SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)


Delaware						72-1211572
(State or other jurisdiction of						(I.R.S. Employer Identification No.)
incorporation or organization)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	STRS	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

On ~~July 30,~~October 29, 2021, there were issued and outstanding ~~8,237,328~~8,245,203 shares of the registrant’s common stock, par value $0.01 per share.

Item 1. Financial Statements.

STRATUS PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS (Unaudited)

(In Thousands, Except Per Share Amounts)

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

The accompanying Notes to Consolidated Financial Statements (Unaudited), which include information regarding noncash transactions, are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

THREE MONTHS ENDED ~~JUNE~~SEPTEMBER 30

Balance at March 31, 2020 9,347 $ 93 $ 186,244 $ (44,637) 1,137 $ (21,600) $ 120,100 $ 11,906 $ 132,006
Stock-based compensation — — 178 — — — 178 — 178
Total comprehensive income (loss) — — — 4,134 — — 4,134 (331) 3,803
Balance at June 30, 2020 9,347 $ 93 $ 186,422 $ (40,503) 1,137 $ (21,600) $ 124,412 $ 11,575 $ 135,987







Balance at June 30, 2020	9,347	$	93	$	186,422	$	(40,503)	1,137	$	(21,600)	$	124,412	$	11,575	$	135,987


Exercised and vested stock-based awards	11	—		22		—		—	—		22		—		22
Stock-based compensation	—	—		176		—		—	—		176		—		176





Total comprehensive loss	—	—		—		(15,078)		—	—		(15,078)		(193)		(15,271)
Balance at September 30, 2020	9,358	$	93	$	186,620	$	(55,581)	1,137	$	(21,600)	$	109,532	$	11,382	$	120,914

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

STRATUS PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

COVID-19 Pandemic Impact. Since January 2020, the COVID-19 pandemic has caused substantial disruption in international and U.S. economies and markets. The impacts of the pandemic are continuing during 2021 but began to lessen as vaccines became widely available in the U.S. during the first quarter of 2021, although there ~~has~~have been ~~a recent rise~~periodic increases in the number of cases in the U.S. as a result of vaccine hesitancy and the spread of COVID-19 variants. The pandemic has resulted in government restrictions of various degrees and effective at various times, including stay-at-home orders, bans on travel, limitations on the size of gatherings, limitations on the operations of businesses deemed non-essential, closures of work facilities, schools, public buildings and businesses, cancellation of events (including entertainment events, conferences and meetings), quarantines, mask mandates and social distancing measures. Effective March 10, 2021, the Governor of Texas issued an executive order lifting the mask mandate in Texas and increasing the capacity of all businesses and facilities in the state to 100 percent. Businesses in Texas may still limit capacity or implement additional safety protocols at their own discretion. As a result of the spread of the COVID-19 variants and resurgence in infections, on July 27, 2021, the U.S. Centers for Disease Control and Prevention (CDC) changed its mask guidance to, among other things, recommend that fully vaccinated individuals wear masks indoors in areas of “substantial” or “high transmission,” which according to the CDC, ~~include~~as of November 12, 2021, includes much of Texas, although Austin and ~~much~~Houston are currently areas of ~~Texas.~~“moderate” transmission. Stratus cannot predict the extent to which individuals may decide to restrict their activities as a result of these developments nor what impact these developments may have on its business.

limited until opening up to full capacity in August 2021.

Related Party Transactions. Refer to Note 3 for discussion of LCHM Holdings, LLC (LCHM), its manager, and JBM Trust, which are related parties as a result of LCHM’s greater than 5 percent beneficial ownership of Stratus’ common stock and representation on Stratus’ Board of Directors. LCHM and JBM Trust have invested in certain of Stratus' limited partnerships.

2. EARNINGS PER SHARE

3. LIMITED PARTNERSHIPS

The Saint June, L.P. OnIn June 2, 2021, The Saint June, L.P., a Texas limited partnership and a subsidiary of Stratus, entered into a construction loan to develop The Saint June, a 182-unit, multi-family luxury garden-style apartment project within the Amarra subdivision of the Barton Creek community in Austin, Texas. Refer to Note 6 for further discussion of this loan. OnIn July 1, 2021, an unrelated equity investor contributed $16.3 million to The Saint June, L.P. partnership for a 65.87 percent interest. Stratus has a 34.13 percent interest in The Saint June, L.P. following its contribution of land, development to date and $1.1 million of cash.

~~Terminated~~Stratus Block ~~21 Sale.~~150, L.P. In ~~December 2019,~~September 2021, Stratus ~~entered into definitive agreements~~Block 150, L.P., a Texas limited partnership and a subsidiary of Stratus, completed financing transactions from which a portion of the proceeds were used to ~~sell~~purchase the land for Block 21150, now known as The Annie B, a proposed luxury multi-family high-rise development with ground-level retail in downtown Austin, Texas. The proceeds will also be used to ~~Ryman Hospitality Properties, Inc. (Ryman) for $275 million. Ryman deposited $15.0~~fund predevelopment costs of the project. These financing transactions included (i) a $14.0 million land loan and (ii) $11.7 million from the sale of Class B limited partnership interests in a private placement offering, along with $3.9 million in ~~earnest money~~cash and pursuit costs contributed by wholly owned subsidiaries of Stratus. Refer to ~~secure its performance under~~Note 6 for further discussion of the agreements governing the sales. In May 2020, Ryman delivered a termination letter, which was agreed to and accepted by Stratus, terminating the agreements to purchase Block 21 and authorizing the release of Ryman's $15.0 million in earnest money to Stratus. During the second quarter of 2020, Stratus recorded the $15.0 million as operating income.land loan.

~~2. EARNINGS PER SHARE~~

Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Net (loss) income and total comprehensive (loss) income attributable to common stockholders $ (10,163) $ 4,134 $ (1,219) $ 3,064
Basic weighted-average shares of common stock outstanding 8,235 8,210 8,229 8,205
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs) 0 a 18 b 0 a 25 b
Diluted weighted-average shares of common stock outstanding 8,235 8,228 8,229 8,230
Basic and diluted net (loss) income per share attributable to common stockholders $ (1.23) $ 0.50 $ (0.15) $ 0.37
LCHM.

b.~~Excludes 59 thousand shares~~initial land partnership phase and potentially followed by a development partnership phase. No asset management fee will be paid to the general partner during the land partnership phase. If the general partner determines to proceed with the development partnership phase, the general partner would continue to manage Stratus Block 150, L.P. and would begin to receive an asset management fee to be agreed on at that time. During the development partnership phase, the general partner would receive a development management fee of approximately 4 percent of certain construction costs for ~~second-quarter 2020 and 37 thousand shares for the first six months of 2020 of common stock associated with RSUs that were anti-dilutive.~~

~~3. RELATED PARTY TRANSACTIONS~~

The Saint Mary, L.P. In June 2018, The Saint Mary, L.P., a Texas limited partnership and a subsidiary of Stratus, completed a series of financing transactions to develop The Saint Mary, a 240-unit luxury, garden-style apartment project in the Circle C community in Austin, Texas. The financing transactions included a $26.0 million construction loan with Texas Capital Bank, National Association and an $8.0 million private placement. ~~As one~~Two of the participants in the private placement offering, LCHM ~~Holdings, LLC (LCHM), a related party as a result of its greater than 5 percent beneficial ownership of Stratus’ common stock,~~and JBM Trust, each purchased limited partnership interests initially representing a 6.1 percent equity interest in The Saint Mary, L.P. Refer to Note 2 of the Stratus 2020 Form 10-K for further discussion.

Stratus Kingwood Place, L.P. In August 2018, Stratus Kingwood Place, L.P., a Texas limited partnership and a subsidiary of Stratus ~~(the Kingwood,~~(Kingwood, L.P.), completed a $10.7 million private placement, approximately $7 million of which, combined with a ~~$6.75~~$6.8 million loan from Comerica Bank, was used to purchase a 54-acre tract of land located in Kingwood, Texas for $13.5 million, for the development of Kingwood Place, a H-E-B, ~~LP (H-E-B)-anchored,~~LP-anchored, mixed-use development ~~project (Kingwood Place). As one~~project. Two of the participants in the private placement offering, LCHM and JBM Trust, each purchased limited partnership interests initially representing an 8.8 percent equity interest in Kingwood, L.P. Refer to Note 2 of the Stratus 2020 Form 10-K for further discussion.

Accounting for Limited Partnerships.Stratus has performed evaluations and concluded that The Saint June, L.P., Stratus Block 150, L.P., The Saint Mary, L.P. and ~~the~~ Kingwood, L.P. are variable interest entities and that Stratus is the primary beneficiary. Accordingly, the partnerships’ results are consolidated in Stratus’ financial statements. Stratus will continue to evaluate which entity is the primary beneficiary of ~~The Saint Mary, L.P. and the Kingwood, L.P.~~these partnerships in accordance with applicable accounting guidance. ~~The Saint Mary, L.P. and the Kingwood, L.P.’s results are consolidated in Stratus’ financial statements.~~

Stratus’ consolidated balance sheets include the following assets and liabilities of the ~~Kingwood, L.P.~~partnerships (in thousands)., except those related to The Saint Mary. The assets and liabilities of The Saint Mary (primarily the real estate held for investment and the related debt) are presented as held for sale in Stratus' consolidated balance ~~sheets~~sheet as of December 31, 2020.

~~Other Transactions.~~

Block 21. In December 2019, Stratus ~~has an arrangement with~~entered into agreements to sell Block 21, a mixed-use development in downtown Austin, ~~Retail Partners~~Texas, that contains the W Austin Hotel and office, retail and entertainment space, to Ryman Hospitality Properties, Inc. (Ryman) for ~~services provided~~$275 million. Ryman deposited $15.0 million in earnest money to secure its performance under the agreements governing the sales. As a result of the negative impact on capital markets and the overall economic environment caused by the COVID-19 pandemic, in May 2020, Ryman delivered a ~~consultant~~termination letter, which was agreed to and accepted by Stratus, terminating the agreements to purchase Block 21 and authorizing the release of ~~Austin Retail Partners who is~~Ryman’s $15.0 million in earnest money to Stratus. During the ~~son~~second quarter of ~~Stratus' President and Chief Executive Officer. Payments to Austin Retail Partners for~~2020, Stratus recorded the consultant's consulting services and expense reimbursements totaled $29 thousand in second-quarter 2021, $26 thousand in second-quarter 2020, $66 thousand for the first six months of 2021 and $65 thousand for the first six months of 2020.$15.0 million as operating income.


	September 30, 2021			December 31, 2020
Assets:
Cash and cash equivalents	$	8,338		$	3,125
Restricted cash	16,225		a	12,850
Real estate held for investment, net	121,010			124,669
Other assets	2,184			2,165
Total assets	$	147,757		$	142,809
Liabilities:
Accounts payable and accrued liabilities, including taxes	$	4,943		$	5,296
Debt	137,284			139,013
Other liabilities	9,887			7,183
Total liabilities	$	152,114		$	151,492

a.Most restricted cash would be received by Ryman upon the closing of the sale.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues:
Hotel	$	5,198	$	1,596	$	11,251	$	8,537
Entertainment	3,658		373		5,923		4,816
Leasing operations and other	356		347		1,124		1,193
Total revenue	9,212		2,316		18,298		14,546
Cost of sales:
Hotel	4,312		3,318		11,076		10,983
Entertainment	2,749		1,112		5,559		5,369
Leasing operations and other	196		350		871		1,137
Depreciation	1,360		1,423		4,134		4,671
Total cost of sales	8,617		6,203		21,640		22,160
General and administrative expenses	170		133		568		1,181
Income from forfeited earnest money	—		—		—		(15,000)
Operating income (loss)	425		(4,020)		(3,910)		6,205
Interest expense, net	(2,005)		(2,039)		(5,976)		(6,099)
Other income, net	—		—		—		27
Provision for income taxes	(52)		(111)		(106)		(109)
Net (loss) income	$	(1,632)	$	(6,170)	$	(9,992)	$	24

The Santal. In September 2021, Stratus entered into an agreement to sell The Santal for $152.0 million, which was subsequently amended to provide the purchaser a $0.7 million repair credit and to extend the closing date to no later than December 10, 2021. The Santal is Stratus’ wholly owned 448-unit garden-style, multi-family luxury apartment complex located in Section N of Austin’s upscale Barton Creek community. In connection with entering into the agreement to sell The Santal, Stratus amended the loan agreement with the project lender to enable prepayment of the loan, subject to a prepayment fee.


