Stratus Properties Inc 10-Q for FY2025 Q3
Stratus Properties Inc (STRS)
10-Q
2025-11-12
For: 2025-09-30
View Original
Added on
April 12, 2026
About this 10-Q
Stratus Properties Inc filed this 10-Q on November 12, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $4.97M
- down 44.1% from $8.89M a year earlier
- Net loss
- $8.01M
- compared with a net loss of $1.41M a year earlier
- Diluted EPS
- -$0.62
- compared with -$0.05 a year earlier
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2025
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number: 001-37716
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |||||||
| incorporation or organization) | ||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
(512 ) 478-5788
(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 | ||||||
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.
☑ Yes ☐ No
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 | ☐ | ||||||||
☑ | 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 November 7, 2025, there were 7,994,746 issued and outstanding shares of the registrant’s common stock, par value $0.01 per share.
| STRATUS PROPERTIES INC. | |||||
| TABLE OF CONTENTS | |||||
| Page | |||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
STRATUS PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands)
| September 30, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Real estate held for sale | |||||||||||
| Real estate under development | |||||||||||
| Land available for development | |||||||||||
| Real estate held for investment, net | |||||||||||
| Lease right-of-use assets | |||||||||||
| Deferred tax assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities, including taxes | |||||||||||
| Debt | |||||||||||
| Lease liabilities | |||||||||||
| Deferred gain | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Equity: | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | |||||||||||
| Capital in excess of par value of common stock | |||||||||||
| Retained earnings | |||||||||||
| Common stock held in treasury | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Noncontrolling interests in subsidiaries | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.
2
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
(In Thousands, Except Per Share Amounts)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Real estate operations | $ | $ | $ | $ | |||||||||||||||||||
| Leasing operations | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||
| Real estate operations | |||||||||||||||||||||||
| Leasing operations | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Total cost of sales | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Gain on sale of assets | ( | ( | ( | ||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Interest expense, net | ( | ( | |||||||||||||||||||||
| Loss on interest rate cap agreements | ( | ( | |||||||||||||||||||||
| Loss on extinguishment of debt | ( | ( | ( | ||||||||||||||||||||
| Other income (loss), net | ( | ||||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Benefit from (provision for) income taxes | ( | ( | ( | ||||||||||||||||||||
| Net loss and total comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
| Total comprehensive loss attributable to noncontrolling interests | |||||||||||||||||||||||
| Net (loss) income and total comprehensive (loss) income attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Basic net (loss) income per share attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Diluted net (loss) income per share attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
Weighted-average shares of common stock outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.
3
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash flow from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Cost of real estate sold | |||||||||||
| Loss on interest rate cap agreements | |||||||||||
| Loss on extinguishment of debt | |||||||||||
| Stock-based compensation | |||||||||||
| Debt issuance cost amortization | |||||||||||
| Gain on sale of assets | ( | ( | |||||||||
| Purchases and development of real estate properties | ( | ( | |||||||||
| Write-off capitalized project costs | |||||||||||
| Decrease in other assets | |||||||||||
| Decrease in accounts payable, accrued liabilities and other | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flow from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from sale of assets, net of selling costs | |||||||||||
Municipal utility district (MUD) reimbursements | |||||||||||
| Payments on master lease obligations | ( | ( | |||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Cash flow from financing activities: | |||||||||||
| Borrowings from credit facility | |||||||||||
| Payments on credit facility | ( | ||||||||||
| Borrowings from project and term loans | |||||||||||
| Payments on project and term loans | ( | ( | |||||||||
| Payment of dividends | ( | ( | |||||||||
| Finance lease principal payments | ( | ( | |||||||||
| Stock-based awards net payments | ( | ( | |||||||||
| Noncontrolling interest distributions | ( | ||||||||||
| Noncontrolling interest contributions | |||||||||||
| Purchases of treasury stock | ( | ||||||||||
| Financing costs | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of year | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
The accompanying Notes to Consolidated Financial Statements (Unaudited), which include information regarding noncash transactions, are an integral part of these consolidated financial statements.
4
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
(In Thousands)
| Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained Earnings (Accumulated Deficit) | Common Stock Held in Treasury | Total | Noncontrolling Interests in Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Capital in Excess of Par Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | At Par Value | Number of Shares | At Cost | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Vested stock-based awards | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Director fees paid in shares of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Tender of shares for stock-based awards | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest distributions | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | ( | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vested stock-based awards | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Director fees paid in shares of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest contributions | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vested stock-based awards | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Director fees paid in shares of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest contributions | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | ( | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
5
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Continued)
(In Thousands)
| Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained Earnings (Accumulated Deficit) | Common Stock Held in Treasury | Total | Noncontrolling Interests in Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Capital in Excess of Par Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | At Par Value | Number of Shares | At Cost | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Vested stock-based awards | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Director fees paid in shares of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Grant of restricted stock units (RSUs) under the Profit Participation Incentive Plan (PPIP) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Tender of shares for stock-based awards | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchases | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vested stock-based awards | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Director fees paid in shares of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | ( | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vested stock-based awards | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Director fees paid in shares of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest contributions | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | ( | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.
6
STRATUS PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
Related Party Transactions. In April 2022, Stratus hired the son of Stratus’ President and Chief Executive Officer as an employee. As an employee, he received the same health and retirement benefits provided to all Stratus employees, annual incentive awards and two awards under the Profit Participation Incentive Plan (PPIP). In first-quarter 2024, he received $22 thousand as an annual incentive award for 2023, and his annual salary was $124 thousand. In September 2024, the employee resigned from employment with Stratus, resulting in the forfeiture of his two outstanding awards under the PPIP. Refer to Note 7 for discussion of the PPIP. For additional information regarding Stratus’ related parties, including LCHM Holdings, LLC and JBM Trust, refer to Notes 1 and 2 in the Stratus 2024 Form 10-K.
2. EARNINGS PER SHARE
Stratus’ basic net (loss) income per share of common stock was calculated by dividing the net (loss) income attributable to common stockholders by the weighted-average shares of common stock outstanding during the periods. A reconciliation of net (loss) income and weighted-average shares of common stock outstanding for purposes of calculating diluted net (loss) income per share follows (in thousands, except per share amounts):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net loss and total comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Total comprehensive loss attributable to noncontrolling interests | |||||||||||||||||||||||
| Net (loss) income and total comprehensive (loss) income attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
Basic weighted-average shares of common stock outstanding | |||||||||||||||||||||||
Add shares issuable upon vesting of dilutive restricted stock units (RSUs) a | |||||||||||||||||||||||
Diluted weighted-average shares of common stock outstanding | |||||||||||||||||||||||
| Basic net (loss) income per share attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Diluted net (loss) income per share attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
7
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:
Partnership a | Indirect Equity Interest | |||||||
| Holden Hills, L.P. | % | |||||||
| Holden Hills Phase 2, L.P. | % | |||||||
| Stratus Block 150, L.P. | % | |||||||
| Stratus Kingwood Place, L.P. | % | |||||||
| The Saint George Apartments, L.P. | % | |||||||
| The Saint June, L.P. | % | |||||||
a.Holden Hills Phase 2, L.P. was formed in second-quarter 2025 – see discussion below. For additional information regarding Stratus' other partnerships, refer to Note 2 in the Stratus 2024 Form 10-K.
Holden Hills Phase 2, L.P. In second-quarter 2025, Holden Hills Phase 2, L.P. (the Holden Hills Phase 2 partnership), a Texas limited partnership and subsidiary of Stratus, was formed for the development of Holden Hills Phase 2 (Holden Hills Phase 2 Project). The Holden Hills Phase 2 Project is Stratus’ approximately 570-acre mixed-use development located along Southwest Parkway in the southern portion of the Barton Creek community in Austin, Texas adjacent to Holden Hills Phase 1, Stratus’ 495-acre residential development. The Holden Hills Phase 2 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 Phase 2 general partner). In second-quarter 2025, the partners made the following initial capital contributions to the Holden Hills Phase 2 partnership: (i) Stratus contributed the Holden Hills Phase 2 land and related personal property at an agreed value of $95.7 million, which reflects an agreed land value of $86.9 million and Stratus’ Tecoma Circle infrastructure investment of approximately $8.8 million, and (ii) The Class B limited partner contributed $47.8 million in cash. Following the Class B limited partner’s initial capital contribution, $47.8 million of cash was distributed by the Holden Hills Phase 2 partnership to Stratus. Further, the Holden Hills Phase 2 partnership will reimburse Stratus for certain initial project costs of approximately $0.8 million. As a result of these transactions, Stratus holds, indirectly through its wholly owned subsidiaries, a 50.0 percent equity interest in the Holden Hills Phase 2 partnership, and the Class B limited partner holds the remaining 50.0 percent equity interest in the Holden Hills Phase 2 partnership. Generally, after the initial distribution described above, distributions will be made to the partners in accordance with their relative equity capital interests. Stratus consolidates the Holden Hills Phase 2 partnership; therefore, its contribution of the Holden Hills Phase 2 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 contribution. The initial purposes of the Holden Hills Phase 2 partnership do not include the development or construction of horizontal or vertical improvements (each, a future project) and the commencement of any future project will require the approval of all partners.
In addition to each partner’s initial capital contribution, upon the call of the Phase 2 general partner from time to time, the partners are obligated to make additional capital contributions for certain Holden Hills Phase 2 partnership costs and expenses defined as “mandatory,” such as property taxes and debt service payments, within available unused reserves in the then-current approved budget or as otherwise approved by the partners. Stratus guaranteed the additional capital contribution obligations of the Phase 2 general partner and the Class A limited partner.
The Phase 2 general partner has the authority to manage the day-to-day operations of the Holden Hills Phase 2 partnership, subject to approval rights given to the partners for specified “major decisions,” including but not limited to operating and future project budgets, the business plan and amendments thereto; commencement of any future project; sales, leases or transfers of any portion of the Holden Hills Phase 2 Project or any future project to any partner, affiliate of any partner, or to any unaffiliated third party other than as contemplated in the business plan; payments, transactions or agreements between the Holden Hills Phase 2 partnership and any partner or its affiliates not already approved; incurring any debt, mortgage or guaranty; capital calls in excess of the initial capital commitment; admitting a new partner; and certain transfers of direct or indirect interests in the Holden Hills Phase 2 partnership. Any partner can initiate a buy-sell at any time by written notice to the other partner, specifying the buyout price.
8
The Holden Hills Phase 2 partnership has agreed to pay Stratus an asset management fee of $39,875 per month for the first 12 months following the formation of the partnership and thereafter subject to an adjustment as agreed by the partners, plus 4.0 percent of the hard costs of landscaping and site clearing approved in the initial operating budget.
The Holden Hills Phase 2 partnership is working to establish a separate revolving credit facility for the Holden Hills Phase 2 Project, which is expected to be sized as needed for future operating costs. The Holden Hills Phase 2 partnership intends to use the facility to reimburse the Class A limited partner for approximately $1.6 million of project costs, including certain initial project costs as described above, fund the approved operating budget for 2025 and fund future partnership activities, as approved by the partners.
Amendment to the Holden Hills, L.P. Partnership Agreement. In second-quarter 2025, the parties to the Holden Hills, L.P. partnership agreement, relating to Holden Hills Phase 1, entered into an amendment thereto that changed certain provisions to more closely align with the Holden Hills Phase 2 partnership agreement, primarily that any partner can initiate a buy-sell at any time by written notice to the other partner.
Amendment to The Saint June, L.P. Partnership Agreement. In third-quarter 2025, the parties to The Saint June, L.P. partnership agreement entered into an amendment to allow for up to $3.0 million of distributions to the partners between September 1, 2025 through September 30, 2027 prior to the partnership’s repayment of the operating loans discussed below.
Operating Loans, Advances and Capital Contributions to Partnerships; Distributions from Partnerships. Stratus has made operating loans to Stratus Block 150, L.P. to facilitate the partnership’s ability to pay ongoing costs, including debt service, of The Annie B project during the pre-construction period. The loans bear interest at one-month Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent, are subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners. In first-quarter 2024, Stratus made an operating loan of $2.4 million. In third-quarter 2024, Stratus made an operating loan of $1.1 million. In first-quarter 2025, Stratus made an operating loan of $1.5 million. In third-quarter 2025, Stratus made an operating loan of $1.1 million. As of September 30, 2025, Stratus’ operating loans outstanding to Stratus Block 150, L.P. totaled $8.3 million.
In third-quarter 2025, Stratus contributed additional capital of $323 thousand in cash to The Saint George Apartments, L.P., representing its 10 percent equity share, and the Class B Limited Partner contributed additional capital of $2.9 million in cash to The Saint George Apartments, L.P. to support the partnership’s ability to pay debt service and project costs, including costs related to damage remediation and repairs for a water leak that occurred in April 2025. In third-quarter 2024, Stratus contributed additional capital of $400 thousand in cash to The Saint George Apartments, L.P., representing its 10 percent equity share, and the Class B Limited Partner contributed additional capital of $3.6 million in cash to The Saint George Apartments, L.P. to support the partnership’s ability to pay its construction loan interest.
As of September 30, 2025, Stratus has advanced $1.3 million to Holden Hills, L.P. to fund costs not included in the original project budget. The partnership is in discussions to modify the construction loan to increase the loan commitment amount and then expects to use these funds to reimburse Stratus, as approved by the partners. As described above, as of September 30, 2025, Stratus has advanced approximately $1.6 million to the Holden Hills Phase 2 partnership to fund certain project costs.
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In October 2025, The Saint June, L.P. made distributions of approximately $435 thousand and $225 thousand to the Class B limited partner in The Saint June partnership and Stratus, respectively.
Potential Returns. The following table presents the distribution percentages for the limited partnerships in which Stratus’ potential returns may increase above its relative equity interest if certain hurdles are achieved.
| Distribution Percentages | |||||||||||||||||||||||||||||||||||
| Holden Hills, L.P. | Stratus Kingwood Place, L.P. | The Saint George Apartments, L.P. | The Saint June, L.P. | ||||||||||||||||||||||||||||||||
| Stratus | Third-party Class B Limited Partner | Stratus | Third-party Class B Limited Partners | Stratus | Third-party Class B Limited Partner | Stratus | Third-party Class B Limited Partner | ||||||||||||||||||||||||||||
| Until all partners have received a return of their capital contributions and a 9.00 percent cumulative return; | % | % | % | % | % | % | % | % | |||||||||||||||||||||||||||
| Until all partners have received an 11.00 percent cumulative return; | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Until the Class B limited partner has received a 12.00 percent cumulative return; | — | — | |||||||||||||||||||||||||||||||||
| Until the Class B limited partner has received an 18.00 percent cumulative return; | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Thereafter | |||||||||||||||||||||||||||||||||||
Accounting for Limited Partnerships. Stratus has performed evaluations and concluded that all of these limited partnerships are variable interest entities (VIEs) and that Stratus is the primary beneficiary of each VIE. Accordingly, the partnerships’ financial statements are consolidated in Stratus’ financial statements. Stratus will continue to re-evaluate which entity is the primary beneficiary of these partnerships in accordance with applicable accounting guidance.
As of September 30, 2025, cash and cash equivalents totaling $3.8 million held at certain of these limited partnerships are subject to restrictions on distribution to Stratus 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 (including the operating loans made by Stratus), which are eliminated (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||
Assets: a | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Real estate under development | |||||||||||
| Land available for development | |||||||||||
| Real estate held for investment | |||||||||||
| Lease right-of-use assets | |||||||||||
| Other assets | |||||||||||
| Total assets | |||||||||||
Liabilities: b | |||||||||||
| Accounts payable | |||||||||||
| Accrued liabilities, including taxes | |||||||||||
| Debt | |||||||||||
| Lease liabilities | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Net assets | $ | $ | |||||||||
a.Substantially all of the assets are available to settle obligations of the partnerships only.
b.All of the debt is guaranteed by Stratus until certain conditions are met as provided in the applicable partnership loan agreements except for The Saint June construction loan, for which Stratus has a 50 percent repayment guaranty obligation, The Saint George construction loan, for which Stratus has a 25 percent repayment guaranty obligation, and the Kingwood Place loan, for which Stratus has customary non-recourse carve-out obligations and an environmental indemnification. The creditors for the remaining liabilities do not have recourse to the general credit of Stratus. See Note 6 of the Stratus 2024 Form 10-K for additional information.
