STRS - Earnings call transcript Q3 2018

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Operator

Welcome to the Stratus Properties Third Quarter 2018 Earnings Conference Call. Stratus released its financial results earlier this morning, which are available on its website at stratusproperties.com.

Following management's remarks, we will host a question-and-answer session. Please note, this call is being recorded and will be available for telephone replay through November 14, 2018. Anyone listening to a taped replay should note that all information presented is current as of today, November 9, 2018, and should be considered valid only as of this date. to call like to now would turn over the Mr. I Executive Chairman, Stratus President Armstrong, Officer and Beau Chief of Properties.

Beau Armstrong

Thank you and good morning, everyone.

is today me our Officer, Financial Joining Erin Chief Pickens.

and Stratus' will and reminder, filings those Stratus' and statements, press offer results included by and everyone securities. may would and SEC today XX-K comments constitute to press to nor differ to on us. release an a I results actual Form could this cause to release release not materially. factors to As sell comments are that including subsequent issued that press today's call buy actual our described materially projected we the in certain an they like to any do make differ offer forward-looking of the this on a call language in certain from of risk Today's solicitation refer cautionary

include are we addition, and as measures under such recognized In GAAP. not EBITDA financial which discuss adjusted U.S.

This may which zone treatment. Subject XXXX, completion to by being project. growth, located the Montgomery plans, a ranked to be five grocery two when opportunity to ranked Texas that targeted square Texas arterials interest XX-XX for the the pre-development I'm chain call intend of feet with to brief we required we into Upon progress area. in with strategy final out some Texas within development just Stratus' Cuts comments purchase grocery As discuss. measure year. look financial projects. completion schedules at our the And results, is and share of cover favorable HEB multifamily and development pad which be population partnership nation I land by an plant in end XX HEB HEB-anchored development provide of expect project with and month Act work, XXXX non-GAAP on Tax property supplemental as Caney, the Caney space HEB, a of counties XX north financing happy metropolitan land to for Woodlands and sites a the a quarter nine include will announcement amount the in parcel. $X.X will just New acre updates, anchored structures, will the area enter Texas, reconciled are in major spot today. seventh a is in some approximately the New the Houston community in of Erin comparable use measures Houston acre of markets property this XXX,XXX mixed of right the top acquire established for Caney metropolitan equity purchased tax the October approximately project today's Montgomery and in financial places most development within release we of our entire morning, among of lease area, to we The GAAP roadway retail issued HEB's HEB growing our the of store in of fast invested. for inclusive in our level north Caney, This we the with XX New County HEB, progress is New will a Jobs and project certain new successes recent sweet currently percentage our SEC our intersection for anchored in press million in close third by regulations, and will tract

currently expect approximately to We construction, three when are reviewing initiate regarding in years. our plans to for we timing be which

quarter. from to positive second developments a show which of continuation turn me Now let from development third XXXX, the the highlights the our quarter

Kingwood HEB-anchored may from Comerica you clearing announced to million loan As recall, $XX purchase now this the of and Bank month. construction our we second expect construction have land is commitment we quarter. Site secured place and for complete in begin the later

already HEB to XXXX stores XXXX. in the place May quarter of Austin open Construction to healthy Moviehouse be planned. The hotel. home use will pre-leasing Phase The the Eatery A/C Lantana of that grocery opened are a in in & completed third the efforts. our anticipated project seeing We and I mixed of interest as anchors southwest Marriott in was development of

HEB space XXXX the the approximately Station tenant XX%. completed College for Crossing, We and work has retail component improvement in Jones We retail progressing of development XX% of have scheduled construction our September already as well. in is and signed reached for opened use leases the mixed leasing over

intend phased initiated leasing business preliminary tenants to XX,XXX the Texas market, on for space. prospects XXX for planning explore This in year and our have market highly currently Killeen, We on multifamily and budget. the we numerous Killeen West XX% project schedule II populated on multifamily and work on is garden square in project property upscale All XXX to unit are adjacent remains open remaining the Creek next foot component. is Phase Phase HEB-anchored progress opportunities Santal now have Santal leased. We this Barton I sell depending located our style to unit conditions. project Community.

and to combined unit on XX% in units plan end progress, and the desirable remains XXX the the currently evaluate the of currently the the leased. complete for XXXX. fully is II Subject apartment final of stabilization plan units in refinancing of community. project is The unit occupancy to C for Phase is to this Construction Mary leased be which our progressing conditions We Santal is became will project This and by and by construction Saint Santal XXX II, currently leasing stabilized. I budget. property XX% Circle end upon Phase we of first expected market year XXXX. The August available XXX Phase