	September 30, 2021		December 31, 2020
Assets:
Real estate held for investment, net	$	67,236	$	69,160
Other assets	28		51
Total assets held for sale	$	67,264	$	69,211
Liabilities:
Accrued liabilities	$	113	$	170
Debt	74,523		74,343
Other liabilities	538		524
Total liabilities held for sale	$	75,174	$	75,037

The Saint Mary. In January 2021, The Saint Mary, L.P. sold The Saint Mary for $60.0 million. After closing costs and payment of the outstanding construction loan, the sale generated net proceeds of approximately $34 million. After establishing a reserve for remaining costs of the partnership, Stratus received $20.9 million from the subsidiary in connection with the sale and $12.9 million of the net proceeds were distributed to the noncontrolling interest owners. Stratus recognized a gain on the sale of $22.9 million ($16.2 million net of noncontrolling interests) for the first ~~six~~nine months of 2021. Stratus also recognized a $63 thousand loss on extinguishment of debt for the first ~~six~~nine months of 2021 related to the repayment of The Saint Mary construction loan.

Stratus reported the assets and liabilities of The Saint Mary as held for sale in its December 31, 2020, consolidated balance sheet. The carrying amounts of the major classes of assets and liabilities for The Saint Mary as of December 31, 2020, follow (in thousands):


Assets:
Real estate held for investment, net	$	36,341
Other assets	175
Total assets held for sale	$	36,516
Liabilities:
Accrued liabilities	$	68
Debt	25,319
Other liabilities	220
Total liabilities held for sale	$	25,607

The Saint Mary had rental revenue prior to the sale of $0.1 million in first-quarter 2021, ~~$0.7~~$0.9 million in ~~second-quarter~~third-quarter 2020, and ~~$1.4~~$2.3 million for the first ~~six~~nine months of 2020. Interest expense, net of capitalized amounts, related to The Saint Mary construction loan was less than $0.1 million in first-quarter 2021, ~~$0.3~~$0.2 million in ~~second-quarter~~third-quarter 2020 and ~~$0.6~~$0.8 million for the first ~~six~~nine months of 2020.

Kingwood Place Land. In September 2021, Stratus entered into a contract to sell the multi-family tract of land at Kingwood Place, which was planned for approximately 275 multi-family units, for $5.5 million. The sale, if consummated, is expected to close by mid-2022. Upon entering into the contract, Stratus recorded a $625 thousand impairment charge in the third quarter of 2021 to reduce the carrying value of the land to its fair value based on the contractual sale price less estimated selling costs.

5. FAIR VALUE MEASUREMENTS

A summary of the carrying amount and fair value of Stratus' debt follows (in thousands):


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value

Liabilities:	Liabilities:									Liabilities:
Debt	Debt	$	352,096	$	355,008	$	351,055	$	354,380	Debt	$	295,394	$	297,997	$	276,712	$	279,328

~~Debt.~~ Stratus' debt is recorded at cost and is not actively traded. Fair value is estimated based on discounted future expected cash flows at estimated current market interest rates. Accordingly, Stratus' debt is classified within Level 2 of the fair value hierarchy. The fair value of debt does not represent the amounts that will ultimately be paid upon the maturities of the loans.

The components of Stratus' debt follow (in thousands):


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Block 21 loan		$	137,855	$	139,013
Block 21 loana						Block 21 loana	$	137,284	$	139,013

The Santal loan		74,480		74,343

Comerica Bank credit facility	Comerica Bank credit facility	45,526		43,304		Comerica Bank credit facility	54,226		43,304
Jones Crossing loan	Jones Crossing loan	23,995		—		Jones Crossing loan	24,016		—
The Annie B land loan						The Annie B land loan	13,816		—
New Caney land loan	New Caney land loan	4,489		4,949		New Caney land loan	4,492		4,949
Paycheck Protection Program loan	Paycheck Protection Program loan	3,987		3,987		Paycheck Protection Program loan	272		3,987
Construction loans:	Construction loans:					Construction loans:
Kingwood Place	Kingwood Place	31,715		31,215		Kingwood Place	31,853		31,215

Lantana Place	Lantana Place	21,827		24,051		Lantana Place	21,726		24,051
West Killeen Market	West Killeen Market	6,642		6,707		West Killeen Market	6,116		6,707
Amarra Villas credit facility	Amarra Villas credit facility	1,580		1,109		Amarra Villas credit facility	1,593		1,109

Jones Crossing	Jones Crossing	—		22,377		Jones Crossing	—		22,377
Total debta		$	352,096	$	351,055
Total debtb						Total debtb	$	295,394	$	276,712

a.The Block 21 loan is expected to be assumed by Ryman as part of the sale of Block 21. Refer to Note 4 for further discussion of the pending Block 21 sale.

b.Includes net reductions for unamortized debt issuance costs of ~~$2.1~~$1.6 million at ~~June~~September 30, 2021, and ~~$2.2~~$1.5 million at December 31, 2020. Total debt does not include debt associated with The Santal or The Saint Mary, which is reflected in liabilities held for sale. Refer to Note 4 for further discussion.

~~The Santal Loan.~~ In April 2021, a Stratus subsidiary entered into an amendment to The Santal loan to (i) extend the maturity date from October 5, 2022, to October 5, 2024 (and remove two options to extend the maturity date for an additional 12 months); (ii) revise the interest rate from London Interbank Offered Rate (LIBOR) (or, if applicable, a replacement rate) plus 2.85 percent, with a 4.80 percent floor, to LIBOR (or, if applicable, a replacement rate) plus 3.25 percent, with a 3.40 percent floor; (iii) eliminate the requirement that Stratus' Santal subsidiary make minimum amortization payments beginning in November 2022; (iv) extend the period during which The Santal loan may not be prepaid from April 2020 to June 2022; and (v) revise certain events or circumstances that would qualify as an event of default or violate the prohibition on conveyances under the applicable provisions.

Jones Crossing Loan. In June 2021, a Stratus subsidiary entered into a $24.5 million loan with Regions Bank (the Jones Crossing loan). Of the proceeds from the Jones Crossing loan, $22.2 million was used to repay in full the original Jones Crossing construction loan. The repayment of the Jones Crossing construction loan resulted in Stratus recognizing a $163 thousand loss on the early extinguishment of debt representing the write-off of unamortized debt issuance costs related to the construction loan.

The Annie B Land Loan. In September 2021, a Stratus subsidiary entered into an 18-month, $14.0 million land loan with Comerica Bank to acquire The Annie B (The Annie B land loan). The loan matures on March 1, 2023, and bears interest at LIBOR plus 3.0 percent, provided LIBOR shall not be less than 0.5 percent. Payments of interest only on the loan are due monthly through February 2023, with the outstanding principal due at maturity.

New Caney Land Loan. In March 2021, Stratus exercised its option to extend the New Caney land loan for an additional 12 months from March 8, 2021, to March 8, 2022, which required a principal payment of $0.5 million.

PPP Loan. In April 2020, Stratus received a $4.0 million loan under the Paycheck Protection Program (PPP loan) of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was signed into law on March 27, 2020. The PPP loan accrues interest at 1 percent and will mature on April 15, 2022, except for the portion that ~~may be~~was forgiven. ~~The proceeds from the loan were to be used to retain workers and maintain payroll and make mortgage interest payments.~~ Stratus' PPP loan forgiveness application ~~is currently under review by~~was accepted and approved in August 2021 and the ~~Small Business Administration; however, no assurance~~outstanding balance and accrued interest were forgiven with the exception of ~~full forgiveness can be provided.~~

Lantana Place Construction Loan. In January 2021, a Stratus subsidiary entered into an amendment to the Lantana Place construction loan in which Stratus' Lantana Place subsidiary was granted a waiver of the debt service coverage ratio covenant until September 30, 2021, at which point the ratio is measured by reference to the three-month period then ended, and subsequently builds each quarter until measured by reference to the 12-month period ending June 30, 2022, and then on a trailing 12-month period for each quarter thereafter. As part of the January 2021 amendment, Stratus repaid $2.0 million in principal on the Lantana Place construction loan.

The Saint June Construction Loan. In June 2021, The Saint June, L.P. entered into a construction loan with Texas Capital Bank to finance approximately 55 percent of the estimated $55 million cost of the development and construction of The Saint June. Available borrowings under the loan total the least of (i) $30.3 million, (ii) 60 percent of the total construction costs, or (iii) 55 percent of the as-stabilized appraised value of the property. As of ~~June~~September 30, 2021, no0 amounts were outstanding under this loan.

Magnolia Place Construction Loan. In August 2021, a Stratus subsidiary entered into a $14.8 million construction loan with Veritex Community Bank secured by the Magnolia Place project. The loan matures on August 12, 2024, with two options to extend the maturity for an additional 12 months, subject to satisfying specified conditions and the payment of an extension fee. The loan bears interest at 30-day LIBOR plus 3.25 percent (or, if applicable, a

Interest Expense and Capitalization. Interest costs (before capitalized interest) totaled ~~$4.0~~$4.2 million in ~~second-quarter~~third-quarter 2021, ~~$4.9~~$4.7 million in ~~second-quarter~~third-quarter 2020, ~~$8.3~~$12.5 million for the first ~~six~~nine months of 2021 and ~~$10.1~~$14.8 million for the first ~~six~~nine months of 2020. Stratus' capitalized interest totaled ~~$1.2~~$1.3 million in ~~second-quarter~~third-quarter 2021, ~~and~~$1.1 million in third-quarter 2020, ~~and $2.5~~$3.8 million for ~~each of~~ the first ~~six~~nine months of 2021, and $3.6 million for the first nine months of 2020. Capitalized interest is primarily related to development activities at Barton Creek.

7. PROFIT PARTICIPATION INCENTIVE PLAN

Stratus had deferred tax assets (net of deferred tax liabilities and valuation allowances) totaling $44 thousand at ~~June~~September 30, 2021, and December 31, 2020. Stratus' deferred tax assets had valuation allowances totaling ~~$12.6~~$12.9 million at ~~June~~September 30, 2021, and $10.7 million at December 31, 2020. In the third quarter of 2020, Stratus recorded a valuation allowance on its deferred tax assets of $9.6 million. In evaluating the recoverability of the deferred tax assets, management considered available positive and negative evidence, giving greater weight to the recent current cumulative losses and uncertainty regarding projected future financial results. Upon a change in facts and circumstances, management may conclude that sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance in the future, which would favorably impact Stratus' results of operations. Stratus’ future results of operations may be negatively impacted by an inability to realize a tax benefit for future tax losses or for items that will generate additional deferred tax assets that are not more likely than not to be realized.

9. BUSINESS SEGMENTS

Stratus has 4 operating segments: Real Estate Operations, Leasing Operations, Hotel and Entertainment.

Revenues from Contracts with Customers. Stratus' revenues from contracts with customers follow (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Real Estate Operations:	Real Estate Operations:									Real Estate Operations:
Developed property sales	Developed property sales	$	575	$	1,832	$	4,615	$	14,140	Developed property sales	$	—	$	5,001	$	4,615	$	19,141
Undeveloped property sales	Undeveloped property sales	0		0		2,500		0		Undeveloped property sales	750		—		3,250		—
Commissions and other	Commissions and other	200		61		281		89		Commissions and other	150		24		431		113
		775		1,893		7,396		14,229			900		5,025		8,296		19,254
Leasing Operations:	Leasing Operations:									Leasing Operations:
Rental revenue	Rental revenue	5,208		5,718		10,375		11,450		Rental revenue	5,723		5,807		16,098		17,257

Hotel:	Hotel:									Hotel:
Rooms, food and beverage	Rooms, food and beverage	3,470		932		5,230		6,007		Rooms, food and beverage	4,748		1,504		9,978		7,511
Other	Other	465		98		823		934		Other	450		92		1,273		1,026
		3,935		1,030		6,053		6,941			5,198		1,596		11,251		8,537
Entertainment:	Entertainment:									Entertainment:
Event revenue	Event revenue	1,055		293		1,650		3,851		Event revenue	2,865		373		4,515		4,224
Other	Other	603		(3)		617		594		Other	794		—		1,411		594
		1,658		290		2,267		4,445			3,659		373		5,926		4,818

Total revenues from contracts with customers	Total revenues from contracts with customers	$	11,576	$	8,931	$	26,091	$	37,065	Total revenues from contracts with customers	$	15,480	$	12,801	$	41,571	$	49,866

Financial Information by Business Segment. The following segment information was prepared on the same basis as Stratus’ consolidated financial statements (in thousands).


