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What changed in STRATUS PROPERTIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of STRATUS PROPERTIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+321 added−329 removedSource: 10-K (2025-03-28) vs 10-K (2024-03-28)

Top changes in STRATUS PROPERTIES INC's 2024 10-K

321 paragraphs added · 329 removed · 230 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

74 edited+15 added−15 removed92 unchanged
Biggest changeIn 2022 and 2023, our leasing operations included the lease of retail space to tenants in a variety of businesses at retail and mixed-use properties that we developed. Retail projects that have not yet stabilized may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions, competition, and construction or leasing delays.
Biggest changeRetail projects that have not yet stabilized may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions, competition, and construction or leasing delays. Our ability to achieve and sustain acceptable occupancy and rental rates may be adversely affected by oversupply, decrease in demand and declines in market rental rates.
Weakening in the Austin residential market generally makes it more difficult for us to sell our residential properties at attractive prices or to rent our properties at attractive rents. Weakening in the Austin residential market may also adversely impact the demand for retail projects, as may any other trends that cause consumers not to shop at retail locations.
Weakening in the Austin residential market generally makes it more difficult for us to sell our residential properties at attractive prices or to rent our properties at attractive rents. Weakening in the Austin residential market may also adversely impact the demand for our retail projects, as may any other trends that cause consumers not to shop at retail locations.
In order to maintain compliance with the covenants in our debt agreements and carry out our business plan, we may need to use cash to pay down the principal balance of the loan, contribute additional equity or make an operating loans to a joint venture or raise additional debt or equity capital, including project-level financing of our subsidiaries.
In order to maintain compliance with the covenants in our debt agreements and carry out our business plan, we may need to use cash to pay down the principal balance of the loan, contribute additional equity or make an operating loan to a joint venture or raise additional debt or equity capital, including project-level financing of our subsidiaries.
Further increases in interest rates would further increase our interest costs and the costs of refinancing existing debt or incurring new debt, which would adversely affect our profits and cash flow. Our operating expenses impacted by inflation include contracted services for our properties such as janitorial and engineering services, utilities, repairs and maintenance and insurance.
Future increases in interest rates would further increase our interest costs and the costs of refinancing existing debt or incurring new debt, which would adversely affect our profits and cash flow. Our operating expenses impacted by inflation include contracted services for our properties such as janitorial and engineering services, utilities, repairs and maintenance and insurance.
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.
Accordingly, 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.
For example, it could: • Increase our vulnerability to adverse changes in economic and industry conditions; • Require us to dedicate a substantial portion of our cash flow from operations and proceeds from asset sales to pay or provide for our indebtedness, thus reducing the availability of cash flows to fund working capital, development projects, capital expenditures, land acquisitions and other general corporate purposes; • Limit our flexibility to plan for, or react to, changes in our business and the markets in which we operate; • Force us to dispose of one or more of our properties, possibly on unfavorable terms; • Place us at a competitive disadvantage to our competitors that have less debt; • Limit our ability to obtain future financing to fund our working capital, our development activities, capital expenditures, debt service requirements and other financing needs; 16 Table of Contents • Limit our ability to obtain bonds, letters of credit or guarantees to governmental authorities and others to ensure completion of certain projects; and/or • Limit our ability to refinance our indebtedness or cause the refinancing terms to be less favorable than the terms of our original indebtedness.
For example, it could: • Increase our vulnerability to adverse changes in economic and industry conditions; • Require us to dedicate a substantial portion of our cash flow from operations and proceeds from asset sales to pay or provide for our indebtedness, thus reducing the availability of cash flows to fund working capital, development projects, capital expenditures, land acquisitions and other general corporate purposes; • Limit our flexibility to plan for, or react to, changes in our business and the markets in which we operate; • Force us to dispose of one or more of our properties, possibly on unfavorable terms; • Place us at a disadvantage to our competitors that have less debt; 17 Table of Contents • Limit our ability to obtain future financing to fund our working capital, our development activities, capital expenditures, debt service requirements and other financing needs; • Limit our ability to obtain bonds, letters of credit or guarantees to governmental authorities and others to ensure completion of certain projects; and/or • Limit our ability to refinance our indebtedness or cause the refinancing terms to be less favorable than the terms of our original indebtedness.
The debt arrangements that we and our subsidiaries have contain significant limitations that may restrict our ability and the ability of our subsidiaries to, among other things: • borrow additional money or provide guarantees; • pay dividends, repurchase equity or make other distributions to equityholders; • make loans, advances or other investments or create liens on assets; • sell assets, enter into sale-leaseback transactions or enter into transactions with affiliates; or • permit a change of management or control, sell all or substantially all of our assets, or engage in mergers, consolidations or other business combinations.
The debt arrangements that we and our subsidiaries have contain significant limitations that may restrict our ability and the ability of our subsidiaries to, among other things: • borrow additional money or provide guarantees; • pay dividends, repurchase equity or make other distributions to equity holders; • make loans, advances or other investments or create liens on assets; • sell assets, enter into sale-leaseback transactions or enter into transactions with affiliates; or • permit a change of management or control, sell all or substantially all of our assets, or engage in mergers, consolidations or other business combinations.
The development of the projects in our portfolio is subject to numerous risks, many of which are outside of our control, including: • inability to obtain, or delays in obtaining, entitlements; • inability to obtain financing on acceptable terms, or delays in obtaining such financing; • increases in labor costs, labor shortages, increases in the costs of building materials, other cost increases or overruns; • inability to engage reliable contractors or default by any of the contractors that we engage to construct our projects; • site accidents; and • failure to secure tenants or buyers of our properties in the anticipated time frame, on acceptable terms, or at all.
The development of the projects in our portfolio is subject to numerous risks, many of which are outside of our control, including: • inability to obtain, or delays in obtaining, entitlements, permits and development approvals; • inability to obtain financing on acceptable terms, or delays in obtaining such financing; • increases in labor costs, labor shortages, increases in the costs of building materials, other cost increases or overruns; • inability to engage reliable contractors or default by any of the contractors that we engage to construct our projects; • site accidents; and • failure to secure tenants or buyers of our properties in the anticipated time frame, on acceptable terms, or at all.
In addition, as described elsewhere in this report, as of December 31, 2023, all of our consolidated debt was variable rate debt, and interest due on such debt rises as interest rates rise. Refer to Note 6 for additional discussion. Our level of indebtedness could have significant adverse consequences.
In addition, as described elsewhere in this report, as of December 31, 2024, all of our consolidated debt was variable rate debt, and interest due on such debt rises as interest rates rise. Refer to Note 6 for additional discussion. Our level of indebtedness could have significant adverse consequences.
We could be impacted by our investments through joint ventures, which involve risks not present in investments in which we are the sole owner. We have increased our use of third-party equity financing of our subsidiaries’ development projects. We expect to continue to fund development projects through the use of such joint ventures.
We could be impacted by our investments through joint ventures, which involve risks not present in investments in which we are the sole owner. We have continued our use of third-party equity financing of our subsidiaries’ development projects. We expect to continue to fund development projects through the use of such joint ventures.
While our real estate operations have expanded to include select markets in Texas outside of the Austin area, the geographic concentration of the majority of our operations and of the properties we may have under development at any given time means that our business is more vulnerable to negative changes in local economic, regulatory, weather and other conditions than the businesses of larger, more geographically diversified companies.
While our real estate operations have expanded to include select markets in Texas outside of the Austin area, the geographic concentration of the majority 14 Table of Contents of our operations and of the properties we may have under development at any given time means that our business is more vulnerable to negative changes in local economic, regulatory, weather and other conditions than the businesses of larger, more geographically diversified companies.
We have relied on proceeds from property sales and debt financing and cash flow from operations as our primary sources of funding. We have also relied on third-party project-level equity financing of our subsidiaries, which we expect to continue to increase in the future.
We have relied on proceeds from property sales and debt financing and cash flow from operations as our primary sources of funding. We have also relied on third-party project-level equity financing of our subsidiaries, which we expect to continue to seek in the future.
On completed projects, we have experienced increased borrowing costs on our variable rate debt due to higher interest rates and increased operating costs due to inflation. As of December 31, 2023, all of our consolidated debt was variable rate debt.
On completed projects, we have experienced increased borrowing costs on our variable rate debt due to higher interest rates and increased operating costs due to inflation. As of December 31, 2024, all of our consolidated debt was variable rate debt.
Our development plans for our undeveloped land and land under development may change over time, including as a result of changes in real estate market conditions, economic conditions, the cost and availability of capital and changes in laws, such as changes resulting from Texas Senate Bill 2038 enacted in 2023, discussed further below.
Furthermore, our development plans for our undeveloped land and land under development may change over time, including as a result of changes in real estate market conditions, economic conditions, the cost and availability of capital and changes in laws, such as changes resulting from Texas Senate Bill 2038 (the ETJ Law) enacted in 2023, discussed further below.
We are vulnerable to concentration risks because our operations are primarily located in the Austin, Texas area and are primarily focused on residential, residential-centric mixed-use, and retail real estate. Our real estate operations are primarily located in the Austin, Texas area.
We are vulnerable to concentration risks because our operations are primarily located in the Austin, Texas area and are focused on pure residential and residential-centric mixed-use real estate. Our real estate operations are primarily located in the Austin, Texas area.
