STRS - Earnings call transcript Q3 2019

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Operator

Welcome to the Stratus Properties' Third Quarter 2019 Financial and Operational Conference Call.

Earlier this morning, Stratus released its financial results, 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 on Stratus' website through November 17, 2019. Anyone listening to the taped replay should note that all information presented is current as of today, November 12, 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 US 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 in 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. you, joining operational Thank for everyone conference third quarter and financial XXXX our

Erin me Our with Chief here Officer, Pickens Financial is today.

our for as stages. diversified development This to As we Texas that fast goal is includes the a process company stockholders. have value real creates in follow process markets a growing the our stated, following previously estate

attractive negotiate an First, and we acquisition. properties identify then

plans prepare and and we the entitlements project. development Second, for permits secure

and project. sale construct which may conditions. lastly, or market the we include refinancing position for we Third, lease a a And project capital event depending on

projects our planned. Our and full are progressing as pipeline opportunities of is

Roadway which results. the projects. I I Magnolia, Afterwards, and securing Magnolia of third to that On today's Last City Magnolia complete. financial construction in new like Place, Place, work northwest current state XX. Highway and Houston. call, phase utility of were although cover first All Texas of mixed-use Department would now Santal Texas Magnolia shared discuss Erin project of process loan is Block our to work a of finance in is the I will on quarter, our we of them, The three not quarter focus will of namely all

clearing fine and efforts. continuing our and pre-leasing are weeks within development next currently our to weeks. We tuning eight development site budget the We financing begin to expect XX

of retail and retail phase and pads this pads sale. of a component XX,XXX feet space. first for The to consists development. be of lease shadow-anchored Three multifamily HEB will square three for held The project and have retail

a We acres evaluating XX,XXX to are for square initial multifamily the The development we units. hotel Houston that of the six two multifamily of market. for have as XXXX is retail, reasons, of with allowing project will knowledgeable the land in area. pad value currently believe of well. residential up our planned and phase XX experience including, We and This sites, in create feet number sites are HEB full area currently this development property third is Houston

property. Stratus favorable use this tenants Magnolia well Municipal was the to infrastructure properties are to mixed the Place future designed, is institutional substantially at District. And project Magnolia expect believe we that large the We by reimbursement and costs attractive there be related us available right for for time and both to located buyers. The opportunities Utility remain East and all of bought to eligible

for of which We we the is refinancing. a such in our in the as increase Place a of sale of key look to which event Two fourth properties the stage in value forward or the capital to the future. Magnolia phase are development working position our property cycle,

further Stratus to Erin Creek and October shortly. but this considered this provide chose the Santal will beginning previously value announced refinance in details Barton sale as we As a provide refinancing in we shareholders. believe of long-term option property the the The this of regarding structure will of year, to

that we a asset to consider future produce us market allows the residential various us Separately, downtown the should value high-quality Block flow. space. decide conditions and use That we to are Refinancing continuing. development our and We return of respect efficient and and provided announced in to room previously with maintain choice that of with is right. units and office are tax luxury an continue XXX value opportunities option the Santal capital process positive The contains appreciate entertainment refinance believe that to that to allows sale mixed XX, hotel, timing, will exploring Texas asset continues property maintain cash the the to Austin, retail to in we this XXX ownership a us condominium

Stratus shareholders invest and be an a Stratus market perform continues is XX trophy to Block attractive asset to for well. to continues market in. Austin our for The and

As I our pipeline going quality is project are opportunities to not progressing mentioned planned. specifically, earlier, and high of our discuss each as full projects while development I'm

November Place XX strong Leasing many of in as such The Lantana tenants and at remains tomorrow, begun open Kingwood Kingwood. Mary to for our have projects, Place, Saint HEB plans out and finish

Chick-fil-A year will in Jones a one believe site the and to that Station, opening of leasing traffic at bring its we pad September on significant and restaurant signed for of Crossing College XX lease this our this Specifically held the development attract grand sites, additional activity. ground was chain

also We development initial are Jones phase evaluating of currently at multifamily Crossing.

for Company. way under currently activities many the are There

review other third our for will a Pickens over Financial third For now information, Erin? Form of and financial details Chief I quarter to our Erin quarter Officer, additional highlights. call turn regarding review the leasing XX-Q. please the