		Real Estate Operationsa		Leasing Operations		Hotel		Entertainment		Corporate, Eliminations and Otherb			Total			Real Estate Operationsa			Leasing Operations			Hotel		Entertainment		Corporate, Eliminations and Otherb			Total

Three Months Ended June 30, 2021:
Three Months Ended September 30, 2021:															Three Months Ended September 30, 2021:
Revenues:	Revenues:														Revenues:
Unaffiliated customers	Unaffiliated customers	$	775	$	5,208	$	3,935	$	1,658	$	0		$	11,576	Unaffiliated customers	$	900		$	5,723		$	5,198	$	3,659	$	—		$	15,480
Intersegment	Intersegment	5		246		28		0		(279)			0		Intersegment	55			247			38		1		(341)			—
Cost of sales, excluding depreciation	Cost of sales, excluding depreciation	1,503		2,528		3,862		1,670		(109)			9,454		Cost of sales, excluding depreciation	1,945			2,547			4,312		2,905		(104)			11,605
Depreciation	Depreciation	47		1,692		877		347		(39)			2,924		Depreciation	46			1,600			878		346		(38)			2,832

General and administrative expenses	General and administrative expenses	0		0		0		0		6,399		c	6,399		General and administrative expenses	—			—			—		—		5,422		c	5,422
Impairment of real estate															Impairment of real estate	625		d	—			—		—		—			625

Operating (loss) income	Operating (loss) income	$	(770)	$	1,234	$	(776)	$	(359)	$	(6,530)		$	(7,201)	Operating (loss) income	$	(1,661)		$	1,823		$	46	$	409	$	(5,621)		$	(5,004)
Capital expenditures and purchases and development of real estate properties	Capital expenditures and purchases and development of real estate properties	$	2,390	$	1,216	$	143	$	10	$	0		$	3,759	Capital expenditures and purchases and development of real estate properties	$	25,962	e	$	4,138		$	177	$	15	$	—		$	30,292
Total assets at June 30, 2021		165,607		194,696		91,878		33,884		24,276			510,341
Total assets at September 30, 2021															Total assets at September 30, 2021	211,405			194,143		f	91,779		35,222		26,551			559,100

Corporate, Eliminations and Otherb

a.Includes sales commissions and other revenues together with related expenses.

b.Includes consolidated general and administrative expenses and eliminations of intersegment amounts.

c.The ~~increases from the comparable prior year periods are~~increase in third-quarter 2021, compared to third-quarter 2020, is primarily the result of a $2.6 million increase in employee incentive compensation costs associated with the PPIP resulting primarily from an increased valuation for The Santal. The increase for the first nine months of 2021, compared to the first nine months of 2020, is primarily the result of a $4.0 million increase in employee incentive compensation costs, including those associated with the PPIP, and increased consulting, legal and public relation costs for Stratus' successful proxy contest and the ~~ongoing REIT~~real estate investment trust exploration process totaling ~~$3.3~~$3.8 million.

d.Represents the difference by which the fair value of the multi-family tract of land at Kingwood Place, based on the contractual sale price less estimated selling costs, was less than Stratus' carrying value of the land.

e.Includes the purchase of The Annie B land for $22.5 million.

f.Includes assets held for sale at The Santal totaling $67.3 million ~~and $4.4 million in second-quarter~~at September 30, 2021, and ~~for the first six months~~The Santal and The Saint Mary, totaling $106.1 million at September 30, 2020.

g.Represents the gain on the January 2021 sale of The Saint Mary.

h.Includes a $1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.

e.i.Includes a $0.8 million credit related to a business interruption insurance claim filed as a result of water and smoke damage in the W Austin Hotel in January 2018.

f.~~Represents income from earnest money received as a result of Ryman's termination of the agreements to purchase Block 21.~~

g.~~Includes assets held for sale at The Saint Mary, which totaled $36.6 million at June 30, 2020.~~

h.~~Represents the gain on the January 2021 sale of The Saint Mary.~~

i.j.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.

~~Table~~k.Represents income from earnest money received as a result of ~~Contents~~Ryman's termination in May 2020 of the 2019 agreements to purchase Block 21.

10. SUBSEQUENT EVENTS

In August 2021, Stratus announced its new project development plans and completed construction financing for the first phase of development of Magnolia Place, an H-E-B grocery shadow-anchored, mixed-use project in Magnolia, Texas.

Magnolia Place is currently planned to consist of 4 retail buildings totaling approximately 35,000 square feet, 5 retail pad sites to be sold or ground leased, 194 single-family lots and approximately 500 multi-family units. The first phase of development is expected to consist of 2 retail buildings totaling approximately 19,000 square feet, all 5 pad sites, and the road, utility and drainage infrastructure necessary to support the entire development. H-E-B recently began construction on its 95,000-square-foot grocery store on an adjoining 18-acre site owned by H-E-B.

Stratus entered into a $14.8 million, three-year construction loan to finance the first phase of development of Magnolia Place. Refer to Note 6 for further discussion of the Magnolia Place construction loan. The remaining estimated project costs are being funded by equity contributed by Stratus.

Stratus evaluated events after ~~June~~September 30, 2021, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us,” “our” and "Stratus" refer to Stratus Properties Inc. and all entities owned or controlled by Stratus Properties Inc. You should read the following discussion in conjunction with our consolidated financial statements and accompanying notes, related MD&A and discussion of our business and properties included in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission (SEC) and the unaudited consolidated financial statements and accompanying notes included in this Form 10-Q. The results of operations reported and summarized below are not necessarily indicative of future operating results, and future results could differ materially from those anticipated in forward-looking statements (refer to “Cautionary Statement” herein, Part II, Item 1A. "Risk Factors" herein and Part I, Item 1A. “Risk Factors” of our 2020 Form 10-K for further discussion). In particular, the impacts of the COVID-19 pandemic continue to affect our operations. As a result, our performance during this interim period, as well as future interim periods while the COVID-19 pandemic is ongoing, will not be comparable to past performance or indicative of future performance. We expect continued uncertainty in our business and the global economy as a result of the duration and intensity of the COVID-19 pandemic and its related effects. All subsequent references to “Notes” refer to Notes to Consolidated Financial Statements (Unaudited) located in Part I, Item 1. “Financial Statements” herein, unless otherwise stated.

We are a diversified real estate company with headquarters in Austin, Texas. We are 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. We generate revenues and cash flows from the sale of our developed properties, rental income from our leased properties and from our hotel and entertainment operations.

In September 2021, we entered into an agreement to sell The Santal, our wholly owned 448-unit garden-style, multi-family luxury apartment complex located in Barton Creek, for $152.0 million. In October 2021, we entered into new agreements to sell Block 21, our wholly owned mixed-use development in downtown Austin, Texas, that contains the W Austin Hotel and office, retail and entertainment space, for $260.0 million. As discussed further below, these sales, if completed, would result in significant after-tax cash proceeds to us. In addition, the sale of Block 21 would eliminate our Hotel and Entertainment segments. Refer to Note 9 for further discussion of our operating segments and “Business Strategy” below for a discussion of our business strategy.

BUSINESS STRATEGY

Our portfolio consists of approximately 1,700 acres of undeveloped acreage and acreage under development for commercial and multi-family and single-family residential projects, as well as several completed commercial and residential projects. Our W Austin Hotel and our ACL Live and 3TEN ACL Live entertainment venues are located in downtown Austin at our Block 21 property and are central to the city's world-renowned, vibrant music scene.

Our primary business objective is to create value for stockholders by methodically developing and enhancing the value of our properties and then selling them or holding them for lease. Our full cycle development program of acquiring properties, securing and maintaining development entitlements, developing and stabilizing properties, and selling them or holding them as part of our leasing operations is a key element of our strategy. We may also seek to

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refinance properties, in order to benefit from the increased value of the property, from lower interest rates or for other reasons.

We believe that Austin and other select, fast-growing markets in Texas continue to be attractive locations. Many of our developments are in locations where development approvals have historically been subject to regulatory constraints, which has made it difficult to obtain or change entitlements. Our Austin properties, which are located in desirable areas with significant regulatory constraints, are entitled and have utility capacity for full buildout. As a result, we believe that through strategic planning, development and marketing, we can maximize and fully realize their value.

Our development plans require significant additional capital, which we may pursue through joint ventures or other arrangements. Our business strategy requires us to rely on cash flow from operations and debt financing as our primary sources of funding for our liquidity needs. We have also, from time to time, relied on project-level equity financing of our subsidiaries. We have formed strategic relationships as part of our overall strategy for particular development projects and may enter into other similar arrangements in the future.

In October 2021, we entered into new agreements to sell Block 21 to Ryman Hospitality Properties, Inc. (Ryman) for $260.0 million. The purchase price includes Ryman's assumption of approximately $138 million of existing mortgage debt and is subject to downward adjustments up to $5.0 million. The transaction is targeted to close near year-end 2021, subject to the timely satisfaction or waiver of various closing conditions. After closing costs and assumption of the outstanding Block 21 loan, the sale is expected to generate net pre-tax proceeds of approximately $115 million before prorations and including $6.9 million to be escrowed for 12 months after closing. We expect to record a pre-tax gain of approximately $110 million upon the closing of the sale.

In September 2021, we entered into an agreement to sell The Santal for $152.0 million. The sale is expected to close in December 2021, subject to the satisfaction or waiver of customary closing conditions. After closing costs and payment of the outstanding Santal loan, the sale is expected to generate net pre-tax proceeds of approximately $70 million. We expect to record a pre-tax gain on the sale of approximately $80 million in the fourth quarter of 2021.

In January 2021, we sold The Saint Mary, a 240-unit luxury garden-style apartment project in the Circle C community, for $60.0 million. After closing costs and payment of the outstanding construction loan, the sale generated net proceeds of approximately $34 million. After establishing a reserve for remaining costs of the partnership, we received $20.9 million from the subsidiary in connection with the sale and $12.9 million of the net proceeds were distributed to the noncontrolling interest owners. We recognized a gain on the sale of $22.9 million ($16.2 million net of noncontrolling interests) for the first ~~six~~nine months of 2021.

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Refer to ~~Notes 1,~~Note 4 for further discussion of our property dispositions. Refer to Note 3 and Note 6 ~~and 10~~ for a discussion of financing transactions we entered into during 2021, including for the construction and development of The Saint June and Magnolia Place, and the refinancing of The Santal and Jones Crossing projects.

If completed, the sales of The Santal and Block 21 will result in us receiving substantial cash proceeds, estimated to be approximately $145 million after tax (approximately $50 million relating to The Santal and $95 million relating to Block 21, including $6.9 million to be escrowed). Our Board of Directors (Board) ~~has authorized an in-depth exploration~~and management team are engaged in a strategic planning process, which includes consideration of the uses of proceeds from the sales and of our long-term business strategy. Potential uses of proceeds may include a combination of further deleveraging, returning cash to shareholders and reinvesting in our robust project pipeline. These factors may impact our evaluation of a potential conversion ~~from a C-Corporation~~ to a real estate investment trust (REIT). We have engaged financial, tax, accounting and legal advisors, and the Board will closely monitor and evaluate the findings to ultimately determine if conversion to a REIT is in the best interest of our stockholders. If the Board determines to move forward, we expect the conversion would occur no earlier than 2022. We believe that the REIT conversion would require consent from our major lenders and amendments to our major debt agreements, among other third-party consents. We also expect to seek stockholder approval to implement provisions in our organizational documents consistent with a public REIT structure, if the Board ultimately determines that a REIT conversion is in stockholders’ best interests.

OVERVIEW OF THE IMPACTS OF THE COVID-19 PANDEMIC

Since January 2020, the COVID-19 pandemic has caused substantial disruption in international and U.S. economies and markets. The impacts of the pandemic are continuing during 2021 but began to lessen as vaccines became widely available in the U.S. during the first quarter of 2021, although there ~~has~~have been ~~a recent rise~~periodic increases in the number of cases in the U.S. as a result of vaccine hesitancy and the spread of COVID-19 variants. The pandemic resulted in government restrictions of various degrees and effective at various times, resulting in limitations on normal daily activities for individuals and capacity restrictions and, in some cases, closures for many businesses. Effective March 10, 2021, the Governor of Texas issued an executive order lifting the mask mandate in Texas and increasing the capacity of all businesses and facilities in the state to 100 percent. Businesses in Texas

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may still limit capacity or implement additional safety protocols at their own discretion. As a result of the spread of the COVID-19 variants and resurgence in infections, on July 27, 2021, the U.S. Centers for Disease Control and Prevention (CDC) changed its mask guidance to, among other things, recommend that fully vaccinated individuals wear masks indoors in areas of “substantial” or “high transmission,” which according to the CDC, ~~include~~as of November 12, 2021, includes much of Texas, although Austin and ~~much~~Houston are currently areas of ~~Texas.~~“moderate” transmission. We cannot predict the extent to which individuals may decide to restrict their activities as a result of these developments nor what impact these developments may have on our business.