4. ASSET SALES
The Oaks at Lakeway. Stratus has remaining lease obligations pursuant to a Pad Sites Master Lease entered into in connection with the sale of The Oaks at Lakeway, as described in Note 9 of the Stratus 2024 Form 10-K under the heading “Deferred Gain on Sale of The Oaks at Lakeway.” In first-quarter 2025, one of the pad sites subject to the master lease was sub-leased and resulted in recognition of a portion of the previously deferred gain of $200 thousand due to the expected savings in the master lease rent over the remaining term. The remaining deferred gain representing the related contract liability is presented in the consolidated balance sheets in the amount of $1.1 million at September 30, 2025 and $1.8 million at December 31, 2024. The reduction in the deferred gain balance also reflects Pad Sites Master Lease payments. The remaining deferred gain balance is expected to be reduced primarily by future Pad Sites Master Lease payments.
West Killeen Market. In second-quarter 2025, Stratus completed the sale of the West Killeen Market retail project for $13.3 million, generating pre-tax net cash proceeds of approximately $7.8 million, after transaction expenses and payment of the remaining project loan, and a pre-tax gain of approximately $5.0 million. In connection with this sale, the West Killeen Market construction loan, which had a balance of $5.2 million, was repaid.
Amarra Villas. In second-quarter 2025, Stratus sold two Amarra Villas homes for a total of $6.8 million. In connection with these sales, the Amarra Villas credit facility, which had a balance of $1.7 million, was repaid. In October 2025, Stratus sold one Amarra Villas home for $3.7 million. In third-quarter 2024, Stratus sold one Amarra Villas home for $4.0 million. In second-quarter 2024, Stratus sold one Amarra Villas home for $3.6 million. In first-quarter 2024, Stratus sold two Amarra Villas homes for a total of $7.6 million.
Magnolia Place. In third-quarter 2024, Stratus completed the sale of Magnolia Place – Retail for $8.9 million, generating pre-tax net cash proceeds of approximately $8.6 million and a pre-tax gain of $1.6 million. In first-quarter 2024, Stratus completed the sale of 47 acres of undeveloped land in Magnolia, Texas planned for a second phase
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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’ interest rate caps follows (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Interest rate caps | $ | $ | $ | $ | |||||||||||||||||||
Interest Rate Cap Agreements. In November 2024, Stratus Kingwood Place, L.P. paid $27,400 to enter into an interest rate cap agreement, with a Term SOFR strike rate equal to 6.00 percent, a notional amount of $33.0 million (the principal amount of the Kingwood Place loan) and an expiration date of December 1, 2026. In March 2025, College Station 1892 Properties, L.L.C. paid $4,800 to enter into an interest rate cap agreement, with a Term SOFR strike rate equal to 5.00 percent, a notional amount of $24.0 million (the principal amount of the Jones Crossing loan) and an expiration date of April 1, 2026.
The interest rate caps are derivative instruments that do not qualify for hedge accounting treatment. Therefore, changes in the instruments’ fair values are recorded in the consolidated statements of comprehensive (loss) income. Stratus uses an interest rate pricing model that relies on market observable inputs such as Term SOFR to measure the fair value of the agreements. Stratus also evaluated the counterparty credit risk associated with the agreements, which is considered a Level 3 input, but did not consider such risk to be significant. Therefore, the interest rate caps are classified within Level 2 of the fair value hierarchy. The fair value of the interest rate caps is presented as part of other assets in the consolidated balance sheets.
Debt. The fair value of Stratus’ debt also approximates fair value, as the interest rates are variable and approximate prevailing market interest rates available for similar mortgage debt. Stratus’ debt is recorded at cost and is not actively traded. Fair value is estimated based on discounted future expected cash flows at estimated current market interest rates available for similar mortgage debt. 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.
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6. DEBT AND EQUITY
Debt
The components of Stratus’ debt follow (in thousands):
| September 30, 2025 | December 31, 2024 | |||||||||||||
Comerica Bank revolving credit facility a | $ | $ | ||||||||||||
| Kingwood Place loan | ||||||||||||||
Lantana Place loan b | ||||||||||||||
Jones Crossing loan c | ||||||||||||||
The Annie B land loan d | ||||||||||||||
| Construction loans: | ||||||||||||||
| The Saint George | ||||||||||||||
The Saint June e | ||||||||||||||
| Holden Hills Phase 1 | ||||||||||||||
West Killeen Market f | ||||||||||||||
Amarra Villas credit facility g | ||||||||||||||
Total debt h | $ | $ | ||||||||||||
a.In January, March and October 2025, the Comerica Bank revolving credit facility was amended, and in June 2025, the borrowing base was reduced pursuant to the terms of the loan agreement. See discussion below.
b.In January 2025, the Lantana Place construction loan was refinanced with a four-year term loan.
c.In March 2025, the Jones Crossing loan was refinanced with a three-year term loan.
d.In July 2025, The Annie B land loan was amended and the maturity date was extended to September 1, 2027.
e.In September 2025, The Saint June construction loan was amended and the maturity date was extended to October 2, 2027.
f.In May 2025, Stratus repaid this loan in connection with the sale of the project.
g.In June 2025, Stratus repaid this credit facility and the credit facility was terminated.
Comerica Bank revolving credit facility. As of September 30, 2025, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $29.1 million, resulting in availability of $17.5 million, net of $11.6 million of letters of credit. In June 2025, the Holden Hills Phase 2 property was removed from the borrowing base for the revolving credit facility, in anticipation of a potential separate revolving credit facility for the property, and the maximum amount that could be borrowed was reduced. Also, in June 2025, after the Amarra Villas credit facility was fully repaid and terminated, the remaining three Amarra Villas homes were added to the borrowing base for the Comerica Bank revolving credit facility. The net effect of these changes was a decrease of $24.8 million to the maximum amount that could be borrowed at that time . Letters of credit have been issued under the revolving credit facility, $9.0 million of which secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2 and $2.3 million of which secure Stratus’ obligations, which are subject to certain conditions, to construct and pay for certain utility infrastructure in Lakeway, Texas, which is expected to be utilized by the planned multi-family project on Stratus’ remaining land in Lakeway.
In January 2025, the Comerica Bank revolving credit facility was modified to increase the aggregate amount of letters of credit that may be committed against the facility from $13.3 million to $15.6 million. In February 2025, Stratus entered into an additional $2.3 million letter of credit to secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2, resulting in outstanding letters of credit totaling $15.6 million. In May 2025, a $4.0 million letter of credit relating to Holden Hills Phase 1 was terminated upon completion of the related obligations and the aggregate amount of letters of credit committed against the facility was reduced to $11.6 million.
In March 2025, Stratus entered into an amendment to its revolving credit facility, which (i) extended the maturity date to March 27, 2027, (ii) lowered the interest rate to one-month Term SOFR plus 0.10 percent (with a floor of 0.50 percent), plus 3.00 percent and (iii) lowered the maximum loan amount to the lesser of $55.0 million or the borrowing base limit.
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In October 2025, Stratus entered into an amendment to its revolving credit facility that further reduced the maximum loan amount to the lesser of $35.0 million or the borrowing base limit, in order to reduce Stratus’ fees associated with the facility.
Kingwood Place loan. In first-quarter 2025, in connection with the refinancing of the Kingwood Place construction loan in November 2024, which generated additional cash proceeds, Stratus paid distributions of $856 thousand to noncontrolling interest holders.
Lantana Place loan. In January 2025, Lantana Place, L.L.C. entered into a loan with Broadway National Bank (the Lantana Place loan) to refinance the prior Lantana Place construction loan. The Lantana Place loan has a principal amount of $29.8 million and matures February 1, 2029, with an option to extend the maturity for an additional 12 months, subject to satisfying certain conditions. The Lantana Place loan bears interest at one-month Term SOFR plus 2.35 percent, with a floor of 0.00 percent . Payments of interest only on the Lantana Place loan are due monthly through January 31, 2026. Thereafter, principal and interest payments are due monthly based on a 30-year amortization with the remaining unpaid principal and interest due at maturity. The Lantana Place loan is secured by the Lantana Place – Retail project. Stratus has provided a guaranty limited to certain non-recourse carve-out obligations. The Lantana Place loan agreement contains a financial covenant that the Lantana Place project maintain a debt service coverage ratio of at least 1.30 to 1.00 measured by reference to a trailing 12-month period for each fiscal year beginning with the year ending December 31, 2025. After paying off the prior Lantana Place construction loan and paying property taxes and closing costs, Stratus received approximately $3.0 million in net cash proceeds. Refer to Note 10 for discussion of the pending sale of Lantana Place – Retail.
Jones Crossing loan. In March 2025, College Station 1892 Properties, L.L.C. entered into a loan with Brighthouse Life Insurance Company (the Jones Crossing loan) to refinance the prior Jones Crossing loan. The Jones Crossing loan has a principal amount of $24.0 million and matures April 1, 2028. The Jones Crossing loan bears interest at one-month Term SOFR plus 1.95 percent, with a floor of 3.00 percent. Payments of interest only on the Jones Crossing loan are due monthly with the outstanding principal due at maturity. College Station 1892 Properties, L.L.C. may prepay all, but not a portion, of the Jones Crossing loan; provided that a prepayment prior to April 1, 2026 is subject to a yield maintenance premium payment. The Jones Crossing loan is secured by the Jones Crossing – Retail project. Stratus has provided a guaranty limited to certain non-recourse carve-out obligations and an environmental indemnification. After paying off the prior Jones Crossing loan and closing costs, Stratus received approximately $1.2 million in net cash proceeds.
The Annie B land loan. In July 2025, The Annie B land loan was modified to extend the maturity date to September 1, 2027. Monthly principal payments of $49,875 in addition to interest are required during the extended term.
The Saint June construction loan. In September 2025, The Saint June construction loan was modified to (i) extend the maturity date of the loan to October 2, 2027; (ii) provide for advances of an additional $1.5 million, bringing the outstanding principal balance of the loan to $32.9 million with no funds remaining available for additional principal advances; (iii) decrease the interest rate applicable margin from 2.35 percent to 2.00 percent; (iv) eliminate the requirement to make monthly principal payments prior to maturity; and (v) add a new property-level minimum debt yield financial covenant, which replaced a property-level debt service coverage ratio. If the debt yield financial covenant is not met, the principal balance of the loan must be paid down in an amount sufficient to achieve the minimum debt yield. The amendments permit the partnership to distribute up to $1.5 million to the partners.
Accordingly, the loan bears interest at the one-month Term SOFR plus 2.00 percent, subject to a 3.50 percent floor. Payments of interest only on the Loan are due monthly with the outstanding principal due at maturity. After closing costs, the partnership used the remaining portion of the $1.3 million proceeds of the loan to establish reserves for partnership expenses and make cash distributions to the partners. In October 2025, The Saint June, L.P. made distributions of approximately $435 thousand and $225 thousand to the Class B limited partner in The Saint June partnership and Stratus, respectively.
Amarra Villas credit facility. In second-quarter 2025, Stratus made a $1.7 million principal payment on the Amarra Villas credit facility upon the closing of a sale of one of the Amarra Villas homes, which fully repaid the credit facility, and the credit facility was terminated.
West Killeen Market construction loan. In May 2025, this loan was repaid in full in connection with the sale of the West Killeen Market retail project.
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For additional information regarding Stratus’ debt, refer to Note 6 in the Stratus 2024 Form 10-K.
Interest Expense and Capitalization. Interest costs (before capitalized interest) totaled $3.8 million in third-quarter 2025, $4.0 million in third-quarter 2024, $11.5 million for the first nine months of 2025 and $11.9 million for the first nine months of 2024. Stratus’ capitalized interest totaled $3.1 million in third-quarter 2025 and $10.4 million for the first nine months of 2025. All of Stratus’ interest costs were capitalized for both 2024 periods. Capitalized interest for the 2025 periods is primarily related to development activities at Holden Hills Phases 1 and 2. The first nine months of 2025 also included capitalized interest related to the development of The Saint George, before it was completed in second-quarter 2025. Capitalized interest for the 2024 periods was primarily related to development activities at Stratus’ Barton Creek properties (primarily Amarra Villas and Holden Hills Phases 1 and 2) and The Saint George.
Equity
The Comerica Bank revolving credit facility, The Annie B land loan, and The Saint George and Holden Hills Phase 1 construction loans require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend payments.
Dividends. On September 1, 2022, with 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, which was paid on September 29, 2022 to stockholders of record as of September 19, 2022. Accrued liabilities included $18 thousand as of September 30, 2025, and $0.3 million as of December 31, 2024, 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.
Share Repurchase Program. In November 2023, with written consent from Comerica Bank, Stratus’ Board approved a new share repurchase program, which authorized repurchases of up to $5.0 million of Stratus’ common stock. In June 2025, with written consent from Comerica Bank, Stratus’ Board approved an increase in the share repurchase program, authorizing repurchases of up to $25.0 million of Stratus’ common stock. The repurchase program authorizes Stratus, in management’s and the Capital Committee of the Board’s discretion, to repurchase shares from time to time, subject to market conditions and other factors. In the first nine months of 2025, Stratus acquired 100,967 shares of its common stock for a total cost of $2.0 million at an average price of $19.50 per share. Through November 7, 2025, Stratus has acquired 180,899 shares of its common stock for a total cost of $3.9 million at an average price of $21.59 per share, and $21.1 million remains available for repurchases under the program.
7. PROFIT PARTICIPATION INCENTIVE PLAN AND LONG-TERM INCENTIVE PLAN
In July 2018, the Stratus Compensation Committee of the Board (the Committee) unanimously adopted the PPIP, which provides participants with economic incentives tied to the success of the development projects designated by the Committee as approved projects under the PPIP. In February 2023, the Committee approved the Long-Term Incentive Plan (LTIP), which amends and restates the PPIP, and is effective for participation interests awarded under development projects on or after its effective date. Outstanding participation interests granted under the PPIP will continue to be governed by the terms of the prior PPIP. Estimates related to the awards may change over time as a result of differences between projected and actual development progress and costs, market conditions and the timing of capital transactions or valuation events. Refer to Notes 1 and 8 of the Stratus 2024 Form 10-K for further discussion.
In July 2023, Kingwood Place reached a valuation event under the PPIP and Stratus obtained an appraisal of the property to determine the payout under the PPIP. The accrued liability under the PPIP related to Kingwood Place was reduced to $1.6 million at December 31, 2023, and was settled in RSUs with a three-year vesting period awarded to eligible participants in first-quarter 2024.
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.
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A summary of PPIP/LTIP costs follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
(Credited) charged to general and administrative expense | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
| Capitalized (credited) to project development costs | ( | ( | ( | |||||||||||||||||||||||
Total PPIP/LTIP costs | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
At September 30, 2025, outstanding awards under the PPIP included Amarra Villas, Jones Crossing – Retail, Magnolia Place and The Saint June, and outstanding awards under the LTIP included The Saint George. The accrued liability for the PPIP and LTIP totaled $1.8 million at September 30, 2025, and $1.9 million at December 31, 2024 (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 2024 Form 10-K.
Stratus has a full valuation allowance against its U.S. Federal net deferred tax assets as of both September 30, 2025 and December 31, 2024. Stratus has recorded a deferred tax asset totaling $153
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.
During 2025, Stratus expects to incur current state income taxes primarily associated with taxable income generated from cash received in the Holden Hills Phase 2 transaction, as discussed in Note 3.
The difference between Stratus’ consolidated effective income tax rate of (1 ) percent for the first nine months of 2025 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 September 30, 2025, the Holden Hills Phase 2 transaction discussed in Note 3 and the executive compensation limitation. The difference between Stratus’ consolidated effective income tax rate of (70 ) percent for the first nine months of 2024 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 September 30, 2024, and the executive compensation limitation.
On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was enacted into law. Key tax components of OBBB include extension of certain expiring tax provisions from the 2017 Tax Cuts and Jobs Act, the reinstatement of immediate expensing of qualifying business property, full expensing of domestic research and experimental expenditures and changes to interest expense limitations. In accordance with Accounting Standards Codification 740, Income Taxes, Stratus has recognized the effects of the new tax law in the period of enactment. The impact of OBBB for the quarter ended September 30, 2025 did not result in a material impact on Stratus’ consolidated financial statements. Stratus continues to evaluate the impact of OBBB on its consolidated financial statements but does not expect a material impact to its financial statements.
9. BUSINESS SEGMENTS
Stratus is engaged primarily in the entitlement, development, management, leasing and sale of multi-family and single-family residential and commercial real estate properties in the Austin, Texas area and other select markets in Texas. Stratus generates revenues primarily from the sale of developed lots or homes and undeveloped land and the lease of developed retail, mixed-use and multi-family properties. Stratus has two operating segments, which are also its two reportable segments: Real Estate Operations and Leasing Operations. The Real Estate Operations
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segment includes properties under various stages of development: developed for sale, under development and available for development. In this segment, Stratus entitles, develops and sells properties. Properties that Stratus develops and then holds for investment become part of the Leasing Operations segment. Decisions about whether to continue to hold a property for investment or to sell it depend on various factors, including conditions in the real estate markets in which Stratus operates and the estimated fair value of the property, and are primarily driven by the objective of maximizing overall asset value.