Each joint venture agreement is individually negotiated, and our ability to operate, 14 Table of Contents finance, or dispose of a joint venture project in our sole discretion is limited to varying degrees depending on the terms of the applicable joint venture agreement. Refer to Note 2 for further discussion of our investments in joint ventures.
Each joint venture agreement is individually negotiated, and our ability to operate, finance, or dispose of a joint venture project in our sole discretion is limited to varying degrees depending on the terms of the applicable joint venture agreement. Refer to Note 2 for further discussion of our investments in joint ventures.
From time to time, the Environmental Protection Agency and similar federal, state or local agencies review land developers’ compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures.
Environmental Protection Agency and similar federal, state or local agencies review land developers’ compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures.
Our development plans for future projects require significant additional debt and equity capital. We have increasingly raised equity capital from third parties through joint venture structures, which have their own risks. We may not be able to obtain the funding necessary to implement our business strategy on acceptable terms or at all.
We may not be able to obtain the capital necessary to implement our business strategy on acceptable terms or at all. Our development plans for future projects require significant additional debt and equity capital. We have increasingly raised equity capital from third parties through joint venture structures, which, as discussed below, have their own risks.
A significant theft, loss, loss of access 15 Table of Contents to, or fraudulent use of employee, tenant or other company data could adversely impact our reputation and could result in a loss of business, as well as remedial and other expenses, fines and litigation.
A significant theft, loss, loss of access to, or fraudulent use of employee, tenant or other company data could adversely impact our reputation and could result in a loss of business, as well as remedial and other expenses, fines and litigation.
In 2022 and 2023, our leasing operations also included the lease of residences in multi-family projects that we developed. Multi-family projects that have not yet stabilized may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions, competition, and construction or leasing delays.
Our leasing operations also include the lease of residences in multi-family projects that we developed. Multi-family projects that have not yet stabilized may fail to meet our original expectations for a number of reasons, including changes in market and economic conditions, competition, and construction or leasing delays.
Further, we may be unable to renew existing leases as they come due. Adverse economic conditions that negatively impact our tenants’ employment could adversely impact our tenants’ ability to pay rent and/or cause tenants and potential tenants to prefer housing alternatives with lower rents.
Further, we may be unable to renew existing leases as they come due. Adverse economic conditions that negatively impact our tenants’ employment could 22 Table of Contents adversely impact our tenants’ ability to pay rent and/or cause tenants and potential tenants to prefer housing alternatives with lower rents.
Other factors that may impact real estate businesses include over-building, changes in traffic patterns, changes in demographic trends, changes in tenant and buyer preferences and changes in government requirements, including tax law changes and changes in zoning laws.
Other factors that may impact real estate businesses include over-building, changes in traffic patterns, changes in demographic trends, changes in tenant and buyer preferences and changes in government requirements, including tax law changes and changes in zoning or land use laws.
We and our joint venture partners may each have the right to initiate a buy-sell arrangement, which could cause us to sell our interest, or acquire a joint venture partner’s interest, at a time when we otherwise would not have entered into such a transaction.
We and our joint venture partners may each have the right to initiate a buy-sell arrangement, which could cause us to sell our interest, or acquire a joint venture partner’s interest, at a time when we otherwise would not have entered into 15 Table of Contents such a transaction.
Our industry has been experiencing inflation, higher borrowing costs, tightened bank credit, more limited availability of equity capital, increased construction costs, higher labor costs, labor shortages, and supply chain constraints. Inflation in the U.S. increased rapidly during 2021 through June 2022.
Our industry has been experiencing inflation, higher borrowing costs, tightened bank credit, more limited availability of equity capital, increased construction costs, higher labor costs, labor shortages, and supply chain constraints. Inflation increased rapidly during 2021 through June 2022.
While these cybersecurity incidents did not result in any material loss to us as of March 25, 2024, there can be no assurance that we will not experience any such losses in the future.
While these cybersecurity incidents did not result in any material loss to us as of March 21, 2025, there can be no assurance that we will not experience any such losses in the future.
Item 1A. Risk Factors This report contains “forward-looking statements” within the meaning of the United States (U.S.) federal securities laws. Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations. For additional information, refer to “Cautionary Statement” in Items 7. and 7A.
Item 1A. Risk Factors This report contains “forward-looking statements” within the meaning of the United States (U.S.) federal securities laws. Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations. For additional information, refer to “Cautionary Statement” in MD&A.
Refer to “Critical Accounting Estimates” in Part II, Items 7. and 7A. for more information. Significant competition could have an adverse effect on our business. Our competitors include local developers who are committed primarily to particular markets and also regional and national developers who acquire and develop properties throughout the U.S.
Refer to “Critical Accounting Estimates” in MD&A for more information. Significant competition could have an adverse effect on our business. Our competitors include local developers who are committed primarily to particular markets and also regional and national developers who acquire and develop properties throughout the U.S.
These factors have increased our costs, adversely impacted the projected profitability of our new projects, delayed the start of or completion of projects, adversely impacted our ability to raise equity capital on attractive terms and in our desired time frame and adversely impacted our ability to sell some properties at attractive prices in our desired time frame; these trends may continue or worsen.
Elevated inflation and interest rates have increased our costs, adversely impacted the projected profitability of our new projects, delayed the start of or completion of projects, adversely impacted our ability to raise equity capital on attractive terms and in our desired time frame and adversely impacted our ability to sell some properties at attractive prices in our desired time frame; and elevated inflation and interest rates may continue or worsen.
Inflation may cause the value of our properties to rise, which could lead to higher property taxes. Our general and administrative expenses include compensation costs, professional fees and technology services, all of which may continue to increase due to inflation.
In addition, inflation may continue to cause the value of our properties to rise, which has resulted in higher property taxes and could lead to future increases. Our general and administrative expenses include compensation costs, professional fees and technology services, all of which may continue to increase due to inflation.
If we are unable to generate sufficient cash to service our debt, or are unable to refinance our debt as it becomes due, our liquidity, financial condition and results of operations could be materially and adversely affected. As of December 31, 2023, our outstanding debt totaled $175.2 million and our cash and cash equivalents totaled $31.4 million.
If we are unable to generate sufficient cash to service our debt, or are unable to refinance our debt as it becomes due, our liquidity, financial condition and results of operations could be materially and adversely affected. As of December 31, 2024, our outstanding debt totaled $194.9 million and our cash and cash equivalents totaled $20.2 million.
Refer to “Overview of Financial Results for 2023 – Real Estate Market Conditions” in Part II, Items 7. and 7A. for more information. We may not be able to raise additional capital for future projects on acceptable terms, if at all. Our industry is capital-intensive and requires significant up-front expenditures to secure land and pursue development and construction.
Refer to “Overview of Financial Results for 2024 – Real Estate Market Conditions” in MD&A for more information. We may not be able to raise additional capital for future projects on acceptable terms, if at all. Our industry is capital-intensive and requires significant up-front expenditures to secure land and pursue development and construction.
Our Holden Hills project involves the development of a large number of residential lots, which exposes us to risks specific to that business. Our Holden Hills project involves the development of a large number of residential lots.
Holden Hills Phase 1 involves the development of a large number of residential lots, which exposes us to risks specific to that business. Holden Hills Phase 1 involves the development of a large number of residential lots.
These risks include, but are not limited to, installation of malicious software, phishing, ransomware, credential attacks, unauthorized access to data and other cybersecurity incidents that could lead to disruptions in information systems, unauthorized release of confidential or otherwise protected information, employee theft or misuse of confidential or otherwise protected information and the corruption of data.
These risks include, but are not limited to, installation of malicious software, phishing, ransomware, credential attacks, unauthorized access to data and other cybersecurity incidents, including those that use artificial intelligence and quantum computing, that could lead to disruptions in information systems, unauthorized release of confidential or otherwise protected information, employee theft or misuse of confidential or 16 Table of Contents otherwise protected information and the corruption of data.
We estimate our interest payments during 2024 will total approximately $13.6 million , assuming interest rates in effect on our debt at December 31, 2023, no new debt agreements, and completed or scheduled principal payments as of March 25, 2024 on debt outstanding at December 31, 2023.
We estimate our interest payments during 2025 will total approximately $12.9 million , assuming interest rates in effect on our debt at December 31, 2024, no new debt agreements, and completed or scheduled principal payments as of March 21, 2025 on debt outstanding at December 31, 2024.
Any of these may limit, delay or increase the costs of acquisition of land and development of our properties. 19 Table of Contents Because government agencies and special interest groups from time to time express concerns about certain of our development plans, and in the future may express similar concerns, our ability to develop these properties and realize future income from our properties could be delayed, reduced, prevented or made more expensive.
Because government agencies and special interest groups from time to time express concerns about certain of our development plans, and in the future may express similar concerns, our ability to develop these properties and realize future income from our properties could be delayed, reduced, prevented or made more expensive.
The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could materially adversely affect our business, assets or results of operations.
The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could materially adversely affect our business, assets or results of operations. 21 Table of Contents From time to time, the U.S.
New environmental regulations or changes in existing regulations or their enforcement may be enacted and such new regulations or changes may require significant expenditures by us. The recent trend toward stricter standards in environmental legislation and regulations is likely to continue and could have a material adverse effect on our operating costs.
New environmental regulations or changes in existing regulations or their enforcement may be enacted and such new regulations or changes may require significant expenditures by us. Any stricter standards in environmental legislation and regulations could have a material adverse effect on our operating costs.
