UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

Notice of Annual Meeting of Stockholders

May 7, 2020

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 7, 2020

This proxy statement and the company’s 2019 annual report to stockholders are available at

www.edocumentview.com/STRS

*We are monitoring the public health and travel concerns relating to COVID-19 and the related recommendations and protocols issued by federal, state and local governments. As a result, we may impose additional procedures or limitations on meeting attendees (beyond those described in this proxy statement) or in the event that it is not possible or advisable to hold our annual meeting in person as originally planned, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Any such change, including details on how to participate, will be announced in advance via press release, a copy of which will be filed with the SEC as additional proxy solicitation materials and posted on our website at stratusproperties.com.

Table of Contents

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Stratus Properties Inc.

212 Lavaca Street, Suite 300

Austin, TX 78701

Proxy Summary

This summary highlights selected information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. For more information regarding our 2019 performance, please review our 2019 annual report to stockholders (“2019 annual report”). The 2019 annual report, including financial statements, is first being sent to stockholders together with this proxy statement and form of proxy on or about April 3, 2020.

2020 Annual Meeting of Stockholders

Agenda and Voting Recommendations

* We are monitoring the public health and travel concerns relating to COVID-19 and the related recommendations and protocols issued by federal, state and local governments. As a result, we may impose additional procedures or limitations on meeting attendees (beyond those described in this proxy statement) or in the event that it is not possible or advisable to hold our annual meeting in person as originally planned, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Any such change, including details on how to participate, will be announced in advance via press release, a copy of which will be filed with the SEC as additional proxy solicitation materials and posted on our website at stratusproperties.com.

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Director Highlights (page 16)

In February 2020, John C. Schweitzer, a director of our company since 2016, passed away. Mr. Schweitzer was an inspiring leader, advisor and friend to many people and he will be deeply missed at our company.

2019 Performance Highlights (page 21)

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Executive Compensation Highlights (page 24)

The following best practices are part of our executive compensation program:

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Corporate Governance Highlights (page 5)

We are committed to strong and effective governance practices that are responsive to our stockholders. Our commitment to good corporate governance is illustrated by the following practices:

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Corporate Governance

Corporate Governance Guidelines; Ethics and Business Conduct Policy

We are committed to strong and effective governance practices that are responsive to our stockholders. Our corporate governance guidelines, along with our certificate of incorporation, by-laws and the charters of the standing committees of our board, provide the framework for the governance of the company and reflect the board’s commitment to monitor the effectiveness of policy and decision making at both the board and management levels. Our certificate of incorporation, by-laws, committee charters and corporate governance guidelines are available at stratusproperties.com under Investors–Corporate Governance. In addition, our ethics and business conduct policy is available at stratusproperties.com under Investors–Ethics and Business Conduct. Amendments to or waivers of our ethics and business conduct policy granted to any of our directors or executive officers will be published promptly on our website.

Board Composition and Leadership Structure

Our board has primary responsibility for overseeing the management of our business and affairs. As of the date of this proxy statement, our board of directors consists of six members, five of whom have been determined by our board to be independent, as discussed below. Mr. Armstrong, the chairman of our board of directors, is not considered an independent director because he is also our president and chief executive officer and receives compensation for his services to the company as a member of our management team. Each of the directors other than Mr. Armstrong is independent, and our board believes that the independent directors provide effective oversight of management.

Our board of directors believes that Mr. Armstrong’s service as both chairman of our board and as president and chief executive officer is in the best interest of the company and our stockholders at this time. With over 25 years of leadership experience with the company, Mr. Armstrong possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the company and its businesses. His experience and relationships in the Austin area and other select Texas markets have been central to the company’s ability to secure and maintain entitlements and successfully develop and sell its properties. He is thus best positioned to develop agendas that ensure that our board’s time and attention are focused on the most critical challenges and opportunities facing the company. His combined role enables decisive leadership, ensures clear accountability, facilitates an efficient board process, and enhances our ability to communicate the company’s message and strategy clearly and consistently to our stockholders, employees and customers.

Our board of directors recognizes the importance of having a strong independent board leadership structure to ensure accountability and to facilitate the effective performance of the board in its role of providing effective oversight of management. In 2013, our board established the position of lead independent director. Mr. Madden has served as lead independent director since 2013. On April 1, 2019, he was appointed to serve a third three-year term as lead independent director, which expires April 1, 2022. The lead independent director serves as a liaison between Mr. Armstrong and the independent directors, works with Mr. Armstrong in setting the agendas for board meetings and, in Mr. Armstrong’s absence, chairs regular sessions of the board. The lead independent director also sets the agenda and presides at all executive sessions of the independent directors. The lead independent director may be removed or replaced at any time with or without cause by a majority vote of our independent directors. In addition, our three standing committees are composed entirely of independent directors, and have the power and authority to engage legal, financial and other advisors as they may deem necessary, without consulting or obtaining the approval of the full board or management.

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Board and Committee Meeting Attendance

Our board of directors held a total of five meetings during 2019. During 2019, none of our incumbent directors attended fewer than 75 percent of the aggregate of the total number of meetings of the board and all committees of the board on which he or she served. Directors are invited but not required to attend annual meetings of our stockholders. Messrs. Armstrong and Porter attended our 2019 annual meeting of stockholders.

Board Committees

To provide for effective direction and management of our business, our board has established three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee is composed entirely of independent directors. Each committee operates under a written charter adopted by our board. All of the committee charters are available on our website at stratusproperties.com under Investors–Corporate Governance. The following table identifies the current committee members, including each committee chair.