The Real Estate Operations segment is comprised of Stratus’ real estate assets, which consists of its properties in Austin, Texas (including the Barton Creek Community, which includes Holden Hills Phases 1 and 2, Amarra multi-family and commercial land, Amarra Villas homes, an Amarra Drive lot and other vacant land; the Circle C community; the Lantana community, which includes a portion of Lantana Place planned for a multi-family phase known as The Saint Julia; and the land for The Annie B); in Lakeway, Texas, located in the greater Austin area (Lakeway); in College Station, Texas (land for future phases of retail and multi-family development and retail pad sites at Jones Crossing); and in Magnolia, Texas (potential development of approximately 11 acres planned for future multi-family use), Kingwood, Texas (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 held for investment that are leased or available for lease and includes The Saint George (which was completed in second-quarter 2025 and moved from the Real Estate Operations segment to the Leasing Operations segment), The Saint June, Kingwood Place, the retail portion of Lantana Place, the completed retail portion of Jones Crossing, and retail pad sites subject to ground leases at Lantana Place, Kingwood Place and Jones Crossing. The segment also included West Killeen Market prior to its sale in second-quarter 2025 and the retail portion of Magnolia Place prior to its sale in third-quarter 2024. As discussed in Note 10, Lantana Place – Retail is under contract to sell. Subject to satisfaction of closing conditions, the sale is expected to close in fourth-quarter 2025.
Stratus’ chief operating decision maker (CODM) is the chief executive officer. The CODM primarily uses segment profit (loss), which is operating income (loss) excluding general and administrative expenses, determined consistent with the measurement principles of U.S. GAAP, to measure the performance of Stratus’ reportable segments. The segment measure of profit (loss) provides a comprehensive view of the segments’ financial performance. The CODM makes decisions about the allocation of operating and capital resources to each segment based on assessment of the performance of the two segments and considering the capital needs for new and existing projects and the objectives of Stratus’ overall business strategy. 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 | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Real Estate Operations: | |||||||||||||||||||||||
| Developed property sales | $ | $ | $ | $ | |||||||||||||||||||
| Undeveloped property sales | |||||||||||||||||||||||
| Commissions and other | |||||||||||||||||||||||
| Leasing Operations: | |||||||||||||||||||||||
| Rental revenue | |||||||||||||||||||||||
| Total revenues from contracts with customers | $ | $ | $ | $ | |||||||||||||||||||
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Financial Information by Business Segment. Summarized financial information by reportable segment for the three months ended September 30, 2025, follows (in thousands):
Real Estate Operations a | Leasing Operations | Total | |||||||||||||||
| Revenue from unaffiliated customers | $ | $ | $ | ||||||||||||||
| Segment expenses: | |||||||||||||||||
| Property taxes and insurance | ( | ( | ( | ||||||||||||||
| Lease expense | ( | ( | |||||||||||||||
Professional fees b | ( | ( | |||||||||||||||
| Maintenance and repairs | ( | ( | |||||||||||||||
| Allocated overhead costs | ( | ( | |||||||||||||||
| Property management fees and payroll | ( | ( | |||||||||||||||
| Utilities | ( | ( | |||||||||||||||
Other segment items c | ( | ( | ( | ||||||||||||||
| Depreciation and amortization | ( | ( | ( | ||||||||||||||
| Segment (loss) profit | ( | ( | |||||||||||||||
| General and administrative expenses | ( | ||||||||||||||||
| Operating loss | ( | ||||||||||||||||
| Interest expense, net | ( | ||||||||||||||||
| Loss on interest rate cap agreements | ( | ||||||||||||||||
| Loss on extinguishment of debt | ( | ||||||||||||||||
| Other income (loss), net | |||||||||||||||||
| Net loss before income taxes | $ | ( | |||||||||||||||
Capital expenditures and purchases and development of real estate properties | $ | $ | $ | ||||||||||||||
a.Includes sales commissions and other revenues together with related expenses.
b.In third-quarter 2025, Stratus terminated a lease for a potential development project and recorded a charge of approximately $2.8 million representing previously capitalized architectural, engineering and consulting fees incurred in connection with planning and evaluating the potential project.
c.For Real Estate Operations, primarily includes advertising, property owner association fees, maintenance and utilities. For Leasing Operations, primarily includes amortization of leasing costs, property owner association fees, professional fees and office and computer equipment.
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Summarized financial information by reportable segment for the three months ended September 30, 2024, follows (in thousands):
Real Estate Operations a | Leasing Operations | Total | |||||||||||||||
| Revenue from unaffiliated customers | $ | $ | $ | ||||||||||||||
| Segment expenses | |||||||||||||||||
| Cost of real estate sold | ( | ( | |||||||||||||||
| Property taxes and insurance | ( | ( | ( | ||||||||||||||
| Lease expense | ( | ( | |||||||||||||||
Professional fees b | ( | ( | |||||||||||||||
| Maintenance and repairs | ( | ( | |||||||||||||||
| Allocated overhead costs | ( | ( | |||||||||||||||
| Property management fees and payroll | ( | ( | |||||||||||||||
| Utilities | ( | ( | |||||||||||||||
Other segment items c | ( | ( | ( | ||||||||||||||
| Depreciation and amortization | ( | ( | ( | ||||||||||||||
Gain on sale of assets d | |||||||||||||||||
| Segment (loss) profit | ( | ||||||||||||||||
| General and administrative expenses | ( | ||||||||||||||||
| Operating loss | ( | ||||||||||||||||
| Other income (loss), net | |||||||||||||||||
| Net loss before income taxes | $ | ( | |||||||||||||||
| Capital expenditures and purchases and development of real estate properties | $ | $ | $ | ||||||||||||||
a.Includes sales commissions and other revenues together with related expenses.
b.In third-quarter 2024, Stratus recorded a charge of $721 thousand to write off previously capitalized costs related to a change in development plans for one property.
c.For Real Estate Operations, primarily includes advertising, property owner association fees, maintenance and utilities . For Leasing Operations, primarily includes amortization of leasing costs, property owner association fees, professional fees and office and computer equipment .
d.Represents a pre-tax gain on the sale of Magnolia Place – Retail in third-quarter 2024 for $1.6 million.
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Summarized financial information by reportable segment for the nine months ended September 30, 2025, follows (in thousands):
Real Estate Operations a | Leasing Operations | Total | |||||||||||||||
| Revenue from unaffiliated customers | $ | $ | $ | ||||||||||||||
| Segment expenses: | |||||||||||||||||
| Cost of real estate sold | ( | ( | |||||||||||||||
| Property taxes and insurance | ( | ( | ( | ||||||||||||||
| Lease expense | ( | ( | |||||||||||||||
Professional fees b | ( | ( | |||||||||||||||
| Maintenance and repairs | ( | ( | |||||||||||||||
| Allocated overhead costs | ( | ( | |||||||||||||||
| Property management fees and payroll | ( | ( | |||||||||||||||
| Utilities | ( | ( | |||||||||||||||
Other segment items c | ( | ( | ( | ||||||||||||||
| Depreciation and amortization | ( | ( | ( | ||||||||||||||
Gain on sale of assets d | |||||||||||||||||
| Segment (loss) profit | ( | ( | |||||||||||||||
| General and administrative expenses | ( | ||||||||||||||||
| Operating loss | ( | ||||||||||||||||
| Interest expense, net | ( | ||||||||||||||||
| Loss on interest rate cap agreements | ( | ||||||||||||||||
| Loss on extinguishment of debt | ( | ||||||||||||||||
| Other (loss) income, net | ( | ||||||||||||||||
| Net loss before income taxes | $ | ( | |||||||||||||||
Capital expenditures and purchases and development of real estate properties | $ | $ | $ | ||||||||||||||
MUD reimbursements applied to real estate under development e | $ | $ | $ | ||||||||||||||
a.Includes sales commissions and other revenues together with related expenses.
b.In third-quarter 2025, Stratus terminated a lease for a potential development project and recorded a charge of approximately $2.8 million representing previously capitalized architectural, engineering and consulting fees incurred in connection with planning and evaluating the potential project.
c.For Real Estate Operations, primarily includes advertising, property owner association fees, maintenance and utilities. In second-quarter 2025, Stratus recorded a $1.0 million charge to write off receivables, included in other assets on the consolidated balance sheet, from owners of properties previously sold by Stratus for a share of historical costs incurred to develop the land . For Leasing Operations, primarily includes amortization of leasing costs, property owner association fees, professional fees and office and computer equipment.
d.Reflects an approximately $5.0 million pre-tax gain on the sale of the West Killeen Market retail project in second-quarter 2025 and a portion of a previously deferred gain of $0.2 million related to The Oaks at Lakeway in first-quarter 2025. Refer to Note 4 for further discussion.
e.In second-quarter 2025, Stratus received $409 thousand of proceeds related to MUD reimbursements of infrastructure costs incurred for development of The Saint June. This was recorded as a reduction of real estate under development on the consolidated balance sheet.
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Summarized financial information by reportable segment for the nine months ended September 30, 2024, follows (in thousands):
Real Estate Operations a | Leasing Operations | Total | |||||||||||||||
| Revenue from unaffiliated customers | $ | $ | $ | ||||||||||||||
| Segment expenses | |||||||||||||||||
| Cost of real estate sold | ( | ( | |||||||||||||||
| Property taxes and insurance | ( | ( | ( | ||||||||||||||
| Lease expense | ( | ( | |||||||||||||||
Professional fees b | ( | ( | |||||||||||||||
| Maintenance and repairs | ( | ( | |||||||||||||||
| Allocated overhead costs | ( | ( | |||||||||||||||
| Property management fees and payroll | ( | ( | |||||||||||||||
| Utilities | ( | ( | |||||||||||||||
Other segment items c | ( | ( | ( | ||||||||||||||
| Depreciation and amortization | ( | ( | ( | ||||||||||||||
Gain on sale of assets d | |||||||||||||||||
| Segment profit | |||||||||||||||||
| General and administrative expenses | ( | ||||||||||||||||
| Operating loss | ( | ||||||||||||||||
| Loss on extinguishment of debt | ( | ||||||||||||||||
| Other income (loss), net | |||||||||||||||||
| Net loss before income taxes | $ | ( | |||||||||||||||
| Capital expenditures and purchases and development of real estate properties | $ | $ | $ | ||||||||||||||
a.Includes sales commissions and other revenues together with related expenses.
b.In third-quarter 2024, Stratus recorded a charge of $721 thousand to write off previously capitalized costs related to a change in development plans for one property.
c.For Real Estate Operations, primarily includes advertising, property owner association fees, maintenance and utilities. For Leasing Operations, primarily includes amortization of leasing costs, property owner association fees, professional fees and office and computer equipment .
d.Represents a pre-tax gain on the sale of Magnolia Place – Retail in third-quarter 2024 for $1.6 million.
Total assets by segment were as follows (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Real Estate Operations | $ | $ | |||||||||
| Leasing Operations | |||||||||||
Corporate and other a | |||||||||||
| Total assets | $ | $ | |||||||||
a.Corporate and other includes cash and cash equivalents and restricted cash of $54.0 million and $18.7 million at September 30, 2025 and 2024, respectively. The remaining cash and cash equivalents and restricted cash is reflected in the operating segments’ assets. Corporate and other also includes elimination of intersegment balances.
10. SUBSEQUENT EVENTS
Subsequent to September 30, 2025, Stratus entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million. Subject to satisfaction of closing conditions, the sale is expected to close in fourth-quarter 2025. Using the proceeds from the sale, Stratus expects to repay the project loan with an approximately $29.8 million principal balance as of September 30, 2025. As a result of this transaction, Stratus estimates an income tax liability of approximately $6.7 million, which would be recognized after the sale has closed. Following the
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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, 2024 (2024 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 I, Item 1A. “Risk Factors” of our 2024 Form 10-K and Part II, Item 1A. “Risk Factors” herein 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 residential and retail focused real estate company with headquarters in Austin, Texas. We are engaged primarily in the entitlement, development, management, leasing and sale of multi-family and single-family residential and commercial real estate properties in the Austin, Texas area and other select markets in Texas. In addition to our developed properties, we have a development portfolio that consists of approximately 1,500 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use. Our commercial real estate portfolio consists of stabilized retail properties or future retail and mixed-use development projects with no commercial office space. We generate revenues and cash flows from the sale of our developed and undeveloped properties, the lease of our retail, mixed-use and multi-family properties and development and asset management fees received from our properties. Refer to Note 9 for discussion of our operating segments and “Business Strategy” below for a discussion of our business strategy.
BUSINESS STRATEGY
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. We endeavor to sell properties at times when we believe market conditions are favorable to us. We are focused on the development of pure residential and residential-centric mixed-use projects in Austin and other select markets in Texas, which we believe continue to be attractive locations. Our successful development program of 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 value of the property or from lower interest rates, or for other reasons.
From time to time, when deemed appropriate by our Board of Directors (the Board) and permitted pursuant to the terms of our debt agreements, we may return capital to stockholders, as we did in 2022 and 2017 with special cash dividends totaling approximately $40 million and $8 million, respectively, and as we did during 2022 and 2023 through our $10.0 million share repurchase program, which was completed in October 2023. In November 2023, our Board approved a new $5.0 million share repurchase program, and in June 2025, our Board approved an increase in the share repurchase program to $25.0 million. As of November 7, 2025, we had repurchased $3.9 million of our shares under the program.
Largely as a result of the cash distribution from the Holden Hills Phase 2 partnership and recent property sales, as of September 30, 2025, we had consolidated cash of $55.0 million and $17.5 million available under our revolving credit facility, net of $11.6 million of letters of credit committed against the facility. Subsequent to the end of the third quarter, we also entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million, which, if completed, will yield significant cash proceeds after payoff of the project loan. Refer to Note 6 for further discussion of our debt. Our Board is carefully exploring opportunities for the use of cash from the Holden Hills Phase 2 partnership and recent and pending asset sales, which will be based on evolving market conditions and may include a combination of further share repurchases, deleveraging, reinvesting in Stratus’ project pipeline and/or other cash returns to stockholders.
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
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potential returns increasing above our relative equity interest in certain projects as negotiated return hurdles are achieved. Refer to Note 3. We expect to continue our limited use of our revolving credit facility and to retain sufficient cash to operate our business, taking into account risks associated with changing market conditions and the variability in cash flows from our business.
Our main sources of revenue and cash flow are expected to be sales of our properties to third parties, debt financings and 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 income 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, have provided and will continue to provide us with positive cash flows and net income over time, as evidenced by our sales of The Santal and The Saint Mary in 2021 and Block 21 in 2022, the cash distributions from the Holden Hills Phase 1 partnership in 2023 and the Holden Hills Phase 2 partnership in June 2025 and our other property sales in 2024 and the first nine months of 2025. Further, we believe our investment strategy, current liquidity and portfolio of projects provide us with many opportunities to increase value for our stockholders.
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 Phase 1 partnership and our share (related to Holden Hills Phase 2) of the cost of the Tecoma Improvements (as defined below). As of September 30, 2025, our share of the estimated remaining costs for the completed Tecoma Improvements totaled $346 thousand. However, over the past two years and in the first nine months of 2025, we made operating loans, advances and capital contributions to our joint ventures. Refer to Note 3 herein and Note 2 of the 2024 Form 10-K for further discussion. Over the next 12 months, we anticipate making future operating loans to the limited partnership for The Annie B totaling up to $1.8 million and a capital contribution to the limited partnership for The Saint George of $150 thousand, representing our 10 percent equity share of debt service and project costs needed by the partnership. Our estimates of future operating loans and capital contributions are based on current estimates of future costs of the partnerships. Refer to Note 3 and “Capital Resources and Liquidity” for further discussion. In addition, our development plans for future projects require significant additional capital.
We have faced difficult conditions in the real estate business over the past two years and in the first nine months of 2025. Interest rates, which began rising in 2022, continued to increase during 2023, and costs remained elevated. During 2024, interest rates stabilized, and in the latter part of 2024 and the first nine months of 2025, interest rates generally declined; however, costs remained elevated. In our markets, retail market fundamentals, such as occupancy and rents, have shown stronger performance compared to the multi-family sector. The market for new suburban multi-family development has continued to face headwinds. Nevertheless, we made important progress executing our business strategy during 2024 and the first nine months of 2025.
