Stratus Properties Inc. (NASDAQ: STRS), a diversified real
estate company with holdings, interests and operations focused in
the Austin, Texas area and other select, fast growing markets in
Texas, today reported year ended December 31, 2020 results.
Financial Highlights:
- In January 2021, a Stratus subsidiary completed the sale of
The Saint Mary, a 240-unit luxury, garden-style apartment
project in Austin, Texas, for $60.0 million, or $250,000 per unit,
which Stratus believes is the highest per unit sales price ever
recorded in the Austin MSA for similar properties. Stratus received
$21.3 million from its subsidiary in connection with the sale and
expects to recognize a pre-tax gain on the sale, net of
noncontrolling interests, of approximately $14 million in the first
quarter of 2021.
- Leasing operations revenue for 2020 increased by 24
percent to an annual record of $24.1 million, compared with
2019.
- Real estate operations revenue for 2020 increased by 64
percent to $22.6 million, compared with 2019.
- Hotel and entertainment segment revenues
decreased significantly in 2020 compared to 2019, as a result of
the COVID-19 pandemic. Stratus collected $15.0 million of forfeited
earnest money after the buyer terminated the agreements to purchase
Block 21 for $275.0 million in May 2020 because of the
pandemic.
- Net loss attributable to common stockholders totaled
$22.8 million, $2.78 per share, for 2020, compared to $2.5 million,
$0.30 per share, for 2019. Losses resulting from the pandemic
contributed to Stratus recording a $10.7 million non-cash tax
charge in 2020 to record a valuation allowance on Stratus’ deferred
tax assets.
- Earnings before interest, taxes, depreciation and
amortization (EBITDA) totaled $9.5 million for 2020, compared
to $21.1 million for 2019. For a reconciliation of net loss
attributable to common stockholders to EBITDA, see the supplemental
schedule, “EBITDA,” on page V.
- As of December 31, 2020, consolidated debt totaled
$351.1 million, consolidated cash totaled $12.4 million, and
Stratus had $16.5 million available under its $60.0 million credit
facility.
Operational Highlights:
- During 2020, Stratus sold 19 lots and 2 completed homes at
Amarra Drive in Barton Creek for an aggregate of $21.8
million and a pad site at West Killeen Market for $0.7
million.
- In March 2021, Stratus commenced site clearing on The Saint
June, a 182-unit multi-family project within the Amarra
subdivision in Barton Creek, and expects to begin project
construction in the second quarter of 2021, subject to completion
of financing. Stratus has continued to advance its land planning,
engineering, and permitting activities across its development
portfolio and pipeline.
- At the start of the pandemic, Stratus acted quickly to engage
with tenants and lenders in its leasing operations. Retail
and multi-family base rent collections were only five percent less
than scheduled base rents from April through December 2020.
- Stratus’ W Austin Hotel has remained open, and Stratus
worked closely with the hotel operator to implement prudent cost
containment measures. Stratus’ team created innovative programming
at Stratus’ ACL Live and 3TEN ACL Live entertainment
venues in order to generate revenue notwithstanding the pandemic’s
constraints.
William H. Armstrong III, Chairman, President and Chief
Executive Officer, stated, “Our talented team at Stratus has gone
above and beyond over the last year to continue executing on our
proven strategy and supporting our tenants in this challenging
environment. We advanced promising development projects, monetized
several of our assets through sales that strengthened our liquidity
position, and supported our tenants with rent deferrals. While our
hotel and entertainment businesses have been severely impacted by
the pandemic, our real estate and leasing segments continue to
perform well. I am confident that we are taking the appropriate
steps to succeed through a market recovery.
“Our company recently took several actions that we believe
will create value for our shareholders, including the sale of The
Saint Mary. In September 2020, we announced a review of our Board
composition and have appointed two new directors, Neville Rhone,
Jr. in December 2020 and Kate Henriksen in January 2021, who bring
additional skillsets, knowledge and diverse perspectives to the
Board that will support Stratus as we move forward.”
Summary Financial
Results
Years Ended December 31,
2020
2019
(In Thousands, Except Per Share
Amounts)
Revenues
Real estate operations
$
22,630
$
13,834
Leasing operations
24,148
19,473
Hotel
10,014
35,531
Entertainment
5,247
25,018
Corporate, eliminations and other
(1,024
)
(1,678
)
Total consolidated revenue
$
61,015
$
92,178
Operating income
(loss):
Real estate operations
$
3,869
$
3,830
a
Leasing operations
3,348
b
9,577
c
Hotel
(9,232
)
d
5,158
Entertainment
(3,507
)
4,666
Corporate, eliminations and other
(519
)
e
(13,068
)
Total consolidated operating (loss)
income
$
(6,041
)
$
10,163
Net loss attributable to common
stockholders
$
(22,790
)
f
$
(2,464
)
Diluted net loss per share
$
(2.78
)
$
(0.30
)
EBITDA
$
9,525
b, d, e
$
21,142
c, g
Capital expenditures and purchases and
development of real estate properties
$
19,966
$
73,827
Diluted weighted average shares of common
stock outstanding
8,211
8,182
- Includes $3.4 million of municipal utility district (MUD)
reimbursements, which were recorded as a reduction of cost of
sales.
- Includes a $1.4 million charge for estimated uncollectible
rents receivable and unrealizable deferred costs.
