STRS - Earnings call transcript Q2 2019

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Operator

Welcome to the Stratus Properties' Second Quarter 2019 Financial and Operational Conference Call. Earlier this morning, Stratus released its financial results, which are available on its Web site 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 August 14, 2019. Anyone listening to the tape replay should note that all information presented is current as of today, August 9, 2019, and should be considered valid only as of this date.

press this certain and call may materially. today's be that actual reminder, differ on made include a release comments and will results As forward-looking statements Stratus' to factors by risk in Stratus. those results Stratus' that language Please to and XX-K described the Form cause and issued today refer included review projected in could press XXXX differ release the from cautionary actual materially

before which interest, to addition, a taxes, and as In adjusted management recognized referred EBITDA, discuss GAAP. amortization, accepted also not as measure earnings adjusted generally accounting is will financial also U.S. referred depreciation under principles, to

release As reconciled today. rules to and measure SEC required comparable most this press GAAP financial by schedule non-GAAP issued is its supplemental and financial measure a regulations, Stratus' of

the now over Chairman, of like Beau Armstrong, Executive turn and Stratus Properties. would Mr. to President to Chief Officer call I

Beau Armstrong

call. operational you, joining financial Thank for everyone, and on the XXXX quarter second conference me

This Our sale. Chief XXXX will either will Erin here results. operational Pickens, a cover certain is Financial our second as discuss Officer, Erin financial which or exploring refinancing for monetization morning, through our properties, opportunities I And highlights, include quarter well. today

diversified shareholders. is our company, estate create value to for a and are We real goal

entitlements As necessary that enter and finally, market as the stages: our secure for a position a construct first, property; talked into on a refinancing proposed and previously, we permits we or conditions. depending project; project; then for a proven-development we and the have event, includes sale a lease property we we capital such we follow next, identify, about process the following contract for

in projects each have currently of these We stages.

providing our Magnolia would in Texas. Place new plans on like our update I an quarter, to project Houston, start by This for

store feet to a allowing mixed-use land on square We to development Magnolia planned adjoining retail Magnolia acres shadow-anchored sites, by proceed, X fronting in sites; of XX,XXX phase subject will space; of Place, be a XXXX; hotel up FM of be for residential pad by XX-acre by Place project Grocery units. Magnolia, XX,XXX HEB new currently to of six XX HEB. and financing, with to HEB constructed Texas, X,XXX are first owned the planning foot site an square

is The phase to of space, of consist development pads of and pads held square expected for approximately to for first retail XX,XXX lease sale. be three three feet

site the of to loan a utility road We development finance XXXX. process joint and use including project, support of in phases, entire that phase third are infrastructure begin in construction quarter the the the work currently securing and future expect of first and to will

We expect store substantially The all XXXX. costs of open Magnolia by East currently municipal district. expected Grocery to future be quarter for the by is to utility the the third infrastructure eligible of reimbursement HEB

pad will tenants from are this that another We and users Stratus. optimistic early successful several are be by interest project for encouraged and

As and release are of The stabilized this contains morning, development Hotel multifamily our you refinance sell W Texas, may have XXXX, that Creek space. XX, property subject unit project downtown issued entertainment Austin, combined Block in and and Barton was the market property we and Residences & XXX conditions. to Santal fully to or mixed-use June this for opportunities continue currently retail we in seen our in Austin our leased as options explore office, Santal to and XX, exploring

is sell several a perspective. to short-term provides asset that recognize Santal valuable good this from decide or a Whether property, or options either Stratus for that we long-term we refinance

high-profile XX, unique commercial entertainment Austin, opportunities Block subject with respect asset various may and is hotel, downtown located market combination a sale, with We to to XX, also possible a which to include venture recapitalization Block uses. or explore continue other conditions. of in

further these near updates properties excited potential are future. the you associated with with in about expect the provide opportunities We and to

our have leasing activity active Regarding continue also perform and that projects well, remained strong. properties, other we multiple to

townhomes quarter Amarra commence new on in the four third construction of to this expect We Villas year.