The Federal Reserve lowered interest rates in September 2024 for the first time in four years, and lowered interest rates again in November and December 2024 and in September and October 2025. We took advantage of lower interest rates and the success of our projects to refinance or amend certain of our project loans. In fourth-quarter 2024 and again in September 2025, we extended the maturity of The Saint June construction loan for additional one-year terms at lower rates and generated aggregate additional cash proceeds of approximately $2.8 million after closing costs. We also refinanced the Kingwood Place construction loan with a three-year term loan at a lower rate and generated additional cash proceeds of approximately $2.0 million after partnership expenses, closing costs and distributions to noncontrolling interest holders. In January 2025, we refinanced the Lantana Place construction loan with a four-year term loan at a lower rate and generated additional cash proceeds of approximately $3.0 million after property taxes and closing costs. In March 2025, we refinanced the Jones Crossing loan with a three-year term loan at a lower rate and generated additional cash proceeds of approximately $1.2 million after closing costs. In March 2025, we amended our revolving credit facility, extending the term and lowering the interest rate.
During 2024, we sold 47 acres of undeveloped land at Magnolia Place for $14.5 million and also sold Magnolia Place – Retail for $8.9 million. We sold five homes at Amarra Villas for a total of $18.9 million and one Amarra Drive Phase III lot for $1.4 million. Also, in 2024, among other things, we completed the lease-up of The Saint June multi-family project, completed construction of six Amarra Villas homes, continued construction on The Saint George multi-family project and advanced road and utility infrastructure construction on Holden Hills Phase 1.
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During the first nine months of 2025, we received a $47.8 million cash distribution from the Holden Hills Phase 2 partnership. In addition, we sold our stabilized West Killeen Market retail project for $13.3 million and two homes at Amarra Villas for a total of $6.8 million. We also completed construction on the last two Amarra Villas homes. We substantially completed construction of the road and utility infrastructure for Holden Hills Phase 1, including the required landscaping, enabling us to proceed with Travis County’s acceptance of the roadway. The first units of The Saint George were available for occupancy in April 2025 and the project was completed in June 2025. We have been focusing intently on the development of Holden Hills Phase 1 and on the development plans and future financing of Holden Hills Phase 2. We continued to advance entitlements on our other development projects and to operate our three stabilized retail projects. We also took steps to advance relationships and pursue opportunities related to our development pipeline, positioning ourselves to capture value, subject to market conditions. In October 2025, we sold an Amarra Villa home for $3.7 million. We also entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million, which subject to satisfaction of closing conditions, is expected to close in fourth-quarter 2025. In addition, beginning in 2024 and through November 7, 2025, we returned $3.9 million to our stockholders through our share repurchase program.
Changes to U.S. tariffs and trade policies during the first nine months of 2025 have introduced additional uncertainties regarding future U.S. real estate market conditions. Refer to Part II, Item 1A. “Risk Factors” herein. We believe we have sufficient liquidity and access to capital to sell properties when market conditions are favorable to us and to hold or refinance our properties or to continue to develop our properties, as applicable, through the market cycle. We expect to re-evaluate our strategy as sales and development progress on the projects in our portfolio and as market conditions continue to evolve.
OVERVIEW OF FINANCIAL RESULTS
Sources of Revenue and Income. Stratus has two operating segments: Real Estate Operations and Leasing Operations. We operate primarily in Austin, Texas and in other select markets in Texas.
Our Real Estate Operations segment encompasses our activities associated with our entitlement, development, and sale of real estate. The current focus of our Real Estate Operations segment is multi-family and single-family residential properties and residential-centric mixed-use properties. We may sell or lease the properties we develop, depending on market conditions. Multi-family and retail rental properties that we develop are reclassified to our Leasing Operations segment when construction is completed and they are ready for occupancy. Revenue in our Real Estate Operations segment 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 1,500 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use. Our Real Estate Operations segment does not have exposure to office space.
Revenue in our Leasing Operations segment is generated from leasing space at retail and mixed-use properties and residences in the multi-family properties that we developed. Our Leasing Operations segment does not have exposure to office space. We also generate income from the sale of our leased properties from time to time, depending on market conditions.
Summary Financial Results for the Third-Quarter and First Nine Months of 2025. Our revenues totaled $5.0 million in third-quarter 2025 and $21.6 million for the first nine months of 2025, compared with $8.9 million in third-quarter 2024 and $43.9 million for the first nine months of 2024. The decreases in revenues for the three and nine-month periods were due to decreases in revenues in our Real Estate Operations segment, as revenues from our Leasing Operations segment were consistent for these periods. The $3.9 million decrease in revenues in our Real Estate Operations segment in third-quarter 2025, compared to third-quarter 2024, was primarily a result of the sale of one Amarra Villas home for $4.0 million in third-quarter 2024 compared to no sales in third-quarter 2025. The $22.9 million decrease in revenues from our Real Estate Operations segment in the first nine months of 2025, compared to the first nine months of 2024, was primarily a result of the sales of approximately 47 acres of undeveloped land at Magnolia Place for $14.5 million and four Amarra Villas homes for an aggregate of $15.2 million in the first nine months of 2024, compared with the sales of two Amarra Villas homes in the first nine months of 2025 for $6.8 million.
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During the nine months ended September 30, 2025, we recorded an approximately $5.0 million pre-tax gain on the sale of West Killeen Market. In third-quarter 2024, we recorded an approximately $1.6 million pre-tax gain on the sale of Magnolia Place – Retail. In third-quarter 2025, we terminated a lease for a potential development project in Austin, Texas, and recorded a charge to professional fees of approximately $2.8 million representing previously capitalized architectural, engineering and consulting fees incurred in connection with planning and evaluating the potential project and fees previously paid to the lessor to extend the review period. In third-quarter 2024, we recorded a charge to professional fees of approximately $721 thousand to write off previously capitalized costs related to a change in development plans for one property. The formation of the Holden Hills Phase 2 partnership also contributed to the increase in professional fees and allocated overhead costs in our Real Estate Operations segment in the first nine months of 2025, compared to the first nine months of 2024. In addition, in second-quarter 2025, we recorded a $1.0 million charge in our Real Estate Operations segment related to a write-off as described further below. Refer to “Results of Operations” below for further discussion of our segments.
Our net loss attributable to common stockholders totaled $(5.0) million, or $(0.62) per diluted share in third-quarter 2025, compared to net loss attributable to common stockholders of $(0.4) million, or $(0.05) per diluted share, in third-quarter 2024. During the first nine months of 2025 our net loss attributable to common stockholders totaled $(7.6) million, or $(0.94) per diluted share, compared to net income attributable to common stockholders of $2.5 million, or $0.30 per diluted share, during the first nine months of 2024.
During the first nine months of 2025, our cash and cash equivalents increased substantially, primarily due to the receipt of a $47.8 million distribution from the formation of the Holden Hills Phase 2 partnership. Refer to Note 3 for further discussion.
RECENT DEVELOPMENT ACTIVITIES
Recent Residential Activities
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” and to “Recent Development Activities” in MD&A in our 2024 Form 10-K.
Barton Creek
Amarra Villas. The Villas at Amarra Drive (Amarra Villas) project is a 20-unit development in Barton Creek. In first-quarter 2024, we sold two of the homes for a total of $7.6 million. In second-quarter 2024, we sold one of the homes for $3.6 million. In third-quarter 2024, we sold one of the homes for $4.0 million. In second-quarter 2025, we completed construction on the last two homes, and we sold two of the homes for a total of $6.8 million. In October 2025, we sold one of the homes for $3.7 million. As of November 7, 2025, two completed homes remain available for 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 first units were available for occupancy in July 2023, and construction was completed in fourth-quarter 2023. We completed the lease-up of The Saint June during 2024.
Holden Hills Phase 1. Our final large residential development within the Barton Creek community, Holden Hills Phase 1, consists of 495 acres. The community has been designed to feature unique luxury residences to be developed in multiple sections with a focus on health and wellness, sustainability and energy conservation.
We entered into a limited partnership agreement with a third-party equity investor for Holden Hills Phase 1 in January 2023, and in February 2023 obtained construction financing for road and utility infrastructure of Holden Hills Phase 1. We have substantially completed the initial road and utility infrastructure, including the required landscaping, enabling us to proceed with Travis County’s acceptance of the roadway. The County’s acceptance of the roadway will then permit us to continue efforts to replat the initial portion of Holden Hills Phase 1 to take advantage of changes in regulations, which we believe will result in improved home sites. As a result of the removal of Holden Hills Phase 1 from Austin’s extraterritorial jurisdiction (ETJ) pursuant to Texas Senate Bill 2038 (the ETJ Law), as described below, our development plans for portions of Holden Hills Phase 1 are being adjusted to benefit from the new regulatory scheme. We anticipate being in a position to start building homes and/or selling home sites in 2026, assuming regulators timely fulfill their permit processing obligations and there are no further changes in the regulatory environment. For additional discussion, refer to Items 1. and 2. “Business and Properties” in our 2024 Form 10-K.
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Further, we entered into a development agreement with the Holden Hills Phase 1 partnership (Development Agreement) pursuant to which, as part of the road and utility infrastructure, the Holden Hills Phase 1 partnership has constructed certain street, drainage, water, sidewalk, electric and gas improvements in order to extend the Tecoma Circle roadway on Holden Hills Phase 2 land from its previous terminus to Southwest Parkway (the Tecoma Improvements). As of September 30, 2025, our share of the estimated remaining costs of the completed Tecoma Improvements, primarily the required landscaping, is $346 thousand.
We capitalize infrastructure costs and may be eligible to receive Travis County municipal utility district (MUD) reimbursements for certain infrastructure costs incurred in the Barton Creek area. Portions of the costs incurred in connection with the Holden Hills Phase 1 project and the Tecoma Improvements totaling approximately $9.3 million and $6.9 million, respectively, are expected to be eligible to be reimbursed in the future by MUDs. All MUD reimbursements that the Holden Hills Phase 1 partnership receives and is entitled to retain at the partnership level must be applied as payments of principal on the Holden Hills Phase 1 construction loan. The Holden Hills Phase 1 partnership has agreed to deliver to Stratus 60 percent of any MUD reimbursements for Tecoma Improvement costs when such reimbursements are received by the partnership. The amount and timing of MUD reimbursements depends upon each MUD having a sufficient tax base within its district to issue bonds, obtaining the necessary state approval for the sale of the bonds and the successful sale of the bonds, among other things. Accordingly, the amount and timing of the receipt of MUD reimbursements is uncertain. MUD reimbursements received for infrastructure costs are recorded as reductions of the related asset’s carrying amount.
Holden Hills Phase 2. Our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community, Holden Hills Phase 2, is adjacent to Holden Hills Phase 1. We are planning both Holden Hills Phase 1 and Holden Hills Phase 2 as one interconnected development branded as Holden Hills. Holden Hills Phase 2 is being designed as a mixed-use project, including a range of commercial and extensive residential uses, surrounded by extensive outdoor recreational and greenspace amenities. We have removed the majority of Holden Hills Phase 2 from Austin’s ETJ pursuant to the ETJ Law, as described below, and are adjusting our development plans to benefit from the new regulatory scheme, which is expected to result in a significant increase in development density as compared to our prior plans.
We entered into a limited partnership agreement with a third-party equity investor in June 2025 (the Holden Hills Phase 2 partnership) for the development of Holden Hills Phase 2 (Holden Hills Phase 2 project). We contributed to the Holden Hills Phase 2 partnership the Holden Hills Phase 2 land and related personal property at an agreed value of approximately $95.7 million, and our 50.0 percent partner contributed $47.8 million in cash. Immediately thereafter, the Holden Hills Phase 2 partnership distributed $47.8 million of cash to us. We consolidate the Holden Hills Phase 2 partnership; therefore, our contribution of the Holden Hills Phase 2 land and related personal property was recorded at historical cost and the contribution from our partner was accounted for as a noncontrolling interest contribution. The initial purposes of the Holden Hills Phase 2 partnership do not include the development or construction of horizontal or vertical improvements (each, a future project) and the commencement of any future project will require the approval of all partners.
The Holden Hills Phase 2 partnership is working to establish a separate revolving credit facility for the Holden Hills Phase 2 project, which is expected to be sized as needed for future operating costs. The Holden Hills Phase 2 partnership intends to use the facility to reimburse Stratus for approximately $1.6 million of project costs, including certain initial project costs of approximately $0.8 million, fund the approved operating budget for 2025 and fund future partnership activities approved by the partners. Refer to Note 2 for further discussion.
ETJ Process. The ETJ Law became effective September 1, 2023. We have completed the statutory process to remove all of our relevant land subject to development, including primarily Holden Hills Phases 1 and 2, from the extraterritorial jurisdiction (ETJ) of the City of Austin, as permitted by the ETJ Law. We have also made filings with Travis County to grandfather Holden Hills Phases 1 and 2 under most laws in effect in Travis County at the time of the filings. A number of cities in Texas have brought lawsuits challenging the ETJ Law. If the ETJ Law is upheld, we expect that the removal of our properties from the ETJ of the City of Austin will streamline the development permitting process, allow greater flexibility in the design of projects, potentially decrease certain development costs, and potentially permit meaningful increases in development density. In light of the ETJ Law, our development plans for portions of Holden Hills Phases 1 and 2 are being adjusted. For additional discussion, refer to Part I, Item 1A. “Risk Factors” in our 2024 Form 10-K.
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The Saint George
The Saint George is a 316-unit luxury wrap-style, multi-family project in north-central Austin. We purchased the land and entered into third-party equity financing for the project in December 2021. We entered into a construction loan for this project and began construction in third-quarter 2022. The first units were available for occupancy in April 2025 and the project was completed in second-quarter 2025. As of November 7, 2025, we had signed leases for approximately 39 percent of the units.
In April 2025, a water leak occurred at The Saint George multi-family project when construction was nearing completion and initial resident move-ins were occurring, resulting in damage that cost $1.9 million to remediate and repair. The event was filed as a builder’s risk insurance claim. Remediation and repairs were completed in second-quarter 2025. Costs of the remediation and repairs to The Saint George Apartments, L.P., to the extent not covered by the insurance company and the general contractor, are currently estimated to be no more than $1.0 million.
Lakeway Multi-Family
After extensive negotiation with the City of Lakeway, utility suppliers and neighboring property owners, we secured the right in 2023 to develop a multi-family project on approximately 35 acres of undeveloped property in Lakeway, Texas located in the greater Austin area. The multi-family project is expected to utilize the road, drainage and utility infrastructure we are required to build, subject to certain conditions, which is secured by a $2.3 million letter of credit under our revolving credit facility. Construction of the required road infrastructure is scheduled to commence in fourth-quarter 2025. Refer to Note 6 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” below for additional discussion.
The Annie B
In third-quarter 2021, we purchased the land and announced plans for The Annie B, a proposed luxury high-rise project in downtown Austin to be developed as a 400-foot tower, consisting of approximately 420,000 square feet with 316 luxury residential units. Stratus Block 150, L.P. raised third-party equity capital and entered into a loan to finance part of the costs of land acquisition and budgeted pre-development costs for The Annie B. We continue to work to finalize our development plans and to evaluate whether the project is most profitable as a for rent or for sale product. Our goal is to commence construction as soon as financing and other market conditions warrant.
Magnolia Place
In first-quarter 2024, we completed the sale of 47 acres of undeveloped land in Magnolia, Texas planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million. In connection with the sale, the Magnolia Place construction loan, which had a balance of $8.8 million was repaid. Following these sales, we retained our potential development of approximately 11 acres planned for 275 multi-family units and approximately $12 million of costs potentially reimbursable in the future by the Magnolia MUD.
Other Residential
We have advanced development plans for The Saint Julia, an approximately 210-unit multi-family project that is part of Lantana Place, a partially developed, mixed-use development project located south of Barton Creek in Austin. Our goal is to commence construction or sell the site, as soon as financing and/or market conditions warrant.
We 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.
Recent Commercial Activities
The discussion below focuses on our recent significant commercial activity. For a description of our properties containing additional information, refer to Items 1. and 2. “Business and Properties” and to “Recent Development Activities” in MD&A in our 2024 Form 10-K.
Holden Hills Phase 2
As described above under the heading “Recent Residential Activities,” Holden Hills Phase 2 has been envisioned to include a significant commercial component. Due to the ETJ process, we are adjusting our development plans for Holden Hills Phase 2.