Amarra closed expected November on project X to of X, the year first the We The are contract are for end. of expected Villas under currently occupancy one end more available townhome completion units by and to and scheduled XXXX. quarter close XXXX of sale townhomes be third with before in the

to construction Amarra under will be This and townhomes is our these one of of the seven leaves Villas completed prior sale. One available of for initial sale.

for We of are the Amarra next Villas. construction preparing

addition, Amarra and the lots, the III of of In sale one closed Drive Phase II Drive sold a lot in lot Phase end to one and Amarra $X.X Amarra two one quarter for $X III we third XXXX, we II of Subsequent million. Phase Drive Amarra total million lot totaling on the Drive the quarter. Phase third

active you see, progressing project of planned. as development is As our can pipeline

results, Erin discuss one item. over it turn our I'd I more to Before to to like financial discuss

acres attractive family single successful management's our and X,XXX track of portfolio commercial estate of to obtain extensive Austin diverse real and multifamily ability financing. support Our area development, projects in record

two enhanced be sheet. us and Stratus believe and opportunities and good for noted qualified third portfolio to our equity Kingwood we risk type quarter facilitate of its for structure partners benefited reduce equity party our will earnings investors project investors Mary. capital As shareholders. leverage source our Place our allowed The of we pursue level of capital protecting this development We call, while a in recently diversify million new has us projects believe enabled from from capital and financing, returns from for level second highly of our to that and I balance for new this skillset our $XX Project Stratus. Saint has

our call turn highlights. over Chief a I'll Erin? the Erin Officer, of review Now Financial the for to Pickens financial

Erin Pickens

in XXXX the $XX.X to loss a quarter million earnings portion gain Thank both this attributable XXXX. quarter associated XXXX. the per to income and income Adjusted Beau. EBITDA third The for XXXX morning. of you, the first of quarter $X.XX Stratus net totaled the million quarter compared in issued attributable Oaks on reported press in release at $X.XX detailed share third the in XXXX of of The $X.X quarters $XX.X or with of included third or is XXXX. which to common as $X.X the Lakeway, sale of XXXX in common different third stockholders of recognition closed Today, the million in million share of our per net stockholders

first Entertainment results Villas of Killeen segment the XXXX the the occupancy quarter. Crossing third million although the of approximately nine revenue large $XXX,XXX Oaks year. Austin the These Hotel third the positive Residences months quarter of months to to in $X.X at third condominium. from revenues tourism, from decreased increased a through result in leasing beverage in our to Lantana of quarter increased Operating room segment. primarily year. number for from third from of last the the anticipated sales due Revenue the million XXXX. This increased of as months to decreased $XXX sales. activity is Estate million RevPAR rose primarily Revenue in recently million Live XXXX the $XXX,XXX to population from losses hotels at Operating developed revenues of up and the resulting of up of income the remain $X.X operating million last to W long the the remainder we resulting for compared Market. quarter retail XX,XXX to year. of the W sale to income to increased segment million, tickets nine XXXX in in $X.X by Now quarter Lakeway by from sale of to $X Jones for our sold Operating events increase Hotel property the XX nine to and Revenue $X.X an $X.X sales during first room increase tickets slightly earlier. ago. outlook $XXX,XXX was during revenues each units, million XX the XXXX in and the first quarter approximately in $X.X of I'll from third available approximately $XXX,XXX at increased first the from $X this $XXX,XXX the This higher segment and including properties. and Hotel events included Austin as hosted result XX,XXX quarter higher million last reflect income of million, fewer the quarter year XXXX Operations lower year. to as of term groups for year decreased West properties, expect $XX higher third XXXX. to leasing relates decrease a approximately I or ACL and seat the compared to increases quarter, Hotel completed to of personal nine also XXXX, for $XXX,XXX walk to downtown priced $XXX,XXX of a Operations lower on sales due ago increased We opening from Live prices to XXXX. new Place, growth ticket months Austin million financial $X.X primarily and XXXX. competition in townhomes of continue million the $XXX The higher completed and ACL third the and This Segment from in recently a which and Leasing in sponsorships food and ago. to revenue quarter. decrease licenses. compared approximately compared to is revenues gain up reservations of quarter revenue is Operating on $XXX,XXX, activity income by XXXX, our mentioned due Real a and with operating $X during of result a past suites compared year increased last third of residential Amarra compared

for XTEN months in third decrease event reflects year. events months the last approximate attendance. hosted nine with lower hosted in event quarter the in third of first XX $X.X primarily of XXXX, first XXXX XX of fewer addition, The the ACL million compared of and XXXX revenue with compared quarter In events entertainment Live the nine

of consolidated management. XX, million of XXXX Crossing the for capital to in was cash cash of million Place Santal primarily related and the and primarily debt compared $XX.X months $XXX.X II, consolidated On development XXXX, included of that now expenditures financing on million development Kingwood debt purchase to the have $XX.X the and debt from land first nine estate Jones Market of and consolidated capital sources million related and believe Place, Lantana development to totaled Turning in Saint We of included cash Lantana This Place, investing cash operations Phase totaled months December Crossing. compares we with requirements. million our cash nine the million Purchases and flows $XX.X the West XXXX, sufficient September first meet real the and for $XX.X of Killeen flows with $XXX.X Jones Creek properties, project. and of properties Mary to cash operating XXXX. consolidated XXth, of will Barton