Audit Committee. The audit committee assists the board in fulfilling its oversight responsibilities related to (1) the effectiveness of the company’s internal control over financial reporting; (2) the integrity of the company’s financial statements; (3) the company’s compliance with legal and regulatory requirements; (4) the qualifications and independence of the company’s independent registered public accounting firm; (5) the performance of the company’s independent registered public accounting firm and internal audit firm; and (6) review and approval or ratification of any transaction that would require disclosure under Item 404 of Regulation S-K of the Securities Exchange Act of 1934 (the “Exchange Act”). Please refer to the “Audit Committee Report” included in this proxy statement for more information. The audit committee held four meetings in 2019.

Compensation Committee. The compensation committee assists the board in fulfilling its oversight responsibilities by (1) discharging the board’s responsibilities relating to the compensation of our executive officers; and (2) administering our cash-based and equity-based incentive compensation programs. Please refer to “Compensation Committee Procedures” included in this proxy statement for more information. The compensation committee held one meeting in 2019.

Nominating and Corporate Governance Committee. The nominating and corporate governance committee assists the board in fulfilling its oversight responsibilities by (1) identifying, considering and recommending to the board candidates to be nominated for election or re-election to the board at each annual meeting of our stockholders or as necessary to fill vacancies and newly created directorships; (2) monitoring the composition of the board and its committees and making recommendations to the board on the membership of the committees; (3) overseeing the company’s corporate governance practices and procedures, including maintaining our corporate governance guidelines and recommending to the board any desirable changes; (4) reviewing and, as necessary, making

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recommendations to the board with respect to stockholder proposals; (5) evaluating the effectiveness of the board and its committees; (6) overseeing the form and amount of director compensation; and (7) addressing any related matters required by the federal securities laws or The NASDAQ Stock Market, LLC (“NASDAQ”). The nominating and corporate governance committee held two meetings in 2019.

Board and Committee Independence

On the basis of information solicited from each director, and upon the advice and recommendation of the nominating and corporate governance committee, our board of directors has affirmatively determined that none of Ms. Benson and Messrs. Joseph, Leslie, Madden, and Porter has, nor did Mr. Schweitzer during his tenure as a director have, any relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and each is independent as defined in the director independence standards of NASDAQ, as currently in effect. In making these determinations, our board, with assistance from the company’s legal counsel, evaluated responses to a questionnaire completed annually by each director regarding relationships and possible conflicts of interest between each director, the company and management. In its review of director independence, our board and legal counsel considered all commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships any director may have with the company or management, including the relationships described in “Consideration of Director Nominees” and in “Certain Transactions” below.

Our board of directors has determined that each of the members of the audit, compensation and nominating and corporate governance committees has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and satisfies the independence criteria (including the enhanced criteria with respect to members of the audit and compensation committees) set forth in the applicable NASDAQ listing standards and SEC rules. In addition, our board of directors has determined that each of Messrs. Joseph, Leslie, Madden and Porter qualifies as an “audit committee financial expert,” as such term is defined by SEC rules.

Compensation Committee Procedures

The compensation committee has the sole authority to set annual compensation amounts and annual incentive program criteria for our executive officers, evaluate the performance of our executive officers, and make awards to our executive officers under our cash-based and equity-based incentive programs. The committee also reviews, approves and recommends to our board of directors any proposed plan or arrangement providing for incentive, retirement or other compensation to our executive officers, as well as any proposed contract under which compensation is awarded to one of our executive officers. The compensation committee oversees our assessment of whether our compensation policies and practices are likely to expose the company to material risks. The committee may form subcommittees and delegate responsibilities and authority to such subcommittees in its sole discretion, to the extent consistent with the committee’s charter, our certificate of incorporation or by-laws, and applicable law.

If equity awards are granted in a given year, in accordance with the committee’s written policies, such awards are generally granted at a committee meeting in the first fiscal quarter of the year. To the extent the committee approves any special awards at other times during the year, such awards will be made during an open window period when our executive officers and directors are permitted to trade in our securities.

The terms of our stock incentive plans permit the committee to delegate to one or more officers of the company its authority to make awards to employees other than those subject to Section 16 of the

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Exchange Act. The committee has delegated authority to the chairman of our board to grant or modify awards to such employees, subject to the following conditions:

The compensation committee has in the past engaged an independent executive compensation consultant to advise the compensation committee on matters related to executive compensation, and will engage such consultants in the future, as the compensation committee determines to be advisable. Please refer to the section titled “Executive Officer Compensation—Compensation Discussion and Analysis” for more information related to the independent executive compensation consultant.

Board Evaluation Process

The nominating and corporate governance committee is responsible for overseeing the annual performance evaluation of our board, which is a multi-step process designed to evaluate the performance of our board and each of its committees, as follows:

Board’s Role in Oversight of Risk Management

Our board of directors as a whole is responsible for risk oversight, with reviews of certain areas being conducted by the relevant board committees that report to the full board. In its risk oversight role, our board of directors reviews, evaluates and discusses with appropriate members of management whether the risk management processes designed and implemented by management are adequate in identifying, assessing, managing and mitigating material risks facing the company, including financial and operational risks.