- Includes a gain on the sale of assets totaling $5.7 million,
primarily related to the sales of Barton Creek Village and a retail
pad subject to a ground lease located in the Circle C
community.
- Includes a $1.6 million charge related to the write-off of
capitalized hotel remodel costs, partially offset by a $0.8 million
credit related to recovery under a business interruption insurance
claim filed as a result of water and smoke damage in the W Austin
hotel in January 2018.
- Includes $15.0 million in income from earnest money received as
a result of the buyer’s termination of the agreements to sell Block
21.
- Includes a $10.7 million non-cash tax charge to record a
valuation allowance on Stratus' deferred tax assets.
- Includes $3.7 million of MUD reimbursements.
Stratus’ sales of its residential real estate and leasing of its
multi-family properties benefited from pandemic-driven home-centric
trends and from increased recognition of Austin, Texas as a
desirable place to live. The increase in revenue from the Real
Estate Operations segment in 2020, compared with 2019,
primarily reflects the sales of two homes built on Amarra Drive
Phase III lots and an increase in lot sales in 2020, including two
premium Amarra Drive Phase III hilltop lots. Operating income from
Real Estate Operations in 2020 approximated operating income in
2019, though operating income in 2019 benefited from $3.4 million
in MUD reimbursements received in 2019 and recorded as a reduction
in real estate cost of sales as the reimbursed property had
previously been sold.
Stratus sold seven Amarra Drive Phase II lots, twelve Amarra
Drive Phase III lots, and two homes built on Amarra Drive Phase III
lots for a total of $21.8 million during 2020. In addition, Stratus
sold a vacant pad site at West Killeen Market for $0.7 million. As
of December 31, 2020, all developed Amarra Drive Phase II lots had
been sold and only five developed Amarra Drive Phase III lots
remained unsold. Subsequent to December 31, 2020, and through March
9, 2021, Stratus sold one Amarra Drive Phase III lot, a
multi-family tract of land in Amarra Drive and the last remaining
condominium at the W Austin Residences for a total of $5.8 million.
As of March 9, 2021, the last four unsold Amarra Drive Phase III
lots were under contract, and two Amarra Villas homes were under
contract, one of which was under construction and one on which
Stratus expects to begin construction in mid-2021.
In addition to the favorable trends noted above, Stratus’
leasing operations were positively impacted by the continued
lease-up of recently completed projects. The increase in revenue
from the Leasing Operations segment for 2020, compared with
2019, primarily reflects the commencement of new leases at The
Saint Mary, Kingwood Place and The Santal. The decrease in
operating income for 2020, compared with 2019, primarily reflects a
pre-tax gain recognized in 2019 on the sale of assets totaling $5.7
million, primarily related to the sales of Barton Creek Village and
a retail pad subject to a ground lease located in the Circle C
community, as well as higher rental costs of sales and depreciation
expense in 2020 primarily as a result of the completion of
construction and the start of leasing operations at The Saint Mary
and Kingwood Place. At the start of the pandemic, Stratus acted
quickly to engage with tenants and lenders, and retail and
multi-family base rent collections were only five percent less than
scheduled base rents from April through December 2020. Most of
Stratus’ retail properties benefited from having HEB grocery as an
anchor or shadow-anchor tenant.
In December 2020, a Stratus subsidiary entered into an agreement
to sell The Saint Mary for $60.0 million and completed the sale in
January 2021. After closing costs and payment of the outstanding
construction loan, the sale generated net proceeds of approximately
$34 million. Stratus received $21.3 million from the subsidiary in
connection with the sale and expects to recognize a pre-tax gain on
the sale, net of noncontrolling interests, of approximately $14
million in the first quarter of 2021. The Saint Mary contributed
$3.2 million of revenue to Stratus’ 2020 leasing operations
revenue.
The pandemic has had a significant adverse impact on Stratus’
hotel and entertainment segments. As previously disclosed, Stratus’
transaction to sell Block 21, which contains the W Austin Hotel and
the ACL Live and 3TEN ACL Live entertainment venues, for $275.0
million was terminated by the buyer in May 2020 because of the
pandemic.
The W Austin Hotel has remained open throughout the pandemic,
although average occupancy during 2020 was 23 percent, compared to
73 percent in 2019. Revenue per available room (RevPAR), which is
calculated by dividing total room revenue by the average total
rooms available during the year, was $61 in 2020, compared with
$235 in 2019. The decreases in revenue and operating income from
the Hotel segment in 2020, compared with 2019, are primarily
a result of lower room reservations and food and beverage sales as
a result of the pandemic.
The decreases in revenue and operating income from the
Entertainment segment in 2020, compared with 2019, primarily
reflect a decrease in the number of events hosted by ACL Live and
3TEN ACL Live, as many scheduled events in 2020 were cancelled or
rescheduled as a result of the pandemic. The number of events
hosted at ACL Live declined to 82 in 2020 from 264 in 2019, and the
number of events hosted at 3TEN ACL Live declined to 102 in 2020
from 201 in 2019. Stratus’ team created innovative programming at
Stratus’ ACL Live and 3TEN ACL Live entertainment venues, although
at significantly reduced capacity, in order to generate revenue
notwithstanding the pandemic’s constraints.