Erin Pickens

interest reported reported the quarter, EBITDA issued $XX.X of debt the our release and XXXX, related $X.X Beau. of million higher XXXX compared at the expense versus in average adjusted increase last properties of due an attributable to quarter our ACL year. loss last third leases million events million from the for increase revenues from revenues stockholders of million our attendance which of and million in million and of in $X.X at results of $XX.X last to year, We primarily common The is commencement the year. third third up press financial our totaling in year morning. primarily quarter In is completed the event quarter totaling recently result last this up this year's higher Live higher to $X you, Stratus net $X.X number Thank to and

results segments, the and Leasing segment. four including Real quarter, Hotel income on all financial four year-over-year operating third revenues Operations, and operating reports Entertainment segments Stratus increased for Operations, our basis. In Estate operating a earned

third for same lots Estate lots Operations primarily and of four of million with two the II lot Our and eight and total the and quarter $X.X developed Phase and due compared last this III two lot Phase $X Amarra Amarra lots the increased million properties. respectively, Phase III quarter, lots contract. November we year, Phase total sold of the $X.X under Phase Drive to of million Drive quarter sales Drive higher of Drive a with last III Real quarter-end, closed recent million Since $X.X year. In segment operating Amarra Drive sale income of Drive were on we in Amarra Amarra revenues compared $X.X total quarter a the for have million X, of one Phase one II for of Amarra a sales III as

this quarter Santal connection and properties, with $X.X leases for as multifamily million Crossing Jones Operations Leasing income from $X.X compared respectively, Saint The in with and last as newly Place primarily million increases occupancy operating year and in which The revenue Our to segment increased the and Mary quarter well reflect revenues executed Lantana

per higher room increased available recent food beverage last quarter Revenue revenues $XXX quarter income compared was of this of of Our to in to segment respectively million weekday third year. year and million $X.X business. and Hotel the the the last this $X.X due in year, $XXX, to and and operating increased and third quarter transient compared primarily third to quarter sales group

revenues. an competition XXXX, We remainder impact XXXX surrounding hotel continued downtown hotel during Austin expect in could area a increase on which Stratus' throughout in of and the the have

However, the W on outlook tourism. continued downtown growth long-term and space increased Austin office we increased are population in about Hotel Austin, based of growth optimistic the

segment the revenues last attendance same an due and in operating Live. quarter the Lastly, and primarily to quarter respectively recent and year million at increase ACL income compared hosted our events of increased the higher to $X.X Entertainment number million in $X.X to event

of and in with and sold events in last of and XX third XX events XX,XXX tickets the XXXX, to XXXX, hosted the quarter Live and X,XXX tickets XX the sold tickets quarter third compared tickets approximately last third events the XX approximately Live, year. of XX,XXX ACL approximately year. quarter approximately compared hosted X,XXX in in ACL XTEN quarter events

of release some morning Live quarter relating Bryan Levit, most and third XXXX by the for of Martin financials of Vampire Please review to issued were information XXXX. which Luther, that Chicago, segment performances included the in the events, quarter was compared popular out to Weekend. sold Ferry this third additional earnings Our

debt This represents $XX.X Moving cash $XX totaled XXXX. $XXX.X forward XXXX. and increases $XXX.X XX, million December million Consolidated to and respectively our at from consolidated million capital XX, at million management. September totaled

paying the presented As million proceeds a $XX.X were in costs a part loans. repay after on used $XX of inclusive property, transaction entered to we we million approximately XX with Santal LLC proceeds, restricted construction ACRC The Lender of reserves The September $XX refinancing into loan approximately of Remaining of cash. million and Santal the

flows, estate cash million balance first for related and Saint credit remarks. and of the October. the Thank of Santal, Place, operating purchase Crossing expenditures flows totaled for of to of $XX to with for for will the Beau his the reduce primarily development in Mary The and of nine The compared to Lantana Purchases Comerica in $XX and nine Place I investing properties The the used facility the million in Barton real Mary. listening. We Creek turn related Jones on and our proceeds Saint primarily cash the months $XX.X the back of included XXXX, development development Kingwood closing capital you to XXXX, properties, included call Kingwood first Place, months land million