If they fail to comply with all applicable laws, we can suffer reputational damage, and may be exposed to potential liability. Our operations are subject to environmental regulations, which can change at any time and could increase our costs. Further, increasing climate change concerns may increase our costs.
If they fail to comply with all applicable laws, we can suffer reputational damage, and may be exposed to potential liability. Our operations are subject to environmental regulations, which can change at any time and could increase our costs. Further, changing governmental and societal expectations on environmental, social and governance matters may increase our costs.
Our business is especially sensitive to economic conditions in the Austin, Texas area, where the majority of our properties are located. As discussed elsewhere in this report, our business was adversely impacted during 2022 and 2023 by rising inflation and interest rates and other adverse economic conditions.
Our business is especially sensitive to economic conditions in the Austin, Texas area, where the majority of our properties are located. As discussed elsewhere in this report, our business has been adversely impacted since 2022 through early 2025 by inflation and elevated interest rates and other adverse economic conditions.
Whether or not the properties in our leasing operations are occupied, we continue to incur expenses such as maintenance costs, insurance costs and property taxes.
Whether or not the properties in our leasing operations are occupied, we continue to incur expenses such as maintenance costs, insurance costs and property taxes. We have experienced and may continue to experience increases in our operating expenses in our leasing operations, including due to inflation.
Refer to “Capital Resources and Liquidity” in Part II, Items 7. and 7A. and Note 6 for additional discussion of restrictive covenants in our debt agreements.
Refer to “Capital Resources and Liquidity” in MD&A and Note 6 for additional discussion of restrictive covenants in our debt agreements.
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.
As of March 21, 2025, $3.0 million remained available for the repurchase of shares under the $5.0 million program. The timing, price and number of shares that may be repurchased under the program will be based on market conditions, applicable securities laws and other factors considered by management and the Capital Committee of the Board.
We have completed the statutory process to remove all of our relevant land subject to development, including primarily Holden Hills and Section N, from the extraterritorial jurisdiction (ETJ) of the City of Austin, as permitted under Texas Senate Bill 2038 (the ETJ Law).
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 under the ETJ Law.
Our long-term success will depend on our ability to profitably execute our development plans over time. Inflation, higher borrowing costs, tightened bank credit, more limited availability of equity capital, increased construction and labor costs and supply chain constraints have had an adverse impact on us and may continue to do so.
Inflation, higher borrowing costs, tightened bank credit, more limited availability of equity capital, increased construction costs, higher labor costs, labor shortages and supply chain constraints have had an adverse impact on us and may continue to do so.
In addition, the zoning that ultimately is approved could include density provisions that would limit the number of homes and other structures that could be built within the boundaries of a particular area.
In addition, the zoning that ultimately is approved could include density provisions that would limit the number of homes and other structures that could be built within the boundaries of a particular area. Any of these may limit, delay or increase the costs of acquisition of land and development of our properties.
Investors should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K. The risk factors described herein are not all of the risks we may face.
Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements are discussed below. Investors should carefully consider the risks described below in addition to the other information set forth in this annual report on Form 10-K. The risk factors described herein are not all of the risks we may face.
We have experienced and may continue to experience increases in our operating expenses in our leasing operations, including due to inflation. 21 Table of Contents Risks Relating to Ownership of Shares of Our Common Stock Our common stock is thinly traded; therefore, our stock price may fluctuate more than the stock market as a whole and it may be difficult to sell large numbers of our shares at prevailing trading prices.
Risks Relating to Ownership of Shares of Our Common Stock Our common stock is thinly traded; therefore, our stock price may fluctuate more than the stock market as a whole and it may be difficult to sell large numbers of our shares at prevailing trading prices.
Such additional funding may not be available on acceptable terms, if at all, when needed. If new debt is added to our current debt levels, the risks described above could intensify. Risks Relating to Real Estate Operations Our business, results of operations, cash flows and financial condition are greatly affected by the performance of the real estate industry.
If new debt is added to our current debt levels, the risks described above could intensify. 18 Table of Contents Risks Relating to Real Estate Operations Our business, results of operations, cash flows and financial condition are greatly affected by the performance of the real estate industry.
Many of our competitors are larger and financially stronger than we are, have more resources than we do, and have greater economies of scale and lower cost structures. If we fail to compete effectively, our business and profitability will be adversely affected.
Many of our competitors are larger and financially stronger than we are, have more resources than we do, and have greater economies of scale and lower cost structures.
Any delays in the development of the community and sale of properties exposes us to the risk that the market assumptions on which we based our development plans may deteriorate and adversely affect or eliminate potential cash flow and profits.
Any delays in the development of the community and sale of properties exposes us to the risk that the market assumptions on which we based our development plans may deteriorate and adversely affect or eliminate potential cash flow and profits. 19 Table of Contents Litigation challenging the ETJ Law may make valuation of Holden Hills Phases 1 and 2 more difficult and execution of our development plans more complex and costly.
We can provide no assurances that we will complete any of the projects in our development portfolio on the anticipated schedule or within the budget, or that, once completed, these properties will achieve the results that we expect.
We can provide no assurances that we will complete any of the projects in our development portfolio on the anticipated schedule or within the budget, or that, once completed, these properties will achieve the results that we expect. During 2023 and 2024, and first-quarter 2025, we made operating loans and a capital contribution to certain of our joint ventures.
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 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 , which may decrease the trading price of our common stock. 23 Table of Contents 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.
We have also made filings with Travis County to grandfather the Holden Hills and Section N projects under most laws in effect in Travis County at the time of the filings.
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.
We cannot assure you that these markets will grow or that underlying real estate fundamentals will be favorable in these markets. 13 Table of Contents As a result of our focus on residential, residential-centric mixed-use, and retail projects in Austin, we may be exposed to greater risks than if our investment focus was based on more diversified types of properties.
As a result of our focus on pure residential and residential-centric mixed-use projects, we may be exposed to greater risks than if our investment focus was based on more diversified types of properties.
Real estate is a relatively illiquid asset and its value may be materially adversely affected by a decline in the value of real estate in our markets. It may be difficult for us to sell our real estate quickly if the need or desire arises, at prices or on terms we find acceptable.
Real estate is a relatively illiquid asset and we may not be able to sell our real estate at times and prices we find desirable. The value of our real estate and our ability to sell our real estate at attractive prices may be materially adversely affected by a decline in the value of real estate in our markets.
Our ability to achieve and sustain acceptable occupancy and rental rates may be adversely affected by oversupply, decrease in demand and declines in market rental rates. We face competition in attracting tenants to choose our retail and mixed-use projects over those of other developers and owners of similar properties.
We face competition in attracting tenants to choose our retail and mixed-use projects over those of other developers and owners of similar properties.
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 are discussed below.
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. 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.
Although we declared special cash dividends on our common stock in March 2017 and September 2022 after receiving written consents from Comerica Bank and we anticipate returning capital to stockholders in connection with any sales of our completed retail projects, we may not decide to or be able to pay special cash dividends in the future.
Further, our Comerica Bank debt agreements prohibit us from paying a dividend on our common stock without the bank’s prior written consent. Although we declared special cash dividends on our common stock in March 2017 and September 2022 after receiving written consents from Comerica Bank, we may decide not to or be unable to pay cash dividends in the future.
Our operations are subject to an intensive regulatory approval process and opposition from environmental and special interest groups, either or both of which could cause delays and increase the costs of our development efforts or preclude such developments entirely. Real estate projects must generally comply with local land development regulations and may need to comply with state and federal regulations.
If we fail to compete effectively, our business and profitability will be adversely affected. 20 Table of Contents Our operations are subject to an intensive regulatory approval process and opposition from environmental and special interest groups, either or both of which could cause delays and increase the costs of our development efforts or preclude such developments entirely.
The performance of the Austin area’s economy and our other select markets in Texas greatly affects our revenue and the values of our properties.
The performance of the Austin area’s economy and our other select markets in Texas greatly affects our revenue and the values of our properties. We cannot assure you that these markets will grow or that underlying real estate fundamentals will be favorable in these markets.
For all such debt, the average interest rate increased for 2023 compared to 2022 and may continue to rise in the future if prevailing market interest rates rise. Refer to Note 6 for additional information.
For all such debt, the average interest rate increased for 2024 compared to 2023, but began to stabilize toward the end of 2024. Interest costs remain elevated and may rise in the future if prevailing market interest rates rise again.
Our ability to generate revenue in our leasing operations depends on our ability to successfully develop new projects and our ability to obtain attractive rental and occupancy rates on existing and new projects.
Even if we are able to obtain the necessary capital, our business strategy may not produce sufficient revenues, profits and cash flows. In addition, our ability to generate revenue in our leasing operations depends on our ability to successfully develop new projects and our ability to obtain attractive rental and occupancy rates on existing and new projects.
We believe that the litigation challenging the ETJ Law makes valuation of our Holden Hills and Section N projects more difficult. In light of the ETJ Law, we have begun work on assessing potential revisions to our development plans.
We believe that the litigation challenging the ETJ Law makes valuation of Holden Hills Phases 1 and 2 more difficult. In light of the ETJ Law, our development plans for portions of Holden Hills Phases 1 and 2 are being adjusted.
As of March 25, 2024, principal payments due on outstanding debt during 2024 total $68.0 million.
As of March 21, 2025, principal payments due on outstanding debt during 2025 are expected to total $48.9 million.
As discussed above, our industry was adversely impacted during 2022 and 2023 by rising inflation 17 Table of Contents and interest rates, and rising or high inflation and interest rates may continue in 2024 and beyond.