We are optimistic about a post-pandemic recovery and are encouraged by indications that the vaccines are effective and by the rising levels of economic activity in our markets. Although the pandemic has had an adverse impact on our hotel and entertainment operations, which have seen improvements over the last two quarters, our residential properties and opportunities have been positively ~~impacted. Despite the pandemic, we have retained substantially all of our pre-pandemic retail tenants, added new tenants, and all of our tenants are currently paying rent per their leases,~~impacted, as ~~well as monthly payments pursuant to previously disclosed base rent deferral arrangements if applicable, as further~~ discussed ~~below.~~in more detail throughout this report.

Impacts on our Business

The COVID-19 pandemic has had, and is expected to continue to have, ~~a significant adverse~~an impact on our business and operations, particularly on ~~the hotel~~our Hotel and ~~entertainment~~Entertainment segments which were adversely impacted beginning late in the first quarter of 2020 and to date in 2021, and are expected to continue to be adversely impacted during the ~~second half~~remainder of 2021, although the impacts continued to lessen during ~~second-quarter~~third-quarter 2021. The hotel has remained open throughout the pandemic and the 3340 percent average occupancy ~~rate~~ in the ~~second~~third quarter of 2021 was higher than the 1216 percent average occupancy ~~rate~~in the third quarter of 2020 and the 33 percent average occupancy in the second quarter of ~~2020 and the 21 percent average occupancy rate in the first quarter of~~ 2021. ~~Our~~While our entertainment venues, ACL Live and 3TEN ACL Live, ~~hosted a~~were able to host events during third-quarter 2021 and the first nine months of 2021, capacity remained limited ~~number of events with restricted~~at our entertainment venues until opening up to full capacity ~~during second-quarter~~in August 2021. The extent to which the adverse impacts of the pandemic continue depends on numerous evolving factors that we cannot predict. Moreover, even as travel advisories and restrictions are lifted, travel and entertainment demand may remain weak for a significant length of ~~time, and attractions and events that previously brought visitors and artists to the city of Austin may not proceed or may proceed with limited capacity.~~time.

The Austin market, as well as the other Texas markets where we operate, continue to rebound from pandemic lows. Our residential properties have been positively impacted by home-centric trends resulting from the pandemic and from the increased attractiveness of Austin, Texas as a desirable place to live. Demand for residential properties is strong in our markets, currently exceeding available supply. For example, we have sold almost all of our single-family lot inventory at Barton Creek at attractive prices, and we have been able to increase rents on apartments ~~with renewing lease terms~~ at The Santal. After the successful sale of The Saint Mary multi-family project in the first quarter of 2021, we began construction on The Saint June, a 182-unit multi-family project in ~~July~~Barton Creek, and closed on a construction loan for the project (refer to Note 6). In April 2021, ~~and~~ we ~~have~~ announced

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~~and are currently seeking financing~~ development plans for ~~our~~ Holden Hills, a new residential ~~project.~~development formerly known as Section KLO, in the Barton Creek community. The project consists of 495 acres and the community is designed to feature 475 unique residences to be developed in multiple phases with a focus on sustainability and energy conservation. We also purchased the land for Block 150, now known as The Annie B, a proposed luxury multi-family high-rise development with ground-level retail in downtown Austin, Texas. We believe we have attractive opportunities to develop or sell residential components of our projects at Magnolia Place, Lantana Place, ~~Kingwood Place,~~ Jones Crossing and our remaining land in Lakeway. Our multi-family tract of land at Kingwood Place is currently under contract to sell for $5.5 million. However, with increased demand and construction activity in our markets, and industry-wide material and labor supply constraints, we have also experienced certain cost ~~increases in certain construction materials.~~increases. We continue to actively manage and monitor these costs. In addition, the ongoing trend toward online shopping has accelerated during the COVID-19 pandemic. We have been adjusting to these retail trends by incorporating more multi-family residential space and more food and beverage and entertainment space into our development plans.

Despite the COVID-19 pandemic, we have continued to advance our land planning, engineering, permitting and development activities. In addition to the projects discussed above, in August 2021, we closed on a construction loan and began construction on the first phase of development of Magnolia Place, an H-E-B, LP (H-E-B) grocery shadow-anchored, mixed-use project in Magnolia, Texas ~~(see Notes 6 and 10). During the second quarter of 2021, we began site work on The Saint June, a 182-unit multi-family project in Barton Creek, and closed on a construction loan for the project (see~~(refer to Note 6). In July 2021, an unrelated equity investor acquired a 65.87 percent interest in The Saint June partnership for $16.3 million ~~(see~~(refer to Note 1) and construction began on The Saint June. In April 2021, we announced development plans for Holden Hills, a new residential development formerly known as Section KLO, in the Barton Creek community. The project consists of 495 acres and the community is designed to feature 475 unique residences to be developed in multiple phases with a focus on sustainability and energy conservation.3).

As a result of the COVID-19 pandemic, and beginning in April 2020, we agreed, generally, to 90-day base rent deferrals with a majority of our retail leasing tenants, which had closed or were operating at significantly reduced capacities. Rent deferrals with our retail tenants resulted in a reduction of scheduled base rent collections of 10 percent during the period from April through December 2020. The deferred rents are scheduled to be collected over a 12-month or 24-month period that started in January 2021. During the first quarter of 2021, we began collecting these rent deferrals. Further, we have retained substantially all of our pre-pandemic retail tenants, added new tenants, and all of our tenants are currently paying rent per their leases, as well as monthly payments pursuant to

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previously disclosed base rent deferral arrangements ifas applicable. At our multi-family properties, we have granted rent deferral accommodations on a case-by-case basis, with no material decline in rent collections or occupancy.

Our ~~previously disclosed transaction~~2019 agreements to sell Block 21 for $275 million ~~was~~were terminated by Ryman ~~Hospitality Properties, Inc. (Ryman)~~ in May 2020 as a result of the negative impact on capital markets and the overall economic environment caused by the COVID-19 pandemic. As a result of Ryman’s termination of the transaction, it forfeited to us $15.0 million of earnest money. We recorded the $15.0 million as operating income during the second quarter of 2020. As discussed above, in October 2021, we entered into new agreements to sell Block 21 to Ryman for $260.0 million.

Because the pandemic is unprecedented in recent history, and its severity, duration and future economic consequences are difficult to predict, we cannot predict its future impact on the company with any certainty. At this time, we continue our focus on maintaining liquidity and controlling costs. As previously discussed, we are also moving forward to secure financing for our Holden Hills development.

Impacts on our Liquidity and Capital Resources

As of ~~June~~September 30, 2021, we had ~~$14.3~~$5.6 million available under our $60.0 million Comerica Bank credit facility, with a $150 thousand letter of credit committed against the credit facility. During the pandemic we have proactively engaged with our project lenders in connection with formulating rent deferral arrangements for our tenants, receiving waivers of and amendments to certain financial covenants for specific project loans and extending maturity dates on project loans with near-term maturities. ~~See~~Refer to Note 6 for further discussion.

With respect to our Block 21 loan, Stratus Block 21, LLC, our wholly owned subsidiary that owns Block 21 (the Block 21 subsidiary) continues to not meet the quarterly debt service coverage ratio test resulting in a "Trigger Period," which is not a default but restricts our ability to receive cash distributions from the project. Although the Block 21 loan agreement is a non-recourse loan, we may contribute cash to our Block 21 subsidiary in order to prevent ~~our Block 21 subsidiary~~it from defaulting under the Block 21 loan agreement. Additionally, under our subsidiary’s hotel operating agreement, the hotel operator has and may continue to request funds from us if it reasonably determines that such funds are required in order to fund the operation of the hotel and specified reserves. Pursuant to such provisions, we contributed $6.3 million during 2020 and ~~$9.1~~$13.0 million during the first ~~six~~nine months of 2021, including ~~$4.1~~$3.9 million during the ~~second~~third quarter. ~~Based~~Depending on ~~current projections,~~the timing of the sale of Block 21, we expect additional contributions ~~are expected~~ to total ~~$4.4~~as much as $1.1 million through early 2022.

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We project that we will be able to meet our debt service and other cash obligations for at least the next 12 months. Our projections are based on many detailed and complex underlying assumptions, including (1) that our Block 21 businesses will generate positive operating income in the second half of 2021 and that Block 21 will generate sufficient cash to cover debt service by early 2022, (2) that current conditions in our leasing operations will not deteriorate materially, (3) that we close on projected asset sales in our real estate operations segment, including certain land sales at our mixed-use properties, on anticipated terms, (4) that we are able to secure anticipated financing for certain development projects, and (5) that we can repay, extend or refinance debt coming due in the next 12 months, including loans at Amarra Villas, West Killeen Market and New Caney. No assurances can be given that the results anticipated by our projections will occur. ~~See~~Refer to Note 6 and “Capital Resources and Liquidity” below for further discussion.

We are continuing to closely monitor health and market conditions and are prepared to make further adjustments to our business strategy if and when appropriate.

OVERVIEW OF FINANCIAL RESULTS FOR ~~SECOND-QUARTER~~THIRD-QUARTER 2021

Our net loss attributable to common stockholders totaled ~~$10.2~~$3.8 million, or ~~$1.23~~$0.46 per share, in ~~second-quarter~~third-quarter 2021, compared ~~with net income of $4.1~~to $15.1 million, or ~~$0.50~~$1.84 per share, in ~~second-quarter~~third-quarter 2020. During the first ~~six~~nine months of 2021 our net loss attributable to common stockholders totaled ~~$1.2~~$5.0 million, or ~~$0.15~~$0.61 per share, compared ~~with net income attributable~~ to ~~common stockholders of $3.1~~$12.0 million, or ~~$0.37~~$1.46 per share, during the first ~~six~~nine months of 2020. Our results for the first ~~six~~nine months of 2021 were positively impacted by the $22.9 million gain on the sale of The Saint Mary in January 2021 ($16.2 million net of noncontrolling interests). Our net losses attributable to common stockholders in the 2021 periods include (i) increases in charges to general and administrative expenses for incentive compensation costs associated with our Profit Participation Incentive Plan (PPIP) resulting primarily from an increased valuation for The Santal (third-quarter and nine-month period), and for consulting, legal and public relation costs incurred in connection with our successful proxy contest and our ~~ongoing~~ REIT exploration ~~process.~~process (nine month period), partly offset by (ii) a $3.7 million gain related to forgiveness of substantially all of our Paycheck Protection Program (PPP) loan (third-quarter and nine-month period). The net ~~income reported~~losses in the 2020 periods ~~includes~~include a non-cash tax charge of $9.6 million in third-quarter 2020 to record a valuation allowance on our deferred tax assets. The net loss for the first nine months of 2020 is net of $15.0 million in income from forfeited earnest money received as a result of the termination of the 2019 Block 21 transaction in second-quarter 2020.

Our revenues totaled ~~$11.6~~$15.5 million in ~~second-quarter~~third-quarter 2021 and ~~$26.1~~$41.6 million for the first ~~six~~nine months of 2021, compared with ~~$8.9~~$12.8 million in ~~second-quarter~~third-quarter 2020 and ~~$37.1~~$49.9 million for the first ~~six~~nine months of 2020. The increase in revenues in ~~second-quarter~~third-quarter 2021, compared to ~~second-quarter~~third-quarter 2020, primarily reflects increases in revenue from our ~~hotel~~Hotel and ~~entertainment~~Entertainment segments as the negative impacts from the COVID-19 pandemic continued to lessen during ~~second-quarter~~third-quarter 2021. The decrease in revenue for the first ~~six~~nine months of 2021, compared to the first ~~six~~nine months of 2020, primarily reflects a decrease in the number of developed residential lots and homes sold as available inventory decreased. ~~See~~Refer to "Results of Operations" below for further discussion of our segments.

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UPDATE ON PROJECT AND DEVELOPMENT ACTIVITIES

Current Residential Activities

~~In second-quarter 2021, we sold one Amarra Drive Phase III lot for $0.6 million.~~ During the first ~~six~~nine months of 2021, we sold three Amarra Drive Phase III lots, a five-acre multi-family tract of land in Amarra Drive and our last remaining condominium unit at the W Austin Residences for a total of $7.1 million. For further discussion, ~~see~~refer to "Results of Operations — Real Estate Operations." As of ~~June~~September 30, 2021, two developed Amarra Drive Phase III lots remained unsold.

The Villas at Amarra Drive (Amarra Villas) project is a 20-unit development in the Barton Creek community for which we completed construction of the first seven homes during 2017 and 2018. We sold the last two completed homes in 2019. We began construction of the next two Amarra Villas homes during the first quarter of 2020, which are expected to be completed ~~later~~ in ~~2021.~~early 2022. As of ~~August 13,~~November 12, 2021, one of these homes was under contract. In addition, a contract had been signed to sell a second home on which we began construction in second-quarter 2021. As of ~~August 13,~~November 12, 2021, a total of 11 units (1 of which is under construction and 10 of which construction has not started) remain available of the initial 20-unit development.

