|
UNITED
STATES
|
|||
|
SECURITIES
AND EXCHANGE COMMISSION
|
|||
|
Washington,
D.C. 20549
|
|||
|
FORM
10-Q
|
|||
|
(Mark
One)
|
|||
|
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
||
|
SECURITIES
EXCHANGE ACT OF 1934
|
|||
|
For
the quarterly period ended March 31, 2006
|
|||
|
OR
|
|||
|
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
||
|
SECURITIES
EXCHANGE ACT OF 1934
|
|||
|
For
the transition period from
|
to
|
||
|
Commission
File Number: 0-19989
|
|||
 |
|||
|
Stratus
Properties Inc.
|
|||
|
(Exact
name of registrant as specified in its
charter)
|
|||
|
Delaware
|
72-1211572
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer Identification No.)
|
|
98
San Jacinto Blvd., Suite 220
|
|
|
Austin,
Texas
|
78701
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(512)
478-5788
|
|
|
(Registrant's
telephone number, including area code)
|
|
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. R
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
one): Large accelerated filer o Accelerated
filer R Non-accelerated
filer o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). ÿo
Yes
R
No
On
March
31, 2006, there were issued and outstanding 7,310,292 shares of the registrant’s
Common Stock, par value $0.01 per share.
STRATUS
PROPERTIES INC.
STRATUS
PROPERTIES INC.
CONDENSED
CONSOLIDATED BALANCE SHEET (Unaudited)
(In
Thousands)
|
March
31,
|
December
31,
|
|||||
|
2006
|
2005
|
|||||
|
ASSETS
|
||||||
|
Current
assets:
|
||||||
|
Cash
and cash equivalents, including restricted cash of
|
||||||
|
$301
and $387, respectively
|
$
|
9,064
|
$
|
1,901
|
||
|
Accounts
receivable
|
741
|
112
|
||||
|
Deposits,
prepaid expenses and other
|
891
|
849
|
||||
|
Discontinued
operations
|
-
|
12,230
|
||||
|
Total
current assets
|
10,696
|
15,092
|
||||
|
Real
estate, commercial leasing assets and facilities, net:
|
||||||
|
Property
held for sale - developed or under development
|
127,000
|
127,450
|
||||
|
Property
held for sale - undeveloped
|
16,129
|
16,071
|
||||
|
Property
held for use, net
|
9,353
|
9,452
|
||||
|
Investment
in Crestview
|
3,820
|
4,157
|
||||
|
Deferred
tax asset
|
6,386
|
-
|
||||
|
Other
assets
|
2,198
|
1,664
|
||||
|
Total
assets
|
$
|
175,582
|
$
|
173,886
|
||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||
|
Current
liabilities:
|
||||||
|
Accounts
payable and accrued liabilities
|
$
|
5,345
|
$
|
6,305
|
||
|
Accrued
interest, property taxes and other
|
2,571
|
3,710
|
||||
|
Current
portion of long-term debt
|
2,172
|
169
|
||||
|
Current
tax liability
|
591
|
-
|
||||
|
Discontinued
operations
|
-
|
12,036
|
||||
|
Total
current liabilities
|
10,679
|
22,220
|
||||
|
Long-term
debt
|
45,260
|
50,135
|
||||
|
Other
liabilities
|
6,713
|
7,364
|
||||
|
Total
liabilities
|
62,652
|
79,719
|
||||
|
Stockholders’
equity:
|
||||||
|
Preferred
stock
|
-
|
-
|
||||
|
Common
stock
|
75
|
74
|
||||
|
Capital
in excess of par value of common stock
|
184,197
|
182,007
|
||||
|
Accumulated
deficit
|
(66,641
|
)
|
(82,943
|
)
|
||
|
Unamortized
value of restricted stock units
|
-
|
(567
|
)
|
|||
|
Common
stock held in treasury
|
(4,701
|
)
|
(4,404
|
)
|
||
|
Total
stockholders’ equity
|
112,930
|
94,167
|
||||
|
Total
liabilities and stockholders' equity
|
$
|
175,582
|
$
|
173,886
|
||
The
accompanying notes are an integral part of these consolidated financial
statements.
3
STRATUS
PROPERTIES INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
(In
Thousands, Except Per Share Amounts)
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
|
2006
|
2005
|
|||||
|
Revenues:
|
||||||
|
Real
estate
|
$
|
11,038
|
$
|
2,252
|
||
|
Rental
income
|
387
|
307
|
||||
|
Commissions,
management fees and other
|
265
|
158
|
||||
|
Total
revenues
|
11,690
|
2,717
|
||||
|
Cost
of sales:
|
||||||
|
Real
estate, net
|
7,547
|
1,892
|
||||
|
Rental
|
324
|
328
|
||||
|
Depreciation
|
186
|
189
|
||||
|
Total
cost of sales
|
8,057
|
2,409
|
||||
|
General
and administrative expenses
|
1,739
|
1,284
|
||||
|
Total
costs and expenses
|
9,796
|
3,693
|
||||
|
Operating
income (loss)
|
1,894
|
(976
|
)
|
|||
|
Interest
expense, net
|
(179
|
)
|
(111
|
)
|
||
|
Interest
income
|
14
|
27
|
||||
|
Income
(loss) from continuing operations before income taxes
|
1,729
|
(1,060
|
)
|
|||
|
Income
tax benefit
|
6,386
|
-
|
||||
|
Income
(loss) from continuing operations
|
8,115
|
(1,060
|
)
|
|||
|
Income
from discontinued operations (including a gain on sale of
|
||||||
|
$7,834,
net of taxes of $1,928, in 2006)
|
8,187
|
148
|
||||
|
Net
income (loss) applicable to common stock
|
$
|
16,302
|
$
|
(912
|
)
|
|
|
Basic
net income (loss) per share of common stock:
|
||||||
|
Continuing
operations
|
$
|
1.12
|
$
|
(0.15
|
)
|
|
|
Discontinued
operations
|
1.13
|
0.02
|
||||
|
Basic
net income (loss) per share of common stock
|
$
|
2.25
|
$
|
(0.13
|
)
|
|
|
Diluted
net income (loss) per share of common stock:
|
||||||
|
Continuing
operations
|
$
|
1.06
|
$
|
(0.15
|
)
|
|
|
Discontinued
operations
|
1.06
|
0.02
|
||||
|
Diluted
net income (loss) per share of common stock
|
$
|
2.12
|
$
|
(0.13
|
)
|
|
|
Average
shares of common stock outstanding:
|
||||||
|
Basic
|
7,242
|
7,216
|
||||
|
Diluted
|
7,697
|
7,216
|
||||
The
accompanying notes are an integral part of these consolidated financial
statements.
4
STRATUS
PROPERTIES INC.
(In
Thousands)
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
|
2006
|
2005
|
|||||
|
Cash
flow from operating activities:
|
||||||
|
Net
income (loss)
|
$
|
16,302
|
$
|
(912
|
)
|
|
|
Adjustments
to reconcile net income (loss) to net cash provided
|
||||||
|
by
operating activities:
|
||||||
|
Income
from discontinued operations
|
(8,187
|
)
|
(148
|
)
|
||
|
Depreciation
|
186
|
189
|
||||
|
Cost
of real estate sold
|
6,559
|
1,442
|
||||
|
Deferred
income taxes
|
(6,386
|
)
|
-
|
|||
|
Stock-based
compensation
|
447
|
70
|
||||
|
Deposits
and other
|
(533
|
)
|
(297
|
)
|
||
|
(Increase)
decrease in working capital:
|
||||||
|
Accounts
receivable and prepaid expenses
|
(672
|
)
|
42
|
|||
|
Accounts
payable, accrued liabilities and other
|
(2,750
|
)
|
3,344
|
|||
|
Net
cash provided by continuing operations
|
4,966
|
3,730
|
||||
|
Net
cash provided by discontinued operations
|
374
|
352
|
||||
|
Net
cash provided by operating activities
|
5,340
|
4,082
|
||||
|
Cash
flow from investing activities:
|
||||||
|
Purchases
and development of real estate properties
|
(6,039
|
)
|
(6,458
|
)
|
||
|
Partial
return of investment in Crestview
|
337
|
-
|
||||
|
Development
of commercial leasing properties and other
|
||||||
|
expenditures
|
(96
|
)
|
(79
|
)
|
||
|
Net
cash used in continuing operations
|
(5,798
|
)
|
(6,537
|
)
|
||
|
Net
cash provided by (used in) discontinued operations
|
10,022
|
(19
|
)
|
|||
|
Net
cash provided by (used in) investing activities
|
4,224
|
(6,556
|
)
|
|||
|
Cash
flow from financing activities:
|
||||||
|
Borrowings
from revolving credit facility
|
7,500
|
6,500
|
||||
|
Payments
on revolving credit facility
|
(9,507
|
)
|
(2,447
|
)
|
||
|
Borrowings
from project loans
|
2,236
|
468
|
||||
|
Repayments
on project loans
|
(3,101
|
)
|
(1,064
|
)
|
||
|
Net
proceeds from exercised stock options
|
725
|
41
|
||||
|
Purchases
of Stratus common shares
|
(254
|
)
|
(335
|
)
|
||
|
Net
cash (used in) provided by continuing operations
|
(2,401
|
)
|
3,163
|
|||
|
Net
cash used in discontinued operations
|
-
|
(36
|
)
|
|||
|
Net
cash (used in) provided by financing activities
|
(2,401
|
)
|
3,127
|
|||
|
Net
increase in cash and cash equivalents
|
7,163
|
653
|
||||
|
Cash
and cash equivalents at beginning of year
|
1,901
|
379
|
||||
|
Cash
and cash equivalents at end of period
|
9,064
|
1,032
|
||||
|
Less
cash at discontinued operations
|
-
|
(121
|
)
|
|||
|
Less
cash restricted as to use
|
(301
|
)
|
(123
|
)
|
||
|
Unrestricted
cash and cash equivalents at end of period
|
$
|
8,763
|
$
|
788
|
||
The
accompanying notes are an integral part of these consolidated financial
statements.
5
STRATUS
PROPERTIES INC.
| 1. |
GENERAL
|
The
accompanying unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for
the
year ended December 31, 2005, included in Stratus Properties Inc.’s (Stratus)
Annual Report on Form 10-K (Stratus 2005 Form 10-K) filed with the Securities
and Exchange Commission. In the opinion of management, the accompanying
consolidated financial statements reflect all adjustments (consisting only
of
normal recurring items) considered necessary to present fairly the financial
position of Stratus at March 31, 2006 and December 31, 2005, and the results
of
operations and cash flows for the three-month periods ended March 31, 2006
and
2005. Operating results for the three months ended March 31, 2006 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2006. Certain prior year amounts have been reclassified to conform
to the current year presentation. A change in accounting principle applied
during 2006 is discussed below in Note 2.
| 2. |
STOCK-BASED
COMPENSATION
|
Accounting
for Stock-Based Compensation.
As of
March 31, 2006, Stratus has three stock-based employee compensation plans and
one stock-based director compensation plan. Prior to January 1, 2006, Stratus
accounted for options granted under all of its plans under the recognition
and
measurement principles of Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and related interpretations, as
permitted by Statement of Financial Accounting Standards (SFAS) No. 123,
“Accounting for Stock-Based Compensation.” APB Opinion No. 25 required
compensation cost for stock options to be recognized based on the difference
on
the date of grant, if any, between the quoted market price of the stock and
the
amount an employee must pay to acquire the stock (i.e., the intrinsic value).
Because all the plans require that the option exercise price be at least the
market price on the date of grant, Stratus recognized no compensation cost
on
the grant or exercise of its employees’ options through December 31, 2005. Other
awards of restricted stock units under the plans did result in compensation
costs being recognized in earnings based on the intrinsic value on the date
of
grant.
Effective
January 1, 2006, Stratus adopted the fair value recognition provisions of SFAS
No. 123 (revised 2004), “Share-Based Payment” or “SFAS No. 123R,” using the
modified prospective transition method. Under that transition method,
compensation cost recognized in 2006 includes: (a) compensation costs for all
stock option awards granted to employees prior to, but not yet vested as of
January 1, 2006, based on the grant-date fair value estimated in accordance
with
the original provisions of SFAS No. 123, and (b) compensation cost for all
stock
option awards granted subsequent to January 1, 2006, based on the grant-date
fair value estimated in accordance with the provisions of SFAS No. 123R. Stratus
granted no stock option awards in the first quarter of 2006. In addition, other
stock-based awards charged to expense under SFAS No. 123 (i.e., restricted
stock
units) continue to be charged to expense under SFAS No. 123R. Results for prior
periods have not been restated. Stratus has elected to recognize compensation
costs for awards that vest over several years on a straight-line basis over
the
vesting period. Stratus’ stock option awards provide for an additional year of
vesting after an employee retires. For stock option awards granted after January
1, 2006, to retirement-eligible employees, Stratus will record one year of
amortization of the awards’ value on the date of grant. In addition, prior to
adoption of SFAS No. 123R, Stratus recognized forfeitures as they occurred
in
its SFAS No. 123 pro forma disclosures. Beginning January 1, 2006, Stratus
includes estimated forfeitures in its compensation cost and updates the
estimated forfeiture rate through the final vesting date of the
awards.
As
a
result of adopting SFAS No. 123R on January 1, 2006, Stratus’ net income for the
three months ended March 31, 2006, was $0.4 million ($0.05 per basic and diluted
share) lower than if it had continued to account for share-based compensation
under APB Opinion No. 25. Basic earnings per share would have been $2.30 per
share and diluted earnings per share would have been $2.17 per share for the
three months ended March 31, 2006, if Stratus had not adopted SFAS No. 123R,
compared to reported earnings of $2.25 per basic share and $2.12 per diluted
share.
Stock-Based
Compensation Cost.
Compensation cost charged against earnings for stock-based awards is shown
below
(in thousands). Stock-based compensation costs are capitalized as appropriate,
but such capitalization was not previously reflected in our pro-forma
disclosures shown below as amounts were not considered
material.
6
|
Three
Months Ended
|
|||||||
|
March31,
|
|||||||
|
2006
|
2005
|
||||||
|
Stock
options awarded to employees (including directors)
|
$
|
145
|
$
|
-
|
|||
|
Stock
options awarded to nonemployees
|
-
|
25
|
|||||
|
Restricted
stock units
|
421
|
68
|
|||||
|
Less
capitalized amounts
|
(119
|
)
|
-
|
||||
|
Impact
on net income
|
$
|
447
|
$
|
93
|
|||
The
following table illustrates the effect on net income and earnings per share
for
the three months ended March 31, 2005, if Stratus had applied the fair value
recognition provisions of SFAS No. 123 to stock-based awards granted under
Stratus’ stock-based compensation plans (in thousands, except per share
amounts):
|
Net
loss applicable to common stock, as reported
|
$
|
(912
|
)
|
|
|
Add:
Stock-based employee compensation expense
|
||||
|
included
in reported net loss applicable to common
|
||||
|
stock
for restricted stock units
|
68
|
|||
|
Deduct:
Total stock-based employee compensation
|
||||
|
expense
determined under fair value-based method
|
||||
|
for
all awards
|
(233
|
)
|
||
|
Pro
forma net loss applicable to common stock
|
$
|
(1,077
|
)
|
|
|
Loss
per share:
|
||||
|
Basic
and diluted - as reported
|
$
|
(0.13
|
)
|
|
|
Basic
and diluted - pro forma
|
$
|
(0.15
|
)
|
|
For
the
pro forma computations, the values of option grants were calculated on the
dates
of grant using the Black-Scholes option pricing model and amortized to expense
on a straight-line basis over the options’ vesting periods. No other discounts
or restrictions related to vesting or the likelihood of vesting of stock options
were applied. There were no stock option grants during the first quarter of
2005.