As discussed above, our industry has been adversely impacted since 2022 by elevated inflation and interest rates, and elevated inflation and interest rates may continue in 2025 and beyond.
Furthermore, our business strategy may not produce sufficient revenues even if we are able to obtain the necessary capital. 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.
The timing of any property sales or refinancings and proceeds from such sales or refinancings are difficult to predict and depend on market conditions and other factors. 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.
Several cities in Texas have brought a lawsuit challenging the ETJ Law, alleging among other things, that it constitutes an unconstitutional delegation of legislative authority to private parties under the Texas constitution. 18 Table of Contents If the ETJ Law is upheld, our projects formerly subject to both the jurisdiction of Travis County and the City of Austin, primarily our Holden Hills and Section N projects, will no longer be subject to the City of Austin regulations applicable in the ETJ.
If the ETJ Law is upheld, our projects formerly subject to both the jurisdiction of Travis County and the City of Austin, primarily Holden Hills Phases 1 and 2, will no longer be subject to the City of Austin regulations applicable in the ETJ.
Since June 2022, the rate of inflation 12 Table of Contents generally has declined; however, it has remained at high levels compared to recent historical periods. 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.
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. Between September 2024 13 Table of Contents and December 2024, the Federal Reserve lowered the federal funds target rate by 100 basis points on a cumulative basis.
If we are unable to adequately address such matters, our reputation and our business could be adversely impacted. 20 Table of Contents Risks Relating to Leasing Operations We may be unable to achieve and sustain satisfactory occupancy and rental rates at our retail and mixed-use projects.
Risks Relating to Leasing Operations We may be unable to achieve and sustain satisfactory occupancy and rental rates at our retail and mixed-use projects. Our leasing operations include the lease of retail space to tenants in a variety of businesses at retail and mixed-use properties that we developed.
Our $10.0 million program was completed in October 2023 and in November 2023 our Board approved a new $5.0 million program. As of March 25, 2024, $5.0 million remained available for the repurchase of shares under the $5.0 million program.
Comerica Bank’s consents to share repurchase programs in the past are not indicative of the bank’s willingness to consent to any future share repurchase programs. Our $10.0 million program was completed in October 2023 and in November 2023 our Board approved a new $5.0 million program.
Increasing governmental and societal focus on environmental, social and governance matters has increased, is controversial, and may continue to increase our costs of assessing and reporting on such matters.
Environmental, social and governance matters have been a focus of society and governments in recent years, are controversial and opinions and reactions continue to evolve. Responding to these changes may continue to increase our costs of assessing and reporting on such matters.
If the litigation is not timely resolved, we may decide to proceed with a revised development plan and incur costs in alignment with the revised plan, subject to the risk that the ETJ law will be invalidated.
We are proceeding with certain revised development plans for portions of Holden Hills Phases 1 and 2 and are incurring costs in alignment with the revised plans, subject to the risk that the ETJ law will be invalidated.
Austin, our primary market, has experienced significant growth in demand for residential projects in recent years, particularly during 2020 and 2021 related in part to COVID-19 pandemic-influenced in-migration; however, prices and demand for residential real estate in the Austin area have generally moderated and in some submarkets declined.
For a description of our current business strategy, refer to “Business Strategy” in MD&A. Our long-term success will depend on our ability to profitably execute our development plans over time. Austin, our primary market, has experienced significant growth in demand for residential projects during 2020 and 2021 and peaking in 2022 related in part to COVID-19 pandemic-influenced in-migration.
We anticipate making future operating loans to three of our joint ventures totaling up to $3.8 million over the next 12 months. Our estimates of future operating loans are based on estimates of future costs of the partnerships and anticipated future operating loans from the Class B limited partners of approximately $2.5 million.
Refer to Note 2 for further discussion. We anticipate making future operating loans to one of our joint ventures totaling up to $1.7 million over the next 12 months. We also anticipate making an additional capital contribution of $125 thousand to one of our joint ventures over the next 12 months.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk. 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.
Added
However, more recently, prices and demand for residential real estate in the Austin area have generally declined from that peak. We also have faced challenging market conditions in recent years, including as a result of high inflation and interest rates.
Removed
For a description of our current business strategy, refer to “Business Strategy” in MD&A. Results of the past sales of our properties are not indicative of results of future sales. The timing of property sales and proceeds from such sales are difficult to predict and depend on market conditions and other factors.
Added
Results of the past sales of our properties are not indicative of results of future sales, and we may determine to hold or refinance our properties or continue to develop them, as applicable, rather than position them for sale.
Removed
In addition, we have faced challenging market conditions in recent periods due to high interest rates, tightened bank credit and high inflation, among other things.
Added
For example, in 2024, we paused exploring the sales of West Killeen Market, Lantana Place – Retail and Kingwood Place, deciding to retain these cash-flowing properties at this time and refinance certain of these properties.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur IT Steering Committee is led by our IT Director and includes senior members from Stratus’ different departments. 23 Table of Contents We have an IT Security Team consisting of our IT Director and Network Administrator/Security Analyst responsible for monitoring our information systems for cybersecurity threats and incidents, detecting and analyzing cybersecurity incidents, and reporting cybersecurity incidents to our Incident Response Team (described below).
Biggest changeWe have an IT Security Team consisting of our IT Director and Network Administrator/Security Analyst responsible for monitoring our information systems for cybersecurity threats and incidents, detecting and analyzing cybersecurity incidents, and reporting cybersecurity incidents to our Incident Response Team (described below). Our IT Security Team is led by our IT Director.
The Audit Committee receives periodic reports from our Chief Financial Officer on our cybersecurity risks and cybersecurity risk management program. The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from our Chief Financial Officer on our cybersecurity risks and cybersecurity risk management program.
The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from our Chief Financial Officer on our cybersecurity risks and cybersecurity risk management program.
Our Network Administrator/Security Analyst holds a Master of Science degree in Cybersecurity from a Center of Academic Excellence in Cyber Defense designated university and has two years of experience working with our information systems, including endpoint security software and Security Information and Event Management tool management.
Our Network Administrator/Security Analyst holds a Master of Science degree in Cybersecurity from a Center of Academic Excellence in Cyber Defense designated university and has three years of experience working with our information systems, including endpoint security software and Security Information and Event Management tool management.
Our IT Security Team is led by our IT Director. Our IT Security Team may also include one or more external IT technical experts depending on the nature and scope of any particular cybersecurity threat or incident. We have an Incident Response Team consisting of management personnel that is responsible for promptly responding to cybersecurity incidents.
Our IT Security Team may also include one or more external IT technical experts depending on the nature and scope of any particular cybersecurity threat or incident. We have an Incident Response Team consisting of management personnel that is responsible for promptly responding to cybersecurity incidents.
Our IT Director has 25 years of experience in the development, implementation and maintenance of public company information systems with a focus on network and IT infrastructure security; four years of experience in cybersecurity matters, including identifying and assessing cybersecurity risks and developing and implementing cybersecurity risk management strategies and programs; and has completed educational programs in cybersecurity risk management.
Our IT Director has over 25 years of experience in the development, implementation and maintenance of public company information systems with a focus on network and IT infrastructure security; five years of experience in cybersecurity matters, including identifying and assessing cybersecurity risks and developing and implementing cybersecurity risk management strategies and programs; and has completed educational programs in cybersecurity risk management.
“Risk Factors.” Cybersecurity Governance Our Board considers risks from cybersecurity threats as part of its risk oversight function and has delegated to the Audit Committee oversight of our information and technology security policies and the internal controls regarding information and technology security and cybersecurity risks .
“Risk Factors.” Cybersecurity Governance Our Board considers risks from cybersecurity threats as part of its risk oversight function and has delegated to the Audit Committee oversight of our information and technology security policies and the internal controls regarding information and technology security and cybersecurity risks . 24 Table of Contents The Audit Committee receives periodic reports from our Chief Financial Officer on our cybersecurity risks and cybersecurity risk management program.
We have an information technology (IT) Steering Committee consisting of senior management that is responsible for establishing IT priorities for Stratus and providing input and guidance on IT issues, including cybersecurity matters and incident response.
We have an information technology (IT) Steering Committee consisting of senior management that is responsible for providing input and guidance on IT issues, including cybersecurity matters and incident response. Our IT Steering Committee is led by our IT Director and includes senior members from Stratus’ different departments.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePickens previously served as Executive Vice President and Chief Financial Officer of Tarragon Corporation from November 1998 until April 2009, and as Vice President and Chief Accounting Officer from 24 Table of Contents September 1996 until November 1998 and Accounting Manager from June 1995 until August 1996 for Tarragon and its predecessors. Ms. Pickens is a licensed Certified Public Accountant.
Biggest changePickens previously served as Executive Vice President and Chief Financial Officer of Tarragon Corporation from November 1998 until April 2009, and as Vice President and Chief Accounting Officer from September 1996 until November 1998 and Accounting Manager from June 1995 until August 1996 for Tarragon and its predecessors. Ms. Pickens is a licensed Certified Public Accountant. Ms.
Armstrong previously served as President, Chief Operating Officer and Chief Financial Officer, from 1996 to 1998. Mr. Armstrong also serves as a director of Moody National REIT II, Inc., a publicly traded real estate investment trust, from September 2017 to present. Mr.