The Santal, a garden-style luxury apartment complex consisting of 448 units in Section N in the Barton Creek community, is fully leased and stabilized. In September 2021, we entered into an agreement to sell The Santal for $152.0 million. The sale is expected to close in December 2021, subject to the satisfaction or waiver of customary closing conditions.

In ~~second-quarter~~third-quarter 2021, after completion of financing, we began ~~site work~~construction on The Saint ~~June, after the completion of financing.~~June. The Saint June is a 182-unit multi-family project within the Amarra ~~subdivision. See Note 1~~subdivision in the Barton Creek community. Refer to Notes 3 and 6 for a discussion of project financing. The first units of The Saint June are currently expected to be completed in third-quarter 2022 with ~~final~~ completion of the project expected in first-quarter 2023. We also expect this property to achieve an Austin Energy Green Building rating.

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For further discussion of our multi-family and single-family residential properties, ~~see~~refer to MD&A in our 2020 Form 10-K.

Current Commercial Activities

In August 2021, we announced new development plans for Magnolia Place, an H-E-B grocery shadow-anchored, mixed-use project in Magnolia, Texas that is ~~fully~~wholly owned by Stratus. We began construction on the first phase of development of Magnolia Place in August 2021. Magnolia Place is currently planned to consist of 4 retail buildings totaling approximately 35,000 square feet, 5 retail pad sites to be sold or ground leased, 194 single-family lots and approximately 500 multi-family units. The first phase of development is expected to consist of 2 retail buildings totaling approximately 19,000 square feet, all 5 pad sites, and the road, utility and drainage infrastructure necessary to support the entire development. H-E-B recently began construction on its 95,000-square-foot grocery store on an adjoining 18-acre site owned by H-E-B. We are evaluating a sale of the land for the single-family residential component.

We have constructed approximately 152,000 square feet of retail space at Kingwood Place, including an H-E-B grocery store, and we have signed ground leases on two of the retail pads. Three pad sites remain available for lease. As of ~~June~~September 30, 2021, we had signed leases for approximately 85 percent of the retail space, including the H-E-B grocery store. ~~We continue~~In September 2021, we entered into a contract to ~~advance the potential~~sell a multi-family ~~project~~tract of land at Kingwood Place, which is currently planned for approximately 275 ~~units.~~multi-family units, for $5.5 million. We recorded a $625 thousand impairment charge in third-quarter 2021 to reduce the land's carrying value to its fair value based on the contractual sale price less estimated selling costs. If consummated, the sale is expected to close in mid-2022.

Lantana Place is a partially developed, mixed-use development project located in southwest Austin. As of ~~June~~September 30, 2021, we had signed leases for approximately 85 percent of the retail space in the first phase, including the anchor tenant, Moviehouse & Eatery (Moviehouse). In July 2020, we entered into a new six-month lease agreement, which was further extended through July 31, 2021, with Moviehouse in which rent was based on a percentage of Moviehouse's revenue. The lease agreement provided Moviehouse the right to extend the lease to the original 20-year term through October 31, 2039, at the original rent schedule, which Moviehouse exercised effective August 1, 2021. The lease is secured by a $1.4 million letter of credit. We also have a ground lease for an AC Hotel by Marriott. Construction of the hotel began in May 2019, and it is expected to ~~be completed~~open in ~~September~~fourth-quarter 2021. We rezoned a portion of the Lantana property for a potential multi-family development of up to 320 ~~units.~~units and expect to begin construction in second-quarter 2022.

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As of ~~June~~September 30, 2021, we had signed leases for substantially all of the retail space at the first phase of Jones Crossing, an H-E-B-anchored, mixed-use development located in College Station, Texas, and approximately 70 percent of the retail space at West Killeen Market, our retail project located in Killeen, Texas, shadow-anchored by an adjacent H-E-B grocery store. During third-quarter 2021, we sold a pad site at West Killeen Market for $750 thousand and only one unsold pad site remains at West Killeen Market. During second-quarter 2021, we refinanced the Jones Crossing project to improve loan terms and take advantage of the low-interest-rate market. Block 21's Class A leasable office space was approximately 60 percent leased as of ~~June~~September 30, 2021, including 9,000 square feet occupied by our corporate office, and the retail space was substantially fully leased as of ~~June~~September 30, 2021. ~~During second-quarter 2021, we refinanced the Jones Crossing project to improve loan terms and take advantage of the low-interest-rate market.~~

For further discussion of our commercial properties, ~~see~~refer to MD&A in our 2020 Form 10-K.

Projects in Planning

In September 2021, we announced plans for The Annie B, a proposed luxury high-rise rental project in downtown Austin. Based on preliminary plans, The Annie B would be developed as a 400-foot tower, consisting of approximately 420,000 square feet with 300 luxury multi-family units for lease and ground level retail. The project includes the historic AO Watson house, which will be renovated and expanded to offer amenities that may include a restaurant, pool and garden, while preserving the property’s historic and architectural features. We closed the land purchase on September 1, 2021, and we expect to finalize development plans over the next 12 to 18 months. The Annie B is expected to achieve an Austin Energy Green Building rating.

We are advancing the planning and permitting process for development of future phases of Barton Creek, including Holden Hills, a new residential development formerly known as Section KLO, and commercial and multi-family Section N.

Holden Hills, our final large residential development within the Barton Creek community, consists of 495 acres and the community is designed to feature 475 unique residences to be developed in multiple phases with a focus on health and wellness, sustainability and energy conservation. The city of Austin and Travis County approved initial subdivision permit applications for Holden Hills in October 2019 and the engineering for roads and utilities for the initial phase has been completed. We anticipate securing final permits to start construction in the first quarter of 2022. We currently expect to complete site work for phase one, including the construction of road, utility, drainage and other required infrastructure, approximately 17 months from the issuance of ~~the~~our final permits. Accordingly, our projections anticipate that we would begin sales in Holden Hills in late 2022 or early 2023. Phases one and two of the Holden Hills development plan encompass the development of the home sites. We may sell the developed home sites, or may elect to build and sell, or build and lease, homes on some or all of the home sites, depending on financing and market conditions.

~~Table of Contents~~

Using a conceptual approach similar to that used for Holden Hills, we are also evaluating a redesign of Section N, our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community. If successful, this new project would be designed as a dense, mid-rise, mixed-use project surrounded by an extensive greenspace amenity, resulting in a significant potential increase in development density, as compared to our prior plans.

These potential development projects require extensive additional permitting and will be dependent on market conditions and financing. Because of the nature and cost of the approval and development process and uncertainty regarding market demand for a particular use, there is uncertainty regarding the nature of the final development plans and whether we will be able to successfully execute the plans. In addition, our development plans for Holden Hills and Section N will require significant additional capital, which we currently intend to pursue through bank debt and third-party equity capital arrangements.

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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 sales, joint ventures or other arrangements. As a result, and because of the COVID-19 pandemic and numerous other factors affecting our business activities as described herein and in our 2020 Form 10-K, 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. Corporate, eliminations and other includes consolidated general and administrative expenses, which primarily consist of employee compensation and other costs described herein.

The following table summarizes our operating results (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating (loss) income:
Real Estate Operationsa
$ (770) $ (46) $ 1,466 $ 2,053

Leasing Operations 1,234 (174) b 25,470 c 650 b
Hotel (776) (1,652) (2,408) (2,706)
Entertainment (359) (1,420) (1,576) (959)
Corporate, eliminations and otherd
(6,530) 11,778 e (11,183) 8,800 e
Operating (loss) income $ (7,201) $ 8,486 $ 11,769 $ 7,838
Interest expense, net $ (2,772) $ (3,666) $ (5,807) $ (7,581)
Net loss (income) attributable to noncontrolling interests in subsidiaries $ 41 $ 331 $ (6,681) $ 1,408
Net (loss) income attributable to common stockholders $ (10,163)

$ 4,134 $ (1,219) $ 3,064


	Three Months Ended September 30,						Nine Months Ended September 30,

	2021			2020			2021			2020
Operating (loss) income:
Real Estate Operationsa	$	(1,661)	b	$	1,388		$	(195)	b	$	3,441
Leasing Operations	1,823			1,186			27,293		c	1,836		d
Hotel	46			(2,594)			(2,362)			(5,300)
Entertainment	409			(1,267)			(1,167)			(2,226)
Corporate, eliminations and othere	(5,621)			(2,937)			(16,804)			5,863		f
Operating (loss) income	$	(5,004)		$	(4,224)		$	6,765		$	3,614
Interest expense, net	$	(2,859)		$	(3,587)		$	(8,666)		$	(11,168)



Net loss (income) attributable to noncontrolling interests in subsidiaries	$	433		$	193		$	(6,248)		$	1,601
Net loss attributable to common stockholders	$	(3,764)	g	$	(15,078)	h	$	(4,983)	g	$	(12,014)	h

a.Includes sales commissions and other revenues together with related expenses.

b.Includes a $625 thousand impairment charge for the multi-family tract of land at Kingwood Place that is under contract to sell for $5.5 million.

c.Includes a $22.9 million gain on the January 2021 sale of The Saint Mary.

d.Includes a $1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.

c.e.~~Includes a $22.9 million gain on the sale of~~ The ~~Saint Mary.~~

d.~~Includes consolidated general and administrative expenses and eliminations of intersegment amounts. The increases~~increase in ~~general and administrative expenses from the comparable prior year periods are~~third-quarter 2021, compared to third-quarter 2020, is primarily the result of a $2.6 million increase in employee incentive compensation costs associated with our PPIP resulting primarily from an increased valuation for The Santal. The increase for the first nine months of 2021, compared to the first nine months of 2020, is primarily the result of a $4.0 million increase in employee incentive compensation costs, including those associated with our PPIP, and increased consulting, legal and public relation costs for ~~Stratus’~~Stratus' successful proxy contest and the ~~ongoing~~ REIT exploration process totaling ~~$3.3 million in second-quarter 2021 and $4.4 million for the first six months of 2021.~~$3.8 million.

e.f.Includes $15.0 million in income from earnest money received as a result of Ryman's termination in May 2020 of the 2019 agreements to purchase Block 21.

g.Includes a $3.7 million gain related to forgiveness of our PPP loan.

h.Includes a $9.6 million tax charge to record a valuation allowance on our deferred tax assets.

We have four operating segments: Real Estate Operations, Leasing Operations, Hotel and Entertainment (refer to Note 9). The following is a discussion of our operating results by segment.

~~Table of Contents~~

Real Estate Operations

The following table summarizes our Real Estate Operations results (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenues:
Developed property sales $ 575 $ 1,833 $ 4,615 $ 14,140
Undeveloped property sales — — 2,500 —
Commissions and other 205 64 290 97
Total revenues 780 1,897 7,405 14,237
Cost of sales, including depreciation 1,550 1,943 5,939 12,184

Operating (loss) income $ (770) $ (46) $ 1,466 $ 2,053


	Three Months Ended September 30,				Nine Months Ended September 30,

	2021		2020		2021		2020
Revenues:
Developed property sales	$	—	$	5,001	$	4,615	$	19,141
Undeveloped property sales	750		—		3,250		—
Commissions and other	205		29		495		126
Total revenues	955		5,030		8,360		19,267
Cost of sales, including depreciation	1,991		3,642		7,930		15,826
Impairment of real estate	625		—		625		—


Operating (loss) income	$	(1,661)	$	1,388	$	(195)	$	3,441

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Developed Property Sales. The following table summarizes our developed property sales (dollars in thousands):
Three Months Ended June 30,
2021 2020
Lots Revenues Average Cost Per Lot Lots Revenues Average Cost Per Lot
Barton Creek
Amarra Drive:
Phase II lots — $ — $ — 2 $ 1,183 $ 179
Phase III lots 1 575 233 1 650 257
Total Residential 1 $ 575 3 $ 1,833


		Six Months Ended June 30,										Three Months Ended September 30,
		2021				2020						2021			2020
		Lots/Units	Revenues		Average Cost Per Lot/Unit	Lots/Homes	Revenues		Average Cost Per Lot/Home			Lots	Revenues	Average Cost Per Lot	Lots	Revenues		Average Cost Per Lot
Barton Creek	Barton Creek										Barton Creek

Amarra Drive:	Amarra Drive:										Amarra Drive:

Phase II lots		—	—		—	4	$	2,372	$	193

Phase III lots	Phase III lots	3	2,215		299	7	4,590		306		Phase III lots	—	—	—	4	$	5,001	$	535
Homes built on Phase III lots		—	—		—	2	7,178		3,273

W Austin Residences at Block 21:
Condominium Unit		1	2,400		1,721	—	—		—

Total Residential	Total Residential	4	$	4,615		13	$	14,140			Total Residential	—	—		4	$	5,001


	Nine Months Ended September 30,
	2021					2020
	Lots/Units	Revenues		Average Cost Per Lot/Unit		Lots/Homes	Revenues		Average Cost Per Lot/Home
Barton Creek




Amarra Drive:

Phase II lots	—	$	—	$	—	4	$	2,372	$	193
Phase III lots	3	2,215		299		11	9,591		389
Homes built on Phase III lots	—	—		—		2	7,178		3,273




W Austin Residences at Block 21:
Condominium unit	1	2,400		1,721		—	—		—
Total Residential	4	$	4,615			17	$	19,141

The decrease in revenues in ~~second-quarter~~third-quarter 2021 and for the first ~~six~~nine months of 2021, compared to the 2020 periods, reflects a decrease in the number of lots and homes sold in 2021 as available inventory decreased.

