View:
STRATUS
PROPERTIES INC.
98
SAN
JACINTO, SUITE 220
AUSTIN,
TEXAS 78701
T: 512.478.5788
F: 512.478.6340
June
11,
2007
United
States Securities and Exchange Commission
Division
of Corporation Finance
100
F
Street, N.E.
Washington,
DC 20549
Attention: Eric
C. McPhee, Staff Accountant
Daniel
L. Gordon, Branch
Chief
Re: Stratus
Properties Inc.
Form
10-K for the year ended December
31, 2006
Filed
March 26, 2007
File
No. 000-19989
Ladies
and Gentlemen:
On
behalf of Stratus Properties Inc.
(“Stratus”), we are submitting this letter in response to the comments received
from the Commission’s staff (the “Staff”) by facsimile dated May 29, 2007, in
connection with the above-captioned periodic report.
We
have numbered and reproduced below
the full text of the Staff’s comments in italics, each of which is followed by
Stratus’ response. We will incorporate the proposed revisions in
response to the Staff’s comments to the above-captioned periodic report into
Stratus’ future filings (i.e., beginning with Stratus’ Form 10-Q for
the quarter ending June 30, 2007) unless otherwise stated below.
Form
10-K For the year ended December 31, 2006
Consolidated
Statements of Cash Flows, page 36
Comment
1: Please
tell us whether the line item Purchases and development of real estate
properties includes any purchases of properties which will be held for
sale. If so, please tell us how you have determined that these cash
flows should be cash used in investing activities rather than cash used in
operating activities. Refer to any accounting literature relied
upon.
United
States Securities and Exchange Commission
Page
2
June 11,
2007
Response
1: At the time of acquisition our
properties have multiple possible uses and the ultimate disposition of the
property is not known. Based on the nature of the property, its
disposition can vary, including sale as is, development into a residential
property for sale as developed lots or development into a commercial leasing
property to be held and used. It may be several years after the
acquisition of a property before the ultimate use is determined and disposition
occurs. The costs of acquired property and development are generally
recovered over several operating periods as discussed
above. Including such costs in cash flows from operating activities
would distort our operating cash flows for any given one-year
period. Therefore, we believe it is appropriate to classify the
initial acquisition of properties as an investing activity.
Our
practice described above is consistent with our response to the Commission’s
inquiry on this matter to the Company in its letter dated January 24,
2005.
[1.]
Summary of Significant Accounting Policies, page 39
Revenue
Recognition, page 40
Comment
2: Please
tell us if you have had any property sales during the periods presented in
your
financial statements for which you did not recognize profit under the full
accrual method.
Response
2: We have had no property sales during the
periods presented in our financial statements for which we did not recognize
profit under the full accrual method.
Cost
of Sales, page 40
Comment
3: Please tell us, and disclose in future filings, how you
allocate the cost of real estate sold as well as costs directly attributable
to
the properties sold to individual lots that are sold during the life of a
project.
Response
3: The total costs and value of the project
in which lots are located determine the cost of real estate sold for individual
lots. The total project costs include the original cost of the land
as well as all capitalized costs directly attributable to the development of
the
project. The value of the project is based on appraisals or
anticipated sales prices of all the lots in the project. The cost of
real estate sold for individual lots is allocated on a relative sales value
method, which compares the actual sales price of the individual lot sold to
the
total value of the entire project. That ratio is then multiplied by
the total project cost to determine the cost of the individual lot
sold.
In
future
filings, we will expand our disclosure for the allocation of costs of sales
and
direct cost of sales for individual lots sold during the life of a
project.
United
States Securities and Exchange Commission
Page
3
June 11,
2007
More
specifically, we will comply with this comment by revising the section under
the
subheading “Cost of Sales” in Note 1 of our 2006 Form 10-K by including the
following in our 2007 Form 10-K (revised language underlined):
“Cost
of Sales. Cost of sales includes the cost of real estate
sold as well as costs directly attributable to the properties sold such as
marketing and depreciation. The total costs and value of the
project in which lots are located determine the cost of real estate sold for
individual lots. The cost of real estate sold for individual lots is
allocated based on a ratio of the actual sales price of the individual lot
sold
to the total value of the entire project. That ratio is then
multiplied by the total project cost to determine the cost of the individual
lot
sold.
A
summary
of Stratus’ cost of sales follows…”
* * * * *
The
Company represents to the Securities and Exchange Commission and its Staff
that
the Company is responsible for the adequacy and accuracy of the disclosures
in
its filings. The Company further acknowledges that Staff comments or
changes to disclosures in response to Staff comments do not foreclose the
Securities and Exchange Commission from taking any action with respect to the
filing. In addition, the Company will not assert Staff comments as a
defense in any proceeding initiated by the Securities and Exchange Commission
or
any person under the federal securities laws of the United States.
Thank
you for your assistance with
these matters. If you have any questions or comments, please call me
at your earliest convenience at 1-800-690-0315.
Sincerely,
/s/
John E. Baker
John
E. Baker
Senior
Vice President and
Chief
Financial
Officer