Beau Armstrong

to process and Erin. shareholders. including to you, continues our Thank select Austin development markets execution fast growing and Houston us The value in of our provide Texas

strong for native Texas are companies work continue HEB. Our such be multi-use properties to to and we assets Stratus with as proud

growth. we increased our have and competition and the and opportunities, regarding markets previous continued our additional but Houston calls be job Hotel population we witness, we continue allows activity. discussed may There segments offer which Austin the as welcome As Entertainment in for to strong

in its our generating value listening. follow on for as any I shareholders. for see you both may development and are have. the we Company invest Thank to answer strong We full focus returns these Erin process to and continue and you happy areas questions and

Operator

[Operator begin will question-and-answer We session Instructions] the now

question first Sam ahead. Kidston from & comes Webster. Please go with Our North

Sam Kidston

process, how bit further you little might and one questions, or to process couple that maybe Just guys, way you Block you Hey a just is another? a something on are of comment one XX have you quick think Hey. the announce today? when could that around

Beau Armstrong

morning, Sam. Good

will think days, to you can and the process that I next bring will But Savills As kind be, my we been appreciate very tell Board don't and it's get consider. running. ongoing me be to they'll our strong into something process what the of we've at get XX but can has forward. specifics, to preliminary to direct Board this -- able for on for we the discuss to that least lay think, is say But is I you the is I in but interest. too I want it out again, reluctant much had process any details, again will conclude that opportunities I'll but to would that detail, closure I I'm into will a probably path

Sam Kidston

Great, that great. burning gain the any around just down? anything you -- the could about on activity And deferred then talk

Beau Armstrong

Erin let if answer I'll OK, that, Sam. that's

Sam Kidston

Great.

Erin Pickens

been build-to-suits building -- one could and -- really deferred hasn't couple gain on pad some there of in built time, it's is related additional The in be because buildings site. a Sam. much is Hi, to there that movement that's that and

probably be any unless and would -- build we it's properties So until, more those probably recognize until, gain. that we

Sam Kidston

on Right. And then any those? comment marketing process -- on on those the marketing

Beau Armstrong

assessing constantly mean, disclose at I are nothing but out active, really guess point, projects those I and active we very very opportunities this are there. to We're

that we at any finding there nothing it's all. just -- right It's there right match of feel with property. the tenant trouble the the So for that is kind the

Sam Kidston

thank well right, All sure. guys. Sure, you,

Beau Armstrong

performing the center rest rest the -- of The the is the center well. I'll add, -- rest and of of just very center

time just, So of -- think, there. matter the before a deal of it's begin we can we I way kind just

Sam Kidston

time. Sure, all right, thank the you for guys

Beau Armstrong

Sam. Thanks,

Operator

question a Investor. next The Private ahead. is Fred Burtner go from Please

Unidentified Analyst

expected caused have about I two the near to what on pleasantly And Beau, you. continue -- the term? its hotel I spoke release The questions. Thank in growth the in press the Is surprised was upturn upturn. quarter. was the

Beau Armstrong

Austin. there -- of would also had tell that always, that new predict future, has base. a Well, to people Fred, I visitor we know our that's but supply you I in but worried difficult to been it's continue has lot the that I expand

So it's all good.

that that buy that situation. I there out think And existing materialized. investors approaching development from opportunities. has considerable overbuild can thought those So that were or that I there I tell either is think still we consider to demand you to don't hotel

optimistic that trend. am will on we I continue this favorable So

we've and think, though of as transition system the to you that those issues I been don't respect results, bit property, have I there from that where accounting details we Marriott addressed, I impact I and we a half issues we're our had, our have and a did have but to about. a reservation of, that to were not some Starwood system, feel first can back did tell an year want be. with and there little there the particular that It's was

So question, your I answer think do very long performing Austin general perhaps a well. is but to in that

hotel is its and our uses. of -- think, different complement extraordinary of I

in that market. Austin compete in good to in we're good So continue -- a the I to shape well feel

Unidentified Analyst

you. distributions my on question other your what cash And is, common are shareholders? Thank thoughts to

Beau Armstrong

Well a this position in to we're in a that done when and decision, I big past we've now, don't Board right the had think, ultimately that a minute, do event. we've Fred we, capital but one right is

that. extent the to the I have So resources to we do think we -- that that

a like the demonstrated would the would Board capital willingness a enable think to has things do event at that. first least past first, to But do in we have that. us to I that

Unidentified Analyst

Okay, thank you much. very

Beau Armstrong

Fred. you, Thank

Operator

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

now disconnect. You may

Stratus Properties (STRS) 13 Nov 192019 Q3 Earnings call transcript