Armstrong previously served as President, Chief Operating Officer and Chief Financial Officer, from 1996 to 1998. Mr. 25 Table of Contents Armstrong also serves as a director of Moody National REIT II, Inc., a publicly traded real estate investment trust, from September 2017 to present. Mr.
Item 4. Mine Safety Disclosures Not applicable. Information About Our Executive Officers Certain information as of March 25, 2024, regarding our executive officers is set forth in the following table and accompanying text. Each of our executive officers serves at the discretion of our Board of Directors. Name Age Position or Office William H.
Item 4. Mine Safety Disclosures Not applicable. Information About Our Executive Officers Certain information as of March 21, 2025, regarding our executive officers is set forth in the following table and accompanying text. Each of our executive officers serves at the discretion of our Board of Directors. Name Age Position or Office William H.
Armstrong III 59 Chairman of the Board, President and Chief Executive Officer Erin D. Pickens 62 Senior Vice President and Chief Financial Officer Mr. Armstrong has been employed by us since our inception in 1992. Mr. Armstrong has served as President since August 1996, Chief Executive Officer since May 1998 and Chairman of the Board since August 1998. Mr.
Armstrong III 60 Chairman of the Board, President and Chief Executive Officer Erin D. Pickens 63 Senior Vice President and Chief Financial Officer Mr. Armstrong has been employed by us since our inception in 1992. Mr. Armstrong has served as President since August 1996, Chief Executive Officer since May 1998 and Chairman of the Board since August 1998. Mr.
Ms. Pickens is a current member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. 25 Table of Contents PART II
Pickens is a current member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. 26 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+2 added−1 removed7 unchanged
Biggest changeOur Comerica Bank debt agreements contain a restrictive covenant limiting common stock repurchases to $1.0 million in the aggregate during the term of the agreements. Any repurchases of our common stock outside of our approved $5.0 million share repurchase program would require a waiver from Comerica Bank. Refer to Part I, Item 1A. “Risk Factors” for further discussion.
Biggest changeAny repurchases of our common stock outside of our approved $5.0 million share repurchase program would require a waiver from Comerica Bank. Refer to Part I, Item 1A. “Risk Factors” for further discussion. Unregistered Sales of Equity Securities None.
Share repurchases under the program may be made from time to time through solicited or 26 Table of Contents unsolicited transactions in the open market, in privately negotiated transactions or by other means in accordance with securities laws.
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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our common stock trades on The Nasdaq Stock Market (NASDAQ) under the symbol “STRS.” As of March 25, 2024, there were 294 holders of record of our common stock including participants in security position listings.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our common stock trades on The Nasdaq Stock Market (NASDAQ) under the symbol “STRS.” As of March 26, 2025, there were 293 holders of record of our common stock including participants in security position listings.
Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities The following table sets forth information with respect to shares of our common stock that we repurchased under our share purchase programs during the three months ended December 31, 2023.
Issuer Purchases of Equity Securities The following table sets forth information with respect to shares of our common stock that we repurchased under our share purchase program during the three months ended December 31, 2024.
In October 2023, we completed the share repurchase program, which did not have an expiration date. On November 14, 2023, we announced that our Board approved a new share repurchase program authorizing repurchases of up to $5.0 million of our common stock.
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.
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 October 1, 2023 through October 31, 2023 2,759 $ 26.61 2,759 $ — November 1, 2023 through November 30, 2023 — — — 5,000,000 December 1, 2023 through December 31, 2023 — — — 5,000,000 Total 2,759 $ 26.61 2,759 $ 5,000,000 a.
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 October 1, 2024 through October 31, 2024 — $ — — $ 5,000,000 November 1, 2024 through November 30, 2024 52,767 25.33 52,767 3,663,598 December 1, 2024 through December 31, 2024 9,919 25.58 9,919 3,409,906 Total 62,686 $ — 62,686 $ 3,409,906 a.
Removed
On September 2, 2022, we announced that our Board approved a share repurchase program authorizing repurchases of up to $10.0 million of our common stock. Share repurchases under the program were 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.
Added
As of March 21, 2025, $3.0 million remains available for repurchases under the program. Our Comerica Bank debt agreements contain a restrictive covenant limiting common stock repurchases to $1.0 million in the aggregate during the term of the agreements.
Added
Through 27 Table of Contents March 21, 2025, we acquired 83,380 shares of our common stock for a total cost of $2.0 million at an average price of $23.98 per share, and $3.0 million remains available for repurchases under the program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

138 edited+74 added−83 removed43 unchanged
Biggest changeDEBT MATURITIES AND OTHER CONTRACTUAL OBLIGATIONS The following table summarizes our total debt maturities based on the principal amounts outstanding as of December 31, 2023 (in thousands): 2024 2025 2026 2027 2028 Thereafter Total Comerica Bank revolving credit facility $ — $ — $ — $ — $ — $ — $ — Jones Crossing loan — — 22,594 — — 22,594 The Annie B land loan a 14,000 — — — — — 14,000 Construction loans: Kingwood Place b 28,282 — — — — — 28,282 The Saint June c 27,814 — — — — — 27,814 The Saint George — — 25,570 — — — 25,570 Lantana Place 319 350 379 21,992 — — 23,040 Amarra Villas credit facility d 15,682 — — — — — 15,682 Magnolia Place e 8,810 — — — — — 8,810 West Killeen Market 58 5,198 — — — — 5,256 Holden Hills — — 6,341 — — — 6,341 Total $ 94,965 $ 5,548 $ 54,884 $ 21,992 $ — $ — $ 177,389 a.
Biggest changeThe 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. 42 Table of Contents DEBT MATURITIES AND OTHER CONTRACTUAL OBLIGATIONS The following table summarizes our total debt maturities based on the principal amounts outstanding as of December 31, 2024 (in thousands): 2025 2026 2027 2028 2029 Thereafter Total Comerica Bank revolving credit facility s $ — $ — $ — $ — $ — $ — $ — Kingwood Place loan b — — 33,000 — — — 33,000 Jones Crossing loan c — 22,581 — — — 22,581 The Annie B land loan d 12,600 — — — — — 12,600 Construction loans: The Saint George — 48,301 — — — — 48,301 The Saint June e 32,200 — — — — — 32,200 Lantana Place f 185 198 25,183 — — — 25,566 Holden Hills Phase 1 — 15,590 — — — — 15,590 West Killeen Market g 5,196 — — — — — 5,196 Amarra Villas credit facility — 1,631 — — — — 1,631 Total $ 50,181 $ 88,301 $ 58,183 $ — $ — $ — $ 196,665 a.
Real Estate Market Conditions. Because of the concentration of our assets primarily in the Austin, Texas area, and in other select markets in Texas, real estate market conditions in these regions significantly affect our business. These market conditions historically have moved in periodic cycles and can be volatile.
Because of the concentration of our assets primarily in the Austin, Texas area, and in other select markets in Texas, real estate market conditions in these regions significantly affect our business. These market conditions historically have moved in periodic cycles and can be volatile.
Lakeway After extensive negotiation with the City of Lakeway, utility suppliers and neighboring property owners, during 2023 we secured the right to develop a multi-family project on approximately 35 acres of undeveloped property in Lakeway, Texas located in the greater Austin area.
Lakeway Multi-Family After extensive negotiation with the City of Lakeway, utility suppliers and neighboring property owners, during 2023 we secured the right to develop a multi-family project on approximately 35 acres of undeveloped property in Lakeway, Texas located in the greater Austin area.
Our development of the properties identified under the heading “Potential Development” is dependent upon the approval of our development plans and permits by governmental agencies, including the city of Austin, Travis County and other local governments in our Texas markets.
Our development of the properties identified under the heading “Potential Development” is dependent upon the approval of our development plans and permits by governmental agencies, including the City of Austin, Travis County and other local governments in our Texas markets.
Those governmental agencies may not approve one or more development plans and permit applications related to such properties or may require us to modify our development plans. Accordingly, our development strategy with respect to those properties may change in the future.
Those governmental agencies may not approve one or more development plans and permit applications related to such properties or may require us to modify our development plans. Accordingly, our development strategy with respect to those properties may change in the future.
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.
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.
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, increases in inflation and interest rates, supply chain constraints, availability of bank credit, defaults by contractors and subcontractors, 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, 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, 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, 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 risks, litigation risks, including the timing and resolution of the ongoing litigation challenging the ETJ Law and our ability to implement any 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 under the heading “Risk Factors” in Part I, Item 1A. of this Form 10-K.
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 tariffs or 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, 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, 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 under the heading “Risk Factors” in Part I, Item 1A. of this Form 10-K.
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. 45 Table of Contents
We caution investors that we undertake no obligation to update our 45 Table of Contents forward-looking statements, which speak only as of the date made, notwithstanding any changes in our assumptions, business plans, actual experience or other changes. 46 Table of Contents
While we may be proceeding with approved infrastructure projects or planning activities for some of these properties, they are not considered to be “under development” for disclosure in this table until construction activities have begun. b. For a discussion of this project, refer to Items 1. and 2. “Business and Properties.” c.
While we may be proceeding with approved infrastructure projects or planning activities for some of these properties, they are not considered to be “under development” for disclosure in this table until construction activities have begun. 35 Table of Contents b. For a discussion of this project, refer to Items 1. and 2. “Business and Properties.” c.
We expect to successfully extend the maturities or refinance our debt that matures in the next 12 months. For future potential significant development projects, we would not plan to enter into commitments to incur material costs for the projects until we obtain what we project to be adequate financing to cover anticipated cash outlays.