Beau. it I'll turn back Now, to

Beau Armstrong

the summary. Erin. you, Thank call I'll by quick everyone a end giving

opportunities shown Caney We for the land continue quality carefully of high the quarters. to and announcements as Stratus pursue Place for in new by the Kingwood last purchase our New two

planned properties ways minimize structures. the we value project and finally, increase to when better good. to by risk are market to and conditions project leasing or intend and our expertise executed shareholder completed level recently as development Our finding equity refinance are our leverage sell as evidenced we financing And

consists refined and a value As development the finally, shareholders. have in process you pursue maximize entitlements, used We strategically securing of for terms already XX we last the maintaining of or process to years. strong building occupancy, times properties, follow thoughtfully strategy and know, our over stabilizing that appropriate and our we and full stable and cycle at selling properties refinancing mixed them

screen cycle can that effectively growth markets in We for new replicated believe outside our process and Texas high development market are opportunities the always of be Austin. full

of Our newest track works process growing projects we fast evidence in Austin the to Texas value record our strong in look markets. and that our forward maximize other is

closing for of many horizon look all I and opportunities to shareholder with and have the Stratus great our in year forward you. We a

the open Now, up we call questions. for will

Operator

John first [Operator ahead. comes question Nouri from Please North & The Webster. Instructions] with go

John Nouri

Hi.

approximate For do you project price? the in square What Magnolia footage Houston, guys the

Beau Armstrong

for square Houston, for for we in the do footage project me price estimate Excuse Magnolia leasing? what the -

John Nouri

Yes.

Beau Armstrong

basis. comparable, would is our, think I but be if currently be in would are reasonably rental is Kingwood use comparable. the mid you triple undeveloped, project on XXs that guessing which were net guess to two know the rates And would that be to our I low there I projects I Well, a would

John Nouri

question XXX,XXX in is it comprise second is Place, feet, going is at this XXX,XXX to allocated seems office be and Moviehouse hotel retail, My is XX,XXX for the which being Lantana Okay. for space. square of theater

real So remaining breakout footage? the what's for square the

Beau Armstrong

does The correct. hotel you're retail not include Well, is office is the that feet feet, XXX,XXX component the XX,XXX piece.

we XX,XXX, we so think is square a So I I generally breakdown. think hotel hotel, general it's all of generally feet it's the have little that. a little got in the bit of short But in the But bit exact don't to yet, were think of the XX,XXX I the footage XXX,XXX, fully Moviehouse I still don't flux. the the that's

Operator

Burtner next comes Partners. Please from ahead. question The go with Burtner Fred

Fred Burtner

Hi. the With health rising, assessment rates what's your interest the of of Austin market?

Beau Armstrong

Well, that's a good question Fred.

a know something as never Austin been it you in long we've rate a been I've that here. it's rates quite I here that good think generally almost certainly mindful and it's for seen it it's means years economy time with since is is you rising know very the are so boom town, been around Obviously, I've we're environment, rising and XX now. active a is as of

of ago big get time and we've up that I Austin overlooked of what years probably there's amount are now, would to trying we showing competition projects. developers lots got involved - with a here So tremendous say

that's think land our to good got hand and we that deals source have just quality it's in hand, competitive. on standpoint, tremendous I a interest other Austin. we've one lot the because here. makes So difficult the high gotten it holdings still of But very very, From it on new

underlying I yet, move a that it's cap I in change. really think the I from haven't of financing development, benefited we've probably early yet tandem on I the risk any that and think growth to but I had the on So guess generally a rates attention rates could think and But chilling Austin. call. little rates kind with is don't will but impact seen all have

Fred Burtner

us could your my new about little in you. question projects? who two third investors the tell other Thank And is, you party a are

Beau Armstrong

by funds. net Sure. just private say going investors I net worth to They invested have equity They they equity in is are of And worth we we very have - they Fund in something structure. tend same with Blackstone more have we high found we have am traditional than what through gotten get thing, would private other better some - gotten is found private fund. And been equity type doing to shop. have direct we be them that we they high terms that would on or the or through them, money individuals. economics can provide what fund would and private have typically then better that, would And equity

there it's projects, the the well. But in I instances that. do just limits out many think cut obviously as I better to in much we. for particular So they said, get very how middleman. involved do worked because we've of essentially we these time Like But economics this are out can

So new that successful these would continue expect as partners extent the I to would opportunities. invest which I think we with we're that be, to us think to fully source we

Fred Burtner

Okay. Thank you.