Stock-Based
Compensation Plans.
As
discussed above, Stratus currently has four stock-based compensation plans
and
all are shareholder approved. As of March 31, 2006, only three of the plans,
which are discussed below, have awards available for grant. Stratus’ Stock
Option Plan, 1998 Stock Option Plan, 2002 Stock Incentive Plan and Stock Option
Plan for Non-Employee Directors (the Plans) provide for the issuance of stock
options, restricted stock units (see below) and stock appreciations rights
(collectively stock-based compensation awards), adjusted for the effects of
the
effective reverse stock split transactions (see Note 6 of the Stratus 2005
Form
10-K), representing 1,330,000 shares of Stratus common stock at no less than
market value at time of grant.
Generally,
stock-based compensation awards are exercisable in 25 percent annual increments
beginning one year from the date of grant and expire 10 years after the date
of
grant. Awards for approximately 3,100 shares under the 1998 Stock Option Plan,
40,000 shares under the Stock Option Plan for Non-Employee Directors and 9,800
shares under the 2002 Stock Option Plan were available for new grants as of
March 31, 2006.
Options.
A
summary of options outstanding as of March 31, 2006 and changes during the
three
months ended March 31, 2006 follows:
7
|
Weighted
|
||||||||||
|
Average
|
Aggregate
|
|||||||||
|
Weighted
|
Remaining
|
Intrinsic
|
||||||||
|
Number
of
|
Average
|
Contractual
|
Value
|
|||||||
|
Options
|
Option
Price
|
Term
(years)
|
($000)
|
|||||||
|
Balance
at January 1
|
838,336
|
$
|
10.11
|
|||||||
|
Granted
|
-
|
-
|
||||||||
|
Exercised
|
(103,652
|
)
|
8.13
|
|||||||
|
Expired/Forfeited
|
-
|
-
|
||||||||
|
Balance
at March 31
|
734,684
|
10.39
|
6.52
|
$
|
10,369
|
|||||
|
Vested
and exercisable at March 31
|
585,184
|
9.50
|
6.17
|
$
|
8,780
|
|||||
The
total
intrinsic value of options exercised during the three months ended March 31,
2006, was $1.6 million. As of March 31, 2006, Stratus had $1.1 million of total
unrecognized compensation cost related to unvested stock options expected to
be
recognized over a weighted average period of 1.3 years. Cash received from
stock
option exercises totaled $0.8 million for the three months ended March 31,
2006,
and less than $0.1 million for the three months ended March 31, 2005. The actual
tax benefit realized for the tax deductions from stock option exercises totaled
$0.6 million for the three months ended March 31, 2006, and none for the three
months ended March 31, 2005. Upon exercise of stock options and vesting of
restricted stock units, employees may tender Stratus shares to Stratus to pay
the exercise price and/or the minimum required taxes. Shares tendered to Stratus
for these purposes totaled approximately 1,500 shares for the three months
ended
March 31, 2006 and approximately 300 shares for the three months ended March
31,
2005. Stratus paid less than $0.1 million during the three months ended March
31, 2006 and none during the three months ended March 31, 2005 for employee
taxes.
Restricted
Stock Units.
Under
Stratus’ restricted stock program, shares of its common stock may be granted to
certain officers of Stratus at no cost. The restricted stock units are converted
into shares of Stratus common stock ratably on the anniversary of each award
over the vesting period, generally four years. The awards fully vest upon
retirement. Fair value for restricted stock unit awards is based on the average
of the high and low Stratus common stock price on the date of
grant.
Stratus
granted 49,000 restricted stock units in the three months ended March 31, 2006.
A summary of outstanding unvested restricted stock units as of March 31, 2006,
and activity during the three months ended March 31, 2006 is presented
below:
|
Weighted
|
|||||||
|
Average
|
Aggregate
|
||||||
|
Number
of
|
Remaining
|
Intrinsic
|
|||||
|
Restricted
|
Contractual
|
Value
|
|||||
|
Stock
Units
|
Term
(years)
|
($000)
|
|||||
|
Balance
at January 1
|
45,045
|
||||||
|
Granted
|
49,000
|
||||||
|
Vested
|
(4,545
|
)
|
|||||
|
Forfeited
|
-
|
||||||
|
Balance
at March 31
|
89,500
|
1.7
|
$
|
2,193
|
|||
The
grant-date fair value of restricted stock units granted during the three months
ended March 31, 2006 was $1.2 million. The total intrinsic value of restricted
stock units vesting during the three months ended March 31, 2006 was $0.1
million. As of March 31, 2006, Stratus had $1.3 million of total unrecognized
compensation cost related to unvested restricted stock units expected to be
recognized over a weighted average period of 1.7 years.
| 3. |
EARNINGS
PER SHARE
|
Stratus’
basic net income (loss) per share of common stock was calculated by dividing
the
income (loss) applicable to continuing operations, income from discontinued
operations and net income (loss) applicable to common stock by the weighted
average number of common shares outstanding during the period. The following
is
a reconciliation of net income (loss) and weighted average common shares
outstanding for purposes of calculating diluted net income (loss) per share
(in
thousands, except per share amounts):
8
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
|
2006
|
2005
|
|||||
|
Net
income (loss) from continuing operations
|
$
|
8,115
|
$
|
(1,060
|
)
|
|
|
Income
from discontinued operations
|
8,187
|
148
|
||||
|
Net
income (loss) applicable to common stock
|
$
|
16,302
|
$
|
(912
|
)
|
|
|
Weighted
average common shares outstanding
|
7,242
|
7,216
|
||||
|
Add:
Dilutive stock options
|
406
|
-
|
||||
|
Restricted
stock
|
49
|
-
|
||||
|
Weighted
average common shares outstanding for
|
||||||
|
purposes
of calculating diluted net income per share
|
7,697
|
7,216
|
||||
|
Diluted
net income (loss) per share of common stock:
|
||||||
|
Continuing
operations
|
$
|
1.06
|
$
|
(0.15
|
)
|
|
|
Discontinued
operations
|
1.06
|
0.02
|
||||
|
Diluted
net income (loss) per share of common stock
|
$
|
2.12
|
$
|
(0.13
|
)
|
|
Stock
options representing 431,000 shares in the first quarter of 2005 that otherwise
would have been included in the first-quarter 2005 earnings per share
calculations were excluded because of the net loss reported for the
period.
| 4. |
DEBT
OUTSTANDING
|
At
March
31, 2006, Stratus had total debt of $47.4 million, including $2.2 million of
current debt, compared to total debt of $50.3 million, including $0.2 million
of
current debt, at December 31, 2005. Stratus’ debt outstanding at March 31, 2006
consisted of the following:
| · |
$13.7
million of net borrowings under the $45.0 million Comerica revolving
credit facility. The $45.0 million facility, of which $3.0 million
is
provided for Stratus’ Calera Court project, matures on May 30,
2007.
|
| · |
$10.0
million of borrowings outstanding under two unsecured $5.0 million
term
loans, one of which will mature in January 2008 and the other in
July
2008.
|
| · |
$6.4
million of net borrowings under the 7500 Rialto Boulevard project
loan,
which matures in January 2008.
|
| · |
$2.0
million of net borrowings under the $9.8 million Deerfield loan,
for which
the Deerfield property and any future improvements are serving as
collateral. This project loan will mature in February
2007.
|
| · |
$10.9
million of net borrowings under the $18.5 million Escarpment Village
project loan, which will mature in June
2007.
|
| · |
$4.4
million of net borrowings under the $10.0 million Meridian project
loan,
which will mature in November 2007.
|
In
addition, Stratus has a $22.8 million commitment from Teachers
Insurance and Annuity Association of America (TIAA)
for a
30-year mortgage available for funding the completed Escarpment Village shopping
center project. The mortgage will be used to refinance the $18.5 million
Escarpment Village project loan discussed above.
Upon
the
closing of the 7000 West sale on March 27, 2006, CarrAmerica
Lantana, LP (CarrAmerica) paid $10.6 million cash to Stratus and assumed the
$11.7 million principal balance remaining under Stratus’ 7000 West project loan
from TIAA (see Note 6). Stratus intends to use the net proceeds from the sale
to
reduce its other outstanding debt.
For
a
further discussion of Stratus’ debt see Note 4 of the Stratus 2005 Form
10-K.
9
| 5. |
RESTRICTED
CASH AND INTEREST COST
|
Restricted
Cash.
Restricted cash totaled $0.3 million at March 31, 2006 and $0.4 million at
December 31, 2005, primarily related to lot sales proceeds to be used for
payment on project loans. Restricted cash also includes approximately $0.1
million held at March 31, 2006 and December 31, 2005 representing funds held
for
payment of fractional shares resulting from the May 2001 stock split (see Note
6
of the Stratus 2005 Form 10-K).
Interest
Cost.
Interest
expense excludes capitalized interest of $0.8 million in the first quarter
of
2006 and $0.5 million in the first quarter of 2005.
| 6. |
DISCONTINUED
OPERATIONS
|
In
the
fourth quarter of 2005, Stratus committed to a plan to sell its office buildings
at 7000 West. On March 27, 2006, Stratus’ wholly owned subsidiary, Stratus 7000
West Joint Venture (7000 West JV), sold its two
70,000-square-foot
office buildings at 7000 West William Cannon Drive (7000 West), known as the
Lantana Corporate Center, to
CarrAmerica for
$22.3
million, resulting in a $9.8 million ($7.8 million net of taxes or $1.08 per
basic share and $1.02 per diluted share) gain in the first quarter of 2006.
CarrAmerica
paid $10.6 million cash to Stratus at closing and assumed the $11.7 million
principal balance remaining under Stratus’ 7000 West project loan from TIAA. In
connection with CarrAmerica’s assumption of the loan, 7000 West JV entered into
a First Modification Agreement with CarrAmerica and TIAA under which TIAA
released 7000 West JV’s $3.5 million letter of credit issued by Comerica Bank
that secured certain re-tenanting obligations and released 7000 West JV from
all
future obligations under the loan. In addition, TIAA released Stratus from
all
future liabilities under its guaranty of 7000 West JV’s environmental
representations and recourse obligations under the loan.
Upon
completion of the sale of 7000 West, Stratus ceased all involvement with the
7000 West office buildings. The operations, assets and liabilities of 7000
West
represented a component of Stratus’ commercial leasing segment.
The
table
below provides a summary of 7000 West’s results of operations (in
thousands):
|
Three
Months Ended
|
|||||||
|
March
31,
|
|||||||
|
2006
|
2005
|
||||||
|
Rental
income
|
$
|
1,057
|
$
|
913
|
|||
|
Rental
property costs
|
(403
|
)
|
(280
|
)
|
|||
|
Depreciation
|
-
|
(229
|
)
|
||||
|
General
and administrative expenses
|
(48
|
)
|
(73
|
)
|
|||
|
Interest
expensea
|
(168
|
)
|
(183
|
)
|
|||
|
Interest
income
|
2
|
-
|
|||||
|
Gain
on sale
|
9,762
|
-
|
|||||
|
Provision
for income taxes
|
(2,015
|
)
|
-
|
||||
|
Income
from discontinued operations
|
$
|
8,187
|
$
|
148
|
|||
| a. |
Relates
to interest expense from 7000 West project loan (see below) and does
not
include any additional allocations of
interest.
|
The
following summarizes 7000 West’s net assets (in thousands) at December 31,
2005:
|
Assets:
|
||||
|
Cash
and cash equivalents
|
$
|
5
|
||
|
Other
current assets
|
1,136
|
|||
|
Property
held for sale, net of accumulated depreciation
|
||||
|
of
$4,577
|
11,089
|
|
Liabilities:
|
||||
|
Current
portion of long-term debt
|
(11,795
|
)
|
||
|
Other
current liabilities
|
(241
|
)
|
||
|
Net
assets
|
$
|
194
|
||
For
a
further discussion of Stratus’ discontinued operations see Note 7 of the Stratus
2005 Form 10-K.
10
| 7. |
BUSINESS
SEGMENTS
|
Stratus
has two operating segments, “Real Estate Operations” and “Commercial Leasing.”
The Real Estate Operations segment is comprised of all Stratus’ developed
properties, properties under development and undeveloped properties in Austin,
Texas, which consist of its properties in the Barton Creek community, the Circle
C community and Lantana. In addition, the Deerfield property in Plano, Texas
is
included in the Real Estate Operations segment.
The
Commercial Leasing segment includes the Lantana Corporate Center office complex
at 7000 West, which consists of two fully leased 70,000-square-foot office
buildings, as well as Stratus’ nearly 100 percent leased 75,000-square-foot
office building at 7500 Rialto Boulevard. In March 2004, Stratus formed
Southwest Property Services L.L.C. to manage these office buildings. In the
fourth quarter of 2005, Stratus committed to sell the two 70,000-square-foot
office buildings at 7000 West and sold 7000 West on March 27, 2006. The 7000
West operating results are reported as discontinued operations for the periods
shown in the table below.
The
segment data presented below were prepared on the same basis as Stratus’
consolidated financial statements.
|
Real
Estate Operationsa
|
Commercial
Leasing
|
Other
|
Total
|
|||||||||
|
(In
Thousands)
|
||||||||||||
|
Three
Months Ended March 31, 2006
|
||||||||||||
|
Revenues
|
$
|
11,303
|
$
|
387
|
$
|
-
|
$
|
11,690
|
||||
|
Cost
of sales, excluding depreciation
|
(7,547
|
)
|
(324
|
)
|
-
|
(7,871
|
)
|
|||||
|
Depreciation
|
(33
|
)
|
(153
|
)
|
-
|
(186
|
)
|
|||||
|
General
and administrative expenses
|
(1,609
|
)
|
(130
|
)
|
-
|
(1,739
|
)
|
|||||
|
Operating
income (loss)
|
$
|
2,114
|
$
|
(220
|
)
|
$
|
-
|
$
|
1,894
|
|||
|
Income
from discontinued operations
|
$
|
-
|
$
|
8,187
|
$
|
-
|
$
|
8,187
|
||||
|
Income
tax benefit
|
$
|
6,386
|
$
|
-
|
$
|
-
|
$
|
6,386
|
||||
|
Capital
expenditures
|
$
|
6,039
|
$
|
96
|
$
|
-
|
$
|
6,135
|
||||
|
Total
assets
|
$
|
143,129
|
$
|
9,353
|
$
|
23,100
|
b
|
$
|
175,582
|
|||
|
Three
Months Ended March 31, 2005
|
||||||||||||
|
Revenues
|
$
|
2,410
|
$
|
307
|
$
|
-
|
$
|
2,717
|
||||
|
Cost
of sales, excluding depreciation
|
(1,892
|
)
|
(328
|
)
|
-
|
(2,220
|
)
|
|||||
|
Depreciation
|
(38
|
)
|
(151
|
)
|
-
|
(189
|
)
|
|||||
|
General
and administrative expense
|
(1,112
|
)
|
(172
|
)
|
-
|
(1,284
|
)
|
|||||
|
Operating
loss
|
$
|
(632
|
)
|
$
|
(344
|
)
|
$
|
-
|
$
|
(976
|
)
|
|
|
Income
from discontinued operations
|
$
|
-
|
$
|
148
|
$
|
-
|
$
|
148
|
||||
|
Capital
expenditures
|
$
|
6,458
|
$
|
98
|
$
|
-
|
$
|
6,556
|
||||
|
Total
assets
|
$
|
130,461
|
$
|
22,862
|
c
|
$
|
5,038
|
b
|
$
|
158,361
|
||
| a. |
Includes
sales commissions, management fees and other revenues together with
related expenses.
|
| b. |
Represents
all other assets except for property held for sale and property held
for
use comprising the Real Estate Operations and Commercial Leasing
segments.
|
| c. |
Includes
assets from the discontinued operations of 7000 West, which Stratus
sold
on March 27, 2006, totaling $13.0 million, net of accumulated depreciation
of $4.1 million, at March 31, 2005. These buildings represented two
of
Stratus’ three commercial leasing
properties.
|
| 8. |
INCOME
TAXES
|
Stratus’
deferred tax assets at December 31, 2005 totaled $17.6 million and Stratus
had
provided a 100 percent valuation allowance because realization of the deferred
tax assets was not considered likely. Realization of Stratus’ deferred tax
assets is dependent on generating sufficient taxable income within the
carryforward period available under tax law. In the first quarter of 2006,
Stratus sold 7000 West (see Note 6) and in April 2006 Stratus completed the
sale
of 58 acres at its Lantana property. These transactions generated income of
approximately $26 million and along with Stratus’ current homebuilder contract
arrangements and projected levels of future sales provide sufficient evidence
that Stratus now believes it is more likely than not that it will be able to
realize all of its deferred tax assets. As a result, first-quarter 2006 net
income from continuing operations included a $6.4 million, $0.88 per basic
share
and $0.83 per diluted share, tax benefit resulting from the reversal of a
portion of Stratus’ deferred tax asset valuation allowance and the remaining
balance of its valuation allowance is being realized in Stratus’ 2006 effective
tax rate.