Stratus’ operations have been subject to government-mandated
capacity restrictions. An executive order of Texas’ governor
provided that effective March 10, 2021, Texas’ businesses are
permitted to operate at full capacity and state residents are no
longer required to wear masks. Businesses may elect to impose
restrictions to promote health and safety. While Stratus is
considering ways to ramp up its hotel and entertainment operations,
it plans to increase capacity gradually and safely and in
compliance with all applicable regulations. The pandemic is
expected to continue to adversely impact Stratus in 2021; however,
given the unprecedented nature of the pandemic, Stratus cannot
predict its impact on Stratus’ business with any certainty.
Losses resulting from the pandemic contributed to Stratus
recording a $10.7 million non-cash tax charge in 2020 to record a
valuation allowance on its deferred tax assets.
On September 21, 2020, Stratus’ Board of Directors (Board)
announced its approval of the initiation of an in-depth exploration
of a conversion from a C-Corporation to a real estate investment
trust (REIT). If the Board determines to move forward, Stratus
expects the conversion would occur no earlier than 2022. At this
time, Stratus believes that the REIT conversion would require
consent from its major lenders and amendments to its major debt
agreements, among other third-party consents. If the Board
ultimately determines that a REIT conversion is in shareholders’
best interests, the REIT conversion will be submitted to a
shareholder vote.
Debt and Liquidity
At December 31, 2020, consolidated debt totaled $351.1 million
and consolidated cash totaled $12.4 million, compared with
consolidated debt of $343.9 million and consolidated cash of $19.2
million at December 31, 2019. As of December 31, 2020, Stratus had
$16.5 million available under its $60.0 million Comerica Bank
credit facility, with a $150 thousand letter of credit committed
against the credit facility. Stratus is evaluating refinance
opportunities for its larger, stabilized assets to take advantage
of historic low interest rates.
Purchases and development of real estate properties (included in
operating cash flows) and capital expenditures (included in
investing cash flows) totaled $20.0 million for 2020, primarily
related to the Kingwood Place, Lantana Place and Barton Creek
properties and the purchase of an office building in Austin. This
compares with $73.8 million for 2019, primarily related to the
development of The Saint Mary, Kingwood Place, and other Barton
Creek properties.
Stratus projects that it will be able to meet its debt service
and other cash obligations for at least the next 12 months.
Stratus’ projections are based on many detailed and complex
underlying assumptions, including (1) that operating income for
Stratus’ Block 21 businesses will gradually ramp up to a break-even
point in the first half of 2021 and that Block 21 will generate
sufficient cash to cover debt service by early 2022, (2) that
current conditions in Stratus’ leasing operations will not
deteriorate materially, and (3) that Stratus closes on projected
asset sales in its real estate operations segment.
Net Asset Value
Stratus' total stockholders' equity was $98.9 million at
December 31, 2020, compared with $121.1 million at December 31,
2019. Stratus' after-tax Net Asset Value (NAV) decreased to $337.3
million, or $40.65 per share, as of December 31, 2020, compared
with $376.4 million, or $45.55 per share, as of December 31, 2019.
The decrease in the after-tax NAV was primarily driven by the
decrease in the gross value reflected for Block 21. At December 31,
2019, Block 21 was under contract to be sold for $275.0 million and
the gross value was equal to the contract price. For the December
31, 2020 gross value, an appraisal was obtained. For additional
information regarding NAV, see "Cautionary Statement," and the
supplemental schedule, “After-Tax Net Asset Value” on page VI.
Additional after-tax NAV information is available on Stratus’
website.
----------------------------------------------
Conference Call
Information
Stratus will conduct an investor conference call to discuss its
year ended December 31, 2020, financial and operating results
today, March 15, 2021, at 11:00 a.m. Eastern Time. The public is
invited to listen to the conference call by dialing (877) 418-4843
for domestic access and (412) 902-6766 for international access. A
replay of the conference call will be available at the conclusion
of the call for five days by dialing (877) 344-7529 for domestic
access and by dialing (412) 317-0088 for international access.
Please use replay ID: 10152367. The replay will be available on
Stratus’ website at stratusproperties.com until March 20, 2021.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND
REGULATION G DISCLOSURE.
This press release contains forward-looking statements in which
Stratus discusses factors it believes may affect its future
performance. Forward-looking statements are all statements other
than statements of historical fact, such as plans, projections or
expectations related to the impacts of the COVID-19 pandemic,
Stratus’ ability to meet its future debt service and other cash
obligations, potential future rent deferrals or other concessions
to Stratus' tenants, Stratus' ability to collect rents timely,
Stratus' ability to ramp-up operations at Block 21 according to its
currently anticipated timeline, Stratus' ability to open and hold
events at its venues, future cash flows and liquidity, and Stratus’
ability to comply with or obtain waivers of financial and other
covenants in debt agreements, Stratus’ intention to engage in an
in-depth exploration of conversion to a REIT, potential steps
necessary prior to conversion to a REIT, the potential timing of
any REIT conversion, Stratus’ expectations about the Austin and
Texas real estate markets, potential changes in governance
practices and Board composition, the planning, financing,
development, construction, completion and stabilization of Stratus’
development projects, plans to sell, recapitalize, or refinance
properties, future operational and financial performance, MUD
reimbursements for infrastructure costs, regulatory matters,
leasing activities, estimated costs and timeframes for development
and stabilization of properties, tax rates, the impact of interest
rate changes, future capital expenditures and financing plans,
possible joint ventures, partnerships, strategic relationships or
other arrangements, Stratus’ projections with respect to its
obligations under the master lease agreements entered into in
connection with the 2017 sale of The Oaks at Lakeway, other plans
and objectives of management for future operations and development
projects, and future dividend payments and share repurchases. The
words “anticipates,” “may,” “can,” “plans,” “believes,”
“potential,” “estimates,” “expects,” “projects,” “targets,”
“intends,” “likely,” “will,” “should,” “to be” and any similar
expressions and/or statements are not historical facts are intended
to identify those assertions as forward-looking statements.