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 of December 31, 2023, we had signed leases for substantially all of the completed retail space, including the H-E-B grocery store, totaling 154,092 square feet. The Jones Crossing site has future development opportunities.
As of December 31, 2024, we had signed leases for substantially all of the completed retail space, including the H-E-B grocery store, totaling 154,092 square feet. The Jones Crossing site has future development opportunities.
Our Comerica Bank revolving credit facility, Amarra Villas credit facility, The Annie B land loan, The Saint George construction loan, Kingwood Place construction loan and the Holden Hills construction loan require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend payments, which was obtained in connection with the special cash dividend and share repurchase programs.
Our Comerica Bank revolving credit facility, Amarra Villas credit facility, The Annie B land loan, The Saint George construction loan and the Holden Hills Phase 1 construction loan 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 the special cash dividend and share repurchase programs.
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 28 Table of Contents may be generated from the sale of properties that are developed, undeveloped or under development, 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.
In addition to the traditional influence of state and federal government employment levels on the local economy, the Austin-Round Rock, Texas area (Austin-Round Rock) has been influenced by growth in the technology sector. Large, high-profile technology companies have expanded their profile in Austin-Round Rock recently as the technology sector has clustered in this market.
In addition to the traditional influence of state and federal government employment levels on the local economy, the Austin-Round Rock, Texas area (Austin-Round Rock) has been influenced by growth in the technology sector. 30 Table of Contents Large, high-profile technology companies have expanded their profile in Austin-Round Rock recently as the technology sector has clustered in this market.
However, we believe that the unique nature and location of our assets, and our team’s ability to execute successfully on development projects, have 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 and the cash distribution from the Holden Hills partnership in 2023.
However, we believe that the unique nature and location of our assets, and our team’s ability to execute successfully on development projects, have 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 distribution from the Holden Hills Phase 1 partnership in 2023 and our property sales in 2024.
“Financial Statements and Supplementary Data.” OVERVIEW We are a diversified 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.
“Financial Statements and Supplementary Data.” 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.
We also generate cash flow from rental income in our leasing operations and from 27 Table of Contents 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.
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.
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 equityholders; make loans, advances or other investments; create liens on assets; sell assets; enter into sale-leaseback transactions; enter into transactions with affiliates; permit a change of control or change in management; sell all or substantially all of its 41 Table of Contents assets; and engage in mergers, consolidations or other business combinations.
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.
The areas requiring the use of management’s estimates are discussed in Note 1 under the heading “Use of Estimates.” Critical accounting estimates are those estimates made in accordance with U.S. generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
The areas requiring the use of management’s estimates are discussed in Note 1 under the heading “Use of Estimates.” Critical accounting estimates are those estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
Our Real Estate Operations encompass our activities associated with our entitlement, development, and sale of real estate. The current focus of our real estate operations is multi-family and single-family residential properties and residential-centric mixed-use properties. We may sell or lease the real estate we develop, depending on market conditions.
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 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.
Our main sources of revenue and cash flow are expected to be sales of our properties to third parties or distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors.
Our main sources of revenue and cash flow are expected to be sales of our properties to third parties or distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market 28 Table of Contents conditions and other factors.
Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations related to inflation, interest rates, supply chain constraints, availability of bank credit, our ability to meet our future debt service and other cash obligations, future cash flows and liquidity, the Austin and Texas real estate markets, the planning, financing, development, construction, completion and stabilization of our development projects, plans to sell, recapitalize, or refinance properties, future operational and financial performance, MUD reimbursements for infrastructure costs, regulatory matters, 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.
Forward-looking statements are all statements other than statements of historical fact, such as plans, projections or expectations related to inflation, interest rates, tariffs, 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, future cash flows and liquidity, the Austin and Texas real estate markets, the planning, financing, development, construction, completion and stabilization of our development projects, plans to sell, recapitalize or refinance properties, future operational and financial performance, MUD reimbursements for infrastructure costs, regulatory matters, 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.
We are pursuing rezoning of approximately 216 undeveloped acres planned for 660,985 square feet of commercial space from commercial to multi-family. d.
We are pursuing rezoning of approximately 216 undeveloped acres planned for 660,985 square feet of commercial space from commercial use to multi-family use.
In February 2024, we completed the sale of approximately 47 acres 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 construction loan with a balance of $8.8 million was repaid.
Magnolia Place In first-quarter 2024, we completed the sale of approximately 47 acres 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 construction loan with a balance of $8.8 million was repaid.
The Comerica Bank revolving credit facility, the Amarra Villas credit facility, the Kingwood Place construction loan, The Annie B land loan, The Saint George construction loan and the Holden Hills construction loan also include a requirement that we maintain a debt-to-gross asset value, as defined in the agreements, of not more than 50 percent.
The Comerica Bank revolving credit facility, the Amarra Villas credit facility, The Annie B land loan, The Saint George construction loan and the Holden Hills Phase 1 construction loan also include a requirement that we maintain a debt-to-gross asset value, as defined in the agreements, of not more than 50 percent.
The Comerica Bank revolving credit facility, the Lantana Place construction loan, the Amarra Villas credit facility, the Kingwood Place construction loan, the West Killeen Market construction loan, The Saint June construction loan, The Annie B land loan, The Saint George construction loan and the Holden Hills construction loan include a requirement that we maintain a net asset value, as defined in each agreement, of $125 million.
The Comerica Bank revolving credit facility, the Amarra Villas credit facility, the West Killeen Market construction loan, The Saint June construction loan, The Annie B land loan, The Saint George construction loan and the Holden Hills Phase 1 construction loan include a requirement that we maintain a net asset value, as defined in each agreement, of $125 million.
The West Killeen Market construction loan, the Kingwood Place construction loan, the Jones Crossing loan and the Lantana Place construction loan each include a financial covenant requiring the applicable Stratus subsidiary to maintain a debt service coverage ratio as defined in each agreement. As of December 31, 2023, we were in compliance with all of our financial covenants.
The West Killeen Market construction loan and the Lantana Place loan each include a financial covenant requiring the applicable Stratus subsidiary to maintain a debt service coverage ratio as defined in each agreement. As of December 31, 2024, we were in compliance with all of our financial covenants.
In developing estimated future cash flows for impairment testing for our real estate assets, we have incorporated our own market assumptions including those regarding real estate prices, sales pace, sales and marketing costs, and infrastructure costs.
In developing estimated future cash flows for impairment testing for our real estate assets, we have incorporated our own market assumptions including those regarding real estate prices, sales pace, sales and marketing costs, 31 Table of Contents and infrastructure costs.
Circle C Community As of December 31, 2023, our Circle C community had remaining entitlements for 660,985 square feet of commercial space and 56 multi-family units. We are pursuing rezoning that would reallocate the commercial space to multi-family use.
Circle C Community As of December 31, 2023, our Circle C community had remaining entitlements for 660,985 square feet of commercial space and 56 multi-family units. We are pursuing rezoning that would change the permitted land use from commercial to multi-family.
We had deferred tax assets (net of deferred tax liabilities and valuation allowances) totaling $173 thousand at 38 Table of Contents December 31, 2023, and $38 thousand at December 31, 2022. Refer to Note 7 for further discussion of income taxes. Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries.
We had deferred tax assets (net of deferred tax liabilities and valuation allowances) totaling $153 thousand at December 31, 2024, and $173 thousand at December 31, 2023. Refer to Note 7 for further discussion of income taxes. Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries.
In February 2024, this loan was repaid with proceeds from the sale of 47 acres of undeveloped land. g. We did not have an outstanding balance during 2022 or during first-quarter and second-quarter 2023.
We did not have an outstanding balance during first-quarter and second-quarter 2023. e. In first-quarter 2024, this loan was repaid with proceeds from the sale of 47 acres of undeveloped land.
We have constructed 151,877 square feet of retail space at Kingwood Place, including an H-E-B grocery store, and as of December 31, 2023, 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.
We have constructed 151,877 square feet of retail space at Kingwood Place, including an H-E-B grocery store, and as of December 31, 2024, 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.
Revolving Credit Facility and Other Financing Arrangements As of December 31, 2023, we had $31.4 million in cash and cash equivalents and restricted cash of $1.0 million, and no amount was borrowed under our revolving credit facility.
Revolving Credit Facility and Other Financing Arrangements As of December 31, 2024, we had $20.2 million in cash and cash equivalents and restricted cash of $1.0 million, and no amount was borrowed under our revolving credit facility.
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.
No distributions to noncontrolling interest owners were paid during 2024. 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.
We entered into a construction loan for the project in July 2022 and began construction in third-quarter 2022. We currently expect to achieve substantial completion by third-quarter 2024. Refer to Notes 2 and 6 for further discussion.
We entered into a construction loan for the project in July 2022 and began construction in third-quarter 2022. We currently expect to achieve substantial completion in the first half of 2025. Refer to Notes 2 and 6 for further discussion.
Accordingly, during this market cycle, we have been working to maintain our business, advance our projects under construction or development, control costs and advance entitlements, relationships and opportunities to position us to capture value when market conditions improve.
We saw limited opportunities for transactions on favorable terms. Accordingly, during this market cycle, we have been working to maintain our business, advance our projects under construction or development, control costs and advance entitlements, relationships and opportunities to position us to capture value when market conditions improve.
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 December 31, 2023.
Refer to Note 6 for additional discussion. 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 December 31, 2024.
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 or other arrangements.
"Business and Properties" and Note 6 for further discussion. 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.