11
The
financial information as of March 31, 2006, and for the three-month periods
ended March 31, 2006 and 2005, included in Part I of this Form 10-Q pursuant
to
Rule 10-01 of Regulation S-X has been reviewed by PricewaterhouseCoopers LLP
(PricewaterhouseCoopers), Stratus’ independent registered public accounting
firm, in accordance with the standards of the Public Company Accounting
Oversight Board (United States). PricewaterhouseCoopers’ report is included in
this quarterly report.
PricewaterhouseCoopers
does not carry out significant or additional procedures beyond those that would
have been necessary if its report had not been included in this quarterly
report. Accordingly, such report is not a “report” or “part of a registration
statement” within the meaning of Sections 7 and 11 of the Securities Act of 1933
and the liability provisions of Section 11 of such Act do not
apply.
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders
of
Stratus Properties Inc.:
We
have
reviewed the accompanying condensed consolidated balance sheet of Stratus
Properties Inc. and its subsidiaries as of March 31, 2006, and the related
consolidated statements of operations for each of the three-month periods ended
March 31, 2006 and 2005 and the consolidated statements of cash flows for the
three-month periods ended March 31, 2006 and 2005. These interim financial
statements are the responsibility of the Company’s management.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based
on
our review, we are not aware of any material modifications that should be made
to the accompanying condensed consolidated interim financial statements for
them to
be in
conformity with accounting principles generally accepted in the United States
of
America.
We
have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet
as of
December 31, 2005, and the related consolidated statements of income, of changes
in stockholders’ equity and of cash flows for the year then ended, management’s
assessment of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2005 and the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2005; and in our
report dated March 16, 2006, we expressed unqualified opinions thereon. The
consolidated financial statements and management’s assessment of the
effectiveness of internal control over financial reporting referred to above
are
not presented herein. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2005,
is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
As
discussed in Note 2 to the condensed consolidated financial statements,
effective January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based
Payment.
/s/
PricewaterhouseCoopers LLP
Austin,
Texas
May
10,
2006
12
OVERVIEW
Management’s
discussion and analysis presented below should be read in conjunction with
our
discussion and analysis of financial results contained in our 2005 Annual Report
on Form 10-K (2005 Form 10-K). The operating results summarized in this report
are not necessarily indicative of our future operating results. All subsequent
references to Notes refer to Notes to Consolidated Financial Statements, unless
otherwise stated.
We
are
engaged in the acquisition, development, management and sale of commercial,
multi-family and residential real estate properties located primarily in the
Austin, Texas area. We conduct real estate operations on properties we
own.
Our
principal real estate holdings are currently in southwest Austin, Texas. As
of
March 31, 2006, our most significant holding is the 1,728 acres of residential,
multi-family and commercial property and 72 developed residential estate lots
located within the Barton Creek community. We also own approximately 384 acres
of undeveloped residential, commercial and multi-family property and 36 acres
of
commercial property under development within the Circle C Ranch (Circle C)
community. Our other properties in the Circle C community are currently being
developed and include Meridian, which is an 800-lot residential development,
and
Escarpment Village, which is a 168,000-square-foot retail center anchored by
a
grocery store. At March 31, 2006, Meridian consisted of approximately 282 acres
and 215 developed residential lots. Our remaining Austin holdings at March
31,
2006, consisted of 282 acres of commercial property and a 75,000-square-foot
office building at 7500 Rialto Boulevard, which is nearly 100 percent leased,
located within Lantana. In the fourth quarter of 2005, we decided to sell our
two 70,000-square-foot office buildings at 7000 West William Cannon Drive (7000
West), known as the Lantana Corporate Center. On March 27, 2006, we sold 7000
West for $22.3 million (see Note 6 and “Discontinued Operations - 7000
West”).
In
January 2004, we acquired approximately 68 acres of land in Plano, Texas, which
we refer to as Deerfield. At March 31, 2006, our Deerfield property consists
of
approximately 26 acres of residential land, which is being developed, and 49
developed residential lots. We also own two acres of undeveloped commercial
property in San Antonio, Texas.
In
November 2005, we formed a joint venture partnership with Trammell Crow Central
Texas Development, Inc. (Trammell Crow) to acquire an approximate 74-acre tract
at the intersection of Airport Boulevard and Lamar Boulevard in Austin, Texas
for $7.7 million. We refer to the property as the Crestview Station project,
a
single-family, multi-family, retail and office development. With our joint
venture partner, we have commenced brown field remediation and permitting of
the
property.
DEVELOPMENT
AND OTHER ACTIVITIES
Lantana.
In
November 2005, we entered into an Agreement of Sale and Purchase with Advanced
Micro Devices, Inc. (NYSE: AMD) under which we agreed to sell them approximately
58 acres at our Lantana community for $21.2 million. The proposed AMD project
consists of approximately 825,000 square feet of office and related uses on
a
58-acre site at the southeast corner of West William Cannon Drive and Southwest
Parkway. The sale was subject to certain conditions, including obtaining certain
permits and approvals from the City of Austin (the City). In February 2006,
the
Save Our Springs Alliance, Inc. (the SOS Alliance) filed a lawsuit against
the
City seeking, among other matters, to prevent the issuance of permits needed
to
develop the AMD project. We intervened in the litigation and vigorously defended
our Lantana entitlements. On April 11, 2006, a state district judge refused
to
stop the approval process for the proposed AMD project and the SOS Alliance
dropped its lawsuit. On April 20, 2006, the City approved the AMD site
development permit, and on April 26, 2006, we closed the sale of our 58-acre
tract at Lantana with AMD for $21.2 million. During the second quarter of 2006,
we expect to recognize a net pre-tax gain of approximately $16 million on the
AMD sale. Lantana is a partially developed, mixed-use project with remaining
Stratus entitlements for approximately 1.9 million square feet of office and
retail use on 224 acres. Regional utility and road infrastructure is in place
with capacity to serve Lantana at full build-out permitted under existing
entitlements.
In
2001,
we reached agreement with the City concerning development of a 417-acre portion
of the Lantana community. The agreement reflected a cooperative effort between
the City and us to allow development based on grandfathered entitlements, while
adhering to stringent water quality standards and other enhancements to protect
the environment. With this agreement, we completed the core entitlement process
for the entire Lantana project allowing for approximately 2.9 million square
feet of office and retail
13
development,
approximately 400 multi-family units (previously sold to an unrelated third
party), and a tract for approximately 330 residential lots which we sold in
2003.
At
March
31, 2006, our 75,000-square-foot office building at 7500 Rialto Boulevard was
approximately 96 percent leased. As a result of increased demand for office
space within Lantana, we commenced construction in January 2006 of a second
75,000-square-foot office building at 7500 Rialto Boulevard. In March 2004,
we
formed Southwest Property Services L.L.C. to manage our office buildings.
Effective June 30, 2004, we terminated our agreement with the third-party
property management firm previously providing this function. Although there
were
higher costs during the initial transition, this change in management
responsibility provides future cost savings for our commercial leasing
operations and better control of building operations. In the fourth quarter
of
2005, we committed to a plan to sell our two office buildings at 7000 West.
On
March 27, 2006, we sold 7000 West for $22.3 million (see Note 6 and
“Discontinued Operations - 7000 West”).
Barton
Creek Community.
We
commenced construction of a new subdivision within the Barton Creek community
during the fourth quarter of 2000. This subdivision, Mirador, was completed
in
late-2001. Mirador adjoins the Escala Drive subdivision. We developed 34 estate
lots in the Mirador subdivision, with each lot averaging approximately 3.5
acres
in size.
Since
January 2002, we have secured subdivision plat approval for three new
residential subdivisions within the Barton Creek Community, including: Versant
Place - 54 lots, Wimberly Lane Phase II - 47 lots and Calera - 155 lots. At
March 31, 2006, our remaining unsold developed lots within the Barton Creek
Community included: Calera Drive - 28 lots, Wimberly Lane Phase II - 23 lots,
Calera Court - 10 lots, Mirador - 10 lots and Escala - 1 lot. Development of
the
remaining Barton Creek property is expected to occur over several
years.
In
May
2004, we entered into a contract with a national homebuilder to sell 41 lots
within the Wimberly Lane Phase II subdivision in the Barton Creek community.
In
June 2004, the homebuilder paid us a non-refundable $0.6 million deposit for
the
right to purchase the 41 lots. The deposit was used to pay ongoing development
costs of the lots. The deposit will be applied against subsequent purchases
of
lots by the homebuilder after certain thresholds are achieved and will be
recognized as income as lots are sold. The lots are being sold on a scheduled
takedown basis, with the initial six lots sold in December 2004 following
completion of subdivision utilities, and then an average of three lots per
quarter beginning in June 2005. The average purchase price for each of the
41
lots is $150,400, subject to a six percent annual escalator commencing in
December 2004. The Wimberly Lane Phase II subdivision also included six estate
lots, each averaging approximately five acres, which we retained, marketed
and
sold in 2005 for a total of $1.8 million.
During
2004, we completed construction of four courtyard homes at Calera Court within
the Barton Creek community. Calera Court, the initial phase of the “Calera”
subdivision, will include 17 courtyard homes on 16 acres. The second phase
of
Calera, Calera Drive, consisting of 53 single-family lots, many of which adjoin
the Fazio Canyons Golf Course, received final plat and construction permit
approval in 2005. In the third quarter of 2005, development of these lots was
completed and the initial five lots were sold for $2.1 million. Development
of
the third and last phase of Calera, which will include approximately 70
single-family lots, will commence in mid-2006.
Circle
C Community. We
have
commenced development activities at the Circle C community based on the
entitlements secured in our Circle C settlement with the City. Our Circle C
settlement permits development of 1.0 million square feet of commercial space,
900 multi-family units and 830 single-family residential lots. In 2004, we
amended our Circle C settlement with the City to increase the amount of
permitted commercial space from 1.0 million square feet to 1.16 million square
feet in exchange for a decrease in allowable multi-family units from 900 units
to 504 units. The preliminary plan has been approved for Meridian, an 800-lot
residential development at the Circle C community. In October 2004, we received
final City plat and construction permit approvals for the first phase of
Meridian, and construction commenced in January 2005. During the first quarter
of 2005, we contracted to sell a total of 494 lots in our Meridian project
to
three national homebuilders in four phases. Sales for each of the four phases
commence upon substantial completion of development for that phase, and continue
every quarter until all of the lots have been sold. The first phase, which
includes 134 lots, was substantially completed at the end of 2005. Development
of the second phase of 134 lots commenced in the third quarter of 2005 and
was
substantially completed in March 2006. We estimate our sales from the first
two
phases of Meridian will total at least 38 lots for $2.3 million during the
second quarter of 2006.
In
addition, several retail sites at the Circle C community have received final
City approvals and are being developed. Zoning for Escarpment Village, a
168,000-square-foot retail project anchored by a grocery
14
store,
was approved during the second quarter of 2004, and construction is progressing
with completion expected by mid-2006. In December 2004, we obtained an $18.5
million project loan from Comerica to fund the construction of Escarpment
Village, as well as a $22.8 million commitment from the Teachers Insurance
and
Annuity Association of America (TIAA) for a long-term mortgage for the completed
project. The grand opening of the shopping center is set for May 12, 2006,
and
we expect to close the long-term mortgage in June 2006.
Deerfield.
In
January 2004, we acquired the Deerfield property in Plano, Texas, for $7.0
million. The property was zoned and subject to a preliminary subdivision plan
for 234 residential lots. In February 2004, we executed an Option Agreement
and
a Construction Agreement with a national homebuilder. Pursuant to the Option
Agreement, the homebuilder paid us $1.4 million for an option to purchase all
234 lots over 36 monthly take-downs. The net purchase price for each of the
234
lots was $61,500, subject to certain terms and conditions. The $1.4 million
option payment is non-refundable, but will be applied against subsequent
purchases of lots by the homebuilder after certain thresholds are achieved
and
will be recognized by us as income as lots are sold. The Construction Agreement
requires the homebuilder to complete development of the entire project by March
15, 2007. We agreed to pay up to $5.2 million of the homebuilder’s development
costs. The homebuilder must pay all property taxes and maintenance costs. In
February 2004, we entered into a $9.8 million three-year loan agreement with
Comerica Bank (Comerica) to finance the acquisition and development of
Deerfield. Development is proceeding on schedule and we had $7.8 million in
remaining availability under the loan at March 31, 2006. The initial lot sale
occurred in November 2004 and subsequent lot sales are on schedule. In October
2005, we executed a revised agreement with the homebuilder, increasing the
lot
sizes and average purchase price to $67,150 based on a new total of 224 lots.
We
expect to complete 20 lot sales for $1.3 million during the second quarter
of
2006.
Crestview
Station.
In
November 2005, we formed a joint venture partnership with Trammell Crow to
acquire an approximate 74-acre tract at the intersection of Airport Boulevard
and Lamar Boulevard in Austin, Texas, for $7.7 million. With our joint venture
partner, we have commenced brown field remediation and permitting of the
property, known as the Crestview Station project, for single-family,
multi-family, retail and office development, with closings on the single-family
and multi-family components expected to occur in 2007 upon completion of the
remediation. At March 31, 2006, our investment in the Crestview Station project
totaled $3.8 million and the joint venture partnership had $6.6 million of
outstanding debt, of which each joint venture partner guarantees $1.9
million.
The
Crestview Station property is divided into three distinct parcels - one
containing approximately 46 acres, a second consisting of approximately 27
acres, and a third 0.5-acre tract. Our joint venture partnership has contracted
with a nationally recognized remediation firm to demolish the existing buildings
and remediate the 27-acre and 0.5-acre tracts as part of preparing them for
residential permitting. Under the terms of the remediation contract, the joint
venture partnership will pay the contractor approximately $4.9 million upon
completion of performance benchmarks and certification by the State of Texas
that the remediation is complete. The contractor is required to pay all costs
associated with the remediation and to secure an environmental liability policy
with $10.0 million of coverage remaining in place for a 10-year term. Pursuant
to the agreement with the contractor, all environmental and legal liability
was
assigned to and assumed by the contractor effective November 30,
2005.
Downtown
Austin Project.
In April
2005, the City selected our proposal to develop a mixed-use project in downtown
Austin immediately north of the new City Hall complex. The project includes
an
entire city block and is suitable for a mixture of retail, office, hotel,
residential and civic uses. We have entered into a negotiation period with
the
City to reach agreement on the project’s design and transaction terms and
structure.