Under Stratus’ Comerica Bank credit facility, Stratus is not
permitted to pay dividends on common stock without Comerica Bank’s
prior written consent. The declaration of dividends is at the
discretion of Stratus’ Board, subject to restrictions under
Stratus’ Comerica Bank credit facility, and will depend on Stratus’
financial results, cash requirements, projected compliance with
covenants in its debt agreements, outlook and other factors deemed
relevant by the Board.
Stratus cautions readers that forward-looking statements are not
guarantees of future performance, and its actual results may differ
materially from those anticipated, expected, projected or assumed
in the forward-looking statements. Important factors that can cause
Stratus’ actual results to differ materially from those anticipated
in the forward-looking statements include, but are not limited to,
evolving risks relative to the COVID-19 pandemic and its economic
effects, Stratus’ ability to pay or refinance its debt or comply
with or obtain waivers of financial and other covenants in debt
agreements and to meet other cash obligations, Stratus’ ability to
ramp up operations at Block 21 and collect anticipated rental
payments, close projected asset sales, the availability and terms
of financing for development projects and other corporate purposes,
implementation, operational, financing and tax complexities to be
evaluated and addressed before Stratus decides whether to pursue a
REIT conversion, the ability of Stratus to qualify as a REIT, which
involves the application of highly technical and complex provisions
of the Internal Revenue Code of 1986, as amended, Stratus’ ability
to complete the steps that must be taken in order to convert to a
REIT and the timing thereof, the potential costs of converting to
and operating as a REIT, whether Stratus’ Board will determine that
conversion to a REIT is in the best interests of Stratus’
shareholders, whether shareholders will approve changes to Stratus’
organizational documents consistent with a public REIT structure,
Stratus’ ability to enter into and maintain joint ventures,
partnerships, strategic relationships or other arrangements,
Stratus’ ability to implement its business strategy successfully,
including its ability to develop, construct and sell properties at
prices its Board considers acceptable, market conditions or
corporate developments that could preclude, impair or delay any
opportunities with respect to plans to sell, recapitalize or
refinance properties, Stratus’ ability to obtain various
entitlements and permits, a decrease in the demand for real estate
in select markets in Texas where Stratus operates, changes in
economic, market and business conditions, reductions in
discretionary spending by consumers and businesses, competition
from other real estate developers, hotel operators and/or
entertainment venue operators and promoters, Stratus' ability to
open and hold events at its venues, challenges associated with
booking events and selling tickets and event cancellations at
Stratus’ entertainment venues, which may result in refunds to
customers, the termination of sales contracts or letters of intent
because of, among other factors, the failure of one or more closing
conditions or market changes, Stratus’ ability to secure qualifying
tenants for the space subject to the master lease agreements
entered into in connection with the 2017 sale of The Oaks at
Lakeway and to assign such leases to the purchaser and remove the
corresponding property from the master leases, the failure to
attract customers or tenants for its developments or such
customers’ or tenants’ failure to satisfy their purchase
commitments or leasing obligations, increases in interest rates and
the phase out of the London Interbank Offered Rate, declines in the
market value of Stratus’ assets, increases in operating costs,
including real estate taxes and the cost of building materials and
labor, changes in external perception of the W Austin Hotel,
unanticipated issues experienced by the third-party operator of the
W Austin Hotel, changes in consumer preferences, industry risks,
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-related risks, including the extent to which the
February 2021 severe winter storm and resulting power and water
disruptions will impact our prospects, loss of key personnel,
cybersecurity incidents and other factors described in more detail
under the heading “Risk Factors” in Stratus’ Annual Report on Form
10-K for the year ended December 31, 2020, filed with the U.S.
Securities and Exchange Commission.
Stratus can provide no assurance as to when, if at all, it will
convert to a REIT. Stratus can give no assurance that its Board
will approve a conversion to a REIT, even if there are no
impediments to such conversion. Stratus’ exploration of a potential
REIT conversion may divert management's attention from traditional
business concerns. If Stratus determines to convert to a REIT,
Stratus cannot give assurance that it will qualify or remain
qualified as a REIT.
This press release also includes EBITDA and after-tax NAV, which
are not recognized under U.S. generally accepted accounting
principles (GAAP). Stratus believes these measures can be helpful
to investors in evaluating its business. EBITDA is a financial
measure frequently used by securities analysts, lenders and others
to evaluate Stratus' recurring operating performance. After-tax NAV
illustrates current embedded value in Stratus' real estate, which
is carried on its GAAP balance sheet primarily at cost. Management
uses after-tax NAV as one of the metrics in evaluating progress on
Stratus' active development plan. EBITDA and after-tax NAV are
intended to be performance measures that should not be regarded as
more meaningful than GAAP measures. Other companies may calculate
EBITDA and after-tax NAV differently. As required by SEC Regulation
G, a reconciliation of Stratus' net loss attributable to common
stockholders to EBITDA and of Stratus’ total stockholders’ equity
to after-tax NAV in its consolidated balance sheet are included in
the supplemental schedules of this press release.