During 2023, among other things, we completed construction and began lease-up of The Saint June multi-family project, continued construction of The Saint George multi-family project, advanced construction on the Holden Hills project, managed our completed retail projects and advanced entitlements on other projects.
During 2023 and 2024, among other things, we completed construction and lease-up of The Saint June multi-family project, continued construction of The Saint George multi-family project, advanced road and utility infrastructure construction of Holden Hills Phase 1, managed our completed retail projects and advanced entitlements on other projects.
As of December 31, 2023, the number of our residential lots/units that are developed, under development and available for potential development by area are shown below: Residential Lots/Units Developed Under Development Potential Development a Total Barton Creek: Amarra Drive: Phase III lots 2 — — 2 Amarra Villas b 2 8 — 10 The Saint June 182 — — 182 Other homes — — 10 10 Holden Hills c — 475 — 475 Section N d — — 1,412 1,412 Other Barton Creek sections — — 2 2 Circle C multi-family — — 56 56 The Annie B d — — 316 316 The Saint George — 316 — 316 Lakeway — — 270 270 Lantana (The Saint Julia) d — — 306 306 Jones Crossing d — — 275 275 Magnolia Place e — — 875 875 New Caney d — — 275 275 Total Residential Lots/Units 186 799 3,797 4,782 a.
As of December 31, 2024, the number of our residential lots/units that are developed, under development and available for potential development by area are shown below: Residential Lots/Units Developed Under Development Potential Development a Total Barton Creek: Amarra Drive: Phase III lot 1 — — 1 Amarra Villas 3 2 — 5 The Saint June 182 — — 182 Other homes — — 10 10 Holden Hills Phase 1 (f/k/a Holden Hills) b — 475 — 475 Holden Hills Phase 2 (f/k/a Section N) c — — 1,412 1,412 Other Barton Creek sections — — 2 2 Circle C multi-family — — 56 56 The Annie B c — — 316 316 The Saint George — 316 — 316 Lakeway — — 270 270 Lantana (The Saint Julia) c — — 212 212 Jones Crossing c — — 275 275 Magnolia Place — — 275 275 New Caney c — — 275 275 Total Residential Lots/Units 186 793 3,103 4,082 a.
During 2023, we recorded $201 thousand to project development costs ($2 thousand in 2022) and credited $(41) thousand to general and administrative expenses (charged $0.5 million in 2022) related to the PPIP and LTIP. The accrued liability for the PPIP and LTIP totaled $3.1 million at December 31, 2023 (included in other liabilities).
During 2023, we capitalized $201 thousand to project development costs and credited $41 thousand to general and administrative expenses related to the PPIP and LTIP. The accrued liability for the PPIP and LTIP totaled $1.9 million at December 31, 2024, and $3.1 million at December 31, 2023 (included in other liabilities).
For further discussion of the ETJ process and ongoing development planning that may result in changes in our development plans and increased densities for Holden Hills and Section N, refer to “Barton Creek” below. d. For a discussion of this project, refer to Items 1. and 2. “Business and Properties.” e.
For further discussion of the ETJ process and ongoing development planning that may result in changes in our development plans and increased densities for Holden Hills Phases 1 and 2, refer to “Barton Creek” below. c. For a discussion of this project, refer to Items 1. and 2. “Business and Properties.” Barton Creek Amarra Villas.
For other projected pre-development costs, much of which are discretionary, and for our costs of the Tecoma Improvements, for our projected operating loans to partnerships and general and administrative expenses, we had cash and cash equivalents of $31.4 million at December 31, 2023 and availability under our revolving credit facility (which matures on March 27, 2025) of approximately $40.5 million as of December 31, 2023 which is expected to be sufficient to fund these cash requirements for the next 12 months.
For other projected pre-development costs, much of which are discretionary, and for our costs of the Tecoma Improvements and projected general and administrative expenses, we had cash and cash equivalents of $20.2 million at December 31, 2024 and availability under our revolving credit facility (which matures on March 27, 2027) of approximately $39.0 million as of December 31, 2024 which is expected to be sufficient to fund these cash requirements for the next 12 months.
As of December 31, 2023, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $53.8 million, resulting in availability of $40.5 million, net of letters of credit totaling $13.3 million issued under the revolving credit facility, $11.0 million of which secure our obligation to build certain roads and utilities facilities benefiting Holden Hills and Section N.
As of December 31, 2024, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $52.3 million, resulting in availability of $39.0 million, net of letters of credit totaling $13.3 million issued under the revolving credit facility, $11.0 million of which secure our obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2.
We have completed the statutory process to remove all of our relevant land subject to development, including primarily Holden Hills and Section N. from the extraterritorial jurisdiction (ETJ) of the City of Austin, as permitted by the ETJ Law.
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.
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. As of December 31, 2023, we had not repurchased any shares under the new program.
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.
As of December 31, 2023, the number of square feet of our commercial property developed, under development and our remaining entitlements for potential development are shown below: Commercial Property Developed Under Development Potential Development a Total Barton Creek: Entry corner — — 5,000 5,000 Amarra retail/office — — 83,081 83,081 Section N b — — 1,560,810 1,560,810 Circle C c — — 660,985 660,985 Lantana: Lantana Place 99,377 — — 99,377 Tract G07 — — 160,000 160,000 Magnolia Place d 18,582 — 15,000 33,582 West Killeen Market 44,493 — — 44,493 Jones Crossing 154,092 — 104,750 258,842 Kingwood Place 151,877 — — 151,877 New Caney b — — 145,000 145,000 The Annie B b — — 8,325 8,325 Office building in Austin — — 7,285 7,285 Total Square Feet 468,421 — 2,750,236 3,218,657 a.
As of December 31, 2024, the number of square feet of our commercial property developed, under development and our remaining entitlements for potential development are shown below: Commercial Property Developed Under Development Potential Development a Total Barton Creek: Entry corner — — 5,000 5,000 Amarra retail/office — — 83,081 83,081 Holden Hills Phase 2 b — — 1,560,810 1,560,810 Circle C c — — 660,985 660,985 Lantana: Lantana Place 99,377 — — 99,377 Tract G07 — — 160,000 160,000 West Killeen Market 44,493 — — 44,493 Jones Crossing 154,092 — 104,750 258,842 Kingwood Place 151,877 — — 151,877 New Caney b — — 145,000 145,000 The Annie B b — — 8,325 8,325 Other Austin — — 7,285 7,285 Total Square Feet 449,839 — 2,735,236 3,185,075 a.
We estimate our interest payments during 2024 will total approximately $13.6 million , assuming interest rates in effect on our debt at December 31, 2023, no new debt agreements, and completed or scheduled principal payments as of March 25, 2024 on debt outstanding at December 31, 2023.
We estimate our interest payments during 2025 will total approximately $12.9 million , based on interest rates in effect on our debt at December 31, 2024, no new debt agreements, and completed or scheduled principal payments as of March 21, 2025 on debt outstanding at December 31, 2024.
We had firm commitments totaling approximately $41 million at December 31, 2023 primarily related to construction of The Saint George, Holden Hills and Amarra Villas and as of March 25, 2024, we have not started construction on any new projects.
We had firm commitments totaling approximately $10 million at December 31, 2024 primarily related to construction of Holden Hills Phase 1 and The Saint George and as of March 21, 2025, we have not started construction on any new projects.
The most significant assumptions in the estimation of the $3.1 million PPIP and LTIP liability at December 31, 2023 were estimated capitalization rates ranging from 4.3 percent to 6.5 percent, expected remaining service periods ranging from 1.4 years to 2.8 years, and estimated transaction costs ranging from 1.3 percent to 7.8 percent of sale prices.
The most significant assumptions in the estimation of the $1.9 million PPIP and LTIP liability at December 31, 2024 were estimated capitalization rates ranging from 4.50 percent to 7.22 percent, expected remaining service periods ranging from 0.3 years to 3.1 years, and estimated transaction costs ranging from 1.25 percent to 7.46 percent of sale prices.
In addition to our developed properties, we have a development portfolio that consists of approximately 1,600 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use.
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 have also made filings with Travis County to grandfather the Holden Hills and Section N projects under most laws in effect in Travis County at the time of the filings. Several cities in Texas have brought a lawsuit challenging 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.
As of December 31, 2023, we had executed leases for approximately 74 percent of the 44,493-square-foot retail space. During third-quarter 2022, we sold the last remaining pad site for $1.0 million. • Jones Crossing is our H-E-B-anchored mixed-use project in College Station, Texas, the location of Texas A&M University.
As of December 31, 2024, we had executed leases for approximately 74 percent of the 44,493-square-foot retail space. • Jones Crossing is our H-E-B-anchored mixed-use project in College Station, Texas, the location of Texas A&M University.
RECENT ACCOUNTING STANDARDS For a discussion of recently issued accounting standards, see Note 1 in the Notes to Consolidated Financial Statements. OFF-BALANCE SHEET ARRANGEMENTS Refer to Note 9 for discussion of our off-balance sheet arrangements.
RECENT ACCOUNTING STANDARDS For a discussion of recently issued accounting standards, see Note 1 in the Notes to Consolidated Financial Statements.
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.
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.
As of December 31, 2023, 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. • Kingwood Place is our H-E-B-anchored, mixed-use development project in Kingwood, Texas (in the greater Houston area).
As of December 31, 2024, 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. • West Killeen Market is our H-E-B shadow-anchored retail project in West Killeen, Texas, near Fort Cavazos.