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Our board believes that full and open communication between senior management and our board is essential to effective risk oversight. Our lead independent director regularly meets with our chairman, president and chief executive officer to discuss a variety of matters, including business strategies, opportunities, key challenges and risks facing the company, as well as management’s risk mitigation strategies. Senior management attends all regularly scheduled board meetings where they make presentations to our board on various strategic matters involving our operations and are available to address any questions or concerns raised by our board on risk management or any other matters. Our board oversees the strategic direction of the company, and in doing so considers the potential rewards and risks of the company’s business opportunities and challenges, and monitors the development and management of risks that impact our strategic goals.

While our board is ultimately responsible for risk oversight, its committees assist the board in fulfilling its oversight responsibilities with respect to certain areas of risk. As set forth in its charter, the audit committee is responsible for reviewing and discussing with management, the internal audit firm and our independent registered public accounting firm any guidelines and policies relating to risk assessment and risk management, and the steps management has taken to monitor, control and minimize the company’s major financial risk exposures, if any. The audit committee also discusses with the internal audit firm and our independent registered public accounting firm the results of their processes to assess risk in the context of their respective audit engagements. The audit committee also assists our board in fulfilling its oversight responsibilities by monitoring the effectiveness of the company’s internal control over financial reporting and legal and regulatory compliance. Our internal audit firm and independent registered public accounting firm meet periodically in executive session with the audit committee. The audit committee regularly reports on these matters to the full board. As set forth in its charter, the compensation committee is responsible for overseeing the company’s assessment of whether its compensation policies and practices are likely to expose the company to material risks and, in consultation with management, is responsible for overseeing the company’s compliance with regulations governing executive compensation. The nominating and corporate governance committee assists our board in fulfilling its oversight responsibilities with respect to the management of risks associated with our board leadership structure and corporate governance matters.

Director and Executive Officer Stock Ownership Guidelines

Our board of directors adopted stock ownership guidelines applicable to our non-employee directors and our executive officers. The guidelines for non-employee directors are administered by the nominating and corporate governance committee and the guidelines for our executives are administered by the compensation committee.

Under the guidelines, each non-employee director is expected to maintain ownership of company stock valued at three times his or her annual retainer, which is currently $35,000. See “Director Compensation.” Our president and chief executive officer, Mr. Armstrong, is expected to maintain ownership of company stock valued at three times his base salary and our chief financial officer, Ms. Pickens, is expected to maintain ownership of company stock valued at her base salary. The value of the stock ownership is calculated based on the three-year trailing average monthly stock price. Shares of our common stock currently owned, but not pledged, and shares issuable upon the vesting of outstanding restricted stock units (“RSUs”) count as stock owned for purposes of the stock ownership guidelines. Performance-based equity awards and shares owned on behalf a spouse or children do not count toward the target level. Finally, shares held in trust may also be included; however, due to the complexities of the trust laws, the decision to include the shares will be made on a case-by-case basis after reviewing the nature of the specific trust involved and considering whether the executive has maintained a pecuniary interest in the shares. As of December 31, 2019, both of our executive officers and each of our current non-employee directors exceeded their target stock ownership levels, as applicable.

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Anti-Hedging and Anti-Pledging Policies

Under our Insider Trading Policy, our directors and officers (defined as “insiders”) are prohibited from engaging in hedging transactions related to the company’s securities. Specifically, our anti-hedging policy reads as follows:

Transactions in publicly traded options are generally short-term in nature and may give the public the perception that insiders are not focused on the long-term performance of the Company. Certain forms of hedging transactions are complex, may be perceived negatively by the public and can present unique insider trading risks. Accordingly, insiders are prohibited from engaging in such transactions.

In addition, effective March  2, 2016, the Insider Trading Policy prohibits insiders from entering into new pledges of the company’s securities.

Consideration of Director Nominees

The identification and evaluation of qualified directors is a complex and subjective process that requires consideration of many intangible factors and will be significantly influenced by the particular needs of the board from time to time. The nominating and corporate governance committee believes that each potential director nominee should be evaluated based on his or her individual merits, taking into account the company’s needs and the composition of the board at the time.

In evaluating nominees for membership on our board of directors, the nominating and corporate governance committee will apply the board membership criteria set forth in our corporate governance guidelines. In selecting nominees, the nominating and corporate governance committee will seek to have a board of directors that represents a diverse range of perspectives and experience relevant to the company. The nominating and corporate governance committee will take into account many factors, including personal and professional integrity, a general understanding of the industry in which we operate, corporate finance and other matters relevant to the successful management of a publicly-traded company in today’s business environment, educational and professional background, independence, diversity and the ability and willingness to work cooperatively with other members of our board and with senior management. The nominating and corporate governance committee will also evaluate each individual in the context of our board as a whole, with the objective of recommending nominees who can best advance the success of the business, be an effective director in conjunction with the full board, and represent stockholder interests through the exercise of sound judgment using his or her diversity of experience in these various areas. In determining whether to recommend a director for re-election, the nominating and corporate governance committee will also consider the director’s past attendance at meetings and participation in and contributions to the activities of our board.

The nominating and corporate governance committee regularly reviews the composition and size of the board to assess whether the size of our board is appropriate and whether any vacancies on our board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the nominating and corporate governance committee will consider various potential candidates, who may come to the nominating and corporate governance committee’s attention through professional search firms, stockholders or other persons. Each candidate brought to the attention of the nominating and corporate governance committee, regardless of who recommended such candidate, will be considered on the basis of the criteria set forth above.