Investors are cautioned that many of the assumptions upon which
Stratus' forward-looking statements are based are likely to change
after the forward-looking statements are made. Further, Stratus may
make changes to its business plans that could affect its results.
Stratus cautions investors that it does not intend to update its
forward-looking statements more frequently than quarterly
notwithstanding any changes in its assumptions, business plans,
actual experience, or other changes, and Stratus undertakes no
obligation to update any forward-looking statements.
A copy of this release is available on Stratus’
website, stratusproperties.com.
STRATUS PROPERTIES
INC.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS (Unaudited)
(In Thousands, Except Per Share
Amounts)
Years Ended December 31,
2020
2019
Revenues:
Real estate operations
$
22,613
$
13,816
Leasing operations
23,257
18,542
Hotel
9,912
35,247
Entertainment
5,233
24,573
Total revenues
61,015
92,178
Cost of sales:
Real estate operations
18,685
9,758
a
Leasing operations
12,591
b
9,402
Hotel
15,427
c
26,849
Entertainment
6,647
18,299
Depreciation
13,670
11,006
Total cost of sales
67,020
75,314
General and administrative expenses
15,036
12,384
Income from forfeited earnest money
(15,000
)
—
Gain on sales of assets
—
(5,683
)
Total
67,056
82,015
Operating (loss) income
(6,041
)
10,163
Interest expense, net
(14,827
)
(12,483
)
Gain (loss) on interest rate derivative
instruments
111
(188
)
Loss on early extinguishment of debt
—
(247
)
Other income, net
116
424
a
Loss before income taxes and equity in
unconsolidated affiliates’ loss
(20,641
)
(2,331
)
Provision for income taxes
(3,818
)
d
(117
)
Equity in unconsolidated affiliates’
loss
(16
)
(19
)
Net loss and total comprehensive loss
(24,475
)
(2,467
)
Total comprehensive loss attributable to
noncontrolling interests
1,685
e
3
Net loss and total comprehensive loss
attributable to common stockholders
$
(22,790
)
$
(2,464
)
Basic and diluted net loss per share
attributable to common stockholders
$
(2.78
)
$
(0.30
)
Basic and diluted weighted-average common
shares outstanding
8,211
8,182
a.
In 2019, Stratus received $4.8 million of
proceeds related to municipal utility district (MUD) reimbursements
of infrastructure costs incurred for development of Barton Creek.
Of the total amount, Stratus recorded $1.1 million as a reduction
of real estate under development on the consolidated balance
sheets, and $3.4 million as a reduction in real estate cost of
sales and $0.3 million in other income, net.
b.
Includes a $1.4 million charge for
estimated uncollectible rents receivable and unrealizable deferred
costs.
c.
Includes a $1.6 million charge related to
the write-off of capitalized hotel remodel costs, partially offset
by a $0.8 million credit related to recovery under a business
interruption insurance claim filed as a result of water and smoke
damage in the W Austin hotel in January 2018.
d.
Includes a $10.7 million non-cash tax
charge to record a valuation allowance on Stratus' deferred tax
assets.
e.
Represents noncontrolling interest
partners' share in the results of the consolidated projects that
they participate in, primarily The Saint Mary. Of the amount for
2020, $573 thousand relates to losses incurred prior to 2020.
STRATUS PROPERTIES
INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
December 31,
2020
2019
ASSETS
Cash and cash equivalents
$
12,434
$
19,173
Restricted cash
21,749
19,418
Real estate held for sale
4,204
14,872
Real estate under development
98,137
95,026
Land available for development
53,432
45,539
Real estate held for investment, net
286,529
292,012
Lease right-of-use assets
10,871
11,378
Deferred tax assets
44
a
12,311
Other assets
20,100
14,318
Assets held for sale - The Saint Mary
36,516
37,321
Total assets
$
544,016
$
561,368
LIABILITIES AND EQUITY
Liabilities:
Accounts payable
$
8,047
$
16,053
Accrued liabilities, including taxes
12,868
11,495
Debt
351,055
343,892
Lease liabilities
13,269
12,636
Deferred gain
6,173
7,654
Other liabilities
17,233
13,490
Liabilities held for sale - The Saint
Mary
25,607
22,066
Total liabilities
434,252
427,286
Commitments and contingencies
Equity:
Stratus stockholders’ equity:
Common stock, par value of $0.01 per
share, 150,000 shares authorized,
9,358 and 9,330 shares issued,
respectively and
8,221 and 8,197 shares outstanding,
respectively
94
93
Capital in excess of par value of common
stock
186,777
186,082
Accumulated deficit
(66,357
)
(43,567
)
Common stock held in treasury, 1,137
shares and 1,133 shares
at cost, respectively
(21,600
)
(21,509
)
Total stockholders’ equity
98,914
121,099
Noncontrolling interests in
subsidiaries
10,850
12,983
Total equity
109,764
134,082
Total liabilities and equity
$
544,016
$
561,368
a.
Net of a valuation allowance recorded in
2020 totaling $10.7 million.