the We two-year have based renovation, been are incorporating expansion design opened with resort feedback. the Barton Barton And in extensive the will on experiencing positively and area. community. a improvements after anticipate resort Creek the to improvements we the townhomes renewed overall buyer interest that impact We Creek

future is of garden-style type clubhouse We and also and of Creek. first this apartment on schedule XXX-unit Circle luxury have budget. Mary, been apartment project completed units have anticipate Construction community, at and Barton XX phases in additional leased. been a progressing in product ahead sections Saint The the The three buildings of C

occupancy fourth development the Place, mixed-use in to The progressing is we budget. during took first and Texas, and expect quarter year. of Construction this our HEB-anchored schedule Kingwood, in July, tenant Kingwood on complete on construction of

project we the for of are first tenants Southwest HEB XXXX. spaces first over buildings XX, The in their signed completed be and as retail this and expected November was approximately the to of later of And mixed-use XXXX. begin had turned Austin scheduled retail Place HEB Construction the including Lantana be development to the located XX% to in open month. leases June of of XXXX, space, to interior construction store is phase store in

Moviehouse approximately lease tenant, the a the high-quality other June including XX% Eatery of Hotel XX, we XXXX. anchor Construction ground in the by several signed As AC retail XXXX, of an had & May hotel and began Marriott. and of for for tenants leases space,

project XXXX, our for Texas, College Jones leases June Station, and mixed-use for leases Killeen retail space. had had Grocery the HEB-anchored XX% an in of shadow-anchored Texas, our HEB store, XX, signed first development signed Crossing, approximately Killeen, space; XX% the in of of round retail by approximately Market, of retail As West

to our Financial Now the highlights. Chief review turn Pickens, Erin quarter call over will will the I who Officer, financial second

Erin?

Erin Pickens

results press of a $X.XX per as second Thank $X.X XXXX morning. of our issued of the the to second loss you, reported on to in Stratus attributable common stockholders for quarter in of quarter the net XXXX, this $X.X quarter Stratus compared share common or net a per financial $X.XX or XXXX. million with share second million Beau. stockholders detailed Today, release of reported loss attributable

from XXXX totaled second XX% $XX.X reflects revenues million second entertainment estate The quarter our hotel million the partly primarily of quarter EBITDA lower revenues operations revenues operations $X.X and offset quarter revenues quarter by the of Our from real second segments, second which compared with for totaled XXXX. segments. and XXXX. a Adjusted for $XX.X higher our increase million in in $X.X XXXX of in leasing was the for million, increase

lots second quarter to Amarra of total Drive Villas during a in Villas townhome and quarter income and real million properties during Amarra sales XXXX. $X.X $X Our quarter estate segment III X This lots, primarily X in second townhomes XXXX, with the of from $X Phase Hotel the million reflects fewer of the developed the compared XXXX. operation Stratus quarter the quarter to also for decreased X million recent $X.X III Amarra Austin of million X decrease Phase last the the total of million the quarter. condominium for of of million second of second $X.X in of $X.X Residences a XXXX, quarter decreased in with second Drive XXXX sales Amarra second completed of revenues sold XXXX. compared in & the Operating W

total X of we lots Drive Amarra Amarra And as $X.X a X, second III August quarter closed XXXX, X Phase the of Since the lots sale of Drive under XXXX, contract. on for Phase III million. of of the were end

quarter million second $X.X of the a year completed operations in income II, million increases and XXXX, XXXX Crossing. up of Operating segment Place $X.X properties, revenues from the commencement $X.X Santal at the Phase leasing second quarter Our quarter in increased increased Lantana in and million from to primarily to XXXX. in $X.X Jones recently of ago. the second The reflect operating our leases new of revenue income million

second the XXXX. the room with Our million in income hotel million quarter to year, decreased second of million million XXXX $X.X These decreased $X $X.X from segment compared quarter $X.X and operating of revenues and second XXXX. last $XXX to in of compared of Revenue weekend for and are was primarily result the food for decreases a with lower sales. of quarter quarter second transient per reduced beverage the available business $XXX XXXX

Downtown, an resulting in outlook from anticipated market, rooms based office tourism and and downtown, Austin, optimistic second the the on hotel the the half growth continued growth impact about While long-term a increased continued Hotel of ongoing throughout Austin in additional have increase of remain we W XXXX during our in to Austin revenues. population the hotel of competition opening is expected on XXXX,

Our entertainment XXXX. up from XXXX, the in million of segment second million $X.X second the quarter revenues quarter $X.X of in to increased

second to million from Our million $X.X of operating increased quarter XXXX. in income the $X.X