Effective March 12, 2020, upon the recommendation of the nominating and corporate governance committee, the board of directors reclassified Mr. Porter as a Class II director to fill the vacancy resulting from Mr. Schweitzer’s death and decreased the size of the board of directors from seven

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directors to six directors. Mr. Porter will serve as a Class II director until the 2021 annual meeting of stockholders, or until his successor is elected and qualified or his earlier death, resignation removal or retirement.

Pursuant to an Investor Rights Agreement with Moffett Holdings, L.L.C. (“MHLLC”) dated March 15, 2012 (the “Investor Rights Agreement”), and subsequently assigned to LCHM Holdings, LLC (“LCHM Holdings”), Mr. Porter was appointed to our board as the designated director of MHLLC and subsequently, LCHM Holdings. Mr. Porter continues to serve as the designated director of LCHM Holdings pursuant to the Investor Rights Agreement, and his current term as a Class II director expires at the 2021 annual meeting of stockholders. For more information, see “Certain Transactions.”

Pursuant to a Board Representation and Standstill Agreement with Oasis Management Company, Ltd., Oasis Investments II Master Fund Ltd. and Oasis Capital Partners (Texas) Inc. (collectively “Oasis”) dated January 11, 2017, Ms. Benson was appointed to our board as a Class III director with a term expiring at the 2022 annual meeting of stockholders and as a member of the compensation committee.

The nominating and corporate governance committee will consider candidates proposed for nomination by our stockholders. Stockholders may propose candidates for consideration by the nominating and corporate governance committee by submitting the names and supporting information to our Corporate Secretary, Stratus Properties Inc., 212 Lavaca Street, Suite 300, Austin, Texas 78701. Supporting information should include (a) the name and address of each of the candidate and proposing stockholder; (b) a comprehensive biography of the candidate and an explanation of why the candidate is qualified to serve as a director, taking into account the criteria identified in our corporate governance guidelines; (c) proof of ownership, the class and number of shares, and the length of time that the shares of our common stock have been beneficially owned by each of the candidate and the proposing stockholder; and (d) a letter in writing from the candidate stating his or her willingness to serve, if elected as a director.

In addition, our by-laws permit stockholders to nominate candidates directly for consideration at next year’s annual meeting of stockholders. Any nomination must be in writing and received by our corporate secretary at our principal executive offices no later than the close of business on January 7, 2021. If the date of next year’s annual meeting is moved to a date more than 30 days before or 90 days after the anniversary of this year’s annual meeting, the nomination must be received no later than 90 days prior to the date of the 2021 annual meeting or 10 days following the public announcement of the date of the 2021 annual meeting. Any stockholder submitting a nomination under our by-laws must include (a) all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act (including such nominee’s written consent to being named in the proxy statement as a nominee and to serve as a director if elected), and (b) the name and address (as they appear on the company’s books) of the nominating stockholder and the class and number of shares beneficially owned by such stockholder. Nominations should be addressed to our Corporate Secretary, Stratus Properties Inc., 212 Lavaca Street, Suite 300, Austin, Texas 78701. Candidates nominated by stockholders will be evaluated under the same criteria as other director nominees. Please see our by-laws for detailed information regarding the process by which a stockholder may nominate a director at meetings of our stockholders. No director candidates were nominated by stockholders as required pursuant to our by-laws for consideration at the 2020 annual meeting of stockholders.

Board Skills Matrix

Our board strives to maintain independence of thought and diverse professional experience among its membership. Our nominating and corporate governance committee seeks to have a board that

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represents a diverse range of perspectives and experience relevant to the company. The table below highlights the diversity of experience and skills that each of our current directors and director nominees brings to the company and which was considered by our nominating and corporate governance committee in evaluating the composition of our board.

Independent directors comprise 83% of our board. Our directors represent a range of tenure and overall experience, which contributes to a variety of perspectives and ensures transition of knowledge from longer-serving members to newer members of our board. We have a comprehensive mix of new and long-standing directors, with two directors serving on our board for 5 years or less, one director serving for more than 5 years but less than 10 years, and three having served for 20 years or more. Our directors range from 34 to 71 years of age. The average age of our directors is 58.5 and the average age of our independent directors is 59.2, compared to an average age of 62.7 for independent directors at S&P 500 companies according to the 2019 Spencer Stuart Board Index. In 2017, Ms. Benson was appointed to our board, expanding the board’s gender diversity representation. Our nominating and corporate governance committee remains committed to an ongoing review of the board’s composition to ensure that we continue to have the right mix of skills, background, diversity and tenure as we continue to address challenges and position the company for long-term success.

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Communications with the Board

Stockholders or other interested parties may communicate directly with one or more members of our board, or the non-employee directors as a group, by writing to the director or directors at the following address: Stratus Properties Inc., Attn: Board of Directors or the name of the individual director or directors, 212 Lavaca Street, Suite 300, Austin, Texas 78701. The communication will be forwarded to the appropriate director or directors.

We engage in regular dialogue with shareholders and shareholders’ representatives representing over 40% of our outstanding common stock, including shareholders representing 21.3% of our outstanding common stock who have director designees on our Board.

Director Compensation

We use a combination of cash and equity-based compensation to compensate our non-employee directors. In setting director compensation, we consider the significant amount of time directors dedicate in fulfilling their duties as directors, as well as the skill-level required to be an effective member of our board. We also seek to align the directors’ compensation with our stockholders’ interest by delivering a portion of that compensation in the form of equity.