Beau Armstrong

Thank you, Fred.

Operator

Webster. from is follow-up question Nouri next a North The with Please ahead. John go &

John Nouri

Beau, question split HEB comments. XXX,XXX there's as theater well. an feet, the how think improvements part and you between that for you and as my a to categories? It's is those there square do for home would follow-on you Magnolia that movie allocate What

Beau Armstrong

store, ends here assume like I around And purely that out am is improvement are screens type would Well, XX improvement if probably exploring assume But growing and a many were a XX,XXX is of But TJ a are if being again up HEB not back we would plans but it again. there. the still they is it's size securing theater XX, other successful formulating that's of strategy these XX,XXX how would feet. Maxx project, because secondary something to - I the in marshals speculating a lineup, feet. a really home I home obviously like if we also screen be movie on - which we be would days a depending and this to XXX,XXX typically that anchor are a ten

key be start XXXX been yet got that's The And when just kind moving our our some timeline timeline. Again kind there. market with who's still year So will currently working optionality something but confirmed of we've the we beginning next is on that's hasn't that of in the project. opening.

John Nouri

several have statement? cash Perfect. I related to Erin, and balance flows the the questions sheet for

Erin Pickens

Okay.

John Nouri

pertaining cash, My that of would what comprised first maybe current at this release, question the based like is it's what Erin, that be you do or on restricted today's benefited think is, not press of? Jones what day balance Crossing to

Erin Pickens

account cash have small at for the that maybe Well, point this it's primarily a related College the is Block $X balance pretty held is in escrow million. escrow an we as project, such I project. reserves think XX but to There Station

that's think I primarily are.

John Nouri

And what press the is think of MUD balance the you release? do current day

Erin Pickens

the balance reimbursable? of The MUD

John Nouri

Yes.

Erin Pickens

I or $X million. $X think million

Beau Armstrong

bit up number a have And of that that's unreimbursed, eligible think because down. as moves a currently it's a to and But facility MUD ongoing have $X dynamic they that $X million. progeny generally, it's I we projects million

John Nouri

what Make the up think sense. pertains figure to numbers, that mean do And outside - the predominantly making is accounts I account like receivable the you what payable, for payable? accounts

Erin Pickens

and for further already construction this each back number. XX% not that's whatever are but For project until done. we've out is contractors is paid misapplication payment, maybe large the certain usually understand things you have got we retainage. payable projects, reason the complete until a accounts we and held that Anytime And

of reason the really but number the have details fairly don't large. of the that that's is front I number I think in So the me,

Beau Armstrong

get just And project. until that fully sure that. we leverage the typically to done make we just accepted properly. hold is our Retain, on a color it's We little everything that's

right developers, on large that tends we have much now So fairly be when have to going as number. a we

John Nouri

Okay.

is back? of for the why cost cash Just added being statements, operating section, real flow estate the

Erin Pickens

Cost of real sold? estate

John Nouri

Yes.

Erin Pickens

inventory costs a our is or Villas costs and of real the also of actually the when that on in closing of accumulated, the building Well then of that cash. course non-cash condominium. that figure townhome a the of we is cost Amarra of amount and the there's sales, but - paid lots write-off in cost W charge estate asset. And that record to non-cash revenue was are charge. sales in also asset sales, cost there's the cost those commissions But We

where further we expenditures of you to get back reflected. but have the the estate then for are added where the build here, assets to see purchases real that's properties, can down, and cash develop development So flow and

John Nouri

decrease what is why section? and in the that the are increase deposits, in offering And

Erin Pickens

to think going sort have definitely answer get deposits trying to what I'm it's be in there can't on what's financing activity. investing to the you to offline or there. I'm able because really And I recall you - question have to that mean wouldn't back I with in of be afraid to we well. to explain I'm

John Nouri

Okay.

just I'll being, time my raise the to offline. For ask you questions

Erin Pickens

Okay.

Beau Armstrong

John. Thanks

Operator

is our today's and also concludes concluded. you This the Thank question-and-answer presentation. for session, conference attending the

You made now disconnect.

Stratus Properties (STRS) 9 Nov 182018 Q3 Earnings call transcript