Undeveloped Property Sales. In third-quarter 2021 we sold a pad site at West Killeen Market for $750 thousand. During the first ~~six~~nine months of 2021, we also sold a five-acre multi-family tract of land in Amarra Drive for $2.5 million.

Cost of Sales. Cost of sales includes costs of property sold, project operating and marketing expenses and allocated overhead costs, partly offset by reductions for certain municipal utility district (MUD) reimbursements. Cost of sales decreased to ~~$1.6~~$2.0 million in ~~second-quarter~~third-quarter 2021 ~~from $1.9 million in second-quarter 2020, primarily reflecting a decrease in the number of lots sold during second-quarter 2021. Cost of sales decreased to $5.9~~and $7.9 million for the first ~~six~~nine months of 2021 from ~~$12.2~~$3.6 million in third-quarter 2020 and $15.8 million for the first ~~six~~nine months of 2020, primarily reflecting a decrease in the number of lots and homes sold during the 2021 periods, partly offset by the sale of our last condominium unit at Block 21 during the first ~~six~~nine months of 2021. ~~The first six months of 2020 included the sale of two homes built on Amarra Drive Phase III lots that had higher average costs.~~

~~Table~~Impairment of ~~Contents~~Real Estate. In September 2021, we entered into a contract to sell the multi-family land at Kingwood Place planned for multi-family units for $5.5 million. At the time of entering into the contract, the fair value of the land based on the contractual sale price less estimated selling costs was less than its carrying value, and we recorded a $625 thousand impairment charge in the third quarter of 2021.

The following table summarizes our Leasing Operations results (in thousands):


		Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020				2021		2020		2021		2020
Rental revenue	Rental revenue	$	5,454	$	5,934		$	10,851	$	11,893		Rental revenue	$	5,970	$	6,030	$	16,821	$	17,923
Rental cost of sales, excluding depreciation	Rental cost of sales, excluding depreciation	2,528		4,074		a	4,909		7,162		a	Rental cost of sales, excluding depreciation	2,547		2,793		7,456		9,955		a
Depreciation	Depreciation	1,692		2,034			3,403		4,081			Depreciation	1,600		2,051		5,003		6,132

Gain on sale of assets	Gain on sale of assets	—		—			(22,931)		—			Gain on sale of assets	—		—		(22,931)		—
Operating income (loss)		$	1,234	$	(174)		$	25,470	$	650
Operating income												Operating income	$	1,823	$	1,186	$	27,293	$	1,836

a.Includes a $1.4 million charge for estimated uncollectible rents receivable and unrealizable deferred costs.

Rental Revenue. Rental revenue primarily includes revenue from The Santal, Lantana Place, Jones Crossing, Kingwood Place, the office and retail space at Block 21, West Killeen Market, and The Saint Mary until its sale in January 2021. The decrease in rental revenue in the 2021 periods, compared with the 2020 periods, primarily reflects the sale of The Saint ~~Mary.~~Mary, partly offset by increased revenue at Lantana Place. The Saint Mary had rental revenue of $0.1 million in first-quarter 2021 prior to the sale compared to ~~$0.7~~$0.9 million in ~~second-quarter~~third-quarter 2020 and ~~$1.4~~$2.3 million during the first ~~six~~nine months of 2020.

Rental Cost of Sales and Depreciation. Rental cost of sales and depreciation expense decreased in ~~second-quarter~~third-quarter 2021 and for the first ~~six~~nine months of 2021, compared with the 2020 periods, primarily as a result of the sale of The Saint Mary. The decrease during the first nine months of 2021, compared to the first nine months of 2020, was further impacted by a $1.4 million charge in second-quarter 2020 for estimated uncollectible rents receivable and unrealizable deferred ~~costs, as well as the sale of The Saint Mary.~~costs. During the second quarter of 2020, our lease with Moviehouse, our anchor tenant at Lantana Place, was terminated and we charged $1.3 million to cost of sales to write off uncollectible rents receivable and unrealizable deferred costs associated with this lease. Subsequently, in July 2020, we entered into a new lease agreement with Moviehouse, which was further extended through July 31, 2021. The new lease agreement provided Moviehouse the right to extend the lease to the original 20-year term through October 31, 2039, at the original rent schedule, which Moviehouse exercised effective August 1, 2021. The lease is secured by a $1.4 million letter of credit.

Gain on Sale of Assets. In January 2021, our subsidiary sold The Saint Mary for $60.0 million. After closing costs and payment of the outstanding construction loan, the sale generated net proceeds of approximately $34 million. After establishing a reserve for remaining costs of the partnership, we received $20.9 million from the subsidiary in connection with the sale and $12.9 million of the net proceeds were distributed to the noncontrolling interest owners. We recognized a gain on the sale of $22.9 million ($16.2 million net of noncontrolling interests) for the first ~~six~~nine months of 2021.

The following table summarizes our Hotel results (in thousands):


		Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020				2021		2020		2021		2020
Hotel revenue	Hotel revenue	$	3,963	$	1,046		$	6,113	$	7,005		Hotel revenue	$	5,236	$	1,614	$	11,349	$	8,619
Hotel cost of sales, excluding depreciation	Hotel cost of sales, excluding depreciation	3,862		1,767		a	6,764		7,675		a	Hotel cost of sales, excluding depreciation	4,312		3,317		11,076		10,992		a
Depreciation	Depreciation	877		931			1,757		2,036			Depreciation	878		891		2,635		2,927

Operating loss		$	(776)	$	(1,652)		$	(2,408)	$	(2,706)
Operating income (loss)												Operating income (loss)	$	46	$	(2,594)	$	(2,362)	$	(5,300)

a.Includes a $0.8 million credit related to a business interruption insurance claim filed as a result of water and smoke damage in the W Austin Hotel in January 2018.

Hotel Revenue. Hotel revenue primarily includes revenue from W Austin Hotel room reservations and food and beverage sales. The increase in Hotel revenues in ~~second-quarter~~the 2021 periods, compared to the 2020 periods, is primarily a result of higher room reservations and food and beverage sales as the impacts of the COVID-19 pandemic continued to lessen during third-quarter 2021.

Hotel Cost of Sales. The increase in Hotel cost of sales, excluding depreciation, in third-quarter 2021, compared to ~~second-quarter~~third-quarter 2020, is primarily a result of higher room reservations and food and beverage sales as the impacts of the COVID-19 pandemic continued to lessen during ~~second-quarter~~third-quarter 2021. The decrease in ~~revenue~~depreciation during the first ~~six~~nine months of 2021, compared to the first ~~six months of 2020, is a result of the COVID-19 pandemic having a less significant impact in the first three months of 2020.~~

~~Hotel Cost of Sales.~~ The increase in Hotel cost of sales, excluding depreciation, in second-quarter 2021, compared to second-quarter 2020, is primarily a result of higher room reservations and food and beverage sales as the impacts of the COVID-19 pandemic continued to lessen during second-quarter 2021. The decrease in Hotel cost of sales, excluding depreciation, in the first six months of 2021, compared to the first six months of 2020, is primarily a result of the COVID-19 pandemic having a less significant impact in the first three months of 2020. The decrease in depreciation during the first six months of 2021, compared to the first sixnine months of 2020, is primarily because of a $202 thousand adjustment made in first-quarter 2020 for the period in December 2019 when the hotel was held for sale and, therefore, not depreciated.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Entertainment revenue	$	3,660	$	367	$	5,927	$	4,826
Entertainment cost of sales, excluding depreciation	2,905		1,242		6,000		5,773
Depreciation	346		392		1,094		1,279

Operating income (loss)	$	409	$	(1,267)	$	(1,167)	$	(2,226)

Entertainment Revenue. Entertainment revenue primarily reflects the results of operations for ACL Live, including ticket sales, revenue from private events, sponsorships, personal seat license sales and suite sales, and sales of concessions and merchandise. Entertainment revenue also reflects revenues associated with events hosted at 3TEN ACL Live. Revenues from the Entertainment segment vary from period to period as a result of factors such as the price of tickets and number of tickets sold, as well as the number and type of events hosted at ACL Live and 3TEN ACL Live. Entertainment revenues increased in ~~second-quarter~~third-quarter 2021 and during the first nine months of 2021, compared to ~~second-quarter~~the 2020 periods, primarily reflecting an increase in the number of events hosted at ACL Live and 3TEN ACL Live as the impacts of the COVID-19 pandemic continued to lessen during ~~second-quarter~~third-quarter 2021. As of August 2021, ACL Live and 3TEN ACL Live are operating at full capacity. In addition, we resumed recognizing revenue from sponsorships and sales of personal seat licenses and suites in second-quarter 2021, which had been suspended during the period in which the entertainment venues were closed. Revenue from sponsorships and sales of personal seat licenses and suites totaled $606 thousand in ~~second-quarter~~third-quarter 2021 ~~totaled $535 thousand compared to none in second-quarter 2020. Entertainment revenues decreased in~~and $1.1 million during the first ~~six~~nine months of 2021 compared to none in third-quarter 2020 and $521 thousand during the first ~~six months of 2020, which primarily reflects the COVID-19 pandemic having a less significant impact in the first three~~nine months of 2020. The COVID-19 pandemic ~~also~~ prevented a full show schedule in the first ~~six~~nine months of 2020, with government restrictions on gatherings forcing ACL Live to close.

Certain key operating statistics specific to the concert and event hosting industry are included below to provide additional information regarding our ACL Live and 3TEN ACL Live operating performance.
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
ACL Live
Events:
Events hosted 26 — 54 38
Estimated attendance 10,814 — 14,230 45,446
Ticketing:
Number of tickets sold 6,060 — 9,770 37,703
Gross value of tickets sold (in thousands) $ 302 $ — $ 675 $ 1,881
3TEN ACL Live
Events:
Events hosted 49 15 71 51
Estimated attendance 6,773 777 8,601 8,232
Ticketing:
Number of tickets sold 2,225 — 2,339 5,278
Gross value of tickets sold (in thousands) $ 37 $ — $ 40 $ 126


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
ACL Live
Events:
Events hosted	52		17		106		55
Estimated attendance	37,815		656		52,045		46,102

Ticketing:
Number of tickets sold	26,047		—		35,817		37,703
Gross value of tickets sold (in thousands)	$	1,653	$	—	$	2,328	$	1,881

3TEN ACL Live
Events:
Events hosted	39		19		110		70
Estimated attendance	4,936		1,607		13,537		9,839

Ticketing:
Number of tickets sold	3,780		—		6,119		5,278
Gross value of tickets sold (in thousands)	$	93	$	—	$	133	$	126

Entertainment Cost of Sales. The increase in Entertainment cost of sales, excluding depreciation, in ~~second-quarter~~third-quarter 2021 and for the first nine months of 2021, compared to ~~second-quarter~~the 2020 periods, reflects an increase in the number of events hosted. The decrease in ~~Entertainment cost of sales, excluding~~ depreciation ~~during~~for the first ~~six~~nine months of 2021, compared to the first six months of 2020, reflects a decrease in the attendance of events hosted by ACL Live as a result of reduced capacities. The decrease in depreciation for the first six months of 2021, compared to the first sixnine months of 2020, is primarily because of an $89 thousand adjustment made for the period in December 2019 when the entertainment venues were held for sale and, therefore, not depreciated.

The pending sale of Block 21 will include the sale of ACL Live and 3TEN ACL Live.