ACL and XX XX,XXX and XX,XXX the XX Live of is in second number the sold in increase XXXX. quarter XXXX, attendance an reflect and primarily increase at quarter events Live. of higher sold tickets hosted event increases the from the tickets ACL events of an approximately events second in which approximately These hosted

tickets Additionally, XXXX. events XX sale sold of and and approximately the XX the XTEN with second events quarter ACL the approximately of tickets compared X,XXX hosted quarter in XXXX Live in of second X,XXX

flows with for consolidated Saint related at cash expenditures first This to Jones and consolidated Phase operating estate which of Turning cash included Place was $XX.X primarily for Kingwood the million XXXX. consolidated capital flows in million totaled now development million XXXX, related $XX.X of properties. Lantana and million real and including and compared totaled Mary with to Creek line and months capital the in of II, million of six first management. of Barton $XX.X Barton XX, development The consolidated the cash XX, six investing debt Santal Crossing. XXXX, to totaled of $XXX.X At June the Purchases in the months debt December included properties, primarily and $XXX.X properties $XX of Creek Place, development XXXX, was million cash

to closing I his And back Beau the now call you. for will Thank turn remarks.

Beau Armstrong

We Erin. our believe that continue Texas Austin select in current you, Stratus. provide opportunities for continually in and investment other and markets to attractive new portfolio markets fast-growing Thank evaluate

piece ends begins risk-adjusted is to our five maximize of fully generally with property a year institutional our with estate returns a quality and the three over stabilized, period. Our unentitled real shareholders Ultimately, model asset. to goal to generally an

already know, Austin you offering As city Stratus. booming further opportunities is a to

of population, and Texas. is to in us major business. are employers continue prime a to types Properties Jobs positioned Although we and population city and of encouraged And to opportunities both Texas. in competition, on have are that growth these of the and here real drives in increased are join beneficiary uniquely continue factor have Central estate the the continue be increasing will we the by will Stratus the job growth and that vectors

any are may we happy you questions take Now to have.

Operator

with comes [Operator Investments. go Burtner Fred Please Instructions] Burtner Our question from first ahead.

Fred Bergner

a have I morning, Good few questions.

the for Creek? The first elaborate sections you've said you what in beyond the efforts Barton status can of planning remaining about is, your

Beau Armstrong

Sure. Good morning Fred, it's Beau.

We permits we residential and and been our Creek, the two we call a last sections months. L, uses, have K, O at through have L, XX working is and those N Barton -- K, mostly O city last the for probably N. basically

of As you know, process. has Austin entitlement bit a a complicated

base O processes. L, have years level K, and ago. now, of many, for those we both other established basically of many to refine sections N further And kind Our kind entitlements been through city have

But two entitlements have last years our K, for must its and pursuing say, and nonetheless, getting we're for -- I close. L O we been the

have of we maybe next the I by end would early next our permits begin think expect then work. of into to we the and year, construction year, the round

next perhaps have year to So product salable us later or early that XXXX. sometime allow would

there. As far actively behind city forth O, as K, with that's a goes, the L on that we commercial bit is back but little and and been and going primarily permits and have multifamily, our N Section

something product XXXX. associated sometime which expect to first sometime have would And maybe have of we the infrastructure phase mid-next work later and kind again next I would the year sometime to then approved begin year, available

and But some and everyone Austin a barriers markets extent other relative entry. in the to Texas, It has knows, entitlement major very, process. through going to the artificial It's very created cumbersome has process, bad. As good some years takes to often a can But patience it record, -- trying. many it that that frustrating. done lot helpful. we've track it a was Hope does for but good have of nonetheless can it be just be many,

Fred Bergner

was. It

mentioned that? status you What's I III II, that's anything did of not hear Santal you I was, construction. question Phase Next and the Phase say

Beau Armstrong

XXX Well, of Santal two so fully it's only and and units, we stabilized. that's -- built total don't had a phases,

Section spoke N. working one previously just associated Now within multifamily are about And add caveat that Santal N, there with essentially is Section I'll additional Section I process kind of N and through something city on that's about, we're and the now. right entitlements currently

We have we and to certain call but authority. road and and to which comply jurisdiction. city's -- quality is, things like not and do not geometry are health we're And they that have -- the their is water with extraterritorial what matters, zoning ETJ, city's we the safety subject means

because And system, gives of these that's as as it we respect lot have with know, we us to you And own flexibility call MUDs, important utility them. Barton a Creek uses. our

don't from the we utility service to about getting So either. have worry city

in of zoning, So city N. certainly that can position will of than go we a Section But -- phases with the just we still be it's process, entitlements bit our coming additional multifamily difficult standard next just more which even a utilities process. require But of doesn't to we enviable be fortunately round thing. the were is the have control those major through own