RESULTS
OF OPERATIONS
We
are
continually evaluating the development potential of our properties and will
continue to consider opportunities to enter into significant transactions
involving our properties. As a result, and because of numerous other factors
affecting our business activities as described herein, our past operating
results are not necessarily indicative of our future results.
15
Summary
operating results follow (in thousands):
|
First
Quarter
|
||||||
|
2006
|
2005
|
|||||
|
Revenues:
|
||||||
|
Real
estate operations
|
$
|
11,303
|
$
|
2,410
|
||
|
Commercial
leasing
|
387
|
307
|
||||
|
Total
revenues
|
$
|
11,690
|
$
|
2,717
|
||
|
Operating
income (loss)
|
$
|
1,894
|
$
|
(976
|
)
|
|
|
Income
tax benefit
|
$
|
6,386
|
$
|
-
|
||
|
Net
income (loss) from continuing operations
|
$
|
8,115
|
$
|
(1,060
|
)
|
|
|
Income
from discontinued operations
|
8,187
|
148
|
||||
|
Net
income (loss)
|
$
|
16,302
|
$
|
(912
|
)
|
|
Our
deferred tax assets at December 31, 2005 totaled $17.6 million and we had
provided a 100 percent valuation allowance because realization of the deferred
tax assets was not considered likely. Realization of our deferred tax assets
is
dependent on generating sufficient taxable income within the carryforward period
available under tax law. In the first quarter of 2006, we sold 7000 West (see
Note 6) and in April 2006 we completed the sale of 58 acres at our Lantana
property. These transactions generated income of approximately $26 million
and
along with our current homebuilder contract arrangements and projected levels
of
future sales provide sufficient evidence that we now believe it is more likely
than not that we will be able to realize all of our deferred tax assets. As
a
result, first-quarter 2006 net income from continuing operations included a
$6.4
million, $0.88 per basic share and $0.83 per diluted share, tax benefit
resulting from the reversal of a portion of our deferred tax asset valuation
allowance and the remaining balance of our valuation allowance is being
realized in our 2006 effective tax rate.
We
have
two operating segments, “Real Estate Operations” and “Commercial Leasing” (see
Note 7). The following is a discussion of our operating results by
segment.
Real
Estate Operations
Summary
real estate operating results follow (in thousands):
|
First
Quarter
|
||||||
|
2006
|
2005
|
|||||
|
Revenues:
|
||||||
|
Developed
property sales
|
$
|
9,538
|
$
|
2,252
|
||
|
Undeveloped
property sales
|
1,500
|
-
|
||||
|
Commissions,
management fees and other
|
265
|
158
|
||||
|
Total
revenues
|
11,303
|
2,410
|
||||
|
Cost
of sales
|
(7,580
|
)
|
(1,930
|
)
|
||
|
General
and administrative expenses
|
(1,609
|
)
|
(1,112
|
)
|
||
|
Operating
income (loss)
|
$
|
2,114
|
$
|
(632
|
)
|
|
Developed
Property Sales. Improving
market conditions in the Austin area have resulted in increased lot sales in
the
first quarter of 2006. Property sales for the first quarters of 2006 and 2005
included the following (revenues in thousands):
16
|
First
Quarter
|
||||||||
|
2006
|
2005
|
|||||||
|
Lots
|
Revenues
|
Lots
|
Revenues
|
|||||
|
Residential
Properties:
|
||||||||
|
Barton
Creek
|
||||||||
|
Calera
Drive
|
6
|
$2,902
|
-
|
$
-
|
||||
|
Calera
Court Courtyard Homes
|
4
|
2,312
|
-
|
-
|
||||
|
Mirador
Estate
|
2
|
1,065
|
-
|
-
|
||||
|
Wimberly
Lane Phase II
|
||||||||
|
Standard
Homebuilder
|
2
|
301
|
-
|
-
|
||||
|
Estate
|
-
|
-
|
1
|
339
|
||||
|
Escala
Drive Estate
|
-
|
-
|
1
|
929
|
||||
|
Circle
C
|
||||||||
|
Meridian
|
39
|
2,287
|
-
|
-
|
||||
|
Deerfield
|
10
|
671
|
16
|
984
|
||||
|
Total
Residential
|
63
|
$9,538
|
18
|
$2,252
|
||||
Undeveloped
Property Sales.
During
the first quarter of 2006, we sold a 7.5-acre tract in the Barton Creek
community for $1.5 million.
Commissions,
Management Fees and Other.
Commissions, management fees and other revenues totaled $0.3 million in the
first quarter of 2006, compared to $0.2 million in the first quarter of 2005,
and included sales of our development fee credits to third parties totaling
$0.2
million in the 2006 quarter and $0.1 million in the 2005 quarter. We received
these development fee credits as part of the Circle C settlement (see Note
8 of
our 2005 Form 10-K).
Cost
of Sales and General and Administrative Expenses.
Cost of
sales totaled $7.6 million in the first quarter of 2006 and $1.9 million in
the
2005 quarter. The increase in cost of sales for the 2006 quarter compared to
the
2005 quarter primarily relates to the increase in developed property sales
in
the 2006 quarter. General and administrative expenses increased to $1.6
million in the first quarter of 2006 compared to $1.1 million for the first
quarter of 2005 primarily because of stock-based compensation costs associated
with adoption of new accounting rules (see "New Accounting
Standard").
Commercial
Leasing
Our
commercial leasing operating results primarily reflect the activities at our
7500 Rialto Boulevard office building and Southwest Property Services L.L.C.
after removing the results for 7000 West which are now classified as
discontinued operations (see below). Summary commercial leasing operating
results follow (in thousands):
|
First
Quarter
|
||||||
|
2006
|
2005
|
|||||
|
Rental
income
|
$
|
387
|
$
|
307
|
||
|
Rental
property costs
|
(324
|
)
|
(328
|
)
|
||
|
Depreciation
|
(153
|
)
|
(151
|
)
|
||
|
General
and administrative expenses
|
(130
|
)
|
(172
|
)
|
||
|
Operating
loss
|
$
|
(220
|
)
|
$
|
(344
|
)
|
In
January 2006, we began earning rental income (less than $0.1 million for the
first quarter) from Escarpment Village. We expect our rental income and related
costs from Escarpment Village to increase throughout the remainder of 2006
following the grand opening of the shopping center on May 12, 2006.
Other
Financial Results
General
and administrative expenses increased to $1.7 million in the first quarter
of
2006 from $1.3 million in the 2005 quarter, primarily because of stock-based
compensation costs. On January 1, 2006, we adopted Statement of Financial
Accounting Standards No. 123 (revised 2004), “Share-Based Payment.” Stock-based
compensation costs totaled $0.6 million in the 2006 quarter, including a net
$0.3 million charged to general and administrative expenses, and $0.1 million
in
the 2005 quarter, which was charged to general and administrative
expenses.
17
DISCONTINUED
OPERATIONS - 7000 WEST
In
the
fourth quarter of 2005, we committed to a plan to sell our office buildings
at
7000 West. On March 27, 2006, our wholly owned subsidiary, Stratus 7000 West
Joint Venture (7000 West JV), sold its two
70,000-square-foot
office buildings at 7000 West William Cannon Drive (7000 West), known as the
Lantana Corporate Center, to
CarrAmerica Lantana, LP (CarrAmerica) for
$22.3
million, resulting in a $9.8 million ($7.8 million net of taxes or $1.08 per
basic share and $1.02 per diluted share) gain in the first quarter of 2006.
CarrAmerica
paid us $10.6 million cash at closing and assumed the $11.7 million principal
balance remaining under our 7000 West project loan from TIAA. In connection
with
CarrAmerica’s assumption of the loan, 7000 West JV entered into a First
Modification Agreement with CarrAmerica and TIAA under which TIAA released
7000
West JV’s $3.5 million letter of credit issued by Comerica Bank that secured
certain re-tenanting obligations and released 7000 West JV from all future
obligations under the loan. In addition, TIAA released us from all future
liabilities under its guaranty of 7000 West JV’s environmental representations
and recourse obligations under the loan.
Upon
completion of the sale of 7000 West, Stratus ceased all involvement with the
7000 West office buildings. The operations, assets and liabilities of 7000
West
represented a component of our commercial leasing segment.
Our
discontinued operations generated net income of $8.2 million, including a $7.8
million gain net of taxes on the sale, in the first quarter of 2006 and $0.1
million in the first quarter of 2005. We earned rental income of $1.1 million
in
the first quarter of 2006 and $0.9 million in the first quarter of 2005 from
our
two fully leased office buildings at 7000 West.
CAPITAL
RESOURCES AND LIQUIDITY
Comparison
of First-Quarter 2006 and 2005 Cash Flows
Operating
activities provided cash of $5.3 million during the first quarter of 2006 and
$4.1 million during the first quarter of 2005, including cash provided by
discontinued operations totaling $0.4 million during the first quarter of 2006
and the first quarter of 2005. Compared to the 2005 quarter, operating cash
flows in the first quarter of 2006 improved primarily because of the increase
in
sales activities, partly offset by working capital changes.
Cash
provided by investing activities totaled $4.2 million during the first quarter
of 2006 and cash used in investing activities totaled $6.6 million during the
first quarter of 2005. First-quarter 2006 included $10.0 million received from
the sale of 7000 West (see “Discontinued Operations - 7000 West”). Other real
estate expenditures for the first quarters of 2006 and 2005 included
improvements to certain properties in the Barton Creek, Lantana and Circle
C
communities.
Financing
activities used cash of $2.4 million during the first quarter of 2006, compared
to $3.1 million provided by financing activities during the first quarter of
2005. During the first quarter of 2006, our financing activities included $2.0
million of net repayments on our revolving line of credit and $0.9 million
of
net repayments on our project construction loans, including net repayments
of
$0.9 million from the Deerfield loan and $0.9 million from the Meridian project
loan, partly offset by $1.0 million of borrowings on the Escarpment Village
loan. During the first quarter of 2005, our financing activities reflected
$4.1
million of net borrowings under our revolving line of credit partially offset
by
net repayments on our project construction loans totaling $0.6 million,
including $0.5 million related to the Deerfield loan. See “Credit Facility and
Other Financing Arrangements” below for a discussion of our outstanding debt at
March 31, 2006.
In
2001,
our Board of Directors approved an open market share purchase program for up
to
0.7 million shares of our common stock. During the first quarter of 2006, we
purchased 10,668 shares for $0.3 million, a $23.78 per share average. During
the
second quarter of 2006 through May 5, 2006, we purchased 10,000 shares for
$0.3
million, a $25.12 per share average. A total of 471,948 shares remain available
under this program. During the first quarter of 2005, we purchased 20,305 shares
for $0.3 million, a $16.48 per share average. Our loan agreement with Comerica
provides a limit of $6.5 million for common stock purchases after September
30,
2005. The timing of future purchases of our common stock is dependent on many
factors including the price of our common shares, our cash flows and financial
position, and general economic and market conditions.
18
Credit
Facility and Other Financing Arrangements
At
March
31, 2006, we had total debt of $47.4 million, including $2.2 million of current
debt, compared to total debt of $50.3 million, including $0.2 million of current
debt, at December 31, 2005. We expect to use the proceeds from the 7000 West
and
AMD sales to reduce debt in the second quarter of 2006. Our debt outstanding
at
March 31, 2006 consisted of the following:
| · |
$13.7
million of net borrowings under the $45.0 million Comerica revolving
credit facility. The $45.0 million facility, of which $3.0 million
is
provided for our Calera Court project, matures on May 30,
2007.
|
| · |
$10.0
million of borrowings outstanding under two unsecured $5.0 million
term
loans, one of which will mature in January 2008 and the other in
July
2008.
|
| · |
$6.4
million of net borrowings under the 7500 Rialto Boulevard project
loan,
which matures in January 2008.
|
| · |
$2.0
million of net borrowings under the $9.8 million Deerfield loan,
for which
the Deerfield property and any future improvements are serving as
collateral. This project loan will mature in February
2007.
|
| · |
$10.9
million of net borrowings under the $18.5 million Escarpment Village
project loan, which will mature in June
2007.
|
| · |
$4.4
million of net borrowings under the $10.0 million Meridian project
loan,
which will mature in November 2007.
|
In
addition, we had a $22.8 million commitment from TIAA
for a
30-year mortgage available for funding the completed Escarpment Village shopping
center project. The mortgage will be used to refinance the $18.5 million
Escarpment Village project loan discussed above.
Upon
the
closing of the 7000 West sale on March 27, 2006, Carr
America paid us $10.6 million cash and assumed the $11.7 million principal
balance remaining under our 7000 West project loan from TIAA (see Note 6 and
“Discontinued
Operations - 7000 West”).
We
intend to use the net proceeds from the sale to reduce our other outstanding
debt.
For
a
further discussion of our debt see Note 4 of our 2005 Form 10-K.
Outlook
As
discussed in “Risk Factors” located in our 2005 Form 10-K, our financial
condition and results of operations are highly dependent upon market conditions
in Austin. Our future operating cash flows and, ultimately, our ability to
develop our properties and expand our business will be largely dependent on
the
level of our real estate sales. In turn, these sales will be significantly
affected by future real estate market conditions in Austin, Texas, development
costs, interest rate levels and regulatory issues including our land use and
development entitlements. From 2001 through 2004, a downturn in the technology
sector negatively affected the Austin real estate market, especially the
high-end residential and commercial leasing markets; however, beginning in
2005,
market conditions have improved.
Over
the
past several years, we have successfully worked cooperatively with the City
to
obtain approvals that allow the development of our properties to proceed in
a
timely manner while protecting the environment. We believe the desirable
location and overall quality of our properties, in combination with the land
use
and development entitlements we have obtained, will command a premium over
the
value of other Austin-area properties.
Our
long-term success will depend on our ability to maximize the value of our real
estate through obtaining required approvals that permit us to develop and sell
our properties in a timely manner at a reasonable cost. We must incur
significant development expenditures and secure additional permits prior to
the
development and sale of certain properties. In addition, we continue to pursue
additional development opportunities, and believe we can obtain bank financing
for developing our properties at a reasonable cost.
NEW
ACCOUNTING STANDARD
Accounting
for Stock-Based Compensation.
As of
March 31, 2006, we had three stock-based employee compensation plans and one
stock-based director compensation plan. Prior to January 1, 2006, we accounted
for options granted under all of our plans under the recognition and measurement
principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and related interpretations, as permitted by
Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for
Stock-Based Compensation.” APB Opinion No. 25 required compensation cost for
stock options to be recognized based on the difference on the date of grant,
if
any, between the quoted market price of the stock and the amount an employee
must pay to acquire the stock (i.e., the intrinsic value). Because all the
plans
require that the option exercise price be at least the market price on the
date
of grant, we recognized no compensation cost on the grant or exercise of our
employees’ options through December 31, 2005. Other awards of restricted stock
units under the plans did result in compensation costs being recognized in
earnings based on the intrinsic value on the date of grant.
Effective
January 1, 2006, we adopted the fair value recognition provisions of SFAS No.
123 (revised 2004), “Share-Based Payment” or “SFAS No. 123R,” using the modified
prospective transition method. Under that transition method, compensation cost
recognized in 2006 includes: (a) compensation costs for all stock option awards
granted to employees prior to, but not yet vested as of January 1, 2006, based
on the grant-date fair value estimated in accordance with the original
provisions of SFAS No. 123, and (b) compensation cost for all stock option
awards granted subsequent to January 1, 2006, based on the grant-date fair
value
estimated in accordance with the provisions of SFAS No. 123R. We granted no
stock option awards in the first quarter of 2006. Other stock-based awards
charged to expense under SFAS No. 123 (i.e., restricted stock units) continue
to
be charged to expense under SFAS No. 123R (see Note 2). Results for prior
periods have not been restated.