The nominating and corporate governance committee reviews the form and amount of director compensation and makes recommendations to the full board. Our director compensation program has not been revised since 2017, when it was revised upon the recommendation of the board’s independent compensation consultant, FPL Associates L.P. (“FPL”). FPL reviewed our non-employee director compensation program in light of prevailing market practices and recommended certain changes to our director compensation program, which have been in effect since January 1, 2018.

2019 Cash Compensation

During 2019, each non-employee director received an annual fee consisting of, as applicable:

In addition, each director received reimbursement for reasonable out of pocket expenses incurred in attending board and committee meetings. Directors do not receive meeting attendance fees.

2019 Equity-Based Compensation

On September 1, 2019, each non-employee director was granted RSUs with a target grant date value of $45,000, resulting in a grant of 1,700 RSUs. The RSUs vest ratably over the first four anniversaries of the grant date, with pro-rata vesting acceleration in the event that the non-employee director dies, incurs a disability or retires, and full vesting acceleration in the event that we incur a qualifying change of control. Each RSU entitles the director to receive one share of our common stock

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upon vesting. See “Executive Officer Compensation—Potential Payments upon Termination or Change in Control” for definitions of “disability” and “change of control” used for purposes of these RSU acceleration provisions.

2019 Director Compensation

The table below summarizes the total compensation paid to or earned by our non-employee directors during 2019. The amount included in the “Stock Awards” column reflects the aggregate grant date fair value of the RSUs, and does not necessarily equate to the income that will ultimately be realized by the director for these stock awards. Mr. Armstrong’s compensation is reflected in the 2019 Summary Compensation Table in the section titled “Executive Officer Compensation.”

Director Compensation

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Proposal No. 1: Election of Directors

In accordance with our by-laws, our board of directors has fixed the current number of directors at six. The table below shows the current members of the different classes of our board and the expiration of their current terms.

Upon the recommendation of our nominating and corporate governance committee, our board of directors has nominated James E. Joseph and Michael D. Madden for election at our 2020 annual meeting to serve as Class I directors, each for a three-year term. Messrs. Joseph and Madden have each consented to being named as a nominee in this proxy statement and to serve as a director if elected. The persons named as proxies on the enclosed proxy card intend to vote your shares of our common stock for the election of each of the two Class I director nominees, unless otherwise directed. If, contrary to our present expectations, either of the nominees is unable to serve or for good cause will not serve, your proxy will be voted for a substitute nominee designated by our board of directors, unless otherwise directed.

Vote Required to Elect Director Nominees

Under our by-laws, our directors are elected by a plurality of shares voted. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.”

Recommendation of our Board of Directors

OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR OUR TWO CLASS I DIRECTOR NOMINEES, MESSRS. JOSEPH AND MADDEN.

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Information About Nominees and Continuing Directors

The table below provides certain information as of March 24, 2020, with respect to the director nominees, James E. Joseph and Michael D. Madden, and each other director whose term will continue after the annual meeting. The biography of each of the directors contains information regarding the person’s business experience, director positions with other public companies held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that led our nominating and corporate governance committee and our board to determine that the person should be nominated to serve as a director of the company. Unless otherwise indicated, each person has been engaged in the principal occupation shown for the past five years.

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Stock Ownership of Directors, Director Nominees and Executive Officers

We believe that it is important for our directors and executive officers to align their interests with the long-term interests of our stockholders. We encourage stock accumulation through the grant of equity incentives to our directors and executive officers and through our stock ownership guidelines applicable to our directors and executive officers.

The table below shows the amount of our common stock beneficially owned as of the record date, March 24, 2020, by each of our directors, our director nominees and our president and chief executive officer and chief financial officer (such officers together being our named executive officers). Unless otherwise indicated, all shares shown are held with sole voting and investment power.

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Stock Ownership of Certain Beneficial Owners

Based on filings with the SEC, the table below shows the beneficial owners of more than five percent of our outstanding common stock other than Mr. Armstrong, whose beneficial ownership is reflected in the table in the section above titled “Stock Ownership of Directors, Director Nominees and Executive Officers.” Unless otherwise indicated, all information is presented as of March 24, 2020, and all shares beneficially owned are held with sole voting and investment power.

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Executive Officer Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis, or CD&A, describes and analyzes our executive compensation philosophy and program in the context of the compensation paid during the last fiscal year to our president and chief executive officer and our chief financial officer (our only executive officers, referred to as our named executive officers or NEOs). Our named executive officers for 2019 are:

Executive Summary

We are a diversified real estate company with headquarters in Austin, Texas. We are engaged primarily in the acquisition, entitlement, development, management, operation and sale of commercial, and multi-family and single-family residential real estate properties located in the Austin, Texas area and other select, fast-growing markets in Texas.

2019 Performance Highlights.

During 2019, the company:

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Executive Compensation Program at a Glance

Our executive compensation program has three primary elements: base salary, annual incentive awards and long-term incentive awards (including awards under our Profit Participation Incentive Plan (the “Profit Plan”) implemented in 2018. Each of these compensation elements serves a specific purpose in our compensation strategy. Base salary is an essential component to any market-competitive compensation program. Annual incentives reward the achievement of short-term goals, while long-term incentives drive our NEOs to focus on stockholder value creation over the long term.

Based on our performance and consistent with the design of our program, the compensation committee of our board, referred to in this CD&A as the “committee,” made the executive compensation payout decisions for 2019 noted in the table below. These payouts are aligned with the company’s business performance in 2019. The committee believes that the design and structure of the company’s incentive programs provide a direct link between company performance and pay outcomes for the executives, as described in later in this CD&A.