Corporate, Eliminations and Other

Corporate, eliminations and other (refer to Note 9) includes consolidated general and administrative expenses, which primarily consist of employee compensation and other costs. Consolidated general and administrative expenses increased to ~~$6.4~~$5.4 million in ~~second-quarter~~third-quarter 2021 from $~~3.1~~2.9 million in ~~second-quarter~~third-quarter 2020, primarily reflecting a ~~$3.3~~$2.6 million increase in employee incentive compensation costs associated with our PPIP resulting primarily from an increased valuation for The Santal. Additional expense of up to $4.0 million may be recognized upon the closing of the sale of the property.

Consolidated general and administrative expenses increased to $16.4 million for the first nine months of 2021 from $8.8 million for the first nine months of 2020, primarily reflecting a $4.0 million increase in employee incentive compensation costs, including those associated with our PPIP, and increased consulting, legal and public relation costs for our successful proxy contest and ~~our ongoing~~the REIT exploration process ~~and a $0.2 million increase in incentive compensation costs. Second-quarter 2020 costs included $0.4 million in legal fees associated with the Block 21 sales agreements and subsequent termination.~~

~~Consolidated general and administrative expenses increased to$10.9 million for the first six months of 2021 from~~$5.9 million for the first six months of 2020, primarily reflecting a $4.4 million increase in consulting, legal and public relation costs mostly for our successful proxy contest and our ongoing REIT exploration process. The remaining increase is primarily the result of an increase of $1.3 million in employee incentive compensation costs during the first six months of 2021 as the first six months 2020 included significant reductions to estimated incentive compensation accruals.totaling $3.8 million. The first ~~six~~nine months of 2020 included $0.6 million in legal fees associated with the 2019 Block 21 sales agreements and subsequent termination. ~~Corporate, eliminations and other also includes eliminations of intersegment transactions among the four operating segments.~~

For the ~~second quarter and~~ first ~~six~~nine months of 2020, corporate, eliminations and other ~~includes~~also included $15.0 million in income from earnest money that was received from Ryman in May 2020 upon its termination of the 2019 agreements to purchase Block 21. Corporate, eliminations and other also includes eliminations of intersegment transactions among the four operating segments.

Non-Operating Results

~~Table~~rates and the repayment of ~~Contents~~The Saint Mary construction loan upon the sale of the property.

Capitalized interest totaled ~~$1.2~~$1.3 million in ~~second-quarter~~third-quarter 2021 and ~~$2.5~~$3.8 million for the first ~~six~~nine months of 2021 compared to ~~$1.2~~$1.1 million in ~~second-quarter~~third-quarter 2020 and ~~$2.5~~$3.6 million for the first ~~six~~nine months of 2020. Capitalized interest is primarily related to development activities at Barton Creek.

(Provision ~~for) Benefit from~~for Income Taxes. We recorded a ~~(provision for) benefit from~~provision for income taxes of ~~$(0.1)~~$0.1 million in ~~second-quarter~~third-quarter 2021 and ~~$(0.3)~~$0.4 million for the first ~~six~~nine months of 2021, compared to ~~$(1.1)~~$7.5 million in ~~second-quarter~~third-quarter 2020 and ~~$1.4~~$6.2 million for the first ~~six~~nine months of 2020. The third quarter and first nine months of 2020 included a $9.6 million non-cash tax charge to record a valuation allowance on our deferred tax assets. Refer to Note 8 for further discussion of income taxes.

CAPITAL RESOURCES AND LIQUIDITY

Comparison of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020

The first ~~six~~nine months of 2020 ~~include~~also includes $15.0 million from earnest money received as a result of Ryman's termination in May 2020 of the 2019 agreements to purchase Block 21. The cash inflow from the increase in accounts payable, accrued liabilities, deposits and other during the first nine months of 2021, compared to the cash outflow from the decrease in accounts payable, accrued liabilities, deposits and other during the first nine months of 2020, is primarily a result of the timing of payments, including contractor retention payments associated with the completion of The Saint Mary and Kingwood Place in 2020.

During the first ~~six~~nine months of 2021, we received proceeds, net of closing costs, from the sale of The Saint Mary of $59.5 million.

~~Financing Activities.~~ ~~Cash used in financing activities totaled $38.8 million for the first six months of 2021 and $4.1 million for the first six~~nine months of 2020. During the first ~~six~~nine months of 2021, net borrowings on the Comerica Bank credit facility totaled ~~$2.2~~$10.9 million, compared with net repayments of ~~$8.5~~$7.2 million for the first ~~six~~nine months of 2020, reflecting the use of $13.8 million of the $15.0 million earnest money received from Ryman in 2020 to pay down the revolving credit facility. During the first ~~six~~nine months of 2021, net repayments on other project and term loans totaled ~~$26.7~~$13.9 million, primarily reflecting the repayment of The Saint Mary construction loan upon the sale of the project. During the first ~~six~~nine months of 2020, net borrowings on other project and term loans totaled ~~$5.0~~$8.1 million, primarily reflecting borrowings from the ~~Paycheck Protection Program~~PPP loan ~~(PPP loan)~~ (refer to Note 6 for further information) and borrowings for the Kingwood Place and The Saint Mary projects, ~~partially~~partly offset by repayment of the Amarra Villas credit facility. ~~See~~Refer to “Credit Facility, Other Financing Arrangements and Liquidity Outlook” below for a discussion of our outstanding debt at ~~June~~September 30, 2021.

Credit Facility, Other Financing Arrangements and Liquidity Outlook

At ~~June~~September 30, 2021, the total principal amount of our outstanding debt was ~~$354.2~~$297.0 million, compared with ~~$353.2~~$278.2 million at December 31, 2020. Consolidated debt at both dates excluded The Santal loan of approximately $75 million, and at December 31, 2020, also excluded The Saint Mary construction loan of approximately $25 million, as a result of these properties being classified as held for sale at those dates. We had borrowings of ~~$45.5~~$54.2 million under our $60.0 million Comerica Bank revolving credit facility, ~~$14.3~~$5.6 million of which was available at ~~June~~September 30, 2021, net of a $150 thousand letter of credit committed against the credit facility.

DEBT MATURITIES AND OTHER CONTRACTUAL OBLIGATIONS



	2021		2022		2023		2024		2025		Thereafter		Total

Block 21 loana	$	636	$	2,613	$	2,765	$	2,904	$	3,094	$	125,872	$	137,884


Comerica Bank credit facility	—		54,226		—		—		—		—		54,226


The Annie B land loan	—		—		14,000		—		—		—		14,000
New Caney land loan	—		4,500		—		—		—		—		4,500
PPP loan	116		156		—		—		—		—		272

Construction loans:
Kingwood Placeb	—		32,078		—		—		—		—		32,078

Jones Crossing	—		—		—		—		—		24,500		24,500
Lantana Place	203		825		20,788		—		—		—		21,816
West Killeen Market	47		6,099		—		—		—		—		6,146
Amarra Villas credit facility	—		1,593		—		—		—		—		1,593

Total	$	1,002	$	102,090	$	37,553	$	2,904	$	3,094	$	150,372	$	297,015	c

a.The Block 21 loan is expected to be assumed by Ryman as part of the sale of Block 21. Refer to Note 4 for further discussion of the pending Block 21 sale.

b.We have the option to extend the maturity date for two additional 12-month periods, subject to certain debt service coverage conditions.

c.Total does not include $75.0 million of debt at September 30, 2021, associated with The Santal, which is reflected as held for sale.

CRITICAL ACCOUNTING ESTIMATES

NEW ACCOUNTING STANDARDS

OFF-BALANCE SHEET ARRANGEMENTS

CAUTIONARY STATEMENT

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, they have concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, 2021.

(b) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 1A. Risk Factors.

Risks Relating to the Pending Sales of Block 21 and The Santal

The closings of the pending sales of Block 21 and The Santal are subject to various risks and uncertainties, may not be completed in accordance with expected plans, on the currently contemplated timelines, or at all, and the pending sales may be disruptive to the operations and profitability of our leasing, hotel and entertainment businesses.

We cannot provide assurances that the sales of Block 21 or The Santal will result in additional value being realized by our shareholders.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities and no repurchases of common stock during the three months ended ~~June~~September 30, 2021.

Incorporated by Reference

Exhibit
Number

Exhibit Title

Filed with this Form 10-Q

Form

File No.

Date Filed

~~10.8~~10.4*

~~Form~~Modification of ~~Notice~~Loan Agreement, Note, Mortgage and Other Loan Documents by and among Santal, L.L.C., as borrower, Stratus Properties Inc., as guarantor, and ACRE Commercial Mortgage 2017-FL3 Ltd., as lender, dated as of ~~Grant of Restricted Stock Units (adopted 2021).~~September 20, 2021.

~~10.9~~10.5*†

~~Form~~Amended and Restated Limited Partnership Agreement of ~~Notice of Grant of Restricted Stock Units for Awards under the Profit Participation Incentive Plan (adopted 2021).~~Stratus Block 150, L.P. entered into by and among The Stratus Block 150 GP, L.L.C., Stratus Properties Operating Co., L.P., and several Class B Limited Partners.

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

101.INS

XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase.

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

* Indicates management contract† Certain identified information has been excluded from this exhibit because it is both not material and is the type that the registrant customarily and actually treats as private or ~~compensatory plan or arrangement.~~confidential.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

STRATUS PROPERTIES INC.

By: /s/ Erin D. Pickens

----------------------------------------

Senior Vice President and

Chief Financial Officer

(authorized signatory and

Principal Financial Officer)


STRATUS PROPERTIES INC.
TABLE OF CONTENTS


			Page

Part I. Financial Information			2

Item 1. Financial Statements			2

Consolidated Balance Sheets (Unaudited)			2

Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss (Unaudited)			3

Consolidated Statements of Cash Flows (Unaudited)			4

Consolidated Statements of Equity (Unaudited)			5

Notes to Consolidated Financial Statements (Unaudited)			7

Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations			1718

Item 3. Quantitative and Qualitative Disclosures About Market Risk			3133

Item 4. Controls and Procedures			3133

Part II. Other Information			3133

Item 1A. Risk Factors			3133

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3134



Item 6. Exhibits			3235

Signature			S-1


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	15,272	$	12,434	Cash and cash equivalents	$	23,169	$	12,434
Restricted cash	Restricted cash	21,612		21,749		Restricted cash	36,452		21,749
Real estate held for sale	Real estate held for sale	1,773		4,204		Real estate held for sale	1,773		4,204
Real estate under development	Real estate under development	113,694		98,137		Real estate under development	144,666		98,137
Land available for development	Land available for development	43,670		53,432		Land available for development	42,564		53,432
Real estate held for investment, net	Real estate held for investment, net	281,573		286,529		Real estate held for investment, net	211,972		217,369

Lease right-of-use assets	Lease right-of-use assets	10,740		10,871		Lease right-of-use assets	10,634		10,871

Other assets	Other assets	22,007		20,144		Other assets	20,606		20,093
Assets held for sale - The Saint Mary		0		36,516
Assets held for sale						Assets held for sale	67,264		105,727
Total assets	Total assets	$	510,341	$	544,016	Total assets	$	559,100	$	544,016

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Accounts payable	Accounts payable	$	9,920	$	8,047	Accounts payable	$	10,541	$	8,047

Accrued liabilities, including taxes	Accrued liabilities, including taxes	7,491		12,868		Accrued liabilities, including taxes	10,066		12,698
Debt	Debt	352,096		351,055		Debt	295,394		276,712
Lease liabilities	Lease liabilities	13,709		13,269		Lease liabilities	13,888		13,269
Deferred gain	Deferred gain	5,596		6,173		Deferred gain	5,253		6,173
Other liabilities	Other liabilities	17,997		17,233		Other liabilities	21,382		16,709
Liabilities held for sale - The Saint Mary		0		25,607
Liabilities held for sale						Liabilities held for sale	75,174		100,644
Total liabilities	Total liabilities	406,809		434,252		Total liabilities	431,698		434,252

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0

Equity:	Equity:					Equity:
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:

Common stock	Common stock	94		94		Common stock	94		94
Capital in excess of par value of common stock	Capital in excess of par value of common stock	188,323		186,777		Capital in excess of par value of common stock	188,553		186,777
Accumulated deficit	Accumulated deficit	(67,576)		(66,357)		Accumulated deficit	(71,340)		(66,357)

Common stock held in treasury	Common stock held in treasury	(21,753)		(21,600)		Common stock held in treasury	(21,753)		(21,600)
Total stockholders’ equity	Total stockholders’ equity	99,088		98,914		Total stockholders’ equity	95,554		98,914
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	4,444		10,850		Noncontrolling interests in subsidiaries	31,848		10,850
Total equity	Total equity	103,532		109,764		Total equity	127,402		109,764
Total liabilities and equity	Total liabilities and equity	$	510,341	$	544,016	Total liabilities and equity	$	559,100	$	544,016