As
a
result of adopting SFAS No. 123R on January 1, 2006, our net income for the
three months ended March 31, 2006, was $0.4 million ($0.05 per basic and diluted
share) lower than if we had continued to account for share-based
compensation under APB Opinion No. 25. Basic earnings per share would have
been
$2.30 per share and diluted earnings per share would have been $2.17 per share
for the three months ended March 31, 2006, if we had not adopted SFAS No. 123R,
compared to reported earnings of $2.25 per basic share and $2.12 per diluted
share.
Compensation
cost charged against earnings for stock-based awards is shown below (in
thousands). We capitalized $0.1 million of stock-based compensation costs to
fixed assets in the first quarter of 2006 and none in the 2005
quarter.
|
Three
Months Ended March31,
|
|||||||
|
2006
|
2005
|
||||||
|
Cost
of sales
|
$
|
133
|
$
|
-
|
|||
|
General
and administrative expenses
|
314
|
93
|
|||||
|
Total
stock-based compensation cost
|
$
|
447
|
$
|
93
|
|||
CAUTIONARY
STATEMENT
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements regarding proposed real estate sales and
development activities at the Deerfield project, the Barton Creek community,
the
Circle C community and at Lantana; the proposed development of a mixed-use
project in downtown Austin; future events related to financing and regulatory
matters; the expected results of our business strategy; and other plans and
objectives of management for future operations and activities. Important factors
that could cause actual results to differ materially from our expectations
include economic and business conditions, business opportunities that may be
presented to and pursued by us, changes in laws or regulations and other
factors, many of which are beyond our control, and other factors that are
described in more detail under “Risk Factors” located in our 2005 Form
10-K.
There
have been no significant changes in our market risks since the year ended
December 31, 2005. For more information, please read the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for
the
year ended December 31, 2005.
20
(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-14(c) and 15d-14(c) 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 their evaluation, they have concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information relating to Stratus (including our consolidated
subsidiaries) required to be disclosed in our periodic Securities and Exchange
Commission filings.
(b) Changes
in internal controls.
There
has been no change in our internal control over financial reporting that
occurred during the first quarter that has materially affected, or is reasonably
likely to materially affect our internal control over financial
reporting.
On
February 21, 2006, the Save Our Springs Alliance, Inc. (“SOS Alliance”) filed
suit against the City of Austin (the City) in the 200th
Judicial
District Court of Travis County, Texas under Cause No. GN-06-000627. SOS
Alliance, among other claims, asserts that (i) the AMD project is not exempt
under Chapter 245 of the Texas Local Government Code (the grandfathering
statute) from current code compliance; and (ii) our Lantana settlement
agreements with the City are invalid. The SOS Alliance requests that the court
enjoin the City from issuing permits for development of the AMD project. On
February 24, 2006, we intervened in the litigation to vigorously defend our
Lantana entitlements. On March 22, 2006, the SOS Alliance’s request for
injunction against the City was heard in the Travis County District Court.
Following
the hearing, the judge requested that the SOS Alliance, the City, AMD and
Stratus attempt to resolve their dispute. From March 23 through April 10,
Stratus, AMD, the City and the SOS Alliance attempted to reach agreement
concerning development of the AMD core tract and the surrounding option parcels.
The parties reached an impasse. On April 11, 2006, the judge issued an order
denying the SOS Alliance’s request for an injunction against the issuance of
permits for AMD’s campus. The SOS Alliance subsequently dismissed its lawsuit.
We
may
from time to time be involved in various legal proceedings of a character
normally incident to the ordinary course of our business. We believe that
potential liability from any of these pending or threatened proceedings will
not
have a material adverse effect on our financial condition or results of
operations. We maintain liability insurance to cover some, but not all,
potential liabilities normally incident to the ordinary course of our business
as well as other insurance coverage customary in our business, with such
coverage limits as management deems prudent.
There
have been no material changes to our risk factors since the year ended December
31, 2005. For more information, please read Item 1A included in our Form 10-K
for the year ended December 31, 2005.
The
following table sets forth shares of our common stock we repurchased during
the
three-month period ended March 31, 2006.
|
Current
Programa
|
|||||||||
|
Period
|
Total
Shares Purchased
|
Average
Price Paid Per Share
|
Shares
Purchased
|
Shares
Available for Purchase
|
|||||
|
January
1 to 31, 2006
|
4,897
|
$23.88
|
4,897
|
487,719
|
|||||
|
February
1 to 28, 2006
|
525
|
24.01
|
525
|
487,194
|
|||||
|
March
1 to 31, 2006
|
5,246
|
23.65
|
5,246
|
481,948
|
|||||
|
Total
|
10,668
|
23.78
|
10,668
|
||||||
| a. |
In
February 2001, our Board of Directors approved an open market share
purchase program for up to 0.7 million shares of our common stock.
The
program does not have an expiration date. Our loan agreement with
Comerica
provides a limit of $6.5 million for common stock purchases after
September 30, 2005.
|
Our
annual meeting of stockholders was held on May 9, 2006 (the “Annual Meeting”).
Proxies were solicited pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended. The following matters were submitted to a vote of
security holders during our Annual Meeting:
|
Votes
Cast For
|
Authority
Withheld
|
||
|
1.
Election of Directors:
|
|||
|
Bruce
G. Garrison
|
6,634,156
|
380,320
|
|
|
James
C. Leslie
|
6,634,130
|
380,346
|
There
were no abstentions with respect to the election of directors. In addition
to
the directors elected at the Annual Meeting, the terms of the following
directors continued after the Annual Meeting: William H. Armstrong III and
Michael D. Madden.
|
Broker
|
||||||||
|
For
|
Against
|
Abstentions
|
Non-Votes
|
|||||
|
2.
Ratification of
|
||||||||
|
PricewaterhouseCoopers
|
||||||||
|
LLP
as independent
|
||||||||
|
auditor
|
6,949,303
|
62,059
|
3,114
|
-
|
||||
|
3.
Proposal to adopt 2006
|
||||||||
|
Stock
Incentive Plan
|
1,126,738
|
2,720,986
|
32,239
|
3,134,513
|
||||
|
4.
Stockholder proposal
|
||||||||
|
regarding
declassification
|
||||||||
|
of
the board of directors
|
2,978,095
|
847,652
|
54,216
|
3,134,513
|
The
exhibits to this report are listed in the Exhibit Index beginning on page E-1
hereof.
Instruments
with respect to other long-term debt of Stratus and its consolidated
subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K
since
the total amount authorized under each such omitted instrument does not exceed
10 percent of the total assets of Stratus and its subsidiaries on a consolidated
basis. Stratus hereby agrees to furnish a copy of any such instrument to the
Securities and Exchange Commission upon request.
22
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/
John E. Baker
-----------------------------------
John
E.
Baker
Senior
Vice President and
Chief
Financial Officer
(authorized
signatory and
Principal
Financial Officer)
Date: May
10,
2006
23
STRATUS
PROPERTIES INC.
EXHIBIT
INDEX
Exhibit
Number
|
3.1
|
Amended
and Restated Certificate of Incorporation of Stratus. Incorporated
by
reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of
Stratus
for the quarter ended March 31, 2004 (Stratus’ 2004 First Quarter Form
10-Q).
|
|
3.2
|
Certificate
of Amendment to the Amended and Restated Certificate of Incorporation
of
Stratus, dated May 14, 1998. Incorporated by reference to Exhibit
3.2 to
Stratus’ 2004 First Quarter Form 10-Q.
|
|
3.3
|
Certificate
of Amendment to the Amended and Restated Certificate of Incorporation
of
Stratus, dated May 25, 2001. Incorporated by reference to Exhibit
3.2 to
the Annual Report on Form 10-K of Stratus for the fiscal year ended
December 31, 2001 (Stratus’ 2001 Form 10-K).
|
|
3.4
|
By-laws
of Stratus, as amended as of February 11, 1999. Incorporated by reference
to Exhibit 3.4 to Stratus’ 2004 First Quarter Form
10-Q.
|
|
4.1
|
Rights
Agreement dated as of May 16, 2002, between Stratus and Mellon Investor
Services LLP, as Rights Agent, which includes the Certificates of
Designation of Series C Participating Preferred Stock; the Forms
of Rights
Certificate Assignment, and Election to Purchase; and the Summary
of
Rights to Purchase Preferred Shares. Incorporated by reference to
Exhibit
4.1 to Stratus’ Registration Statement on Form 8-A dated May 22,
2002.
|
|
4.2
|
Amendment
No. 1 to Rights Agreement between Stratus Properties Inc. and Mellon
Investor Services LLC, as Rights Agent, dated as of November 7, 2003.
Incorporated by reference to Exhibit 4.1 to the Current Report on
Form 8-K
of Stratus dated November 7, 2003.
|
|
10.1
|
Loan
Agreement by and between Stratus Properties Inc., Stratus Properties
Operating Co., L.P., Circle C Land, L.P., Austin 290 Properties,
Inc.,
Calera Court, L.P., and Comerica Bank dated as of September 30, 2005.
Incorporated by reference to Exhibit 10.1 to the Current Report on
Form
8-K of Stratus dated September 30, 2005.
|
|
10.2
|
Revolving
Promissory Note by and between Stratus Properties Inc., Stratus Properties
Operating Co., L.P., Circle C Land, L.P., Austin 290 Properties,
Inc.,
Calera Court, L.P., and Comerica Bank dated as of September 30, 2005.
Incorporated by reference to Exhibit 10.2 to the Current Report on
Form
8-K of Stratus dated September 30, 2005.
|
|
10.3
|
Loan
Agreement dated December 28, 2000, by and between Stratus Properties
Inc.
and Holliday Fenoliglio Fowler, L.P., subsequently assigned to an
affiliate of First American Asset Management. Incorporated by reference
to
Exhibit 10.20 to the Annual Report on Form 10-K of Stratus for the
fiscal
year ended December 31, 2000.
|
|
10.4
|
Loan
Agreement dated June 14, 2001, by and between Stratus Properties
Inc. and
Holliday Fenoliglio Fowler, L.P., subsequently assigned to an affiliate
of
First American Asset Management. Incorporated by reference to Exhibit
10.20 to the Quarterly Report on Form 10-Q of Stratus for the quarter
ended September 30, 2001.
|
|
10.5
|
Construction
Loan Agreement dated June 11, 2001, between 7500 Rialto Boulevard,
L.P.
and Comerica Bank-Texas. Incorporated by Reference to Exhibit 10.26
to
Stratus’ 2001 Form 10-K.
|
|
10.6
|
Modification
Agreement dated January 31, 2003, by and between Lantana Office Properties
I, L.P., formerly 7500 Rialto Boulevard, L.P., and Comerica Bank-Texas.
Incorporated by reference to Exhibit 10.19 to Form 10-Q of Stratus
for the
quarter ended March 31, 2003.
|
E-1
|
10.7
|
Second
Modification Agreement dated as of December 29, 2003, to be effective
as
of January 31, 2004, by and between Lantana Office Properties I,
L.P., a
Texas limited partnership (formerly known as 7500 Rialto Boulevard,
L.P.),
as borrower, and Comerica Bank, as lender. Incorporated by reference
to
Exhibit 10.20 to the Annual Report on Form 10-K of Stratus for the
fiscal
year ended December 31, 2003 (Stratus’ 2003 Form
10-K).
|
|
10.8
|
Guaranty
Agreement dated June 11, 2001, by Stratus Properties Inc. in favor
of
Comerica Bank-Texas. Incorporated by Reference to Exhibit 10.27 to
Stratus’ 2001 Form 10-K.
|
|
10.9
|
Loan
Agreement dated September 22, 2003, by and between Calera Court,
L.P., as
borrower, and Comerica Bank, as lender. Incorporated by reference
to
Exhibit 10.26 to Form 10-Q of Stratus for the quarter ended September
30,
2003.
|
|
10.10
|
Development
Agreement dated August 15, 2002, between Circle C Land Corp. and
City of
Austin. Incorporated by reference to Exhibit 10.18 to the Quarterly
Report
on Form 10-Q of Stratus for the quarter ended September 30,
2002.
|
|
10.11
|
First
Modification Agreement dated March 27, 2006, by and between Stratus
7000
West Joint Venture, as Old Borrower, and CarrAmerica Lantana, LP,
as New
Borrower, and Teachers Insurance and Annuity Association of America,
as
Lender. Incorporated by reference to Exhibit 10.1 to the Current
Report on
Form 8-K of Stratus dated March 27, 2006.
|
|
Agreement
of Sale and Purchase dated November 23, 2005, by and between Stratus
Properties Operating Co., L.P., as Seller, and Advanced Micro Devices,
Inc., as Purchaser.
|
|
|
First
Amendment to Agreement of Sale and Purchase dated April 26, 2006,
by and
between Stratus Properties Operating Co., L.P., as Seller, and Advanced
Micro Devices, Inc., as Purchaser.
|
|
|
Executive
Compensation Plans and Arrangements (Exhibits 10.14 through
10.23)
|
|
|
10.14
|
Stratus’
Performance Incentive Awards Program, as amended, effective February
11,
1999. Incorporated by reference to Exhibit 10.24 to Stratus’ 2004 First
Quarter Form 10-Q.
|
|
10.15
|
Stratus
Stock Option Plan. Incorporated by reference to Exhibit 10.25 to
Stratus’
2003 Form 10-K.
|
|
10.16
|
Stratus
1996 Stock Option Plan for Non-Employee Directors. Incorporated by
reference to Exhibit 10.22 to the Quarterly Report on Form 10-Q of
Stratus
for the quarter ended June 30, 2005 (Stratus’ 2005 Second Quarter Form
10-Q).
|
|
10.17
|
Stratus
Properties Inc. 1998 Stock Option Plan. Incorporated by reference
to
Exhibit 10.23 to Stratus’ 2005 Second Quarter Form
10-Q.
|
|
10.18
|
Form
of Notice of Grant of Nonqualified Stock Options and Limited Rights
under
the 1998 Stock Option Plan. Incorporated by reference to Exhibit
10.24 to
Stratus’ 2005 Second Quarter Form 10-Q.
|
|
10.19
|
Form
of Restricted Stock Unit Agreement under the 1998 Stock Option Plan.
Incorporated by reference to Exhibit 10.25 to Stratus’ 2005 Second Quarter
Form 10-Q.
|
|
10.20
|
Stratus
Properties Inc. 2002 Stock Incentive Plan. Incorporated by reference
to
Exhibit 10.26 to Stratus’ 2005 Second Quarter Form
10-Q.
|
|
10.21
|
Form
of Notice of Grant of Nonqualified Stock Options and Limited Rights
under
the 2002 Stock Incentive Plan. Incorporated by reference to Exhibit
10.27
to Stratus’ 2005 Second Quarter Form 10-Q.
|
|
10.22
|
Form
of Restricted Stock Unit Agreement under the 2002 Stock Incentive
Plan.
Incorporated by reference to Exhibit 10.28 to Stratus’ 2005 Second Quarter
Form 10-Q.
|
E-2
|
10.23
|
Stratus
Director Compensation. Incorporated by reference to Exhibit 10.20
to the
Annual Report on Form 10-K of Stratus for the fiscal year ended December
31, 2005.
|
|
Letter
from PricewaterhouseCoopers LLP regarding the unaudited interim financial
statements.
|
|
Certification
of Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a).
|
|
|
Certification
of Principal Financial Officer pursuant to Rule
13a-14(a)/15d-14(a).
|
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section
1350.
|
|
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section
1350.
|
E-3
AGREEMENT
OF SALE AND PURCHASE
THE
STATE
OF
TEXAS §
§
COUNTY
OF
TRAVIS §
THIS
AGREEMENT OF SALE AND PURCHASE (“Agreement”) is made by and between STRATUS
PROPERTIES OPERATING CO., L.P., a Delaware limited liability partnership
(“Seller”) and ADVANCED MICRO DEVICES, INC., a Delaware corporation
(“Purchaser”) and is as follows:
II.