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Stabilized Retail Projects
As of September 30, 2025, we also owned and operated the following stabilized retail projects that we developed:
•Jones Crossing is part of our H-E-B-anchored mixed-use project in College Station, Texas, the location of Texas A&M University. As of September 30, 2025, we had signed leases for substantially all of the completed retail space, including the H-E-B grocery store, totaling 154,092 square feet, and a ground lease on one retail pad site. Four retail pad sites remain available for lease. The Jones Crossing site has additional commercial development potential of approximately 104,750 square feet of commercial space on approximately 22 undeveloped acres.
•Lantana Place is part of our mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas. As of September 30, 2025, we had signed leases for substantially all of the 99,377-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. In October 2025, we entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million. Subject to satisfaction of closing conditions, the sale is expected to close in fourth-quarter 2025. Using the proceeds from the sale, we expect to repay the project loan with an approximately $29.8 million principal balance as of September 30, 2025. Following the sale, we would retain the property planned for The Saint Julia (discussed above).
•Kingwood Place is our H-E-B-anchored, mixed-use development project in Kingwood, Texas (in the greater Houston area). We have constructed 151,877 square feet of retail space at Kingwood Place, including an H-E-B grocery store. As of September 30, 2025, we had signed leases for substantially all of the retail space, including the H-E-B grocery store. We have also signed ground leases on four of the retail pad sites. One retail pad site remains available for lease.
In third-quarter 2024, we completed the sale of Magnolia Place – Retail for $8.9 million, generating pre-tax net cash proceeds of approximately $8.6 million and a pre-tax gain of $1.6 million.
In second-quarter 2025, we completed the sale of the West Killeen Market retail project for $13.3 million, generating pre-tax net cash proceeds of approximately $7.8 million, after transaction expenses and payment of the remaining $5.2 million project loan, and a pre-tax gain of approximately $5.0 million.
We have engaged a broker to explore the potential sale of Kingwood Place, subject to market conditions.
Potential Development Projects and Pipeline
Our development plans for The Annie B, The Saint Julia and multi-family projects at Lakeway and College Station will require significant additional capital, which we currently intend to pursue through project-level debt and third-party equity capital arrangements through joint ventures in which we may also receive development management fees and asset management fees and potential returns increasing above our relative equity interest in certain projects as negotiated return hurdles are achieved. We are working to establish a credit facility to fund certain initial project costs and future partnership activities for Holden Hills Phase 2 and anticipate seeking additional debt to finance the future development in Holden Hills Phase 1. We are also pursuing other development projects. These potential development projects and projects in our portfolio 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 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.
Market Conditions
Our industry has experienced construction and labor cost increases, supply chain constraints, labor shortages, higher borrowing costs and tightened bank credit. Inflation increased rapidly during 2021 through June 2022. Since June 2022, the rate of inflation generally has declined but has generally remained higher than the Federal Reserve’s target rate of inflation of two percent. In response, the Federal Reserve raised the federal funds target rate multiple times from March 2022 through July 2023, by 525 basis points on a cumulative basis. As inflation began to decline, the Federal Reserve began to focus on improving the labor market and price stability. Between September 2024 and September 2025, the Federal Reserve lowered the federal funds target rate by 125 basis points on a cumulative basis, and in October 2025, the Federal Reserve lowered the federal funds target rate by another 25 basis points. Elevated inflation and interest rates increase our costs of materials, services, labor and capital. Changing U.S. tariffs and trade policies commencing in the first nine months of 2025 present additional risks to our business. Refer to Part II, Item 1A. “Risk Factors” herein.
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To manage the risks of rising construction and labor costs, we go through extensive pricing exercises culminating with competitive bids from reputable contractors based on final plans and 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 construction and labor cost increases on projects under construction is limited; however, rising costs and delays in delivery of materials may increase the risk of default by contractors and subcontractors. Also, as discussed elsewhere in this report, higher costs and project delays have required us to make operating loans and equity contributions to some of our joint ventures, and we expect to make additional operating loans and capital contributions during the next 12 months. Refer to Part I, Item 1A. “Risk Factors” of our 2024 Form 10-K and Part II, Item 1A. “Risk Factors” herein for more information regarding our risk factors.
Austin, our primary market, has experienced significant growth in demand for residential projects in recent years, particularly due to growth in the technology-related sector in the region and, during 2020 and 2021 related in part to COVID-19 pandemic-influenced in-migration. The expanding economy resulted in rising demand for residential housing and retail services. This surge in population growth spurred a rapid increase in multi-family construction which caused rental rates in 2024 to drop from the previous year while occupancy rates have remained high. Retail market fundamentals, such as occupancy and rents, have shown stronger performance compared to the multi-family sector. The market for new suburban multi-family development has continued to face headwinds. Despite macroeconomic challenges, we continue to see reasons for optimism regarding real estate market conditions in our Texas markets over the next 12 months, as rents have been strong at The Saint June, absorption of new downtown Austin multi-family units has been encouraging and we continue to see some opportunities for sales transactions for our properties.
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 joint ventures, refinancings or other arrangements. As a result, and because of numerous factors affecting our business activities as described herein and in our 2024 Form 10-K, our past operating results are not necessarily indicative of our future results.
The following table summarizes our operating results (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating (loss) income: | |||||||||||||||||||||||
Real Estate Operations a | $ | (4,544) | $ | (1,421) | $ | (9,582) | $ | 4,541 | |||||||||||||||
Leasing Operations b | 317 | 3,265 | 8,609 | 6,375 | |||||||||||||||||||
General and administrative expenses c | (3,866) | (3,363) | (11,474) | (11,670) | |||||||||||||||||||
| Operating loss | (8,093) | (1,519) | (12,447) | (754) | |||||||||||||||||||
| Net loss | (8,007) | (1,414) | (14,059) | (495) | |||||||||||||||||||
Net (loss) income attributable to common stockholders | $ | (4,978) | $ | (364) | $ | (7,593) | $ | 2,463 | |||||||||||||||
a.Includes sales commissions and other revenues together with related expenses. The three and nine-month periods ended September 30, 2025 include a charge of approximately $2.8 million representing previously capitalized architectural, engineering and consulting fees incurred in connection with planning and evaluating a potential project that was terminated in third-quarter 2025. The nine-month period ended September 30, 2025 includes a $1.0 million charge to write off receivables, included in other assets on the consolidated balance sheet, from owners of properties previously sold by us for a share of historical costs incurred to develop the land.
b.The nine-month period ended September 30, 2025 includes an approximately $5.0 million pre-tax gain on the sale of the West Killeen Market retail project and a portion of a previously deferred gain of $0.2 million related to The Oaks at Lakeway. The three- and nine-month periods ended September 30, 2024 include a pre-tax gain on the sale of Magnolia Place – Retail for $1.6 million. Refer to Note 4 for further discussion.
c.Includes employee compensation and other costs.
We 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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We use operating loss before general and administrative expenses to measure the performance of our business segments. 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.
Real Estate Operations
The following table summarizes our Real Estate Operations segment results (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Developed property sales | $ | — | $ | 3,950 | $ | 6,760 | $ | 15,198 | |||||||||||||||
| Undeveloped property sales | — | — | — | 14,500 | |||||||||||||||||||
| Commissions and other | 45 | 21 | 108 | 25 | |||||||||||||||||||
| Total revenues | 45 | 3,971 | 6,868 | 29,723 | |||||||||||||||||||
| Segment expenses: | |||||||||||||||||||||||
| Cost of real estate sold | — | (3,266) | (6,244) | (20,388) | |||||||||||||||||||
| Property taxes and insurance | (354) | (303) | (1,096) | (925) | |||||||||||||||||||
| Lease expense | (285) | (285) | (855) | (855) | |||||||||||||||||||
| Professional fees | (3,191) | (1,074) | (4,360) | (1,702) | |||||||||||||||||||
| Allocated overhead costs | (337) | (239) | (1,883) | (741) | |||||||||||||||||||
| Other segment items | (374) | (177) | (1,868) | (435) | |||||||||||||||||||
| Depreciation and amortization | (48) | (48) | (144) | (136) | |||||||||||||||||||
| Operating (loss) income | $ | (4,544) | $ | (1,421) | $ | (9,582) | $ | 4,541 | |||||||||||||||
Developed Property Sales. The following tables summarize our developed property sales (dollars in thousands):
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Homes | Revenues | Average Cost Per Home | Homes | Revenues | Average Cost Per Home | ||||||||||||||||||||||||||||||
| Barton Creek | |||||||||||||||||||||||||||||||||||
| Amarra Drive: | |||||||||||||||||||||||||||||||||||
| Amarra Villas homes | — | $ | — | $ | — | 1 | $ | 3,950 | $ | 3,266 | |||||||||||||||||||||||||
| Total Residential | — | $ | — | 1 | $ | 3,950 | |||||||||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Homes | Revenues | Average Cost Per Home | Homes | Revenues | Average Cost Per Home | ||||||||||||||||||||||||||||||
| Barton Creek | |||||||||||||||||||||||||||||||||||
| Amarra Drive: | |||||||||||||||||||||||||||||||||||
| Amarra Villas homes | 2 | $ | 6,760 | $ | 3,124 | 4 | $ | 15,198 | $ | 3,173 | |||||||||||||||||||||||||
| Total Residential | 2 | $ | 6,760 | 4 | $ | 15,198 | |||||||||||||||||||||||||||||
The decrease in revenues from developed property sales for third-quarter 2025, compared to third-quarter 2024, reflects the sale of one Amarra Villas homes in third-quarter 2024 for $4.0 million compared to no sales in third-quarter 2025. The decrease in revenues for the first nine months of 2025 compared to the first nine months of 2024, reflects the sales of two Amarra Villas homes for $6.8 million in the 2025 period compared to the sales of four Amarra Villas homes for a total of $15.2 million in the 2024 period.
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Undeveloped Property Sales. In first-quarter 2024, we completed the sale of approximately 47 acres of undeveloped land at Magnolia Place that was planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million.
Real Estate Operations Expenses. Real Estate Operations expenses include cost of real estate sold, property taxes and insurance, lease expense, professional fees, allocated overhead costs, other segment items and depreciation and amortization. Other segment items primarily include advertising, property owner association fees, maintenance and utilities. In second-quarter 2025, we recorded a $1.0 million charge to write off receivables, included in other assets on the consolidated balance sheet, from owners of properties previously sold by us for a share of historical costs incurred to develop the land.
Cost of real estate sold is directly related to property sales. Cost of real estate sold decreased $3.3 million in third-quarter 2025, compared to third-quarter 2024, primarily due to the sale of one Amarra Villas home in third-quarter 2024 compared to no sales in third-quarter 2025. Cost of real estate sold decreased $14.1 million in the first nine months of 2025, compared to the first nine months of 2024, primarily due to the sales of two Amarra Villas homes in the 2025 period compared to the sale of undeveloped property at Magnolia Place and the sales of four Amarra Villas homes in the 2024 period.
In third-quarter 2025, we terminated a lease for a potential development project in Austin, Texas, and recorded a charge to professional fees of approximately $2.8 million representing previously capitalized architectural, engineering and consulting fees incurred in connection with planning and evaluating the potential project and fees previously paid to the lessor to extend the review period. In third-quarter 2024, we recorded a charge to professional fees of approximately $721 thousand to write off previously capitalized costs related to a change in development plans for one property. The formation of the Holden Hills Phase 2 partnership also contributed to the increase in professional fees and allocated overhead costs in our Real Estate Operations segment in the first nine months of 2025, compared to the first nine months of 2024.
Leasing Operations
The following table summarizes our Leasing Operations segment results (in thousands):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Rental revenue | $ | 4,924 | $ | 4,920 | $ | 14,749 | $ | 14,165 | |||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Property taxes and insurance | (1,197) | (770) | (2,927) | (2,268) | |||||||||||||||||||
| Maintenance and repairs | (530) | (522) | (1,536) | (1,376) | |||||||||||||||||||
| Property management fees and payroll | (330) | (259) | (904) | (672) | |||||||||||||||||||
| Utilities | (228) | (162) | (452) | (343) | |||||||||||||||||||
| Other segment items | (298) | (251) | (823) | (725) | |||||||||||||||||||
| Depreciation | (2,024) | (1,317) | (4,698) | (4,032) | |||||||||||||||||||
| Gain on sale of assets | — | 1,626 | 5,200 | 1,626 | |||||||||||||||||||
| Operating income | $ | 317 | $ | 3,265 | $ | 8,609 | $ | 6,375 | |||||||||||||||
Rental Revenue. For the 2025 periods, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place – Retail, Kingwood Place, Jones Crossing – Retail and West Killeen Market and our multi-family properties, The Saint June and The Saint George. In second-quarter 2025, we sold West Killeen Market and began recognizing rental revenue from The Saint George. For the 2024 periods, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place – Retail, Kingwood Place, Jones Crossing – Retail, West Killeen Market and Magnolia Place – Retail and our multi-family property, The Saint June. In third-quarter 2024, we sold Magnolia Place – Retail. The increase in rental revenue in the first nine months of 2025, compared with the first nine months of 2024, primarily reflects revenue from The Saint June, which was in the process of leasing up in the first nine months of 2024, and The Saint George, which began leasing up in second-quarter 2025, partially offset by a decrease in revenue resulting from the sales of Magnolia Place – Retail, which was sold in third-quarter 2024, and West Killeen Market, which was sold in second-quarter 2025. In October 2025, we entered into an agreement, as amended, to sell Lantana Place – Retail, which, subject to satisfaction of closing conditions, is
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expected to close in fourth-quarter 2025. The Lantana Place – Retail project made up approximately 26 percent of the rental revenue for each period presented.
Leasing Operations Expenses. Leasing Operations expenses include property taxes and insurance, maintenance and repairs, property management fees and payroll, utilities, other segment items and depreciation. Other segment items primarily includes amortization of leasing costs, property owner association fees, professional and consulting fees, and office and computer equipment. Increases in property taxes and insurance and depreciation in the 2025 periods were primarily attributable to the commencement of leasing operations at The Saint George in second-quarter 2025. Approximately 18 percent and 24 percent of Leasing Operations expenses (excluding gain on sale of assets) were attributable to Lantana Place – Retail for third-quarter 2025 and 2024, respectively, and approximately 20 percent for the first nine months of both 2025 and 2024.
Gain on Sale of Assets. In second-quarter 2025, we closed on the sale of the West Killeen Market project for $13.3 million. The sale generated a pre-tax gain of approximately $5.0 million. The nine months ended September 30, 2025 also includes a portion of a previously deferred gain of $0.2 million related to The Oaks at Lakeway in first-quarter 2025. In third-quarter 2024, we closed on the sale of Magnolia Place – Retail for $8.9 million. The sale generated a pre-tax gain of approximately $1.6 million. Refer to Note 4 for further discussion.
Non-Operating Results
Interest Expense, Net. Interest costs (before capitalized interest) totaled $3.8 million in third-quarter 2025 and $11.5 million for the first nine months of 2025, compared with $4.0 million in third-quarter 2024 and $11.9 million for the first nine months of 2024. As of September 30, 2025, all of our debt was variable-rate debt, and for all of such debt, the interest rates have decreased over the past year primarily from amending or refinancing loans with lower rates over the last nine months as well as overall interest rates declining.
Capitalized interest totaled $3.1 million in third-quarter 2025 and $10.4 million for the first nine months of 2025. All of our interest costs were capitalized for both 2024 periods. Capitalized interest for the 2025 periods is primarily related to development activities at Holden Hills Phases 1 and 2. The first nine months of 2025 also included capitalized interest related to the development of The Saint George before it was completed in second-quarter 2025. Capitalized interest for the 2024 periods was primarily related to development activities at our Barton Creek properties (primarily Amarra Villas and Holden Hills Phases 1 and 2) and The Saint George.
Other (Loss) Income, Net. Other (loss) income, net in the first nine months of 2025 includes a $1.0 million charge to record the estimated cost to The Saint George Apartments, L.P., of the repair of the damage caused by a water leak in second-quarter 2025.
Benefit from (Provision for) Income Taxes. We recorded a benefit from income taxes of $321 thousand in third-quarter 2025 and provision for income taxes of $166 thousand for the first nine months of 2025, compared to a provision of $58 thousand in third-quarter 2024 and $204 thousand for the first nine months of 2024. Refer to Note 8 for further discussion of income taxes.
Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries. Our partners’ share of losses totaled $3.0 million in third-quarter 2025 and $6.5 million for the first nine months of 2025, compared to $1.1 million in third-quarter 2024 and $3.0 million for the first nine months of 2024. The increases in both periods were primarily due to the initial operating expenses for The Saint George Apartments, L.P., which was completed in second-quarter 2025.
