s/~~


			By:			/s/ Erin D. Pickens
						Erin D. Pickens
						Senior Vice President and Chief Financial Officer (authorized signatory and Principal Financial Officer and Principal Accounting Officer)

~~----------------------------------------~~

~~Senior Vice President and~~

~~Chief Financial Officer~~

~~(authorized signatory and~~

~~Principal Financial Officer)~~


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 (Loss) Income (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			1417

Item 3. ~~Quantitative~~Quantitative and Qualitative Disclosures About Market Risk			2529

Item 4. Controls and Procedures			2529

Part II. Other Information			2530

Item 1A. Risk Factors			2530

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2630

~~Item 5. Other Information~~			26

Item 6. Exhibits			2631

Signature			S-1


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	12,273	$	24,229	Cash and cash equivalents	$	50,895	$	37,666
Restricted cash	Restricted cash	10,859		18,294		Restricted cash	8,889		8,043
Real estate held for sale	Real estate held for sale	1,773		1,773		Real estate held for sale	1,773		1,773
Real estate under development	Real estate under development	206,191		181,224		Real estate under development	246,819		239,278
Land available for development	Land available for development	34,816		40,659		Land available for development	48,858		39,855
Real estate held for investment, net	Real estate held for investment, net	89,760		90,284		Real estate held for investment, net	92,433		92,377

Lease right-of-use assets	Lease right-of-use assets	10,460		10,487		Lease right-of-use assets	11,981		10,631
Deferred tax assets	Deferred tax assets	4,843		6,009		Deferred tax assets	38		38
Other assets	Other assets	22,621		17,214		Other assets	18,033		15,479
Assets held for sale - discontinued operations		151,172		151,053
Total assets	Total assets	$	544,768	$	541,226	Total assets	$	479,719	$	445,140

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Accounts payable	Accounts payable	$	14,573	$	14,118	Accounts payable	$	14,684	$	15,244

Accrued liabilities, including taxes	Accrued liabilities, including taxes	19,682		22,069		Accrued liabilities, including taxes	5,929		7,049
Debt	Debt	121,446		106,648		Debt	128,336		122,765
Lease liabilities	Lease liabilities	14,135		13,986		Lease liabilities	16,382		14,848
Deferred gain	Deferred gain	4,274		4,801		Deferred gain	3,289		3,519
Other liabilities	Other liabilities	10,381		17,894		Other liabilities	5,874		9,642
Liabilities held for sale - discontinued operations		149,717		153,097
Total liabilities	Total liabilities	334,208		332,613		Total liabilities	174,494		173,067

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies

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	188,971		188,759		Capital in excess of par value of common stock	196,308		195,773
Accumulated deficit		(6,691)		(8,963)

Retained earnings						Retained earnings	35,651		41,452
Common stock held in treasury	Common stock held in treasury	(22,205)		(21,753)		Common stock held in treasury	(31,181)		(30,071)
Total stockholders’ equity	Total stockholders’ equity	160,169		158,137		Total stockholders’ equity	200,872		207,248
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	50,391		50,476		Noncontrolling interests in subsidiaries	104,353		64,825
Total equity	Total equity	210,560		208,613		Total equity	305,225		272,073
Total liabilities and equity	Total liabilities and equity	$	544,768	$	541,226	Total liabilities and equity	$	479,719	$	445,140


		Three Months Ended					Three Months Ended
		March 31,					March 31,
		2022		2021			2023		2022
Cash flow from operating activities:	Cash flow from operating activities:					Cash flow from operating activities:
Net income		$	2,187	$	15,666
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		873		3,002
Net (loss) income						Net (loss) income	$	(6,273)	$	2,187
Adjustments to reconcile net (loss) income to net cash used in operating activities:						Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization						Depreciation and amortization	928		873
Cost of real estate sold	Cost of real estate sold	—		3,112		Cost of real estate sold	2,010		—

Gain on sale of assets	Gain on sale of assets	(4,812)		(22,931)		Gain on sale of assets	—		(4,812)
Loss on extinguishment of debt		—		63
Debt issuance cost amortization and stock-based compensation	Debt issuance cost amortization and stock-based compensation	515		529		Debt issuance cost amortization and stock-based compensation	713		515

Equity in unconsolidated affiliates' loss		2		2

Equity in unconsolidated affiliate’s loss						Equity in unconsolidated affiliate’s loss	3		2
Deferred income taxes	Deferred income taxes	1,167		—		Deferred income taxes	—		1,167

Purchases and development of real estate properties	Purchases and development of real estate properties	(4,864)		(2,489)		Purchases and development of real estate properties	(9,027)		(4,864)

(Increase) decrease in other assets		(5,559)		238
Increase in other assets						Increase in other assets	(2,945)		(5,559)
Decrease in accounts payable, accrued liabilities and other	Decrease in accounts payable, accrued liabilities and other	(7,629)		(7,563)		Decrease in accounts payable, accrued liabilities and other	(3,813)		(7,629)
Net cash used in operating activities	Net cash used in operating activities	(18,120)		(10,371)		Net cash used in operating activities	(18,404)		(18,120)

Cash flow from investing activities:	Cash flow from investing activities:					Cash flow from investing activities:
Capital expenditures	Capital expenditures	(14,724)		(1,009)		Capital expenditures	(10,006)		(14,724)
Proceeds from sale of assets		—		59,488
Payments on master lease obligations	Payments on master lease obligations	(182)		(270)		Payments on master lease obligations	(248)		(182)

Other, net		—		(5)
Net cash (used in) provided by investing activities		(14,906)		58,204
Other						Other	22		—
Net cash used in investing activities						Net cash used in investing activities	(10,232)		(14,906)

Cash flow from financing activities:	Cash flow from financing activities:					Cash flow from financing activities:
Borrowings from credit facility		10,000		17,000
Payments on credit facility		—		(26,227)
Borrowings from revolving credit facility						Borrowings from revolving credit facility	—		10,000
Borrowings from project loans	Borrowings from project loans	5,111		458		Borrowings from project loans	11,618		5,111
Payments on project and term loans	Payments on project and term loans	(1,172)		(28,708)		Payments on project and term loans	(6,551)		(1,172)

Payment of dividends						Payment of dividends	(184)		—
Finance lease principal payments						Finance lease principal payments	(4)		—
Stock-based awards net payments	Stock-based awards net payments	(452)		(157)		Stock-based awards net payments	(216)		(452)
Distributions to noncontrolling interests		—		(13,087)

Noncontrolling interest contribution						Noncontrolling interest contribution	40,000		—
Purchases of treasury stock						Purchases of treasury stock	(894)		—
Financing costs	Financing costs	(17)		(53)		Financing costs	(1,058)		(17)
Net cash provided by (used in) financing activities		13,470		(50,774)
Net decrease in cash, cash equivalents and restricted cash		(19,556)		(2,941)

Net cash provided by financing activities						Net cash provided by financing activities	42,711		13,470
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	14,075		(19,556)
Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	70,139		34,183		Cash, cash equivalents and restricted cash at beginning of year	45,709		70,139
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	50,583	$	31,242	Cash, cash equivalents and restricted cash at end of period	$	59,784	$	50,583






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	—		—		—		—	—		—		—		—

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




	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