Sale
and Purchase
1.01
The Property. Seller hereby agrees to sell and convey unto Purchaser, and
Purchaser hereby agrees to purchase from Seller, for the price and subject
to
the terms, covenants, conditions and provisions herein set forth: (i) all of
the
real property described on Exhibit “A” attached hereto and incorporated
herein by reference (the “Land”); (ii) all of Seller’s right, title, and
interest in and to all appurtenances to the extent, and only to the extent,
benefiting or pertaining to the Land, including, without limitation, all of
Seller’s right, title, and interest in and to all streets, alleys,
rights-of-way, or easements benefiting the Land (all of the foregoing being
referred to herein collectively as the “Appurtenances”); and (iii) all of
Seller’s right, title, and interest in and to all of the items described and
defined on Exhibit “B” attached hereto and incorporated herein by
reference, being the Plans and Reports, Governmental Approvals and Permits,
Utility Service Permits, Utility Service Rights, and Street and Drainage Rights
described and defined therein (all of the foregoing being referred to herein
individually by the names set out above, and collectively as the “Personal
Property”). The Land and Appurtenances are collectively referred to herein as
the “Real Property.” The Real Property and the Personal Property are herein
collectively referred to as the “Property.”
1.02 The
Options. If and only if Purchaser closes the purchase of the Property under
the terms of this Agreement, then Purchaser will have options (the “Options”) to
purchase those certain option tracts described on Exhibit “C” attached
hereto and incorporated herein (collectively referred to as the “Option Tracts”
and individually as an “Option Tract”). Accordingly, at the Closing of the
purchase of the Property hereunder by Purchaser, Seller and Purchaser shall
enter into: (i) the option agreements in the forms of Exhibits “D-1,” “D-2”
and “D-3” attached hereto and incorporated herein by reference
(collectively, the “Option Agreements”) pursuant to which Purchaser shall have
the option to purchase each of the Option Tracts (it being contemplated that
Seller and Purchaser will enter into an Option Agreement to purchase each Option
Tract); and (ii) a memorandum of options in the form of Exhibit “E”
attached hereto and incorporated herein by reference to be recorded in the
Official Public Records of Travis County, Texas, evidencing Purchaser’s option
to purchase each of the Option Tracts (the “Memorandum of
Options”).
II.
Consideration
2.01
Purchase Price. The purchase price to be paid by Purchaser to Seller for
the sale and conveyance of the Property shall be NINETEEN MILLION AND NO/100
DOLLARS ($19,000,000.00) (the “Purchase Price”).
2.02
Payment of the Purchase Price. The Purchase Price shall be payable in
full in readily available funds at the Closing.
2.03
Earnest Money. In order to secure Purchaser’s performance of this
Agreement, Purchaser shall, within two (2) business days after the Effective
Date of this Agreement, deposit FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00)
in cash or other readily available funds with Heritage Title Insurance Company
of Austin, Inc., (the “Title Company”) at its offices at 401 Congress Avenue,
Suite 1500, Austin, Texas 78701, Attn: Amy Fisher. All cash deposited with
the
Title Company pursuant to the terms hereof is referred to herein collectively
as
the “Earnest Money.” The Earnest Money will be placed in an interest bearing
account at one or more state or federally chartered banks while under the
control of the Title Company, and all interest earned thereon will become part
of the Earnest Money hereunder. Purchaser will promptly execute and deliver
to
the Title Company all documents and certificates as are required by Title
Company to invest the Earnest Money in an interest bearing account. If the
transaction contemplated hereby is consummated in accordance with the terms
and
provisions hereof, the Earnest Money shall be applied against the Purchase
Price
at Closing. If the transaction is not so consummated, the Earnest Money shall
be
held and delivered by the Title Company as hereinafter provided. Upon the
expiration of the “SDP Contingency Period” (defined in Section 4.03.A), the
Earnest Money will only be refundable to Purchaser upon a Seller Default or
upon
any specific termination right of Purchaser that expressly provides for the
refund of the Earnest Money to Purchaser and, otherwise, will be delivered
to
Seller as and when provided under the provisions of this Agreement.
III
Title
and Survey
3.01
Title Commitment. Within fifteen (15) days after the Effective Date,
Seller shall cause the Title Company to deliver to Purchaser a title commitment
(“Commitment”) issued by the Title Company showing Seller as the record fee
title owner of the Property by the terms of which the Title Company agrees
to
issue to Purchaser an owner’s policy of title insurance (“Title Policy”) in the
amount of the Purchase Price on the standard form promulgated by the State
Board
of Insurance of Texas insuring Purchaser’s fee simple title to the Property to
be good and indefeasible, subject to the terms of such policy and the exceptions
set forth therein together with copies of all documents which will be shown
as
Schedule B Exceptions on the Title Policy upon issuance (the “Title Review
Documents”). The Commitment shall provide that the standard printed exceptions
set forth in the Title Policy shall be modified as follows: (i) the exception
relating to restrictive covenants shall be deleted except for restrictions
which
may be Permitted Exceptions; (ii) the exception as to boundaries, etc. shall
be
modified to except only as to “shortages in area”; and (iii) there shall be no
exception for “rights of parties in possession.”
3.02
Survey. Seller at its sole cost and expense shall, within twenty (20)
days after the Effective Date of this Agreement, cause to be furnished to
Purchaser: six (6) copies of an on-the-ground, survey with attached field notes
(“Survey”) of the Real Property, prepared and certified as to all matters shown
thereon by a registered surveyor (“Surveyor”). The Survey shall be dated
subsequent to the Effective Date of this Agreement; shall comply with the Texas
Society of Professional Surveyors Standards and Specifications for a Category
1-A, Condition II Survey; and shall contain a certificate addressed to Purchaser
and the Title Company in the form set forth on Exhibit “F” (“Survey
Certificate”), attached hereto and incorporated herein by reference. In
addition, the Survey shall be in a form acceptable to the Title Company to
modify the survey exception in the Title Policy to read “shortages in
area.”
2
3.03
Permitted Exceptions. On or before ten (10) business days after all of
the Commitment, the Title Review Documents, and the Survey have been delivered,
Purchaser shall provide Seller with written notice of any objections which
Purchaser has to exceptions shown on the Commitment or any condition of the
Property as revealed by the Survey. All objections raised by Purchaser in the
manner herein provided are hereafter called “Objections.” Seller shall have no
obligation to cure or remove any Objections, but, Seller shall notify Purchaser
in writing within ten (10) business days after receipt of the Objections as
to
which Objections Seller will cure. Purchaser may, on or before five (5) business
days after Seller’s delivery to Purchaser of such notice, terminate this
Agreement in its entirety by giving Seller written notice of termination.
Thereafter, the Earnest Money shall be returned to Purchaser except for the
sum
of $100 which will be delivered to Seller as independent consideration
hereunder, and Seller and Purchaser shall be released and relieved of further
obligations, liabilities and claims hereunder except for the Post Termination
Obligations (defined below) which will survive such termination. If Purchaser
fails to give written notice of termination within such five (5) business day
period, all Objections that Seller refuses to cure shall be deemed waived.
Seller shall cure all Objections Seller represents it will cure and in no event
shall such Objections remain uncured five days prior to Closing. If Seller
fails
to cure such Objections within said five (5) day period, Closing shall be
extended for thirty (30) days, and if such Objections remain uncured after
such
extension, Purchaser’s sole and exclusive remedy shall be either:
A.
to terminate this Agreement; have the Earnest Money returned to it, less the
independent consideration; and Seller shall be obligated to pay Purchaser within
thirty (30) days after such election is made by Purchaser the out of pocket
costs and expenses incurred by Purchaser after the Effective Date for third
party contractors, consultants and attorneys regarding the Property provided
that Purchaser provides Seller reasonable documentation of such costs that
are
incurred after the Effective Date; or
B.
to enforce specific performance of Seller’s agreement to cure such Objections;
or
C. to proceed to Closing, in which event such Objections shall be
deemed waived.
The
term
“Permitted Exceptions” as used herein shall include: (i) all exceptions which
are set forth on the Commitment and all conditions of the Property which are
revealed by the Survey which are not timely objected to by Purchaser during
the
objection period herein provided; and (ii) any exceptions or conditions made
the
subject of Objections which are waived by Purchaser or are deemed waived by
Purchaser.
3.04. Section
10(a) Restriction.
A. The
Property is covered by a United States Fish & Wildlife Service Section 10(a)
Permit (the “Section 10(a) Permit”), which was issued effective February 10,
1995. Seller has provided Purchaser a complete copy of the Section 10(a) Permit.
As provided in Section 4.07, below, at Closing, Purchaser agrees to pay Seller
the Lantana Community Contribution, a portion of which represents full and
final
payment of costs and expenditures allocated to the Property by Seller for
maintenance and related obligations required under the Section 10(a) Permit.”
B. Seller
agrees that prior to Closing, Seller shall obtain, at Seller’s sole cost and
expense, and deliver to Purchaser a letter or other document from the US
Department of Fish and Wildlife, stating that the Section 10(a) Permit is in
good standing and
covers the Property.
Failure
of Seller to obtain said letter prior to Closing shall entitle Purchaser to
the
remedy stated in Section 7.01.B(i) as if Seller breached one of Seller’s
Representations and Warranties.
3
C. Purchaser
covenants (which covenant shall survive Closing) and agrees that, while
Purchaser is the owner of the Property, it shall not take, and shall use
commercially reasonable efforts to prevent, any use or development of the
Property by Purchaser, or Purchaser’s officers, employees and contractors, which
would jeopardize the continued efficacy of the Section 10(a) Permit. The
provisions of this Section 3.04 shall be included in the deed executed by Seller
to Purchaser at Closing and shall be a “Permitted Exception”
hereunder.
D. Seller
covenants (which covenant shall survive Closing) and agrees that, while Seller
is the owner of any property covered by the Section 10(a) Permit, that Seller
shall use commercially reasonable efforts to keep the Section 10(a) Permit
in
good standing.
IV.
Review
Period and Development Permit Contingency
4.01
Review Materials. To the extent Seller has not delivered the following to
Purchaser prior to the Effective Date, Seller shall, within five (5) business
days after the Effective Date of this Agreement, deliver to Purchaser copies
of
all reports, plans, specifications, plats, surveys, documents, instruments
or
other items of any kind or nature which relate to the Property and are in
Seller’s possession, including but not limited to copies of all Plans and
Reports. Notwithstanding the foregoing, prior earnest money contracts,
appraisals, trust agreements and related instruments, and privileged
communications under the attorney/client privilege are excluded from Seller’s
disclosure requirement hereunder. All materials and information required to
be
submitted by Seller to Purchaser hereunder are referred to herein as the “Review
Materials.” All Review Materials are delivered by Seller and accepted by
Purchaser “AS IS” and without any representation or warranty with respect to
their content by Seller; provided, however, Seller agrees to advise Purchaser
when the Review Materials are delivered of any material defects or materials
errors in the Review Materials known to Seller to the extent affecting the
use
or development of the Property.
4.02
Review Period. During the period of time following the Effective Date of
this Agreement until the date which is the later to occur of (i) thirty
(30) days after the Effective Date or (ii) the date by which all of the
Commitment, the Title Review Documents, and the Survey have been delivered
to
Purchaser (the later being herein called the “Termination Date”), Purchaser
shall have the right to review the Review Materials; to inspect the Property;
and to otherwise conduct a feasibility review and analysis with respect to
the
Property. Purchaser agrees that it will provide Seller with copies of all
reports it obtains and studies that relate to the condition or potential
development by Purchaser of the Property promptly upon receipt of such reports
and studies by Purchaser. Notwithstanding any provision hereof to the contrary,
should Purchaser determine, in Purchaser’s sole and absolute discretion, that
the Property is not satisfactory to Purchaser for any reason, Purchaser may
terminate this Agreement by delivering written notice of such termination to
Seller on or before the Termination Date. If Purchaser fails to deliver written
notice of termination on or before the Termination Date, Purchaser’s right of
termination under this Section 4.02 will be deemed waived. If Purchaser timely
terminates this Agreement pursuant to the terms of this Section 4.02, then
the
Earnest Money shall be returned to Purchaser except for the sum of $100 which
will be delivered to Seller as independent consideration, and thereafter neither
party shall have any further rights, remedies, or obligations hereunder except
for the Post Termination Obligations which will survive termination. Prior
to
the Effective Date, Seller and Purchaser entered into that certain Site Access
Agreement (the “Site Access Agreement”) dated July 28, 2005 (the “Site
Access Date”) providing Purchaser’s early access to the Property pending the
negotiation and execution of this Agreement. This Agreement supercedes the
terms
and provisions of the Site Access Agreement.
4
Without
limiting the foregoing provisions of this Section, throughout the term of this
Agreement, Purchaser shall have the right to (i) enter into and upon the
Property, inspect the Property and conduct tests of the Property and other
related due diligence activities (“Due Diligence Activities”), and
(ii) enter into and upon the Property to engage in certain pre-closing site
work subject to and more particularly described in Section 4.05 below. Prior
to
conducting any Due Diligence Activities on the Property as permitted by this
Agreement, Purchaser will (i) provide Seller an insurance certificate in
the form attached to the Site Access Agreement as Exhibit
“B”
thereto
reflecting Seller as an additional insured under the insurance policy described
in such certificate, and (ii) provide Seller reasonable advance written
notice of such activity, including a description of the activity and a time
schedule for such activity. Seller reserves the right to be present for the
purpose of observing any such Due Diligence Activities which may be conducted
by
or on behalf of Purchaser. In fulfilling its obligations under subpart (ii)
of
the prior sentence, Seller will not be required to incur or pay any third party
costs or expenses related to preparing or processing the SDP Application.
Purchaser, at its sole expense, will pay all third-party costs associated with
preparing and processing the SDP Application including, without limitation,
engaging any legal counsel, engineer, land planner, lobbyist or other consultant
that Purchaser determines is necessary or advisable to prepare and process
the
SDP Application. Purchaser agrees to provide Seller copies of all third party
studies, reports, surveys, tests and other materials generated in connection
with Purchaser’s Due Diligence Activities (excluding attorney work product and
attorney-client privileged information and communications) within a reasonable
time after such materials are available to Purchaser. Notwithstanding anything
in this Agreement or elsewhere to the contrary, all Due Diligence Activities
shall be conducted in compliance with all applicable governmental requirements,
rules and regulations.
Purchaser
agrees to indemnify Seller and its principals, partners and affiliates against
and hold Seller and its principals, partners and affiliates harmless from,
any
claim for bodily injury or death or for damage to tangible personal property
or
for physical damage to the Property in any case sustained by Seller or its
principals, partners and affiliates, and for the costs, expenses (including
reasonable attorneys’ fees), actually incurred by Seller or its principals,
partners and affiliates to the extent such claim, damage, loss or expense arises
out of or results from the Due Diligence Activities conducted by or for
Purchaser on the Property. Notwithstanding anything to the contrary in this
Agreement, said obligation to indemnify and hold harmless Seller and its
principals, partners and affiliates shall not exceed ONE MILLION AND NO/100
DOLLARS ($1,000,000.00) in the aggregate; provided, however, in the event this
Agreement terminates and under the other provisions of this Agreement the
Earnest Money is paid to Seller, then all obligation of indemnity and hold
harmless provided in this paragraph shall be included in and covered by the
delivery of the Earnest Money to Seller and shall not be in addition to the
Earnest Money. The obligations of indemnity and hold harmless set forth in
this
paragraph shall survive any termination of this Agreement except a termination
of this Agreement in which the Earnest Money is paid to the Seller. In no event
shall the indemnification and hold harmless contained in this Agreement extend
to or cover any claim or cause of action brought against Seller (whether
singularly or together with others) relating to or based upon an Entitlements
Challenge or existing environmental conditions or characteristics on or of
the
Property, loss
of
profits or perceived loss of profits; reduction in value, perceived loss of
value, or stigma of the Property; or inability to sell, lease or finance the
Property.