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 Nine Months Ended September 30, 2025 and 2024
Operating Activities. Cash used in operating activities totaled $24.1 million for the first nine months of 2025, compared with $2.4 million for the first nine months of 2024. The decline in operating cash flow was primarily attributable to reduced revenue resulting from fewer property sales in the first nine months of 2025. Expenditures for purchases and development of real estate properties totaled $20.5 million for the first nine months of 2025, primarily
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related to development of Holden Hills Phase 1, and $22.9 million for the first nine months of 2024, primarily related to development of Amarra Villas and Holden Hills Phase 1.
Investing Activities. Cash provided by (used in) investing activities totaled $4.6 million for the first nine months of 2025 and $(15.0) million for the first nine months of 2024. The first nine months of 2025 includes proceeds after transaction costs from the sale of West Killeen Market of $13.0 million. Also, during the first nine months of 2025, our investing cash flows included $0.4 million of Barton Creek MUD reimbursements of infrastructure costs incurred for development of The Saint June. Capital expenditures totaled $8.1 million for the first nine months of 2025, primarily for The Saint George, and $23.0 million for the first nine months of 2024, primarily for The Saint George and to a lesser extent for tenant improvements at Lantana Place – Retail.
Financing Activities. Cash provided by financing activities totaled $53.9 million for the first nine months of 2025 and $5.3 million for the first nine months of 2024. During the first nine months of 2025, we borrowed and repaid $4.0 million on the Comerica Bank revolving credit facility. During the first nine months of 2024, we had no borrowings or repayments on the Comerica Bank revolving credit facility. During the first nine months of 2025, net borrowings on other project and term loans totaled $8.0 million, primarily reflecting borrowings from Holden Hills Phase 1 and The Saint George construction loans and the refinancing of the Lantana Place and The Saint June construction loans and the Jones Crossing loan, partially offset by the payoff of the West Killeen construction loan and the Amarra Villas credit facility and paydowns on The Annie B land loan. During the first nine months of 2024, net repayments on other project and term loans totaled $2.6 million, primarily reflecting borrowings on The Saint George and Holden Hills Phase 1 construction loans and the Amarra Villas credit facility partially offset by the payoff of the Magnolia Place construction loan and paydowns on the Amarra Villas credit facility and the Annie B land loan. Refer to “Revolving Credit Facility and Other Financing Arrangements” below for a discussion of our outstanding debt at September 30, 2025.
During the first nine months of 2025, we received a contribution of $47.8 million from a noncontrolling interest holder related to the Holden Hills Phase 2 partnership. Also, during the first nine months of 2025, in connection with the refinancing of the Kingwood Place construction loan in November 2024, which generated additional cash proceeds, we paid distributions of $856 thousand to noncontrolling interest holders. During the first nine months of 2025, the Class B limited partner contributed additional cash of $2.9 million in cash to The Saint George Apartments, L.P., representing its 90 percent share to support the partnership’s ability to pay debt service and project costs, including costs related to water leak damage remediation and repairs as described in “Recent Development Activities.” During the first nine months of 2024, the Class B limited partner contributed additional capital of $3.6 million in cash to The Saint George Apartments, L.P., representing its 90 percent share to support the partnership’s ability to pay its construction loan interest.
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 stockholders of record as of September 19, 2022. During the first nine months of 2025, $246 thousand of accrued dividends for unvested RSUs were paid to the holders upon the vesting of the RSUs, leaving $18 thousand of dividends accrued for unvested RSUs presented in accrued liabilities as of September 30, 2025. The remaining accrued dividends will be paid to the holders of the RSUs as the RSUs vest.
In November 2023, with written consent from Comerica Bank, our Board approved a new share repurchase program, which authorized repurchases of up to $5.0 million of our common stock. In June 2025, with written consent from Comerica Bank, our Board approved an increase in the share repurchase program from up to $5.0 million to up to $25.0 million of our common stock. The repurchase program authorizes us, in management’s and the Capital Committee of the Board’s discretion, to repurchase shares from time to time, subject to market conditions and other factors. 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 and the Capital Committee of the Board. 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. In the first nine months of 2025, we acquired 100,967 shares of our common stock for a total cost of $2.0 million at an average price of $19.50 per share. As of November 7, 2025, we have acquired 180,899 shares of our common stock for a total cost of $3.9 million at an average price of $21.59 per share, and $21.1 million remains available for repurchases under the program.
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Revolving Credit Facility and Other Financing Arrangements
As of September 30, 2025, we had $55.0 million in cash and cash equivalents and restricted cash of $0.5 million, and no amount was borrowed under our revolving credit facility. Of the $55.0 million in consolidated cash and cash equivalents at September 30, 2025, $3.8 million held at certain consolidated subsidiaries was subject to restrictions on distribution to the parent company pursuant to project loan agreements. In the third quarters of 2025 and 2024, development and asset management fees of $289 thousand and $216 thousand, respectively, were paid by the limited partnerships to Stratus. In the first nine months of 2025 and 2024, development and asset fees of $830 thousand and $1.2 million, respectively, were paid by the limited partnerships to Stratus. The payments of these intercompany fees resulted in increases in cash available to the parent company, and the income to Stratus and cost to the partnerships have been eliminated in the consolidated financial statements.
As of September 30, 2025, we had total debt of $205.7 million based on the principal amounts outstanding compared with $196.7 million at December 31, 2024. As of September 30, 2025, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $29.1 million, resulting in availability of $17.5 million, net of letters of credit totaling $11.6 million issued under the revolving credit facility. In June 2025, the Holden Hills Phase 2 property was removed from the borrowing base for the revolving credit facility in anticipation of a potential separate revolving credit facility for the property, and the maximum amount that could be borrowed was reduced. Also, in June 2025, after the Amarra Villas credit facility was fully repaid and terminated, the remaining three Amarra Villas homes were added to the borrowing base for the Comerica Bank revolving credit facility. The net effect of these changes was a decrease of $24.8 million to the maximum amount that could be borrowed. Letters of credit have been issued under the revolving credit facility, $9.0 million of which secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2 and $2.3 million of which secure Stratus’ obligations, which are subject to certain conditions, to construct and pay for certain utility infrastructure in Lakeway, Texas, which is expected to be utilized by the planned multi-family project on Stratus’ remaining land in Lakeway. 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 September 30, 2025. In October 2025, we amended the revolving credit facility to further reduce the maximum loan amount to the lesser of $35.0 million or the borrowing base limit, in order to reduce our fees associated with the facility.
We have made operating loans to Stratus Block 150, L.P. to facilitate the partnership’s ability to pay ongoing costs, including debt service, of The Annie B project during the pre-construction period. The loans bear interest at one-month Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent, are subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners. In first-quarter 2024, we made an operating loan of $2.4 million. In third-quarter 2024, we made an operating loan of $1.1 million. In first-quarter 2025, we made an operating loan of $1.5 million. In third-quarter 2025, we made an operating loan of $1.1 million. As of September 30, 2025, our operating loans outstanding to Stratus Block 150, L.P. totaled $8.3 million.
Stratus and the Class B limited partner have made operating loans to The Saint June, L.P. to support the partnership’s ability to pay its construction loan interest, which has exceeded the amount anticipated because of interest rate increases. The loans bear interest at one-month Term SOFR plus 5.00 percent, are subordinate to The Saint June construction loan and, unless approved by all partners, no distributions may be made to the partners until the operating loans are repaid. In third-quarter 2025, The Saint June partnership was amended to allow up to $3.0 million of distributions to the partners prior to the repayment of the operating loans. In first-quarter 2024, Stratus made an operating loan of $339 thousand, and the Class B limited partner made an operating loan of $339 thousand. In second-quarter 2024, Stratus made an operating loan of $85 thousand, and the Class B limited partner made an operating loan of $165 thousand. No loans were made in the first nine months of 2025. As of September 30, 2025, Stratus’ and the Class B limited partner’s operating loans outstanding to The Saint June, L.P. totaled $962 thousand and $493 thousand, respectively.
In January 2025, the Lantana Place construction loan was refinanced. The new loan has a principal amount of $29.8 million and matures February 1, 2029. The loan bears interest at one-month Term SOFR plus 2.35 percent, with a floor of 0.00 percent. Payments of interest only on the loan are due monthly through January 31, 2026. Thereafter, principal and interest payments are due monthly based on a 30-year amortization with the remaining unpaid principal and interest due at maturity. After paying off the prior loan and paying property taxes and closing costs, Stratus received approximately $3.0 million in net cash proceeds.
In March 2025, the Jones Crossing loan was refinanced. The new loan has a principal amount of $24.0 million and matures April 1, 2028. The loan bears interest at one-month Term SOFR plus 1.95 percent, with a floor of 3.00 percent. As required by the loan, College Station 1892 Properties, L.L.C. purchased an interest rate cap with a Term
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SOFR strike rate equal to 5.00 percent, a notional amount of $24.0 million and an expiration date of April 1, 2026. Upon expiration, as required by the loan, College Station 1892 Properties, L.L.C. will enter into two subsequent, consecutive interest rate cap agreements, each with a one-year term, a notional amount of the maximum loan amount and a strike price commensurate to the then-current interest rate. Payments of interest only on the loan are due monthly with the outstanding principal due at maturity. College Station 1892 Properties, L.L.C. may prepay all, but not a portion, of the loan; provided that a prepayment prior to April 1, 2026 is subject to a yield maintenance premium payment. After paying off the prior loan and closing costs, Stratus received approximately $1.2 million in net cash proceeds.
In July 2025, The Annie B land loan was modified to extend the maturity date to September 1, 2027. Monthly principal payments of $49,875 in addition to interest will be required during the extended term.
In September 2025, The Saint June construction loan was modified to (i) extend the maturity date of the loan to October 2, 2027; (ii) provide for advances of an additional $1.5 million, bringing the outstanding principal balance of the loan to $32.9 million with no funds remaining available for additional principal advances; (iii) decrease the interest rate applicable margin from 2.35 percent to 2.00 percent; (iv) eliminate the requirement to make monthly principal payments prior to maturity; and (v) add a new property-level minimum debt yield financial covenant, which replaced a property-level debt service coverage ratio. If the debt yield financial covenant is not met, the principal balance of the loan must be paid down in an amount sufficient to achieve the minimum debt yield. The amendments permit the partnership to distribute up to $1.5 million to the partners. Accordingly, the loan bears interest at the one-month Term SOFR plus 2.00 percent, subject to a 3.50 percent floor. Payments of interest only on the Loan are due monthly with the outstanding principal due at maturity. After closing costs, the partnership used the remaining portion of the $1.3 million proceeds of the loan to establish reserves for partnership expenses and make cash distributions to the partners. In October 2025, The Saint June, L.P. made distributions of approximately $435 thousand and $225 thousand to the Class B limited partner in The Saint June partnership and Stratus, respectively.
During the first nine months of 2025, we also increased borrowings under the Holden Hills Phase 1 and The Saint George construction loans. We paid off the Amarra Villas credit facility and the West Killeen construction loan and paid down The Annie B land loan. Refer to Note 6 for further discussion.
Most of our debt agreements require compliance with specified financial covenants. Refer to Note 6 and MD&A in our 2024 Form 10-K for a discussion of the financial covenants in our debt agreements. As of September 30, 2025, we were in compliance with all of our financial covenants.
Stratus’ and its subsidiaries’ debt arrangements, including Stratus’ guaranty agreements, 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 equity holders; 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 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, The Annie B land loan, and The Saint George and the Holden Hills Phase 1 construction loans require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend payments, which was obtained in connection with our current $25.0 million 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 project, and our Comerica Bank revolving credit facility is secured by substantially all of our assets other than those encumbered by separate project level financing. In anticipation of a separate revolving credit facility for the Holden Hills Phase 2 project, Comerica Bank released the Holden Hills Phase 2 property from the collateral pool for the Comerica Bank revolving credit facility. In addition, we, as the parent company, are typically required to guarantee all or a significant portion of the payment of our project loans, in some cases until certain development milestones and/or financial conditions are met, in some cases on a full recourse basis and in other cases on a more limited recourse basis. As of September 30, 2025, we, as the parent company, guaranteed the payment of all of the project loans, except for the Kingwood Place, Jones Crossing and Lantana Place loans. Our guarantees of the Kingwood Place, Jones Crossing and Lantana Place loans are generally limited to non-recourse carve-out obligations. Our payment guarantee on
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The Saint June construction loan is limited to 50.0 percent and on The Saint George construction loan is limited to 25.0 percent until certain conditions are met. Refer to Note 6 to our consolidated financial statements in our 2024 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 September 30, 2025 (in thousands):
| 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
Comerica Bank revolving credit facility | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||
Kingwood Place loan | — | — | 33,000 | — | — | — | 33,000 | ||||||||||||||||||||||||||||||||||
Lantana Place loan | — | 295 | 368 | 388 | 28,749 | — | 29,800 | ||||||||||||||||||||||||||||||||||
Jones Crossing loan | — | — | — | 24,000 | — | 24,000 | |||||||||||||||||||||||||||||||||||
| The Annie B land loan | — | — | 11,920 | — | — | — | 11,920 | ||||||||||||||||||||||||||||||||||
| Construction loans: | |||||||||||||||||||||||||||||||||||||||||
| The Saint George | — | 52,533 | — | — | — | — | 52,533 | ||||||||||||||||||||||||||||||||||
The Saint June a | — | — | 33,376 | — | — | — | 33,376 | ||||||||||||||||||||||||||||||||||
Holden Hills Phase 1 b | — | 21,096 | — | — | — | — | 21,096 | ||||||||||||||||||||||||||||||||||
| Total | $ | — | $ | 73,924 | $ | 78,664 | $ | 24,388 | $ | 28,749 | $ | — | $ | 205,725 | |||||||||||||||||||||||||||
a.Includes operating loans from our third-party partner of $493 thousand.
b.The maturity date of the Holden Hills Phase 1 construction loan is February 8, 2026. We are currently evaluating options to modify the loan and expect to extend the loan on or before the maturity date.
The following table summarizes the weighted-average interest rate of each loan, all of which have variable rates, for the periods presented:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Comerica Bank revolving credit facility a | — | % | — | % | 7.43 | % | — | % | ||||||||||||||||||
| Kingwood Place loan | 6.12 | 8.16 | 6.12 | 8.18 | ||||||||||||||||||||||
| Lantana Place loan | 6.67 | 7.67 | 6.69 | 7.71 | ||||||||||||||||||||||
Jones Crossing loan | 6.27 | 7.68 | 6.27 | 7.69 | ||||||||||||||||||||||
| The Annie B land loan | 7.43 | 8.41 | 7.44 | 8.41 | ||||||||||||||||||||||
| Construction loans: | ||||||||||||||||||||||||||
| The Saint George | 6.78 | 7.69 | 6.78 | 7.70 | ||||||||||||||||||||||
| The Saint June | 6.60 | 8.16 | 6.66 | 8.18 | ||||||||||||||||||||||
| Holden Hills Phase 1 | 7.42 | 8.34 | 7.43 | 8.36 | ||||||||||||||||||||||
West Killeen Market b | — | 8.01 | — | 8.06 | ||||||||||||||||||||||
Amarra Villas credit facility c | — | 8.40 | — | 8.38 | ||||||||||||||||||||||
a.In second-quarter 2025, we repaid the amount outstanding on the revolving credit facility. We did not have an outstanding balance during third-quarter 2025, third-quarter 2024 or the first nine months of 2024.
b.In May 2025, we repaid this loan in connection with the sale of the property.
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c.In June 2025, this credit facility was terminated after the outstanding balance was repaid.
Liquidity Outlook
We had firm commitments totaling approximately $5.2 million at September 30, 2025 primarily related to construction of the road and utility infrastructure we are required to build in Lakeway Texas, and Holden Hills Phase 1. We have a construction loan to fund the projected cash outlays for Holden Hills Phase 1 over the next 12 months following this filing. We expect to make a capital contribution to The Saint George partnership of $150 thousand representing our 10 percent equity share of debt service and project costs in the next 12 months. With respect to Holden Hills Phase 1, we have agreed to reimburse the Holden Hills Phase 1 partnership for 60 percent of the costs of the Tecoma Improvements. As of September 30, 2025, our share of the estimated remaining costs totaled $346 thousand. Also, we anticipate making future operating loans to Stratus Block 150, L.P. totaling up to $1.8 million over the next 12 months to enable the partnership to pay debt service and project costs. The operating loans would bear interest at one-month Term SOFR plus 5.00 percent, would be subordinate to The Annie B land loan and required to be repaid before distributions may be made to the partners.