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Compensation Governance and Stockholder Engagement.

Our executive compensation program is designed and managed by the committee, which is comprised entirely of independent directors. Structuring a compensation program is a complex process that includes weighing various possible incentives and associated risks, assessing the competitive environment for executive talent, and understanding various constituencies. The committee values stockholder perspectives as an element of the review process. The committee ensures it is aware of our stockholders’ views both through direct conversations with stockholders, including one large investor with a representative on the committee and another with a representative on our board, and through the broad feedback mechanism of our annual say-on-pay vote on executive compensation. At our 2019 annual meeting, approximately 80% of our investors supported the compensation of our named executive officers. The committee also seeks input from its independent compensation consultant from time to time and strives to incorporate compensation “best practices” into our program design, some of which are highlighted below and discussed elsewhere in this CD&A.

Objectives of Our Compensation Program

The committee is responsible for designing, implementing, and administering our executive compensation program. The committee seeks to increase stockholder value by:

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The committee believes compensation should reward achievement of business performance goals, recognize individual initiative and leadership and link the interests of the executive officers and our stockholders. As a result, as reflected in the graph below, the majority of our president and chief executive officer’s total compensation paid during the three-year period ended December 31, 2019 consisted of variable, at risk forms of pay that were dependent on our performance and the price of our common stock. The graph does not reflect the participation interests granted under the Profit Plan, as these long-term cash awards are not reflected in the Summary Compensation Table until payout.

Components of Executive Compensation

During 2019, our executive compensation program included four primary components: base salary, annual incentive awards, long-term incentive awards in the form of RSUs and participation interests in the Profit Plan. The first three components of the program are reflected in the 2019 Summary Compensation Table below. However, the participation interests in the Profit Plan, which reflect a cash-based long-term incentive award, are not included in the table and will only be reflected in the Summary Compensation Table in future years if our executive officers earn any payouts under the Profit Plan.

After reviewing these components of our compensation program, the committee believes that the risks arising from our compensation policies and practices for our employees, including our executive officers, are not reasonably likely to have a material adverse effect on the company.

Base Salaries.

Our philosophy is that base salaries, which provide fixed compensation, should meet the objective of attracting and retaining the executive officers needed to manage our business successfully. Actual individual salary amounts reflect the committee’s judgment with respect to each executive officer’s responsibilities, performance, work experience and the individual’s historical salary level. With regard to our president and chief executive officer, our goal is to allocate more compensation to the variable,

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performance-dependent elements of the total compensation package. The committee did not increase our executive officers’ base salaries during 2019.

Annual Incentive Awards.

Under our annual incentive program for 2019, the annual incentive award was determined by the committee following the end of the year based on the participant’s level of responsibility for the company’s performance during the year after reviewing overall market conditions. As noted above, we have only two executive officers, and the committee’s decisions regarding annual incentive awards reflect its views as to the broad scope of responsibilities of each executive officer and its subjective assessment of each executive officer’s significant impact on the company’s overall success.

For 2019, annual cash incentives were a variable component of compensation designed to reward our executive officers for maximizing annual operating and financial performance. In prior years, the annual cash incentives were also based in part on our executive officers’ efforts in executing the company’s board–approved active development plan. However, given the adoption during 2018 of the Profit Plan, which provides our executive officers with an interest in the profit resulting from our development projects, the committee did not consider efforts or accomplishments in connection with the development projects when awarding annual cash incentives for 2019.

In March 2020, the committee evaluated the company’s accomplishments and performance during 2019, both independently and as compared to the peer group, the key roles of each of Mr. Armstrong and Ms. Pickens in those accomplishments, and each executive officer’s overall compensation. Although not impacting 2019 performance, the committee also believed it was important to consider the current and rapidly evolving COVID-19 pandemic, which is having a significant impact on the hotel and entertainment industries, including our Block 21 operations, as well as on the restaurant and retail tenants at our retail developments. As a result, despite the 2019 accomplishments noted below, the committee decided to decrease the annual incentive awards for 2019, and approved cash awards of $700,000 for Mr. Armstrong and $160,000 for Ms. Pickens, which amounts represent an approximate 20% reduction for each as compared to the annual incentive awards received for 2018. The committee also elected to increase the annual RSU grant for our executive officers for 2020, thereby shifting a portion of the reduced 2019 annual incentive award to a long-term award, the value of which is dependent on our stock price. For Mr. Armstrong, this increase resulted in an award of 25,000 RSUs during 2020, up from the annual grant of 12,000 RSUs he has received in recent years.

In determining the 2019 annual incentive awards, the committee noted the following accomplishments:

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Long-Term Incentive Awards.

The long-term incentives granted to our NEOs are based upon the position of each executive officer and the committee’s subjective assessment of corporate and individual performance for the prior year. Since 2018, our long-term incentive program has consisted of the following two incentives:

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Description of the Profit Plan. The Profit Plan is modeled after a “promote” arrangement that is a common compensation structure used by the company’s private company peers. Highlights of the Profit Plan include:

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The following table sets forth the development projects currently in the Profit Plan and the participation interest in each granted to our executive officers:

Limited Executive Perquisites and No Special Retirement Benefits

We seek to maintain a cost conscious culture. As a result, we provide limited perquisites to our executive officers. Please see “Executive Compensation Tables—2019 Summary Compensation Table” for a description of the limited perquisites provided in 2019.