The
indemnification obligations set forth in, and as limited by the provisions
of,
this paragraph are referred to as the “Due Diligence Activities
Indemnification.”
4.03
Development Permit Contingency.
A.
Plat and Site Development Permit. Seller (i) has, at Seller’s sole
cost and expense, filed a complete subdivision plat application (the “Plat
Application”) that has been approved by Purchaser with the City of Austin and
any other governmental authority with jurisdiction over subdivision of the
Property pursuant to and in accordance with that certain approved Preliminary
Plan approved by the City of Austin on August 28, 1988 under Case Number
C8-84-102(88) (the “Preliminary Plan”), and (ii) agrees, at
5
Purchaser’s
sole cost and expense, to file a complete site development permit application
that has been supplied by Purchaser and approved by Seller, which approval
will
not be unreasonably withheld, (the “SDP Application”) with the City of Austin
for a site development permit for the development of the Property as “Phase I”
(herein so called) of Purchaser’s “Project” (herein so called) as shown and
generally described on Purchaser’s conceptual plan attached hereto as Exhibit
“H” (the “Conceptual Plan”). Seller agrees to make said filing as provided
in the subsequent portions of this paragraph, but in any event, on or before
December 30, 2005 (December 30, 2005, being herein called the “SDP Application
Deadline”). The Plat Application and the SDP Application must each be in
compliance with all applicable laws, ordinances, regulations, codes, and
restrictive covenants when submitted to the City of Austin and may not, without
Seller’s and Purchaser’s prior written approval, request a variance from any of
the foregoing. Purchaser will submit the SDP Application to the Seller for
Seller’s review on or before November 25, 2005. Seller will either submit
to Purchaser any written comments it has to the SDP Application or notify
Purchaser in writing that Seller has approved the SDP Application within five
(5) business days after receipt of the SDP Application. Upon the approval or
deemed approval of the SDP Application, Seller agrees to forthwith file said
application with the City of Austin. Seller may not make any comment to the
SDP
Application that is inconsistent with the Preliminary Plan or the Conceptual
Plan. In the event that Seller fails to submit written comments or notify
Purchaser in writing that it has approved the SDP Application within such five
(5) business day period, then Seller will be deemed to have approved the SDP
Application. In the event either Seller or Purchaser submits any comments to
one
another on the Plat Application or the SDP Application then both will work
diligently and in good faith with one another to resolve any such comments
so
that the Plat Application and the SDP Application can be submitted to the City
of Austin on or before their respective deadlines set forth above.
After
the
Plat Application and/or the SDP Application, as applicable, has/have been
finalized and filed, Seller and Purchaser will diligently and in good faith
process the Plat Application and the SDP Application simultaneously with the
applicable governmental authorities in order to obtain a final subdivision
plat
of the Property (the “Plat”) that is in compliance with the Preliminary Plan and
to obtain a site development permit for the Property (the “Site Development
Permit”) based on the SDP Application. The period beginning on the Effective
Date and ending on the first to occur of (i) the date of issuance of the
Site Development Permit by the City of Austin or (ii) March 15, 2006 is
referred to herein as the “SDP Contingency Period”; provided, however, the SDP
Contingency Period may be extended as provided in Section 4.03.C.
B.
Processing Plat and SDP Applications. Purchaser and Seller each covenant
and agree with the other that: (i) Except for the Plat Application, the SDP
Application, the application for a Building Permit and responses to City staff
comments in respect to them, no other applications or materials in connection
with the Property will be submitted to the City of Austin or other governmental
authority with jurisdiction until the same have been submitted in their entirety
to Seller and Purchaser as the case may be and approved in writing by them
(such
approval not to be unreasonably withheld or delayed); (ii) Purchaser and
Seller will use commercially reasonable efforts to obtain approval from the
City
of Austin of the SDP Application and the Plat Application on a timely basis
and
will promptly, at the expense of them, respectively, respond to any comments
received from the City of Austin or other governmental authority with
jurisdiction; (iii) Purchaser and Seller will deliver to the other written
notice of the filing of any applications for governmental approvals of any
kind
with the City of Austin within three (3) business days after the date of any
such filing, and Purchaser and Seller will keep the other fully informed on
a
timely basis of all matters which come to Purchaser’s and Seller’s attention
with respect to the Plat Application and/or the SDP Application, or any other
applications for governmental approvals, including, without limitation, all
comments or responses received by them from the City of Austin or any third
parties; and (iv) Seller will pay all expenses of any kind or nature in
connection with the application for and/or the issuance of the Plat including,
without limitation, all fiscal deposits that are required by applicable
governmental authorities and all other fees or expenses incurred to process
the
Plat
6
Application,
and Purchaser will pay all expenses of any kind or nature in connection with
the
application for and/or the issuance of the Site Development Permit and/or any
other requested governmental approvals, including, without limitation, all
fiscal deposits that are required by applicable governmental authorities and
all
other fees or expenses incurred in connection with the preparation of the site
plan and other application materials prepared in connection with the SDP
Application, and all application fees and other fees or expenses incurred to
process the SDP Application and/or any other requested governmental approvals.
Seller and Purchaser will reasonably cooperate with the other in connection
with
the pursuit of the Plat and the Site Development Permit approval, including
execution of the Plat Application and the final approved Plat and the SDP
Application, provided, however, that Seller will not be required to incur any
costs or expenses in that regard except as specifically contemplated herein
for
the Plat Application and will not be required to approve a Plat Application
or a
SDP Application that has, or could have, a material adverse effect on the
entitlements or development rights related to the remaining property owned
by
Seller that is covered or included in or by the Preliminary Plan; provided,
however that in no event shall a material adverse effect on said entitlements
or
development rights be deemed or construed to occur by virtue of Purchaser filing
or prosecuting a SDP Application that would permit development of the Property
at less than the maximum intensity of development and/or in compliance with
water quality standards that are more stringent than as permitted or allowable
under the Entitlements. Neither Seller nor Purchaser will unreasonably withhold
its approval of a proposed Plat Application or SDP Application submitted for
approval by them. If Seller or Purchaser fails to respond within five (5)
business days after receipt of a written request for approval of either a Plat
Application or a SDP Application, the party failing to respond will be deemed
to
have approved such request. Purchaser and Seller will not amend or modify the
Plat Application or the SDP Application or any other requested governmental
approvals in any way without prior written consent by the other of them, and
Purchaser will not agree to any access restrictions, water detention or
filtration improvement construction obligations, or any other agreements of
any
kind or nature which would be binding upon Seller or the Property, unless
contemplated by the SDP Application approved by Seller.
C.
Failure to Secure Plat or SDP. If either the Plat or the Site Development
Permit have not been recorded or issued, respectively, during the SDP
Contingency Period, then Purchaser shall have the right to terminate this
Agreement by giving written notice of such termination to Seller on or before
the last day of the SDP Contingency Period. If Purchaser fails to give said
written notice of termination to Seller on or before said date, Purchaser’s
right of termination under this paragraph C will be deemed waived. If Purchaser
does timely terminate this Agreement pursuant to this paragraph C, and has
complied with all of Purchaser’s obligations under this Section 4.03, then the
Earnest Money shall be returned to Purchaser, except for $100 of independent
consideration which will be delivered to Seller, and thereafter neither party
shall have any further rights, remedies or obligations hereunder, except for
the
Post Termination Obligations which will survive such termination. In the event
that an “Entitlements Challenge” (as defined in Section 8.02) occurs on or
before the expiration of the SDP Contingency Period, the SDP Contingency Period
shall be extended for the same period of time as said Entitlement Challenge
shall prevent or delay recordation of the Plat or issuance of the Site
Development Permit.
4.04
Purchaser’s Post Termination Obligations. All costs and expenses related
to Purchaser’s inspection of the Property and the preparation and processing of
the Site Development Permit shall be paid for by Purchaser, and Purchaser agrees
to indemnify and hold Seller harmless from and against all such costs and
expenses. All costs and expenses related to Seller’s preparation and processing
of the Plat shall be paid by Seller, and Seller agrees to indemnity and hold
Purchaser harmless from and against all said costs and expenses. Purchaser
shall
not permit any liens, encumbrances, obligations or conditions of any kind or
nature to attach to the Property by reason of the exercise of Purchaser’s rights
hereunder. Purchaser agrees that if Seller or Purchaser terminates this
Agreement under any right granted hereunder, Purchaser will: (i) restore
the Property to substantially the same condition which existed prior to any
inspections, tests or other activities of Purchaser thereon; (ii) indemnify
and hold Seller harmless from
7
and
against any and all liens by contractors, subcontractors, materialmen or
laborers performing work or tests for Purchaser and from and against any and
all
claims for damages by third parties arising out of the conduct of such work
and
tests and/or any other activities of Purchaser or Purchaser’s employees or
agents; (iii) pay and/or reimburse Seller for the payment of any expenses
(including attorney fees and court costs) incurred in connection with any of
the
foregoing; (iv) except to the extent not already delivered to Seller
pursuant to Section 4.03A above, deliver to Seller copies of all studies,
reports, surveys, tests and other materials of any kind or nature obtained
by
Purchaser in connection with Purchaser’s feasibility study of the Property
excepting communications under the attorney/client privilege; (v) return
all of the Review Materials to Seller with Purchaser having the right to retain
a copy set of the materials for its records; (vi) deliver to Seller copies
of all documents, plans, applications and reports prepared in connection with
the SDP Application and will assign to Seller all of Purchaser’s right, title
and interest therein; and (vii) will pay any amounts then owing on or under
the Due Diligence Activities Indemnification. The foregoing obligations of
Purchaser are referred to herein collectively as the “Post Termination
Obligations.” Notwithstanding any provision herein to the contrary, it is agreed
and understood that a termination of this Agreement under any right granted
hereunder shall terminate all obligations of Seller to sell the Property and
all
obligations of Purchaser to purchase the Property, but such termination shall
not terminate the provisions in this Agreement relating to the Post Termination
Obligations and the disposition of the Earnest Money. The Post Termination
Obligations shall survive any termination of this Agreement and shall be fully
binding upon Purchaser and enforceable by Seller until and unless Seller gives
to Purchaser a written release which specifically references the Post
Termination Obligations and which expressly waives or releases all claims in
connection therewith.
4.05
Pre-Closing Site Work. After Purchaser has secured the final approval of
the Site Development Permit from the City of Austin and prior to Closing,
Purchaser may, at Purchaser’s sole cost and expense, perform the preliminary
site work identified on Exhibit “I” attached hereto (the “Preliminary
Site Work”). Prior to the commencement of the construction of the Preliminary
Site Work, and in any event, within ten (10) days after Purchaser provides
Seller with a copy of the Site Development Permit issued by the City of Austin,
Seller and Purchaser will enter into that certain preliminary site work license
agreement in the form attached hereto and incorporated herein as Exhibit
“J” (the “Preliminary Site Work License Agreement”). The Preliminary Site
Work must be performed in accordance with the Preliminary Site Work License
Agreement and the Site Development Permit.
4.06
Building Permit. Purchaser will, at Purchaser’s sole cost and expense,
file a complete application for a building permit with the City of Austin (the
“Building Permit Application”) for the construction of “Phase I” of Purchaser’s
“Project” as shown and generally described on the Conceptual Plan on or before
six (6) months after the Effective Date and will, contemporaneously with the
submittal of the Building Permit Application to the City of Austin, deliver
a
copy of the Building Permit Application to Seller. Purchaser agrees to use
commercially reasonable efforts in processing said Building Permit Application
with the City of Austin (such building permit as issued by the City of Austin
is
referred to as the “Building Permit”).
4.07
Deed Restrictions, Exclusion from Commercial Owner’s Association and
Assessments. Seller and Purchaser agree that the Property will not be made
subject to that certain Master Declaration of Covenants, Conditions and
Restrictions for Lantana [Commercial/Multi-Family] recorded under Document
No.
2000205500 of the Real Property Records of Travis County, Texas (as amended
from
time to time, the “Declaration”) and Seller agrees that it will not file a
Notice of Applicability against the Property or otherwise encumber the Property
with the Declaration. The Declaration shall not be a Permitted Exception
hereunder. At Closing, Purchaser shall pay to Seller the sum of FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($500,000.00) (the “Lantana Community Contribution”)
in cash as a lump sum, one time payment to be used by Seller, or the property
owners association to be created pursuant to the Declaration, for maintenance,
repair and replacement of common areas or features of the
8
Lantana
community and for maintenance and related obligations under the Section 10(a)
Permit as described in Section 3.04A, above.
V.
Closing
5.01
Closing Date. This transaction shall close at the Title Company’s offices
or other location acceptable to the parties on or before the earlier to occur
of: (i) the date which is five (5) days after the issuance of the Building
Permit by the City of Austin; or (ii) April 14, 2006. The closing of this
transaction is herein called “Closing,” and the date for Closing is herein
called the “Closing Date.” The Closing Date is, however, subject to extension
pursuant to Section 8.02 below. Seller and Purchaser acknowledge and agree
that
Armbrust & Brown, L.L.P. will act as the closing agent at the Closing
pursuant to a P-22 agreement with the Title Company.
5.02
Seller’s Closing Obligations. At the Closing, Seller shall, at Seller’s
sole cost and expense:
| (i) |
execute
and deliver to Purchaser a special warranty deed in the form of
Exhibit
“L”
attached hereto and incorporated herein by reference with a description
of
the Property attached thereto as Exhibit
“A”
and a list of the Permitted Exceptions attached thereto as Exhibit
“B”
(the “Deed”);
|
| (ii) |
execute
and deliver to Purchaser a bill of sale and assignment in the form
of
Exhibit
“M”
attached hereto and incorporated herein by reference (the “Bill of Sale
and Assignment”);
|
| (iii) |
execute
and deliver to Purchaser two (2) counterpart originals of each of
the
three (3) Option Agreements;
|
| (iv) |
execute
and deliver to Purchaser two (2) counterpart originals of the Memorandum
of Options;
|
| (v) |
execute
and deliver to Purchaser two (2) counterpart originals of the Memorandum
of Rialto Blvd. Cost Reimbursement
Agreement;
|
| (vi) |
cause
Stratus Properties Inc. to execute and deliver to Purchaser an original
counterpart of the AMD/Stratus Community Trust Agreement, as provided
by
Section 8.03;
|
| (vii) |
deliver
to Purchaser physical possession of the
Property;
|
| (viii) |
deliver
evidence of Seller’s authority to act hereunder in form reasonably
satisfactory to Purchaser and the Title Company;
and
|
| (ix) |
execute
and deliver to Purchaser a “non-foreign” certificate sufficient to
establish that withholding of tax is not required in connection with
this
transaction.
|
5.03
Purchaser’s Closing Obligations. At the Closing, Purchaser shall, at
Purchaser’s sole cost and expense:
9
| (i) |
deliver
the Purchase Price and the Lantana Community Contribution to the
Title
Company for disbursement in accordance with the terms and provisions
of
this Agreement;
|
| (ii) |
execute
and deliver the Deed;
|
| (iii) |
execute
and deliver to Seller two (2) counterpart originals of the
Assignment;
|
| (iv) |
execute
and deliver to Seller two (2) counterpart originals of each of the
three
(3) Option Agreements;
|
| (v) |
execute
and deliver to Seller two (2) counterpart originals of the Memorandum
of
Options;
|
| (vi) |
execute
and deliver to Seller two (2) counterpart originals of the Memorandum
of
Rialto Blvd. Cost Reimbursement Agreement;
|
| (vii) |
cause
Advanced Micro Devices, Inc. to execute and deliver to Seller an
original
of the AMD/Stratus Community Trust Agreement, as provided by
Section 8.03; and
|
| (viii) |
deliver
such evidence of Purchaser’s authority to act hereunder as Seller and the
Title Company may reasonably require for
Closing.
|
5.04
Closing Costs. Seller shall pay: (i) the fee for the recording of
the Deed, the Memorandum of Options and the Memorandum of Rialto Blvd. Cost
Reimbursement Agreement; (ii) one-half (1/2) of any escrow fee charged by
the Title Company; and (iii) the basic premium for the Title Policy and any
additional premiums charged by the Title Company to delete the exception for
the
rights of parties in possession. Purchaser shall pay one-half (1/2) of any
escrow fee charged by the Title Company. If Purchaser desires to obtain any
other special endorsements to the Title Policy, such as deletion of the survey
exception, additional premiums therefor and related fees and other expenses
thereto shall be paid in full by Purchaser. Each party shall be responsible
for
the payment of its own attorney’s fees, copying expenses, and other costs
incurred in connection with this transaction.