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
(In Thousands)
Years Ended December 31,
2020
2019
Cash flow from operating activities:
Net loss
$
(24,475
)
$
(2,467
)
Adjustments to reconcile net loss to net
cash used in
operating activities:
Depreciation
13,670
11,006
Cost of real estate sold
12,092
7,210
Gain on sales of assets
—
(5,683
)
(Gain) loss on interest rate derivative
contracts
(111
)
188
Loss on early extinguishment of debt
—
247
Debt issuance cost amortization and
stock-based compensation
2,099
1,574
Equity in unconsolidated affiliates’
loss
16
19
Deferred income taxes
12,267
(318
)
Purchases and development of real estate
properties
(13,775
)
(11,277
)
Write-off of capitalized hotel remodel
costs
1,584
—
Municipal utility districts
reimbursements
—
1,143
Increase in other assets
(5,023
)
(2,241
)
Decrease in accounts payable, accrued
liabilities and other
(2,446
)
(1,836
)
Increase in deposits and other, net
44
75
Net cash used in operating activities
(4,058
)
(2,360
)
Cash flow from investing activities:
Capital expenditures
(6,191
)
(62,550
)
Proceeds from sales of assets
—
10,820
Payments on master lease obligations
(1,637
)
(1,798
)
Purchase of noncontrolling interests in
consolidated subsidiaries
—
(10,345
)
Investment in unconsolidated affiliates
and other, net
6
(9
)
Net cash used in investing activities
(7,822
)
(63,882
)
Cash flow from financing activities:
Borrowings from credit facility
29,300
27,186
Payments on credit facility
(28,478
)
(34,925
)
Borrowings from project loans
16,322
143,318
Payments on project and term loans
(8,708
)
(67,943
)
Cash dividend paid on vested stock-based
awards
(10
)
(31
)
Stock-based awards net payments
(68
)
(234
)
Distributions to noncontrolling
interests
(448
)
(90
)
Financing costs
(438
)
(1,366
)
Net cash provided by financing
activities
7,472
65,915
Net decrease in cash, cash equivalents and
restricted cash
(4,408
)
(327
)
Cash, cash equivalents and restricted cash
at beginning of year
38,591
38,918
Cash, cash equivalents and restricted cash
at end of year
$
34,183
$
38,591
STRATUS PROPERTIES INC. BUSINESS
SEGMENTS
Stratus has four operating segments: Real Estate Operations,
Leasing Operations, Hotel and Entertainment.
The Real Estate Operations segment is comprised of Stratus’ real
estate assets (developed for sale, under development and available
for development), which consists of its properties in Austin, Texas
(including the Barton Creek community; the Circle C community; the
Lantana community, including a portion of Lantana Place planned for
a future multi-family phase; and one condominium unit at the W
Austin Residences in Block 21, which was sold in February 2021); in
Lakeway, Texas, located in the greater Austin area (Lakeway); in
College Station, Texas (a portion of Jones Crossing and vacant pad
sites); in Killeen, Texas (vacant pad sites at West Killeen
Market); and in Magnolia, Texas (Magnolia Place), Kingwood, Texas
(land for future multi-family development and vacant pad sites) and
New Caney, Texas (New Caney), located in the greater Houston
area.
The Leasing Operations segment is comprised of Stratus’ real
estate assets, both residential and commercial, that are leased or
available for lease and includes The Santal, West Killeen Market,
The Saint Mary, office and retail space at Block 21 and completed
portions of Lantana Place, Jones Crossing and Kingwood Place. The
Saint Mary was sold in January 2021.
The Hotel segment includes the W Austin Hotel located at Block
21 in downtown Austin, Texas.
The Entertainment segment includes ACL Live, a live music and
entertainment venue, and 3TEN ACL Live, both located at Block 21.
In addition to hosting concerts and private events, ACL Live is the
home of Austin City Limits, the longest running music series in
American television history.
Stratus uses operating income or loss to measure the performance
of each segment. General and administrative expenses, which
primarily consist of employee salaries, wages and other costs, are
managed on a consolidated basis and are not allocated to Stratus’
operating segments. The following segment information reflects
management determinations that may not be indicative of what the
actual financial performance of each segment would be if it were an
independent entity.
Segment information presented below was prepared on the same
basis as Stratus’ consolidated financial statements (in
thousands).