		Six Months Ended					Nine Months Ended
		June 30,					September 30,
		2021		2020			2021		2020
Cash flow from operating activities:	Cash flow from operating activities:					Cash flow from operating activities:
Net income		$	5,462	$	1,656
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Net income (loss)						Net income (loss)	$	1,265	$	(13,615)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:						Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation	Depreciation	5,926		7,010		Depreciation	8,758		10,339
Cost of real estate sold	Cost of real estate sold	3,341		8,732		Cost of real estate sold	4,028		10,692
Impairment of real estate						Impairment of real estate	625		—
Gain on sale of assets	Gain on sale of assets	(22,931)		0		Gain on sale of assets	(22,931)		—
Loss on early extinguishment of debt		226		0
Net gain on extinguishment of debt						Net gain on extinguishment of debt	(3,454)		—
Amortization of debt issuance costs and stock-based compensation	Amortization of debt issuance costs and stock-based compensation	969		1,095		Amortization of debt issuance costs and stock-based compensation	1,468		1,601

Equity in unconsolidated affiliates' loss	Equity in unconsolidated affiliates' loss	9		0		Equity in unconsolidated affiliates' loss	11		9

Deferred income taxes	Deferred income taxes	0		2,731		Deferred income taxes	—		12,277

Purchases and development of real estate properties	Purchases and development of real estate properties	(4,879)		(8,655)		Purchases and development of real estate properties	(30,841)		(11,607)
Increase in deposits		358		46

(Increase) decrease in other assets		(1,309)		1,215
Decrease in accounts payable, accrued liabilities and other		(2,162)		(8,385)

Increase in other assets						Increase in other assets	(997)		(2,974)
Increase (decrease) in accounts payable, accrued liabilities, deposits and other						Increase (decrease) in accounts payable, accrued liabilities, deposits and other	5,699		(6,263)
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	(14,990)		5,445		Net cash (used in) provided by operating activities	(36,369)		459

Cash flow from investing activities:	Cash flow from investing activities:					Cash flow from investing activities:
Capital expenditures	Capital expenditures	(2,378)		(4,397)		Capital expenditures	(6,708)		(5,328)
Proceeds from sale of assets	Proceeds from sale of assets	59,488		0		Proceeds from sale of assets	59,488		—
Payments on master lease obligations	Payments on master lease obligations	(643)		(691)		Payments on master lease obligations	(1,019)		(1,093)

Other, net	Other, net	37		0		Other, net	36		(9)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	56,504		(5,088)		Net cash provided by (used in) investing activities	51,797		(6,430)

Cash flow from financing activities:	Cash flow from financing activities:					Cash flow from financing activities:
Borrowings from credit facility	Borrowings from credit facility	29,000		12,800		Borrowings from credit facility	37,700		18,800
Payments on credit facility	Payments on credit facility	(26,778)		(21,304)		Payments on credit facility	(26,778)		(25,975)
Borrowings from project loans	Borrowings from project loans	25,355		11,926		Borrowings from project loans	39,445		15,690
Payments on project and term loans	Payments on project and term loans	(52,040)		(6,976)		Payments on project and term loans	(53,330)		(7,584)

Cash dividend paid on vested stock-based awards		(4)		(8)

Stock-based awards net payments	Stock-based awards net payments	(153)		(91)		Stock-based awards net payments	(132)		(79)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(13,087)		0		Distributions to noncontrolling interests	(13,227)		—
Noncontrolling interests’ contributions						Noncontrolling interests’ contributions	27,977		—

Financing costs	Financing costs	(1,106)		(423)		Financing costs	(1,645)		(423)
Net cash used in financing activities		(38,813)		(4,076)
Net cash provided by financing activities						Net cash provided by financing activities	10,010		429
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	2,701		(3,719)		Net increase (decrease) in cash, cash equivalents and restricted cash	25,438		(5,542)

Cash, cash equivalents and restricted cash at beginning of year	Cash, cash equivalents and restricted cash at beginning of year	34,183		38,591		Cash, cash equivalents and restricted cash at beginning of year	34,183		38,591
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	36,884	$	34,872	Cash, cash equivalents and restricted cash at end of period	$	59,621	$	33,049


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	698	$	745	Cash and cash equivalents	$	6,454	$	745

Restricted cash						Restricted cash	15,511		—
Real estate under development	Real estate under development	2,380		2,380		Real estate under development	35,413		2,380
Land available for development	Land available for development	8,167		8,143		Land available for development	7,627		8,143
Real estate held for investment	Real estate held for investment	31,609		31,962		Real estate held for investment	31,615		31,962
Other assets	Other assets	2,101		2,195		Other assets	3,181		2,195
Total assets	Total assets	44,955		45,425		Total assets	99,801		45,425
Liabilities:	Liabilities:					Liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	617		850		Accounts payable and accrued liabilities	2,451		850

Debt	Debt	31,715		31,215		Debt	45,669		31,215
Total liabilities	Total liabilities	32,332		32,065		Total liabilities	48,120		32,065
Net assets	Net assets	$	12,623	$	13,360	Net assets	$	51,681	$	13,360


		Stockholders’ Equity																										Stockholders’ Equity
														Common Stock Held in Treasury					Total																													Common Stock Held in Treasury					Total
		Common Stock			Capital in Excess of Par Value				Accum-ulated Deficit									Noncontrolling Interests in Subsidiaries										Common Stock									Capital in Excess of Par Value			Accum-ulated Deficit						Common Stock Held in Treasury	Total
		Number of Shares	At Par Value										Number of Shares		At Cost						Total Equity	Total						Number of Shares						At Par Value									Number of Shares		At Cost					Total Equity		Total
Balance at March 31, 2021		9,377	$	94			$	188,121			$	(57,413)			1,143				$	(21,753)				$	109,049				$	4,485		$	113,534
Balance at June 30, 2021																										Balance at June 30, 2021					9,377				$	94				$	188,323		$	(67,576)				1,143		$	(21,753)				$	99,088				$	103,532

Exercised and vested stock-based awards																													Exercised and vested stock-based awards					11			—			25			—					—		—			25				—			25
Stock-based compensation	Stock-based compensation	—	—		202				—					—		—			202					—					202			Stock-based compensation			—				—			205			—				—			—			205				—			205

Distributions to noncontrolling interests																													Distributions to noncontrolling interests					—			—			—			—					—		—			—				(140)			(140)
Noncontrolling interests’ contributions																													Noncontrolling interests’ contributions					—			—			—			—					—		—			—				27,977			27,977

Total comprehensive loss	Total comprehensive loss	—	—		—				(10,163)					—		—			(10,163)			(41)				(10,204)			Total comprehensive loss					—			—			—			(3,764)					—		—			(3,764)				(433)			(4,197)
Balance at June 30, 2021		9,377	$	94	$	188,323			$	(67,576)				1,143		$	(21,753)		$	99,088		$	4,444			$	103,532
Balance at September 30, 2021																													Balance at September 30, 2021					9,388			$	94		$	188,553		$	(71,340)				1,143		$	(21,753)		$	95,554			$	31,848		$	127,402







Balance at March 31, 2020	9,347	$	93	$	186,244	$	(44,637)	1,137	$	(21,600)	$	120,100	$	11,906	$	132,006



Stock-based compensation	—	—		178		—		—	—		178		—		178





Total comprehensive income (loss)	—	—		—		4,134		—	—		4,134		(331)		3,803
Balance at June 30, 2020	9,347	$	93	$	186,422	$	(40,503)	1,137	$	(21,600)	$	124,412	$	11,575	$	135,987


Balance at December 31, 2019	Balance at December 31, 2019	9,330	$	93	$	186,082	$	(43,567)	1,133	$	(21,509)	$	121,099	$	12,983	$	134,082	Balance at December 31, 2019	9,330	$	93	$	186,082	$	(43,567)	1,133	$	(21,509)	$	121,099	$	12,983	$	134,082

Exercised and vested stock-based awards	Exercised and vested stock-based awards	17	—		—		—		—	—		—		—		0		Exercised and vested stock-based awards	28	—		22		—		—	—		22		—		22

Stock-based compensation	Stock-based compensation	—	—		340		—		—	—		340		—		340		Stock-based compensation	—	—		516		—		—	—		516		—		516

Tender of shares for stock-based awards	Tender of shares for stock-based awards	—	—		—		—		4	(91)		(91)		—		(91)		Tender of shares for stock-based awards	—	—		—		—		4	(91)		(91)		—		(91)

Total comprehensive income (loss)		—	—		—		3,064		—	—		3,064		(1,408)		1,656
Balance at June 30, 2020		9,347	$	93	$	186,422	$	(40,503)	1,137	$	(21,600)	$	124,412	$	11,575	$	135,987
Total comprehensive loss																		Total comprehensive loss	—	—		—		(12,014)		—	—		(12,014)		(1,601)		(13,615)
Balance at September 30, 2020																		Balance at September 30, 2020	9,358	$	93	$	186,620	$	(55,581)	1,137	$	(21,600)	$	109,532	$	11,382	$	120,914


Six Months Ended June 30, 2021:
Nine Months Ended September 30, 2021:																Nine Months Ended September 30, 2021:
Revenues:	Revenues:															Revenues:
Unaffiliated customers	Unaffiliated customers	$	7,396	$	10,375		$	6,053	$	2,267	$	0		$	26,091	Unaffiliated customers	$	8,296		$	16,098		$	11,251	$	5,926	$	—		$	41,571
Intersegment	Intersegment	9		476			60		0		(545)			0		Intersegment	64			723			98		1		(886)			—
Cost of sales, excluding depreciation	Cost of sales, excluding depreciation	5,836		4,909			6,764		3,095		(220)			20,384		Cost of sales, excluding depreciation	7,781			7,456			11,076		6,000		(324)			31,989
Depreciation	Depreciation	103		3,403			1,757		748		(85)			5,926		Depreciation	149			5,003			2,635		1,094		(123)			8,758

General and administrative expenses	General and administrative expenses	0		0			0		0		10,943		c	10,943		General and administrative expenses	—			—			—		—		16,365		c	16,365

Impairment of real estate																Impairment of real estate	625		d	—			—		—		—			625
Gain on sale of assets	Gain on sale of assets	0		(22,931)		h	0		0		0			(22,931)		Gain on sale of assets	—			(22,931)		g	—		—		—			(22,931)
Operating income (loss)		$	1,466	$	25,470		$	(2,408)	$	(1,576)	$	(11,183)		$	11,769
Operating (loss) income																Operating (loss) income	$	(195)		$	27,293		$	(2,362)	$	(1,167)	$	(16,804)		$	6,765

Capital expenditures and purchases and development of real estate properties	Capital expenditures and purchases and development of real estate properties	$	4,879	$	2,135		$	215	$	28	$	0		$	7,257	Capital expenditures and purchases and development of real estate properties	$	30,841	e	$	6,273		$	392	$	43	$	—		$	37,549


Six Months Ended June 30, 2020:
Nine Months Ended September 30, 2020:																		Nine Months Ended September 30, 2020:
Revenues:	Revenues:																	Revenues:
Unaffiliated customers	Unaffiliated customers	$	14,229	$	11,450		$	6,941		$	4,445		$	0		$	37,065	Unaffiliated customers	$	19,254	$	17,257		$	8,537		$	4,818		$	—		$	49,866
Intersegment	Intersegment	8		443			64			14			(529)			0		Intersegment	13		666			82			8			(769)			—
Cost of sales, excluding depreciation	Cost of sales, excluding depreciation	12,068		7,162		d	7,675		e	4,531			(137)			31,299		Cost of sales, excluding depreciation	15,653		9,955		h	10,992		i	5,773			(246)			42,127
Depreciation	Depreciation	116		4,081			2,036		i	887		i	(110)			7,010		Depreciation	173		6,132			2,927		j	1,279		j	(172)			10,339
General and administrative expenses	General and administrative expenses	0		0			0			0			5,918			5,918		General and administrative expenses	—		—			—			—			8,786			8,786
Income from forfeited earnest money	Income from forfeited earnest money	0		0			0			0			(15,000)		f	(15,000)		Income from forfeited earnest money	—		—			—			—			(15,000)		k	(15,000)

Operating income (loss)	Operating income (loss)	$	2,053	$	650		$	(2,706)		$	(959)		$	8,800		$	7,838	Operating income (loss)	$	3,441	$	1,836		$	(5,300)		$	(2,226)		$	5,863		$	3,614
Capital expenditures and purchases and development of real estate properties	Capital expenditures and purchases and development of real estate properties	$	8,655	$	3,965		$	310		$	122		$	0		$	13,052	Capital expenditures and purchases and development of real estate properties	$	11,607	$	4,681		$	523		$	124		$	—		$	16,935