We project that we will be able to meet our debt service and other cash obligations for at least the next 12 months. Our stabilized retail and multi-family properties (Jones Crossing – Retail, Lantana Place – Retail, Kingwood Place and The Saint June) are projected to generate sufficient cash flow to cover debt service over the next 12 months. In October 2025, we entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million. Subject to satisfaction of closing conditions, the sale is expected to close in fourth-quarter 2025 and to yield substantial cash proceeds after payment of the project loan. We expect to sell the two remaining Amarra Villas homes and may sell other properties. 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 had cash and cash equivalents of $55.0 million at September 30, 2025 and availability under our revolving credit facility (which matures on March 27, 2027) of approximately $17.5 million, net of letters of credit, which is expected to be sufficient to fund these cash requirements for the next 12 months.
We expect to successfully extend the maturities of, or to refinance, our outstanding 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 sources of revenue and cash flow are expected to be sales of our properties to third parties, debt financings 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 segment 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 2024 Form 10-K and Part I, Item 1A. “Risk Factors” of our 2024 Form 10-K and Part II, Item 1A. “Risk Factors” herein for further discussion.
Our ability to meet our cash obligations over the longer term 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.
CRITICAL ACCOUNTING ESTIMATES
There have been no changes in our critical accounting estimates from those discussed in our 2024 Form 10-K.
RECENT ACCOUNTING STANDARDS
In November 2024, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses.” This ASU requires disaggregated disclosure in the notes to the financial statements of certain costs and expenses presented on the face of the income statement, on an interim and annual basis. This ASU also requires additional footnote disclosure about selling expenses. The amendments are effective for fiscal years beginning after December 15, 2026 and interim periods beginning after
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December 15, 2027 and early adoption is permitted. Stratus is currently assessing adoption timing and the effect that the updated standard will have on its financial statement disclosures.
OFF-BALANCE SHEET ARRANGEMENTS
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 “Capital Resources and Liquidity” above and Note 9 to our consolidated financial statements in our 2024 Form 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 inflation, interest rates, tariffs and trade policies, supply chain constraints, our ability to pay or refinance our debt obligations as they become due, availability of bank credit, our ability to meet our future debt service and other cash obligations, projected future operating loans or capital contributions to our joint ventures, statements regarding the exploration of opportunities for the use of cash proceeds from the Holden Hills Phase 2 partnership formation and recent and pending asset sales, and whether and when the sale of Lantana Place – Retail will be completed, potential costs for which The Saint George Apartments, L.P. may be responsible for the remediation and repair of damage caused by the water leak at The Saint George, future cash flows and liquidity, the Austin and Texas real estate markets, the planning, financing, development, construction, completion and stabilization of our development projects, including projected costs and estimated times to complete construction, plans to sell, recapitalize or refinance properties and estimated timing for closing properties under contract, future operational and financial performance, MUD reimbursements for infrastructure costs, regulatory matters, including the expected impact of the ETJ Law and related ongoing litigation, leasing activities, tax rates, 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, and potential future cash returns to stockholders, including the timing and amount of repurchases under our share repurchase program. The words “anticipate,” “may,” “can,” “plan,” “believe,” “potential,” “estimate,” “expect,” “project,” “target,” “intend,” “likely,” “will,” “should,” “to be” and any similar expressions or statements are intended to identify those assertions as forward-looking statements.
Under our Comerica Bank 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, which we obtained in connection with our current $25.0 million share repurchase program. Any future declaration of dividends or decision to repurchase our common stock outside of the approved share repurchase program 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.
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, our ability to implement our business strategy successfully, including our ability to develop, construct and sell or lease properties on terms our Board considers acceptable, increases in operating and construction costs, including real estate taxes, maintenance and insurance costs, and the cost of building materials and labor, elevated inflation and interest rates, the effect of changes in tariffs and trade policies, including threatened tariffs, supply chain constraints, our ability to pay or refinance our debt, extend maturity dates of our loans or comply with or obtain waivers of financial and other covenants in debt agreements and to meet other cash obligations, availability of bank credit, defaults by contractors and subcontractors, the results of our Board’s exploration of opportunities for the use of cash proceeds from the Holden Hills Phase 2 partnership formation and recent and pending asset sales, the occurrence of any event, change or other circumstance that could delay the closing of the sale of Lantana Place – Retail or result in the termination of the agreement to sell Lantana Place – Retail, the outcome of our analysis and discussions with the insurance company and general contractor regarding responsibility for payment of costs to remediate and repair the damage caused by the water leak at The Saint George, declines in the market value of our assets, market conditions or corporate developments that could preclude, impair or delay any opportunities with respect to plans to sell,
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recapitalize or refinance 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, business and geopolitical conditions, potential U.S. or local economic downturn or recession, the availability and terms of financing for development projects and other corporate purposes, 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, any major public health crisis, eligibility for and potential receipt and timing of receipt of MUD reimbursements, industry risks, changes in buyer preferences, potential additional impairment charges, competition from other real estate developers, our ability to obtain various entitlements and permits, changes in laws, regulations or the regulatory environment affecting the development of real estate, opposition from special interest groups or local governments with respect to development projects, weather- and climate-related risks, environmental and litigation risks, including the timing and resolution of the ongoing litigation challenging the ETJ Law and our ability to implement revised development plans in light of the ETJ Law, the failure to attract buyers or tenants for our developments or such buyers’ or tenants’ failure to satisfy their purchase commitments or leasing obligations, cybersecurity incidents and other factors described in more detail in Part I, Item 1A. “Risk Factors” of our 2024 Form 10-K, filed with the SEC, and Part II, Item 1A. “Risk Factors” of this report.
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.
Not applicable.
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 September 30, 2025.
(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 September 30, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1A. Risk Factors.
We are supplementing the risk factors described under Part I, Item 1A. “Risk Factors” of our 2024 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 2024 Form 10-K.
Changes in U.S. tariffs and trade policies could adversely affect our business.
We are monitoring changes and potential changes to U.S. tariffs and trade policies under the current Presidential administration, along with reciprocal tariffs or other countermeasures imposed or that may be imposed by other countries in response. The current environment is dynamic and uncertain, as the U.S. President has imposed, modified and paused tariffs, and granted exemptions from tariffs, on different countries and products multiple times since taking office in January 2025. A number of important construction materials, including steel and lumber, are either currently subject to higher tariffs or have been threatened with higher tariffs in the future, which we believe is likely to further disrupt supply chains and increase construction costs. The lack of predictability regarding future U.S. tariffs and trade policies creates uncertainties that make it more challenging for construction contractors to price projects and for developers and investors to make projections. Changing U.S. tariffs and trade policies could also cause higher inflation and interest rates and slower economic growth or a recession in the U.S. These changes and uncertainties regarding future changes could result in, among other things, higher costs to our business generally, higher costs and more limited availability of capital, lower demand from buyers of our real estate and higher tenant default rates, and could cause our real estate development projects in planning to be less profitable, delayed or cancelled. These factors could have a material adverse effect on our business, profitability and cash flow.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of our equity securities during the three months ended September 30, 2025.
The following table provides a summary of repurchases of shares of our common stock by our company and any “affiliated purchaser” as defined by the SEC during the three months ended September 30, 2025, and the approximate dollar value of shares remaining available for purchase pursuant to our $25.0 million share repurchase program as of September 30, 2025:
| 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 | ||||||||||||||||||||||
| July 1, 2025 through July 31, 2025 | 46,115 | $ | 19.20 | 46,115 | $ | 21,999,096 | ||||||||||||||||||||
| August 1, 2025 through August 30, 2025 | 7,538 | $ | 18.26 | 7,538 | $ | 21,861,463 | ||||||||||||||||||||
| September 1, 2025 through September 30, 2025 | 19,241 | $ | 20.47 | 19,241 | $ | 21,467,622 | ||||||||||||||||||||
| Total | 72,894 | $ | 18.94 | 72,894 | $ | 21,467,622 | ||||||||||||||||||||
a.On November 14, 2023, we announced that our Board approved a share repurchase program authorizing repurchases of up to $5.0 million of our common stock. On June 13, 2025, we announced that our Board approved an increase in the share repurchase program from $5.0 million to up to $25.0 million. 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 and the Capital Committee of the Board. 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. Through November 7, 2025, we acquired 180,899 shares of our common stock for a total cost of $3.9 million at an average price of $21.59 per share, and $21.1 million remains available for repurchases under the program.
Item 5. Other Information.
Director and Officer Trading Arrangements. During the quarter ended September 30, 2025, no
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Deadline for 2026 Stockholder Proposals Not To Be Included in 2026 Proxy Statement. Stratus’ Definitive Proxy Statement on Schedule 14A filed with the SEC on April 8, 2025, under the heading “2026 Stockholder Proposals,” included a summary of the advance notice requirements under Stratus’ amended and restated by-laws (By-Laws) for stockholder proposals not intended to be included in Stratus’ proxy statement for the 2026 annual meeting of stockholders. Due to a typographical error, the deadline included in the window for stockholders to deliver such proposals with respect to the 2026 annual meeting of stockholders is incorrectly stated. The correct window is between October 15, 2025 and January 13, 2026.
Thus, if a stockholder would like to present a proposal at 2026 annual meeting of stockholders, but does not wish to have it included in Stratus’ proxy statement, the stockholder must submit it in writing to: Corporate Secretary, Stratus Properties Inc., 212 Lavaca Street, Suite 300, Austin, Texas 78701, by no later than the close of business January 13, 2026 and no earlier than the close of business on October 15, 2025, in accordance with the specific procedural requirements in Stratus’ By-Laws.
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Item 6. Exhibits.
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Title | Filed with this Form 10-Q | Form | File No. | Date Filed | |||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||
| Agreement of Sale and Purchase by and between Lantana Place, L.L.C., as seller, and Scripps CMH LLC and Lantana SRB LLC, as purchasers, dated as of September 3, 2025. | 8-K | 001-37716 | 10/23/2025 | |||||||||||||||||||||||||||||
| First Amendment to Agreement of Sale and Purchase by and between Lantana Place, L.L.C., as seller, and Scripps CMH LLC and Lantana SRB LLC, as purchasers, effective as of October 17, 2025. | 8-K | 001-37716 | 10/23/2025 | |||||||||||||||||||||||||||||
| Composite Certificate of Incorporation of Stratus Properties Inc. | 10-Q | 001-37716 | 5/15/2023 | |||||||||||||||||||||||||||||
| Second Amended and Restated By-Laws of Stratus Properties Inc., as amended effective August 3, 2017. | 10-Q | 001-37716 | 8/9/2017 | |||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||
| Amendment to Loan Documents by and among The Saint June, L.P., as borrower, Stratus Properties Inc., as guarantor, Texas Capital Bank, as administrative agent, and each of the lenders party thereto, dated September 30, 2025. | 8-K | 001-37716 | 10/6/2025 | |||||||||||||||||||||||||||||
Note by and between The Saint June, L.P. and Texas Capital Bank effective September 30, 2025. | 8-K | 001-37716 | 10/6/2025 | |||||||||||||||||||||||||||||
Ninth Modification Agreement by and between Stratus Properties Inc., certain of its subsidiaries and Comerica Bank, effective as of October 22, 2025. | X | |||||||||||||||||||||||||||||||
| Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). | X | |||||||||||||||||||||||||||||||
| Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). | X | |||||||||||||||||||||||||||||||
| Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350. | X | |||||||||||||||||||||||||||||||
| Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350. | X | |||||||||||||||||||||||||||||||
| 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. | X | ||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema. | X | ||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. | X | ||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase. | X | ||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase. | X | ||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase. | X | ||||||||||||||||||||||||||||||
43
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Title | Filed with this Form 10-Q | Form | File No. | Date Filed | |||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). | X | ||||||||||||||||||||||||||||||
44
SIGNATURE
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/ Erin D. Pickens | |||||||
| Erin D. Pickens | ||||||||
Senior Vice President and Chief Financial Officer (authorized signatory and Principal Financial Officer and Principal Accounting Officer) | ||||||||
Date: November 12, 2025
S-1
When recorded, return to: RECORD IN DEED OF TRUST RECORDS
TRAVIS COUNTY, TEXAS
Holland & Knight LLP
TRAVIS COUNTY, TEXAS
Holland & Knight LLP
1722 Routh Street, Suite 1500
Dallas, Texas 75201
Attention: Ashley Jo Zaccagnini
Dallas, Texas 75201
Attention: Ashley Jo Zaccagnini
NOTICE OF CONFIDENTIALITY RIGHTS; IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER
NINTH MODIFICATION AGREEMENT
This NINTH MODIFICATION AGREEMENT (this “Agreement”) is dated effective as of October 22, 2025 (the “Effective Date”) by and between STRATUS PROPERTIES INC., a Delaware corporation (“Stratus”), STRATUS PROPERTIES OPERATING CO., L.P., a Delaware limited partnership (“SPOC”), CIRCLE C LAND, L.P., a Texas limited partnership (“Circle C”), THE VILLAS AT AMARRA DRIVE, L.L.C., a Texas limited liability company (“Amarra”), and STRATUS LAKEWAY CENTER, L.L.C., a Texas limited liability company (“Lakeway”) (Stratus, SPOC, Circle C, Amarra, and Lakeway are sometimes referred to in this Agreement severally as “Borrower”), and COMERICA BANK (“Lender”);
W I T N E S S E T H:
A.The following documents were previously executed and delivered by Borrower, Magnolia East 149, L.L.C., a Texas limited liability company (“Magnolia”), 210 Lavaca Holdings, L.L.C., a Texas limited liability company (“Lavaca”) and Austin 290 Properties, Inc., a Texas corporation (“Austin”), to Lender, inter alia, relating to a loan (the “Original Loan”) in the original principal sum of $60,000,000.00, each dated June 29, 2018:
i.that certain Loan Agreement (the “Loan Agreement”);
ii.that certain Revolving Promissory Note, payable to the order of Lender in the original principal sum of $60,000,000.00 (the “Original Note”);
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iii.that certain Deed of Trust, Security Agreement, Fixture Filing and Assignment of Rents from Circle C to Brian P. Foley, Trustee, securing the payment of the Note (defined below), covering certain real and personal property described therein, recorded under Clerk’s File No. 2018103077 of the Official Public Records of Travis County, Texas (the “Circle C Deed of Trust”);
iv.that certain Deed of Trust, Security Agreement, Fixture Filing and Assignment of Rents from SPOC to Brian P. Foley, Trustee, securing the payment of the Note, covering certain real and personal property described therein, recorded under Clerk’s File No. 2018103072 of the Official Public Records of Travis County, Texas, (the “SPOC Deed of Trust”);
v.that certain Deed of Trust, Security Agreement, Fixture Filing and Assignment of Rents from Amarra to Brian P. Foley, Trustee, securing the payment of the Note, covering certain real and personal property described therein, recorded under Clerk’s File No. 2018103073 of the Official Public Records of Travis County, Texas (the “Amarra Deed of Trust”);
vi.that certain Deed of Trust, Security Agreement, Fixture Filing and Assignment of Rents from Lakeway to Brian P. Foley, Trustee, securing the payment of the Note, covering certain real and personal property described therein, recorded under Clerk’s File No. 2018103076 of the Official Public Records of Travis County, Texas (the “Lakeway Deed of Trust”);
vii.that certain Subordination Agreement, recorded under Clerk’s File No. 2018106189 of the Official Public Records of Travis County, Texas, executed by SPOC in favor of Lender (the “Subordination Agreement”);
viii.that certain Security Agreement, executed by Stratus in favor of Lender (the “Stratus Security Agreement”); and
ix.that certain Assignment of Reimbursables, Credits and Other Fees executed by Borrower, Magnolia, Lavaca and Austin in favor of Lender (the “Assignment of Reimbursables”).
The instruments described above, the Prior Modifications, this Agreement, the Note (defined below) and all other documents evidencing, securing or otherwise executed in connection with the Loan (defined below), being herein collectively called the “Loan Documents”;
B.Borrower and Austin previously executed and delivered to Lender that certain Amended and Restated Revolving Promissory Note (the “Prior Note”) dated May 13, 2022, in the stated principal amount of Sixty Million and No/100 Dollars ($60,000,000.00), in substitution of the Original Note;
C.In connection with the Eighth Modification (defined below), the amount of the Original Loan was reduced to $55,000,000 (the “Existing Loan”).