Real Estate Operationsa
Leasing Operations
Hotel
Entertainment
Eliminations and Otherb
Total
Year Ended December 31, 2020:
Revenues:
Unaffiliated customers
$
22,613
$
23,257
$
9,912
$
5,233
$
—
$
61,015
Intersegment
17
891
102
14
(1,024
)
—
Cost of sales, excluding depreciation
18,533
12,611
c
15,436
d
7,082
(312
)
53,350
Depreciation
228
8,189
3,810
e
1,672
e
(229
)
13,670
General and administrative expenses
—
—
—
—
15,036
15,036
Income from forfeited earnest money
—
—
—
—
(15,000
)
f
(15,000
)
Operating income (loss)
$
3,869
$
3,348
$
(9,232
)
$
(3,507
)
$
(519
)
$
(6,041
)
Capital expenditures and purchases and
development of real estate properties
$
13,775
$
5,203
$
837
$
151
$
—
$
19,966
Total assets at December 31, 2020
161,581
236,549
g
90,831
33,827
21,228
544,016
STRATUS PROPERTIES INC. BUSINESS SEGMENTS
(continued)
Real Estate Operationsa
Leasing Operations
Hotel
Entertainment
Eliminations and Otherb
Total
Year Ended December 31, 2019:
Revenues:
Unaffiliated customers
$
13,816
$
18,542
$
35,247
$
24,573
$
—
$
92,178
Intersegment
18
931
284
445
(1,678
)
—
Cost of sales, excluding depreciation
9,758
h
9,420
26,984
18,871
(725
)
64,308
Depreciation
246
6,159
3,389
1,481
(269
)
11,006
General and administrative expenses
—
—
—
—
12,384
12,384
Gain on sales of assets
—
(5,683
)
i
—
—
—
(5,683
)
Operating income (loss)
$
3,830
$
9,577
$
5,158
$
4,666
$
(13,068
)
$
10,163
Capital expenditures and purchases and
development of real estate properties
$
11,277
$
61,245
$
1,167
$
138
$
—
$
73,827
MUD reimbursements applied to real estate
under developmenth
1,133
10
—
—
—
1,143
Total assets at December 31, 2019
161,912
235,476
g
96,577
42,328
25,075
561,368
- Includes sales commissions and other revenues together with
related expenses.
- Includes consolidated general and administrative expenses and
eliminations of intersegment amounts.
- Includes a $1.4 million charge for estimated uncollectible
rents receivable and unrealizable deferred costs.
- Includes a $1.6 million charge related to the write-off of
capitalized hotel remodel costs, partially offset by a $0.8 million
credit related to recovery under a business interruption insurance
claim filed as a result of water and smoke damage in the W Austin
hotel in January 2018.
- Includes a $202 thousand adjustment in the Hotel segment and an
$89 thousand adjustment in the Entertainment segment for the period
in December 2019 when the hotel and entertainment venues were held
for sale and, therefore, not depreciated.
- Represents income from earnest money received as a result of
the buyer's termination of the agreements to sell Block 21.
- Includes assets held for sale at The Saint Mary, which totaled
$36.5 million at December 31, 2020, and $37.3 million at December
31, 2019. The Saint Mary was sold in January 2021.
- In 2019, Stratus received $4.8 million of proceeds related to
MUD reimbursements of infrastructure costs incurred for development
of Barton Creek. Of the total amount, Stratus recorded $1.1 million
as a reduction of real estate under development on the consolidated
balance sheets and $3.4 million as a reduction in real estate cost
of sales.
- Includes the sale of Barton Creek Village and a retail pad
subject to a ground lease located in the Circle C community.
RECONCILIATION OF NON-GAAP MEASURES
EBITDA
EBITDA (earnings before interest, taxes, depreciation and
amortization) is a non-GAAP (U.S. generally accepted accounting
principles) financial measure that is frequently used by securities
analysts, investors, lenders and others to evaluate companies’
recurring operating performance, including, among other things,
profitability before the effect of financing and similar decisions.
Because securities analysts, investors, lenders and others use
EBITDA, management believes that Stratus’ presentation of EBITDA
affords them greater transparency in assessing Stratus’ financial
performance. This information differs from net loss from continuing
operations determined in accordance with GAAP and should not be
considered in isolation or as a substitute for measures of
performance determined in accordance with GAAP. EBITDA may not be
comparable to similarly titled measures reported by other
companies, as different companies may calculate such measures
differently. Management strongly encourages investors to review
Stratus’ consolidated financial statements and publicly filed
reports in their entirety.
A reconciliation of Stratus’ net loss attributable to common
stockholders to EBITDA follows (in thousands).
Years Ended December 31,
2020
2019
Net loss attributable to common
stockholders
$
(22,790
)
a, b
$
(2,464
)
c
Depreciation
13,670
11,006
Interest expense, net
14,827
12,483
Provision for income taxes
3,818
b
117
EBITDA
$
9,525
$
21,142
- Includes $15.0 million in income from earnest money received as
a result of the buyer's termination of the agreements to sell Block
21, a $1.6 million charge related to the write-off of capitalized
hotel remodel costs and a $1.4 million charge for estimated
uncollectible rents receivable and unrealizable deferred costs.
These charges are partially offset by a $0.8 million credit related
to recovery under a business interruption insurance claim filed as
a result of water and smoke damage in the W Austin hotel in January
2018.
- Includes a $10.7 million non-cash tax charge to record a
valuation allowance on Stratus' deferred tax assets.
- Includes $3.7 million of MUD reimbursements and a $5.7 million
gain on the sale of a retail pad subject to a ground lease located
in the Circle C community.
AFTER-TAX NET ASSET VALUE
After-tax NAV estimates the market value of Stratus' assets
(gross value) and subtracts the book value of Stratus' total
liabilities reported under GAAP (excluding deferred financing costs
presented in debt), value attributable to third party owners,
estimated HEB profits interests and profit participation incentive
plan awards, and estimated income taxes computed on the difference
between the estimated market values and the tax basis of the
assets. Stratus also presents the non-GAAP measure after-tax NAV
per share, which is after-tax NAV divided by shares of its common
stock outstanding as of December 31, 2020 and 2019, plus all
outstanding stock options and restricted stock units. The
computation of Stratus' after-tax NAV uses third-party appraisals
conducted by independent appraisal firms, which were primarily
retained by Stratus' lenders as required under its financing
arrangements. The appraisal firms represent in their reports that
they employ certified appraisers with local knowledge and expertise
who are Members of the Appraisal Institute (MAI) certified by the
Appraisal Institute and/or state certified as a Certified General
Real Estate Appraiser.