Retirement benefits fulfill an important role within our overall executive compensation objectives by providing a financial security component, which in turn promotes retention. We provide our executive

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officers with the same retirement benefits that are generally available to our other full-time employees. Specifically, we maintain a 401(k) plan, which is a tax-qualified defined contribution retirement plan. Our 401(k) plan provides a 5% employer match, a 3% safe harbor contribution and a discretionary match of up to 10% of employee eligible compensation. We do not maintain any excess benefit plans, defined benefit or pension plans, or any deferred compensation plans. We provide life insurance to all full-time company employees.

Change of Control and Severance Benefits

We provide our executive officers with certain contractual protections in the event of an involuntary separation either prior to or in connection with a change of control of the company. Effective April 1, 2019, each of Mr. Armstrong and Ms. Pickens entered into a severance and change of control agreement with the company, with each agreement having a three-year term and with terms consistent with the previous agreements. We believe that severance protections, including reduced levels of protection triggered in connection with a qualifying termination without a change of control, can play a valuable role in attracting and retaining key executive officers by providing protections commonly provided in the real estate industry. In addition, we believe these benefits also serve our stockholders’ interest by promoting a continuity of management in the context of an actual or threatened change of control transaction. The existence of these arrangements does not impact our decisions regarding other components of our executive compensation program, although we consider these severance protections to be an important part of our executive officers’ compensation packages.

We also believe that the occurrence, or potential occurrence, of a change of control transaction will create uncertainty regarding the continued employment of our executive officers. This uncertainty results from the fact that many change of control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage our executive officers to remain employed with the company during the important time when their prospects for continued employment following a transaction are often uncertain, we provide them with enhanced severance benefits if their employment is terminated by the company without cause or by the executive with good reason in connection with a change of control. We do not provide excise tax gross-up protections under any change of control arrangements with our executive officers.

The payment of cash severance benefits following a change of control transaction is only triggered by an actual or constructive termination of employment following the change of control (i.e. a “double trigger”). In addition, our long-term incentive awards also provide for a double-trigger. Under the terms of these awards, time-vested RSUs will only accelerate upon a qualifying termination occurring within two years following the change of control.

The potential severance and change of control benefits payable under these agreements as of December 31, 2019, are more fully described in “Potential Payments upon Termination or Change in Control.”

Compensation Processes and Policies

Role of Advisors.

To assist in evaluating our compensation practices and the level of compensation provided to our executives, the committee has engaged FPL from time to time as its independent compensation consultant. Consistent with the committee’s longstanding policy, FPL will not provide, and has not provided, any services to the company’s management. As required by SEC rules, prior to any engagement the committee assesses the independence of FPL. FPL’s most recent engagement with respect to our executive compensation program was during 2018, when it (1) provided certain

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background information on market practices relating to how development-focused companies compensate their key executive officers, and (2) assessed the general economic terms of the Profit Plan and otherwise assisted the committee in its formulation of the Profit Plan.

Market Data and Peer Group.

With input from the committee, during 2017 FPL recommended a group of comparable public real estate investment trusts (“REITs”) and real estate management companies that it believed represents an appropriate peer group based on asset focus and size, as well as geographic location to a lesser degree. The resulting peer group selected by the committee consisted of the 14 public real estate companies listed below (the “peer group”), with the 2016 median total capitalization of the peer group companies being approximately $642 million, compared to our 2016 median total capitalization of approximately $559 million (putting the company in the 44^th percentile) at the time:

FPL used this peer group to prepare its executive compensation study, which compared our NEOs’ base salaries, annual incentive awards, long-term incentive awards and total remuneration to their counterparts in the peer group. The committee used FPL’s report to assess competitive compensation, industry trends and best practices regarding executive compensation, primarily in setting 2018 base salaries of our executive officers, which was not changed during 2019.

Role of Executive Officers.

Our chief executive officer makes recommendations to the committee regarding the base salary, annual incentive award and long-term incentive awards for our chief financial officer, based on his qualitative judgment regarding her individual performance, although the committee makes all final compensation decisions regarding our executive officers. Neither of our executive officers is present when the committee discusses or determines any aspect of their compensation.

Clawback Policy.

The awards under the Profit Plan are subject to a clawback provision that enables the company to clawback all or a portion of incentive compensation paid under the respective award in the event an executive’s misconduct causes the company to issue a restatement of its financial statements. The awards also provide that they will be subject to any clawback policy adopted by the company in accordance with the SEC’s final rules regarding compensation clawbacks mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

Stock Ownership Guidelines.

We require stock accumulation because we believe that it is important for our executive officers to align their interests with the long-term interests of our stockholders. Accordingly, our board of directors adopted stock ownership guidelines applicable to our executive officers. The guidelines are administered by the committee. Under the guidelines, Mr. Armstrong and Ms. Pickens are expected to maintain ownership of shares of our common stock valued at three times and one time, respectively, his or her base salary, determined by reference to the three-year trailing average monthly stock price. Shares of our common stock currently owned but not pledged and shares issuable upon the vesting of

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outstanding time-vested RSUs are counted for purposes of the stock ownership guidelines. Shares pledged under our grandfathered pledge policy, shares issuable under performance-based equity awards and shares owned on behalf of a spouse or children are not counted for purposes of the stock ownership guidelines. Finally, shares held in trust may also be included; however, due to the complexities of the trust laws, the decision to include the shares will be made on a case-by-case basis after reviewing the nature of the specific trust involved and considering whether the executive has maintained a pecuniary interest in the shares. Mr. Armstrong and Ms. Pickens both currently exceed their target ownership levels, as applicable.