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D.In connection with the Eighth Modification, Borrower executed and delivered to Lender (i) that certain Second Amended and Restated Revolving Promissory Note payable to the order of Lender, dated March 25, 2025, in the stated principal amount of Fifty-Five Million and No/100 Dollars ($55,000,000.00) (the “Note”), in substitution of the Prior Note, and (ii) that certain Deed of Trust, Security Agreement, Fixture Filing and Assignment of Rents dated as of July 30, 2025, from SPOC to Brian P. Foley, Trustee, securing the payment of the Note, covering certain real and personal property described therein, recorded on August 1, 2025, under Clerk’s File No. 2025084849 of the Official Public Records of Travis County, Texas (the “Club House Deed of Trust”; and together with the Circle C Deed of Trust, the SPOC Deed of Trust, the Amarra Deed of Trust, and the Lakeway Deed of Trust, as they may be affected by various partial releases of lien executed by Lender prior to the Effective Date, collectively, the “Deed of Trust”);
E.The Loan Documents were previously modified by that certain Modification Agreement dated April 14, 2020, executed by Borrower, Magnolia, Lavaca. Austin and Lender (the “First Modification”), that certain Second Modification Agreement dated June 12, 2020, executed by Borrower, Magnolia, Lavaca, Austin and Lender, recorded under Clerk's File No. 2020057667 of the Official Public Records of Montgomery County, Texas and recorded under Clerk's File No. 2020097580 of the Official Public Records of Travis County, Texas (the “Second Modification”), that certain Third Modification Agreement dated May 13, 2022, executed by Borrower, Austin and Lender, recorded under Clerk's File No. 2022087674 of the Official Public Records of Travis County, Texas (the “Third Modification”), that certain Fourth Modification Agreement dated November 8, 2022, executed by Borrower, Austin and Lender (the “Fourth Modification”), that certain Fifth Modification Agreement dated March 10, 2023, executed by Borrower, Austin and Lender (the “Fifth Modification”), that certain Sixth Modification Agreement dated May 31, 2023, executed by Borrower, Austin and Lender (the “Sixth Modification”), that certain Seventh Modification Agreement dated January 21, 2025, executed by Borrower, Austin and Lender (the “Seventh Modification”), and that certain Eighth Modification Agreement dated March 25, 2025, executed by Borrower and Lender, recorded on March 25, 2025, under Clerk’s File No. 2025031497 of the Official Public Records of Travis County, Texas (the “Eighth Modification”; and together with the First Modification, the Second Modification, the Third Modification, the Fourth Modification, the Fifth Modification, the Sixth Modification, and the Seventh Modification, collectively, the “Prior Modifications”);
F.Borrower has requested that Lender decrease the amount of the Existing Loan to $35,000,000.00 (the “Loan”), and make certain modifications to the Loan Documents, and Lender is willing to do so on the terms and conditions set forth below; and
G.Lender is the owner and holder of the Note and Borrower is the owner of the legal and equitable title to the Mortgaged Property.
NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
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1.Defined Terms. Capitalized terms used but not defined in this Agreement shall have the meaning given to such capitalized terms in the Loan Agreement (as modified by this Agreement).
2.Maximum Loan Amount Decrease. Effective as of the date hereof, the Existing Loan is decreased by the amount of $20,000,000.00 to $35,000,000.00 (the “Loan”). All references to the loan amount, $55,000,000.00, “fifty-five million dollars” or any similar reference in the Loan Documents shall hereafter mean $35,000,000.00. All references to the “Maximum Loan Amount” in the Loan Documents shall hereafter mean the lesser of (a) $35,000,000.00 or (b) the Borrowing Base Limitation.
3.Representations and Warranties. Borrower hereby represents and warrants that (a) Borrower is the sole legal and beneficial owner of the Mortgaged Property (other than the Mortgaged Property which has been released by Lender from the liens of the Deed of Trust); (b) Borrower is duly organized and legally existing under the laws of the state of its organizations and is duly qualified to do business in the State of Texas; (c) the execution and delivery of, and performance under this Agreement are within Borrower’s power and authority without the joinder or consent of any other party and have been duly authorized by all requisite action and are not in contravention of law or the powers of Borrower’s articles of incorporation and bylaws; (d) this Agreement constitutes the legal, valid and binding obligations of Borrower enforceable in accordance with its terms; (e) the execution and delivery of this Agreement by Borrower do not contravene, result in a breach of or constitute a default under any deed of trust, loan agreement, indenture or other contract, agreement or undertaking to which Borrower is a party or by which Borrower or any of its properties may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both) and do not violate or contravene any law, order, decree, rule or regulation to which Borrower is subject; and (f) to the best of Borrower’s knowledge there exists no uncured default under any of the Loan Documents. Borrower agrees to indemnify and hold Lender harmless against any loss, claim, damage, liability or expense (including without limitation reasonable attorneys’ fees) incurred as a result of any representation or warranty made by it herein proving to be untrue in any respect.
4.Further Assurances. Borrower, upon request from Lender, agrees to execute such other and further documents as may be reasonably necessary or appropriate to consummate the transactions contemplated herein or to perfect the liens and security interests intended to secure the payment of the loan evidenced by the Note.
5.Default; Remedies. If Borrower shall fail to keep or perform any of the covenants or agreements contained herein or if any statement, representation or warranty contained herein is false, misleading or erroneous in any material respect, subject to the applicable notice and/or cure periods provided in Section 6.1 of the Loan Agreement, Borrower shall be deemed to be in default under the Deed of Trust and Loan Agreement and Lender shall be entitled at its option to exercise any and all of the rights and remedies granted pursuant to the any of the Loan Documents or to which Lender may otherwise be entitled, whether at law or in equity.
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6.Endorsement to Title Policy. As an accommodation to Borrower, Lender has agreed to waive the requirement for recordation of this Agreement and issuance of an endorsement to the Title Policy at this time. At Lender’s request, Borrower shall, at its sole cost and expense, arrange for recordation of this Agreement in each county where the Mortgaged Property is located and obtain and deliver to Lender an endorsement of the Title Policy insuring the lien of the Deed of Trust, under Procedural Rule P-9b(3) of the applicable title insurance rules and regulations, in form and content acceptable to Lender, stating that the company issuing said Title Policy will not claim that policy coverage has terminated or that policy coverage has been reduced, solely by reason of the execution of this Agreement.
7.Ratification of Loan Documents. Except as provided herein, the terms and provisions of the Loan Documents shall remain unchanged and shall remain in full force and effect. Any modification herein of any of the Loan Documents shall in no way adversely affect the security of the Deed of Trust and the other Loan Documents for the payment of the Note. The Loan Documents as modified and amended hereby are hereby ratified and confirmed in all respects. All liens, security interests, mortgages and assignments granted or created by or existing under the Loan Documents remain unchanged and continue, unabated, in full force and effect, to secure Borrower’s obligation to repay the Note.
8.Liens Valid; No Offsets or Defenses. Borrower hereby acknowledges that the liens, security interests and assignments created and evidenced by the Loan Documents are valid and subsisting and further acknowledges and agrees that there are no offsets, claims or defenses to any of the Loan Documents.
9.Merger; No Prior Oral Agreements. This Agreement supersedes and merges all prior and contemporaneous promises, representations and agreements. No modification of this Agreement or any of the Loan Documents, or any waiver of rights under any of the foregoing, shall be effective unless made by supplemental agreement, in writing, executed by Lender and Borrower. Lender and Borrower further agree that this Agreement may not in any way be explained or supplemented by a prior, existing or future course of dealings between the parties or by any prior, existing, or future performance between the parties pursuant to this Agreement or otherwise.
10.Costs and Expenses. Contemporaneously with the execution and delivery hereof, Borrower shall pay, or cause to be paid, all costs and expenses incident to the preparation hereof and the consummation of the transactions specified herein, including without limitation title insurance policy endorsement charges, recording fees and fees and expenses of legal counsel to Lender.
11.Release of Lender. Borrower hereby releases, remises, acquits and forever discharges Lender, together with its employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, and related corporate divisions (all of the foregoing hereinafter called the “Released Parties”), from any and all actions and causes of
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action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter accruing, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the Effective Date, and in any way directly or indirectly arising out of or in any way connected to this Agreement or any of the Loan Documents or any of the transactions associated therewith, or the Mortgaged Property, including specifically but not limited to claims of usury.
12.Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.
13.Severability. If any covenant, condition, or provision herein contained is held to be invalid by final judgment of any court of competent jurisdiction, the invalidity of such covenant, condition, or provision shall not in any way affect any other covenant, condition or provision herein contained.
14.Time of the Essence. It is expressly agreed by the parties hereto that time is of the essence with respect to this Agreement.
15.Representation by Counsel. The parties acknowledge and confirm that each of their respective attorneys have participated jointly in the review and revision of this Agreement and that it has not been written solely by counsel for one party. The parties hereto therefore stipulate and agree that the rule of construction to the effect that any ambiguities are to or may be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor either party against the other.
16.Governing Law. This Agreement and the rights and duties of the parties hereunder shall be governed for all purposes by the law of the State of Texas and the law of the United States applicable to transactions within said State.
17.Successors and Assigns. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
18.Notice of No Oral Agreements. Borrower and Lender hereby take notice of and agree to the following:
A. PURSUANT TO SUBSECTION 26.02(b) OF THE TEXAS BUSINESS AND COMMERCE CODE, A LOAN AGREEMENT IN WHICH THE AMOUNT INVOLVED THEREIN EXCEEDS $50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE AGREEMENT IS IN WRITING AND SIGNED BY THE PARTY TO BE BOUND OR BY THAT PARTY’S AUTHORIZED REPRESENTATIVE.
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B. PURSUANT TO SUBSECTION 26.02(c) OF THE TEXAS BUSINESS AND COMMERCE CODE, THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO THE LOAN DOCUMENTS SHALL BE DETERMINED SOLELY FROM THE LOAN DOCUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO THE LOAN DOCUMENTS.
C. THE LOAN DOCUMENTS AND THIS AGREEMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES THERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, this Agreement is executed on the respective dates of acknowledgement below but is effective as of the date first above written.
BORROWER:
STRATUS PROPERTIES INC., a Delaware corporation By: /s/ Erin D. Pickens Erin D. Pickens, Senior Vice President | THE VILLAS AT AMARRA DRIVE, L.L.C., a Texas limited liability company By: STRS L.L.C., a Delaware limited liability company, Manager By: Stratus Properties Inc., a Delaware corporation, Sole Member By: /s/ Erin D. Pickens Erin D. Pickens, Senior Vice President | ||||
STRATUS PROPERTIES OPERATING CO., L.P., a Delaware limited partnership By: STRS L.L.C., a Delaware limited liability company, General Partner By: Stratus Properties Inc., a Delaware corporation, Sole Member By: /s/ Erin D. Pickens Erin D. Pickens, Senior Vice President | STRATUS LAKEWAY CENTER, L.L.C., a Texas limited liability company By: STRS L.L.C., a Delaware limited liability company, Manager By: Stratus Properties Inc., a Delaware corporation, Sole Member By: /s/ Erin D. Pickens Erin D. Pickens, Senior Vice President | ||||
CIRCLE C LAND, L.P., a Texas limited partnership By: Circle C GP, L.L.C., a Delaware limited liability company, General Partner By Stratus Properties Inc., a Delaware corporation, Sole Member By: /s/ Erin D. Pickens Erin D. Pickens, Senior Vice President | |||||
[Signature Page – Ninth Modification Agreement]
STATE OF TEXAS §
§
COUNTY OF TRAVIS §
This instrument was acknowledged before me on the 14th day of October , 2025, by Erin D. Pickens, Senior Vice President of Stratus Properties Inc., a Delaware corporation, on behalf of said corporation. Such person is personally known to me or produced a state issued driver’s license as identification, and did take an oath.
[SEAL]
/s/ Leticia L. Silva
Notary Public, State of Texas
My Commission Expires: 02/23/2027
Printed Name of Notary: Leticia L. Silva
STATE OF TEXAS §
§
COUNTY OF TRAVIS §
This instrument was acknowledged before me on the 14th day of October , 2025, by Erin D. Pickens, Senior Vice President of Stratus Properties Inc., a Delaware corporation, Sole Member of STRS L.L.C., a Delaware limited liability company, General Partner of Stratus Properties Operating Co., L.P., a Delaware limited partnership, on behalf of said corporation, limited liability company and limited partnership. Such person is personally known to me or produced a state issued driver’s license as identification, and did take an oath.
[SEAL]
/s/ Leticia L. Silva
Notary Public, State of Texas
My Commission Expires: 02/23/2027
Printed Name of Notary: Leticia L. Silva
[Signature Page – Ninth Modification Agreement]
STATE OF TEXAS §
§
COUNTY OF TRAVIS §
This instrument was acknowledged before me on the 14th day of October , 2025, by Erin D. Pickens, Senior Vice President of Stratus Properties Inc., a Delaware corporation, Sole Member of Circle C GP, L.L.C., a Delaware limited liability company, General Partner of Circle C Land, L.P., a Texas limited partnership, on behalf of said corporation, limited liability company and limited partnership. Such person is personally known to me or produced a state issued driver’s license as identification, and did take an oath.
[SEAL]
/s/ Leticia L. Silva
Notary Public, State of Texas
My Commission Expires: 02/23/2027
Printed Name of Notary: Leticia L. Silva
STATE OF TEXAS §
§
COUNTY OF TRAVIS §
This instrument was acknowledged before me on the 14th day of October , 2025, by Erin D. Pickens, Senior Vice President of Stratus Properties Inc., a Delaware corporation, Sole Member of STRS L.L.C., a Delaware limited liability company, Manager of The Villas at Amarra Drive, L.L.C., a Texas limited liability company, on behalf of said corporation and limited liability companies. Such person is personally known to me or produced a state issued driver’s license as identification, and did take an oath.
[SEAL]
/s/ Leticia L. Silva
Notary Public, State of Texas
My Commission Expires: 02/23/2027
Printed Name of Notary: Leticia L. Silva
[Signature Page – Ninth Modification Agreement]
STATE OF TEXAS §
§
COUNTY OF TRAVIS §
This instrument was acknowledged before me on the 14th day of October , 2025, by Erin D. Pickens, Senior Vice President of Stratus Properties Inc., a Delaware corporation, Sole Member of STRS L.L.C., a Delaware limited liability company, Manager of Stratus Lakeway Center, L.L.C., a Texas limited liability company, on behalf of said corporation and limited liability companies. Such person is personally known to me or produced a state issued driver’s license as identification, and did take an oath.
[SEAL]
/s/ Leticia L. Silva
Notary Public, State of Texas
My Commission Expires: 02/23/2027
Printed Name of Notary: Leticia L. Silva
[Signature Page – Ninth Modification Agreement]
LENDER:
COMERICA BANK
By: /s/ Elaine K. Houston
Elaine K. Houston, Vice President
STATE OF TEXAS §
§
COUNTY OF TRAVIS §
This instrument was acknowledged before me on the 14 day of October , 2025, by Elaine K. Houston, Vice President of Comerica Bank, on behalf of said bank. Such person is personally known to me or produced a state issued driver’s license as identification, and did take an oath.
[SEAL]
/s/ Deborah M. Hudgeons
Notary Public, State of Texas
My Commission Expires: 6/20/29
Printed Name of Notary: Deborah M. Hudgeons
[Signature Page – Ninth Modification Agreement]
Exhibit 31.1
Certification
I, William H. Armstrong III, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Stratus Properties Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 12, 2025 | ||||||||
| By: | /s/ William H. Armstrong III | |||||||
| William H. Armstrong III | ||||||||
Chairman of the Board, | ||||||||
| President and Chief Executive Officer | ||||||||
Exhibit 31.2
Certification
I, Erin D. Pickens, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Stratus Properties Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 12, 2025 | ||||||||
| By: | /s/ Erin D. Pickens | |||||||
| Erin D. Pickens | ||||||||
| Senior Vice President and | ||||||||
| Chief Financial Officer | ||||||||
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350
(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report on Form 10-Q of Stratus Properties Inc. (the “Company”) for the quarter ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), William H. Armstrong III, as Chairman of the Board, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 12, 2025 | ||||||||
| By: | /s/ William H. Armstrong III | |||||||
| William H. Armstrong III | ||||||||
Chairman of the Board, | ||||||||
| President and Chief Executive Officer | ||||||||
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350
(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report on Form 10-Q of Stratus Properties Inc. (the “Company”) for the quarter ended September 30, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Erin D. Pickens, as Senior Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of her knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 12, 2025 | ||||||||
| By: | /s/ Erin D. Pickens | |||||||
| Erin D. Pickens | ||||||||
Senior Vice President and | ||||||||
| Chief Financial Officer | ||||||||
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.