Each appraisal states that it is prepared in conformity with the
Uniform Standards of Professional Appraisal Practice and utilizes
at least one of the following three approaches to value:
- the cost approach, which establishes value by estimating the
current costs of reproducing the improvements (less loss in value
from depreciation) and adding land value to it;
- the income capitalization approach, which establishes value
based on the capitalization of the subject property’s net operating
income; and/or
- the sales comparison approach, which establishes value
indicated by recent sales of comparable properties in the market
place.
One or more of the approaches may be selected by the appraiser
depending on its applicability to the property being appraised. To
the extent more than one approach is used, the appraiser performs a
reconciliation of the indicated values to determine a final opinion
of value for the subject property. Significant professional
judgment is exercised by the appraiser in determining which inputs
are used, which approaches to select, and the weight given to each
selected approach in determining a final opinion as to the
appraised value of the subject property.
Stratus is a diversified real estate company and its portfolio
of real estate assets includes commercial, hotel, and entertainment
properties, as well as multi-family and single-family residential
real estate properties. Consequently, each appraisal is unique and
certain factors reviewed and evaluated in each appraisal may be
particular to the nature of the property being appraised. However,
in performing their analyses, the appraisers generally (i)
performed site visits to the properties, (ii) performed independent
inspections and/or surveys of the market area and neighborhood,
(iii) performed a highest and best use analysis, (iv) reviewed
property-level information, including, but not limited to,
ownership history, location, availability of utilities, topography,
land improvements and zoning, and (v) reviewed information from a
variety of sources about regional market data and trends applicable
to the property being appraised. Depending on the valuation
approach utilized, the appraisers may have used one or more of the
following: the recent sales prices of comparable properties; market
rents for comparable properties; operating and/ or holding costs of
comparable properties; and market capitalization and discount
rates.
The appraisals of the specified properties are as of the dates
so indicated, and the appraised value may be different if prepared
as of a current date. As noted above, the appraisers utilize
significant professional judgment in determining the appraisal
methodology best suited to a particular property and the weight
afforded to the various inputs considered, which could vary
depending on the appraiser’s evaluation of the property being
appraised. Moreover, the opinions expressed in the appraisals are
based on estimates and forecasts that are prospective in nature and
subject to certain risks and uncertainties. Events may occur that
could cause the performance of the properties to materially differ
from the estimates utilized by the appraiser, such as changes in
the economy, interest rates, capitalization rates, the financial
strength of certain tenants, and the behavior of investors, lenders
and consumers. Additionally, in some situations, the opinions and
forecasts utilized by the appraiser may be partly based on
information obtained from third party sources, which information
neither Stratus nor the appraiser verifies. Stratus reviews the
appraisals to confirm that the information provided by Stratus to
the appraiser is accurately reflected in the appraisal, but Stratus
does not validate the methodologies, inputs and professional
judgment utilized by the certified appraiser.
The appraised values may not represent fair value, as defined
under GAAP. After-tax NAV and after-tax NAV per share may not be
equivalent to the enterprise value of Stratus or an appropriate
trading price for our common stock for many reasons, including but
not limited to the following: (1) income taxes included may not
reflect the actual tax amounts that will be due upon the ultimate
disposition of the assets; (2) components were calculated as of the
dates specified and calculations as of different dates are likely
to produce different results; (3) opinions are likely to differ
regarding appropriate capitalization rates; and (4) a buyer may pay
more or less for Stratus or its real estate assets as a whole than
for the sum of the components used to calculate after-tax NAV.
Accordingly, after-tax NAV per share is not a representation or
guarantee that Stratus' common stock will or should trade at this
amount, that a stockholder would be able to realize this amount in
selling Stratus' shares, that a third party would offer the
after-tax NAV per share in an offer to purchase all or
substantially all of Stratus' common stock, or that a stockholder
would receive distributions per share equal to the after-tax NAV
per share upon Stratus’ liquidation. Investors should not rely on
the after-tax NAV per share as being an accurate measure of the
current fair market value of Stratus' common stock. Management
strongly encourages investors to review Stratus' consolidated
financial statements and publicly filed reports in their
entirety.
Below are reconciliations of Stratus' total stockholders’
equity, the most comparable GAAP measure, to after-tax NAV (in
millions).
December 31,
2020
2019
Total stockholders’ equity
$
98.9
$
121.1
Less: Total assets
(544.0
)
(561.4
)
Add: Noncontrolling interest in
subsidiaries
10.8
13.0
Total liabilities
(434.3
)
(427.3
)
Add: Gross value of assets
844.2
884.5
Lease liabilities
13.3
12.6
Less: Deferred financing costs presented
in liabilities
(2.2
)
(3.4
)
21% corporate tax on built-in gain
(54.4
)
(62.4
)
Value attributable to third party
ownership
(26.1
)
(22.7
)
Estimated HEB profits interests and profit
participation incentive plan awards
(3.2
)
(4.8
)
Rounding
—
(0.1
)
After-tax NAV
$
337.3
$
376.4
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210315005387/en/
Financial and Media Contact: William H. Armstrong III
(512) 478-5788
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