Stratus Properties Inc. (NASDAQ: STRS) (“Stratus” or the
“Company”) today announced that it has completed the previously
announced sale of The Santal for $152 million, or approximately
$339 thousand per unit, in cash. The sale generated pre-tax net
cash proceeds to Stratus of approximately $74 million, after
transaction expenses and payment of the project loan. Stratus
estimates after-tax net cash proceeds to be approximately $51
million, after payment of profit participation incentive plan
amounts, and expects to record a pre-tax gain on sale of
approximately $80 million in the fourth quarter of 2021.
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The Santal (Photo: Business Wire)
The sale generated an internal rate of return to Stratus of
approximately 32 percent (pre-tax) calculated based on the
Company’s carrying value of the property contributed to the
project, resulting in an equity multiple of 3.58x. The sales price
of The Santal implies a net asset value (“NAV”) of $51 million, a
103 percent premium to the $25 million estimated after-tax NAV of
The Santal as of December 31, 2020, as reflected in Stratus’
Investor Presentation dated March 15, 2021, available on Stratus’
website.
The Santal was Stratus’ wholly owned 448-unit garden-style,
multi-family luxury apartment complex located in Section N of
Austin’s upscale Barton Creek community, located minutes away from
downtown Austin and offering both Hill Country and downtown Austin
views. Stratus commenced construction on The Santal during
first-quarter 2015 and completed construction of the first phase
during third-quarter 2016 and the second phase during first-quarter
2019. Stratus had opportunities to sell The Santal in 2019 for a
substantially lower price than the current sale price, but elected
to hold and refinance it at the time. On the date of sale, The
Santal was fully leased and stabilized.
William H. Armstrong III, Chairman of the Board and Chief
Executive Officer of Stratus, stated, “We are pleased with the
continued validation of our strategy to source, plan, develop and
sell properties at the right time. The sale prices of The Santal
and The Saint Mary, which we sold earlier this year, reflect
significant premiums to NAV. The Board is currently reviewing
options for the uses of proceeds from the sale of The Santal, and
is incorporating in its analysis the potential cash proceeds from
the pending sale of Block 21.”
Mr. Armstrong continued, “We look forward to advancing our
current pipeline of development opportunities, which includes The
Annie B, a luxury high-rise tower in downtown Austin; The Saint
June, which is currently under construction in the Amarra
section of Barton Creek; the Holden Hills residential and Section N
mixed-use development projects planned for Barton Creek; and
several multi-family, HEB-anchored or shadow-anchored development
projects in Austin and the greater Houston market.”
The Stratus Board and management team remain engaged in a
strategic planning process, which includes consideration of the
uses of proceeds from the sale of The Santal and the pending sale
of Block 21, and of Stratus’ long-term business strategy. The
potential uses of proceeds may include a combination of further
deleveraging, returning cash to shareholders and reinvesting in
Stratus’ project pipeline. These factors may impact Stratus’
evaluation of a potential conversion to a real estate investment
trust. In the interim, Stratus plans to use approximately $56
million of the pre-tax net cash proceeds of the sale of The Santal
to pay the full balance on its revolving credit facility with
Comerica Bank.
About Stratus Properties Inc.
Stratus is a diversified real estate company engaged primarily
in the acquisition, entitlement, development, management, and sale
of commercial, and multi-family and single-family residential real
estate properties, real estate leasing, and the operation of hotel
and entertainment businesses located in the Austin, Texas area and
other select, fast-growing markets in Texas.
Forward-Looking Statements
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 Stratus’ estimated gains and net cash
proceeds from the sale of The Santal, and potential uses of
proceeds from the sale of The Santal and the pending sale of Block
21. The words “anticipates,” “may,” “can,” “could,” “plans,”
“believes,” “potential,” “possible,” “estimates,” “expects,”
“projects,” “targets,” “intends,” “likely,” “will,” “should,” “to
be” and any similar expressions are intended to identify those
assertions as forward-looking statements. 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,
the possibility that the anticipated benefits from The Santal sale
will not be fully realized or may take longer to realize than
expected, the occurrence of any event, change or other circumstance
that could delay the closing of the sale of Block 21, or result in
the termination of the agreements to sell Block 21, the results of
the Board’s strategic planning process, the uncertain and ongoing
impact of the COVID-19 pandemic, 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, and
Quarterly Report on Form 10-Q for the quarter ended September 30,
2021, each filed with the U.S. Securities and Exchange
Commission.
Under Stratus’ Comerica Bank $60 million revolving credit
facility, Stratus is not permitted to repurchase its common stock
in excess of $1 million or pay dividends on its common stock
without Comerica Bank’s prior written consent. The declaration of
dividends or decision to repurchase Stratus’ common stock 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.
Investors are cautioned that many of the assumptions upon which
Stratus’ forward-looking statements are based are likely to change
after the date 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 undertakes no
obligation to update any forward-looking statements, which speak
only as of the date made, notwithstanding any changes in its
assumptions, business plans, actual experience, or other
changes.
A copy of this release is available on Stratus’
website, stratusproperties.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20211213006052/en/
Financial and Media Contact: William H. Armstrong III
(512) 478-5788
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