Fred Bergner

able is you what to us buyers? XX, And of are on from level tell interest the Block

Beau Armstrong

really of summer those And out there as the after list. high something with have -- really they're but we're to not major everybody's are ideal our we're of Day. I of But would getting kind know, Austin, advisors characterizing of out to the just potential targeting And an having call more buyers, kind dead is starting. some obviously, their Labor strategic a of, kind so like -- is time effort in -- handful Well, timing roll this. get far, we all conversations been

sense some had this It's us. in hard too to makes interest. that pretty whether result we've tell any for of good something So will just

allows guess, recovered it, -- our if and what's you low that a in asset the produces all our the very the basis years XX -- pretty But property. Marriott had reflagging investment, having of so can for property of somewhat, for XX% flow, XX afford agreement property to interesting good connection with had essentially I now a good in cash will. is, years, the we've sale having picky have we we're we And of after -- been of a with about we'll operating be

a amount of bring would And own that different lot other for they brand, or interest would operators. their people control like generated, among wrinkle that is I an they to option attractive hotel has in so think, whether fair of to, a like brand a

again, how we'll together. high-profile So interest just have it's opportunities able then with been, to hopefully nature I'm given report substantive, how coupled the to early Austin, forth of the anything asset, some -- overall something little in be but that to good successful good just to with and hopeful the bring the Board put

Fred Bergner

If you able -- or future from investments deals it are future have refinance out do projects? again, you opportunities incremental from cash to more

Beau Armstrong

there. a we'd got couple there's shortage trying things. to Well, of to We're of say opportunities out -- we've like no

forward. requires L existing As portfolio, projects we you our just those know, have our K, that we N, that Section and discussed, certainly -- to O move capital

us, new we opportunities in successful that's is a line that work. HEB So money. of to always continue of business for that use very retail This good been our evaluate

that somehow are are to things we that the capital. another capital-intensive get redeploy on any -- anything the we big, W but high to have had evaluates. if that want those I don't if myself, time that is else Board certainly or to would to we we -- -- thing of again, our two monetize, money would even getting would shareholders that be list then, And ahead it's whether returning so And often were if able obviously,

strongly say, something portfolio opportunities, -- the or the that whether within to get a I first returning So we or consider. first, should some something But of or that thing our and/or, is just good reinvest to that think find range for money -- is sense another things in current I is general to it's deal things makes want our always shareholders of property. new

Fred Bergner

I question appreciate master-lease you at update last Lakeway? on My is, us an it. The at give the Oaks agreements can

Beau Armstrong

you that we I but details, if there. down can I mean on continue the work be have our continue will. to to you detailed don't tell I plan, we obligation

to it's paying property, piece -- and permit very the even -- there are -- finally that next though XX-year delays we of there's out has some on been opened, it related. has has still technically were rent us, to close there the think really obligation a tenant But been being we I master-lease has over for hotel a that that that term.

So even that of it's though with soon. practical number, we'll getting be it, big a we no but off pretty see risk associated part

there I out other where have point well. to doing the we had are unfortunately, this numbers. at very a HEB couple again, all but continues expected don't post sales reduced guess, And our we've that and, to tenants I to obligation. want are that know leases that be there But strong

opportunity of is -- center challenge Our remaining I fell with been out attractive that under in or the residential our it contract. out. additional for really Lakeway, back the say, agreement planned some That has We're That's land very behind uses. there's the has there, shopping We of City asset. would contract that. had part evaluating as PUD a

to middle trying trying we're in out we're that. figure the do exactly to what -- with So to

is, land It's Lakeway as market. to limited, only attractive so got much very a develop. there just again,

probably work but that pointed to currently asset. current get our And through, obligations city to see a density we master opportunity we're for. than trying as last these big we if it's little more have we plans with that our can But we're expect So perhaps allow out, you where with the that be. to working Lakeway is it lease

Operator

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

You disconnect. now may

Beau Armstrong	Chairman, President and Chief Executive Officer
Erin Pickens	Chief Financial Officer
Fred Burtner	Burtner Investments

Stratus Properties (STRS) 9 Aug 192019 Q2 Earnings call transcript