Accounting and Tax Considerations.

The accounting and tax treatment of compensation generally has not been a factor in determining the amounts of compensation awarded to our executive officers. However, the committee and management have considered the accounting and tax impact of various program designs to balance the potential cost to the company with the benefit or value to the executive officer.

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to certain named executive officers. The compensation committee does not have a policy requiring executive compensation to qualify as deductible under Section 162(m), and has retained discretion to compensate executive officers in a manner commensurate with performance and the competitive landscape for executive talent.

Compensation Committee Report

The compensation committee of the board has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, and based on such review and discussion, the compensation committee recommended to the board that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by the Compensation Committee on March 19, 2020:

James C. Leslie, Chair

Ella G. Benson

James E. Joseph

Michael D. Madden

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Executive Compensation Tables

The table below summarizes the total compensation paid to or earned by our named executive officers for the fiscal years ended December 31, 2019, 2018 and 2017. Mr. Armstrong and Ms.  Pickens were our only executive officers during such fiscal years.

2019 Summary Compensation Table

Grants of Plan-Based Awards

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For additional information regarding the compensation paid to our NEOs, see “Compensation Discussion and Analysis.”

Outstanding Equity Awards at December 31, 2019

2019 Option Exercises and Stock Vested

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Equity Compensation Plan Information

The following table presents information as of December 31, 2019, regarding our incentive compensation plans under which common stock may be issued to employees and non-employees as compensation. All of our outstanding equity compensation plans were previously approved by our stockholders.

Potential Payments upon Termination or Change in Control

Severance and Change of Control Agreements.

Effective April 1, 2019, we renewed the prior severance and change of control agreements (the “agreements”) with each of Mr. Armstrong and Ms. Pickens. The 2019 agreements entitle each executive to receive additional benefits in the event of the termination of his or her employment under certain circumstances.

Termination without Cause or with Good Reason.

Each agreement provides that if the executive officer’s employment is terminated by the company without cause or by the executive with good reason, the executive will receive from the company:

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Termination after Change of Control as a Result of Death, Disability or Retirement.

Each agreement provides that if, during the three-year period following a change of control, the executive’s employment with the company or its successor is terminated as a result of death, disability or retirement, the executive or his or her legal representatives will receive from the company or its successor any accrued but unpaid salary and a pro-rata bonus for the year in which he or she was terminated.

Termination after Change of Control for Cause or Voluntary Termination without Good Reason.

Each agreement provides that if, following a change of control, the executive’s employment with the company or its successor is terminated for cause (as defined below) or by the executive for other than good reason (as defined below), the executive will receive from the company or its successor any accrued but unpaid salary.

Termination after Change of Control without Cause or with Good Reason.

Each agreement provides that if, during the three-year period following a change of control, the company or its successor terminates the executive without cause, or the executive voluntarily terminates his or her employment for good reason, the executive will receive from the company or its successor:

If any part of the payments or benefits received by the executive in connection with a termination following a change of control constitutes an excess parachute payment under Section 4999 of the Internal Revenue Code, the executive will receive the greater of (1) the amount of such payments and benefits reduced so that none of the amount constitutes an excess parachute payment, net of income taxes, or (2) the amount of such payments and benefits, net of income taxes and net of excise taxes under Section 4999 of the Internal Revenue Code.

As a condition to receipt of these benefits, Mr. Armstrong and Ms. Pickens must retain in confidence all confidential information known to him or her concerning our business. Such obligations continue to apply after a change of control. Notwithstanding the timing of benefits noted above, in the event that Mr. Armstrong or Ms. Pickens are considered to be “specified employees” under Section 409A of the Internal Revenue Code at the time of their termination of employment, they may not receive certain severance benefits until the expiration of a six month period following their respective terminations of employment.

Equity-Based Awards – Impact of Termination of Employment or Change of Control.

Pursuant to the terms of the RSU agreements, upon termination of employment as a result of death, disability or retirement, or, in the discretion of the compensation committee, termination of

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employment by the company without cause, the executive officer’s outstanding RSUs will vest. In connection with a change of control, outstanding RSUs will vest only upon the termination of the recipient’s employment by the company without cause or by the recipient for good reason within two years following the change of control.

Profit Participation Incentive Plan – Impact of Termination of Employment or Change of Control.

Pursuant to the terms of the Profit Plan, except as noted below, upon termination of employment prior to completion of a capital transaction with respect to an approved project or the grant of RSUs in connection with a valuation event, an executive officer will forfeit his or her award relating to the approved project under the Profit Plan. If the termination is by the company without cause or by the executive officer with good reason, then outstanding unvested awards will not be forfeited, and will remain outstanding and be paid out in accordance with the Profit Plan; provided, that any payment of any total valuation bonus will be made in a lump sum cash payment prior to March 15^th of the following year.

The following table quantifies the potential payments to our NEOs that would be due or accelerated under the contracts, arrangements, plans and scenarios discussed above, assuming a December 31, 2019 termination date, and where applicable, using the closing price of our common stock of $30.98 (as reported on the NASDAQ on December 31, 2019). The table does not include amounts that may be payable under our 401(k) plan. All amounts below include certain estimates and assumptions that exist as of December 31, 2019, and actual amounts or benefits that could be payable to any NEO upon a termination of employment or a change of control cannot be known with certainty until the actual event occurs.

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Potential Payments Upon Termination or Change in Control