Capitalized interest totaled $12.5 million in 2023 and $6.6 million in 2022, and is primarily related to development activities at Barton Creek (Holden Hills, Section N and The Saint June), The Saint George and The Annie B. Provision for Income Taxes . We recorded a provision for income taxes of $1.5 million in 2023 and $0.4 million in 2022.
Capitalized interest in 2023 was primarily related to development activities at Barton Creek (Holden Hills Phases 1 and 2 and The Saint June), The Saint George and The Annie B. Provision for Income Taxes . We recorded provisions for income taxes of $0.4 million in 2024 and $1.5 million in 2023.
In first-quarter 2023, we completed and sold of one home for $2.5 million. Construction was completed on two of the homes in fourth-quarter 2023 and one home was completed and sold in February 2024 for $4.0 million.
We completed construction and sale of the first nine homes between 2017 and 2022. In first-quarter 2023, we completed and sold one home for $2.5 million. Construction was completed on two of the homes in fourth-quarter 2023.
We have construction loans, as well as remaining equity capital contributed to the Holden Hills partnership, to fund these projected cash outlays for the projects over the next 12 months following this filing except for anticipated operating loans to The Saint George Apartments, L.P., Stratus Block 150, L.P. and The Saint June, L.P. described below and 60 percent of the costs of the Tecoma Improvements for which we have agreed to reimburse the Holden Hills partnership.
We have construction loans, as well as remaining equity capital contributed to the Holden Hills Phase 1 partnership, to fund over the next 12 months following this filing, these projected cash outlays for the projects and 60 percent of the costs of the Tecoma Improvements for which we have agreed to reimburse the Holden Hills Phase 1 partnership.
Accordingly, the amount and timing of the receipt of MUD reimbursements is uncertain. Section N. Using an entitlement strategy similar to that used for Holden Hills, we continue to progress the development plans for Section N, our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community adjacent to Holden Hills.
Holden Hills Phase 2 (formerly known as Section N). Using an entitlement strategy similar to that used for Holden Hills Phase 1, we continue to progress the development plans for Holden Hills Phase 2, our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community adjacent to Holden Hills Phase 1.
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 FOR 2023 Sources of revenue and income. As a result of the sale of Block 21 in May 2022, Stratus has two operating segments: Real Estate Operations and Leasing Operations.
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 FOR 2024 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 Board also approved a share repurchase program, which authorized repurchases of up to $10.0 million of our common stock. In October 2023, we completed the share repurchase program. In total, under the completed share repurchase program, we acquired 389,378 shares of our common stock for a total cost of $10.0 million at an average price of $25.68 per share.
In total, under the completed share repurchase program, we acquired 389,378 shares of our common stock for a total cost of $10.0 million at an average price of $25.68 per share. 39 Table of Contents In November 2023, with written consent from Comerica Bank, our Board approved a new share repurchase program, which authorizes repurchases of up to $5.0 million of our common stock.
The following table summarizes the weighted-average interest rate of each loan, all of which have variable rates, for the periods presented: December 31, 2023 2022 a Comerica Bank revolving credit facility b — % 4.97 % Jones Crossing loan 7.27 3.85 The Annie B land loan 7.96 4.67 New Caney land loan c — 4.06 Construction loans: Kingwood Place 7.74 4.06 The Saint June d 7.87 5.89 The Saint George e 7.68 — Lantana Place 7.47 4.18 Amarra Villas revolving credit facility 8.11 5.10 Magnolia Place f 8.38 5.12 Holden Hills g 8.38 — West Killeen Market 7.75 4.45 a.
The following table summarizes the weighted-average interest rate of each loan, all of which have variable rates, for the periods presented: December 31, 2024 2023 Comerica Bank revolving credit facility a — % — % Kingwood Place loan b 6.37 7.74 Jones Crossing loan 7.57 7.27 The Annie B land loan 8.25 7.96 Construction loans: The Saint George c 7.53 7.68 The Saint June 7.90 7.87 Lantana Place 7.52 7.47 Holden Hills Phase 1 d 8.15 8.38 West Killeen Market 7.89 7.75 Amarra Villas credit facility 8.33 8.11 Magnolia Place e — 8.38 a.
CAUTIONARY STATEMENT Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements in which we discuss factors we believe may affect our future performance.
OFF-BALANCE SHEET ARRANGEMENTS Refer to Note 9 for discussion of our off-balance sheet arrangements. 44 Table of Contents CAUTIONARY STATEMENT Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements in which we discuss factors we believe may affect our future performance.
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. Refer to Note 6 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” below for additional discussion.
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 34 Table of Contents letter of credit under our revolving credit facility.
We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions and/or conditions.
GAAP) The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions and/or conditions.
Net borrowings on other project and term loans totaled $51.4 million in 2023, primarily reflecting borrowings on The Saint George and The Saint June construction loans and Amarra Villas construction credit facility, partially offset by the payoff of the New Caney land loan, compared with net borrowings of $14.3 million in 2022, primarily reflecting borrowings on the Magnolia Place and The Saint June construction loans and Amarra Villas revolving credit facility.
Net borrowings of $51.4 million in 2023 primarily reflected borrowings on The Saint George and The Saint June construction loans and Amarra Villas construction credit facility, partially offset by the payoff of the New Caney land loan.
Revenue in our Leasing Operations is generated from the lease of space at retail and mixed-use properties that we developed and the lease of residences in the multi-family projects that we developed. We may also generate income from the sale of our leased properties, depending on market conditions. Refer to Note 10 and Items 1. and 2.
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.
For those properties held for sale and deemed to be impaired, we determine fair value based on appraised values, adjusted for estimated costs to sell, as we believe this is the value for which the property could be sold. 30 Table of Contents We recorded impairment charges on real estate totaling $0.7 million during 2022.
For those properties held for sale and deemed to be impaired, we determine fair value based on appraised values, adjusted for estimated costs to sell, as we believe this is the value for which the property could be sold. We recorded no impairment charges on real estate during 2024 or 2023. Deferred Tax Assets Valuation Allowance.
We recorded no impairment charges during 2023. Deferred Tax Assets Valuation Allowance. The carrying amounts of deferred tax assets are required to be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized.
The carrying amounts of deferred tax assets are required to be reduced by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, we assess the need to establish valuation allowances for deferred tax assets periodically based on the more-likely-than-not realization threshold criterion.
As a result, and because of numerous factors affecting our business activities as described herein, our past operating results are not necessarily indicative of our future results. We use operating income or loss to measure the performance of each operating segment.
As a result, and because of numerous factors affecting our business activities as described herein, our past operating results are not necessarily indicative of our future results.
Refer to Note 9 for further discussion of future cash requirements. We project that we will be able to meet our debt service and other cash obligations for at least the next 12 months following this filing.
We project that we will be able to meet our debt service and other cash obligations for at least the next 12 months.
CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the U.S. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
CRITICAL ACCOUNTING ESTIMATES Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States (U.S.
Also, we anticipate making future operating loans to The Saint George Apartments, L.P., Stratus Block 150, L.P. and The Saint June, L.P. totaling up to $3.8 million over the next 12 months following this filing to enable the partnerships to pay debt service and project costs.
Also, we anticipate making future operating loans to Stratus Block 150, L.P. totaling up to $1.7 million and a capital contribution to The Saint George partnership of $125 thousand over the next 12 months to enable the partnerships to pay debt service and project costs.
In 2023, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place, Kingwood Place, Jones Crossing, West Killeen Market and Magnolia Place and from our multi-family project, The Saint June. In 2022, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place, Jones Crossing, Kingwood Place and West Killeen Market.
In 2024 and 2023, rental revenue included revenue from our retail and mixed use properties Lantana Place – Retail, Kingwood Place, Jones Crossing – Retail, West Killeen Market and Magnolia Place – Retail and our multi-family property, The Saint June. The Saint June commenced operations in mid-2023 and was completed in fourth-quarter 2023.
The community has been designed to feature unique residences to be developed in multiple phases with a focus on health and wellness, sustainability and energy conservation. Phases I and II of the Holden Hills development plan encompass the development of the home sites.
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.
Accordingly, we assess the need to establish valuation allowances for deferred tax assets periodically based on the more-likely-than-not realization threshold criterion. In the assessment of the need for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets.
In the assessment of the need for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets.
As of December 31, 2023, we had approximately 23 undeveloped acres with estimated development potential of approximately 104,750 square feet of commercial space and four retail pad sites. • Lantana Place - Retail is part of our mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas.
As of December 31, 2024, we had approximately 22 undeveloped acres with estimated development potential of approximately 104,750 square feet of commercial space and four retail pad sites. • Kingwood Place is our H-E-B-anchored, mixed-use development project in Kingwood, Texas (in the greater Houston area).
Of the $31.4 million in consolidated cash and cash equivalents at December 31, 2023, $5.5 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements.
Of the $20.2 million in consolidated cash and cash equivalents at December 31, 2024, $11.1 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements. In 2024 and 2023, development and asset management fees of $2.2 million and $2.4 million, respectively, were paid by the limited partnerships to Stratus.
As of December 31, 2023, two developed Phase III lots and two completed Amarra Villas homes remained unsold. Undeveloped Property Sales .
As of December 31, 2024, one developed Phase III lot and three completed Amarra Villas homes remained unsold and the remaining two Amarra Villas homes were under construction. Undeveloped Property Sales .

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