5.05
Prorations. All normally and customarily proratable items, including,
without limitation, real estate taxes, and utility expenses shall be prorated
as
of the Closing Date, Seller being charged and credited for all of the same
up to
such date and Purchaser being charged and credited for all of the same on and
after such date. If the actual amounts to be prorated are not known as of the
Closing Date, the proration shall be made on the basis of the best information
then available, and thereafter, when actual figures are received, a cash
settlement will be made between Seller and Purchaser. Any additional ad valorem
taxes relating to the year of Closing and/or prior years arising out of a change
in usage or ownership of the Property (including without limitation any
“rollback” or other additional taxes payable under the terms of Section 23.46 or
Section 23.55 of the Texas Tax Code, as amended, or any similar laws) shall
be
borne and paid in full by the Seller. The provisions of this Section 5.05 shall
survive the Closing.
10
VI.
Warranties;
Condemnation; Covenants; Notices
6.01
Warranties. Purchaser acknowledges that Purchaser has already inspected
the Property and/or will hereafter independently cause the Property to be
inspected on its behalf and that Purchaser has not entered into this Agreement
based upon any representation, warranty, agreement, statement or expression
of
opinion by Seller or by any person or entity acting or allegedly acting for
or
on behalf of Seller as to the Property or the condition of the Property except
for the Representations and Warranties (defined below), the Covenants (defined
below) and the Entitlements Defense (defined below). Purchaser agrees that
the
Property is to be sold to and accepted by Purchaser at Closing, AS IS, WHERE
IS,
WITH ALL FAULTS, IF ANY, AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESS OR IMPLIED, except for the warranty of title set out in
the
Deed, the Representations and Warranties, the Covenants and the Entitlements
Defense. Seller hereby represents and warrants to Purchaser as follows, which
representations and warranties shall be deemed made by Seller to Purchaser
also
as of the Closing Date (the “Representations and Warranties”) and all of which
shall survive Closing as fully and for all purposes as if a separate written
document were executed by Seller at Closing making the Representations and
Warranties to Purchaser therein:
| (i) |
There
are no outstanding leases, options to purchase, rights of first refusal,
letters of intent or rental agreements with respect to any of the
Property.
|
| (ii) |
The
person or persons executing this Agreement on behalf of Seller have
full
power and authority to execute this Agreement, and to bind Seller
to the
terms hereof.
|
| (iii) |
Seller,
to its knowledge, has complied with all applicable laws, ordinances,
regulations, statutes, rules and restrictions relating to the Property,
or
any part thereof in all material respects and Seller has received
no
written notice of any violation of any applicable zoning regulation,
ordinance, or any other law, covenant, condition, or restriction
relating
to the Property from any governmental agency having jurisdiction
over the
Property, nor does Seller have any knowledge of any such material
violation.
|
| (iv) |
There
are no parties other than Seller who own or hold title to any portion
of
the Property in undivided interests or otherwise, and no person or
entity
other than Purchaser has any right to acquire any interest in any
portion
of the Property.
|
| (v) |
Seller
has no knowledge of any special assessments of a governmental authority
which have been levied against the Property, and no written notice
of any
special assessments of a governmental authority has been received
by
Seller.
|
| (vi) |
No
portion of the Property has been designated or assessed for “agricultural
use” or as “qualified open space land” within the meaning of Article VIII,
Section 1-D or Section 1-D-1 of the Texas Constitution, or the statutes
relating thereto which are codified under the Texas Tax Code, as
amended.
|
| (vii) |
To
Seller’s knowledge, no portion of the Property is currently in violation
of or subject to any existing, pending, or threatened investigation
or
inquiry by any governmental authority or to any remedial obligations
under
any applicable laws pertaining to health or the environment, including,
without limitation: (a) the
|
11
Comprehensive
Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986;
(b) the Resource Conservation and Recovery Act of 1976, as amended; and
(c) the Texas Water Code and the Texas Solid Waste Disposal
Act.
| (viii) |
To
Seller’s knowledge, there is no asbestos located upon or within any
portion of the Property, no portion of the Property has been used
as a
garbage or refuse dump site, a landfill, a waste disposal facility,
a
transfer station, or any other type of facility for storage, processing,
treatment, or temporary or permanent disposal of waste materials,
including, without limitation, solid, industrial, toxic, hazardous,
radioactive, nuclear or putrescible waste or sewage, and there are
no
underground storage tanks of any kind or nature located within the
Property.
|
| (ix) |
To
Seller’s knowledge, giving effect to the Section 10(a) Permit, development
of the Property is not impacted by any habitat or potential habitat
of any
species of flora or fauna which is protected under any applicable
laws
pertaining to the protection of flora or fauna (including, without
limitation, federal Endangered Species Act) and the anticipated use
of the
Property does not violate any regulations concerning endangered or
threatened species of flora or
fauna.
|
| (x) |
The
“Entitlements” (as defined in Section 8.02) are in full force and effect
without modification and to Seller’s knowledge, the Real Property may be
developed to the extent provided thereby.
|
|
(xi)
|
No
written notice has been received by Seller from any governmental
agency
asserting the invalidity of the Entitlements or its intention to
take
actions or to initiate proceedings for the termination or modification
thereof.
|
The
obligation of Purchaser to close this transaction is contingent upon the
continued truth and accuracy of Seller’s Representations and Warranties
hereunder as of the Closing Date. If at the Closing any of the Representations
or Warranties set forth herein are untrue or incorrect in any material respect,
Purchaser shall be entitled to the remedy set forth in Section 7.01 B(i) as
Purchaser’s sole and exclusive remedy.
The
characterization of any statement or representation in this Agreement as being
to the knowledge of Seller or actual knowledge of Seller (or any similar words
or phrases to that effect) means the actual knowledge of William H. Armstrong,
III and in the event William H. Armstrong, III is no longer the Chief Executive
Officer of Seller, his successor, and Kenneth N. Jones, Esq., General Counsel
of
Seller and if Kenneth N. Jones is no longer the General Counsel of Seller,
his
successor only, and does not mean any constructive knowledge applied to such
individuals or to Seller as an entity.
6.02
Condemnation. If prior to Closing, any governmental or other entity
having condemnation authority shall institute an eminent domain proceeding
with
regard to the Property or any part thereof and the same is not dismissed on
or
before ten (10) days prior to Closing, then (i) if the proposed
condemnation involves so much of the Property that it prevents Purchaser from
developing the Project on the Property as generally contemplated on the
Conceptual Plan in a commercially reasonable manner, then Purchaser shall be
entitled either to terminate this Agreement upon written notice to Seller or
to
waive such right of termination and receive all condemnation proceeds, or
(ii) if the proposed condemnation does not prevent Purchaser from
developing the Project on the Property as described in item (i) above, then
Purchaser will not be entitled to terminate this Agreement due to such
condemnation but will entitled to receive all condemnation proceeds on or after
Closing. In the event of termination of
12
this
Agreement pursuant to the terms hereof, the Earnest Money shall be returned
to
Purchaser and thereafter neither Purchaser nor Seller shall have any further
rights or obligations hereunder except for the Post Termination Obligations
which will expressly survive any termination of this Agreement.
6.03
Covenants of Seller. Seller agrees that between the Effective Date of
this Agreement and the Closing Date (collectively, the “Covenants”):
(i) Seller will not enter into or grant any liens, easements, restrictive
covenants or other agreements of any kind which would survive the Closing and
which would affect title to or use or possession of the Property, without the
prior written approval of Purchaser; (ii) Seller will not enter into any
leases, contracts or agreements of any kind or nature relating to the Property
which would survive the Closing, without the prior written approval of
Purchaser; (iii) Seller will not knowingly use, occupy or knowingly allow
the use or occupancy of the Property in any manner which violates any applicable
laws, ordinances, rules, regulations or restrictive covenants; (iv) Seller
will not allow or permit the introduction, spillage, release, discharge, use,
storage or disposal of any hazardous material, hazardous waste or pollutant
of
any kind or nature into, onto or from the Property by Seller or any of Seller’s
agents, contractors or representatives; and (v) Seller will immediately
upon obtaining notice of same, notify Purchaser of any legal, political,
governmental, or administrative proceeding or moratorium instituted or proposed
which specifically effects the Property.
VII.
Remedies
7.01
Purchaser’s Remedies. Notwithstanding any provision of this Agreement to
the contrary other than Section 7.03 and, if applicable,
Section 3.03:
A.
if Seller fails or refuses to timely comply with Seller’s obligations hereunder
and such failure continues for a period of ten (10) days after delivery of
written notice from Purchaser to Seller specifying such failure (provided,
however, that if such failure requires more than ten (10) days to cure, then
such ten (10) day period will extend to thirty (30) days provided that Seller
commences to cure such failure within such initial 10 day period and diligently
prosecutes such cure thereafter), Purchaser may, as Purchaser’s sole and
exclusive remedy, either: (i) terminate this Agreement by giving Seller
timely written notice of such election prior to or at Closing, and thereupon
this Agreement shall terminate, and Purchaser shall be entitled to an immediate
return of the Earnest Money and Seller and Purchaser shall be relieved and
released of all further obligations, claims and liabilities hereunder; or
(ii) enforce specific performance of Seller’s obligations hereunder;
or
B.
if any of Seller’s Representations and Warranties other than
Section 6.01(x) is untrue or is breached in any material respect and is not
cured by Seller within ten (10) days after delivery of written notice specifying
such breach from Purchaser to Seller (provided, however, that if such breach
requires more than ten (10) days to cure, then such ten (10) day period will
extend to thirty (30) days provided that Seller commences to cure such breach
within such initial ten (10) day period and diligently prosecutes such cure
thereafter), Purchaser may elect, as Purchaser’s sole and exclusive remedy, by
giving Seller timely written notice of said election prior to Closing,
either:
| (i) |
to
terminate this Agreement, whereupon within thirty (30) days after
said
election is made by Purchaser, Seller shall refund and pay to Purchaser
both the Earnest Money, less the Independent Consideration, and the
out of
pocket costs and expenses incurred by Purchaser after the Effective
Date
for third party contractors, consultants and attorneys regarding
the
Property as evidenced by commercially reasonable supporting documentation
provided by Purchaser; and
|
13
upon
making said payments to Purchaser, Seller and
Purchaser shall be relieved and released of all further obligations, claims
and
liabilities hereunder, or
| (ii) |
to
waive the Seller’s failure to cure and proceed to close this transaction
in accordance with the other provisions of this
Agreement.
|
C.
if the Representations and Warranties set forth in Section 6.01(x) is untrue
or
is breached in any material respect, Purchaser may elect, as Purchaser’s sole
and exclusive remedy, by giving Seller timely written notice of said election
prior to Closing, either:
| (i) |
to
terminate this Agreement, whereupon within thirty (30) days after
said
election is made by Purchaser, Seller shall refund and pay to Purchaser
the Earnest Money, less the Independent Consideration, and upon making
said payment to Purchaser, Seller and Purchaser shall be relieved
and
released of all further obligations, claims and liabilities hereunder;
or
|
| (ii) |
to
require Seller and Purchaser to follow the procedure set out in
Section 8.02
|
D.
Notwithstanding the foregoing, Purchaser may pursue all legal rights available
at law or in equity in connection with (i) any breach of any of Seller’s
Representations or Warranties, other than Section 6.01(x), discovered after
Closing, and/or (ii) any of Seller’s specific indemnification obligations
hereunder; provided, that in no event may Purchaser recover any indirect or
consequential damages arising out of any such breach by Seller all of which
are
hereby waived by Purchaser. With regard to any breach of Section 6.01(x)
discovered after Closing, Purchaser’s sole and exclusive remedy is set forth in
Section 8.02 below. The provisions of this paragraph shall survive Closing
and
the delivery of the Deed fully and for all purposes as if contained in a
separate written document signed by Seller and Purchaser at
Closing.
7.02
Seller’s Remedies. Notwithstanding any provision of this Agreement to the
contrary other than Section 7.03, if Purchaser fails or refuses to timely comply
with Purchaser’s obligations hereunder or is unable to do so as the result of
Purchaser’s act or failure to act and any such failure (other than a failure to
fund the Purchase Price at Closing Date) continues for a period of ten (10)
days
after delivery of written notice specifying such failure from Seller to
Purchaser (provided, however, that if such failure requires more than ten (10)
days to cure, then such ten (10) day period will extend to thirty (30) days
provided that Purchaser commences to cure such failure within such initial
ten
(10) day period and diligently prosecutes such cure thereafter), Seller may
terminate this Agreement and, as Seller’s sole and exclusive remedies: recover
or retain the Earnest Money. It is agreed and understood that the Earnest Money
will be delivered to Seller as liquidated damages, and not a penalty, in full
satisfaction of all of Seller’s claims against Purchaser hereunder or pursuant
hereto or in connection herewith. Seller and Purchaser agree that it is
difficult to determine the actual amount of Seller’s damages arising out of
Purchaser’s breach but said amount is a fair estimate of those damages which has
been agreed to by the parties in a good faith effort to make the damages
certain. If a party exercises a right of termination pursuant to the terms
and
provisions of this Agreement that provides for the return of the Earnest Money
to Purchaser, then, notwithstanding the foregoing, Seller may (i) recover
damages with respect to any failure by Purchaser to comply with Purchaser’s Post
Termination Obligations or any other indemnification obligations of Purchaser
hereunder, and (ii) enforce specific performance of Purchaser’s Post Termination
Obligations. The foregoing notwithstanding, a failure by Purchaser to timely
fund the Purchase Price on the Closing Date will be a default by Purchaser
hereunder without a notice and cure opportunity.
14
7.03
Attorney’s Fees. Notwithstanding the foregoing, in the event of any
default by either Seller or Purchaser, the prevailing party in any dispute
shall
be entitled to recover from the non-prevailing party reasonable attorney’s fees,
expenses and costs of court.
VIII.
Special
Provisions
8.01
Rialto Blvd. Cost Reimbursement Agreement. Seller and Purchaser
acknowledge and agree that Seller is constructing that certain segment of Rialto
Blvd. pursuant to and as described in that certain site development permit
issued by the City of Austin under Site Development Permit No. C8-84-102.8B
(the
“Rialto Boulevard Segment”) in anticipation of the development and construction
of Purchaser’s Project on the Property generally in accordance with the
Conceptual Plan. Seller agrees, at Seller’s sole cost and expense, but subject
to reimbursement as provided below, to complete construction of the Rialto
Boulevard Segment in a good and workmanlike manner and to secure City of Austin
approval of the construction of Rialto Boulevard (“Final Completion”) on or
before 120 days after the Closing Date (as it may be extended hereunder).
After Final Completion of the Rialto Boulevard Segment,
Purchaser agrees to reimburse Seller the design, permitting and construction
costs incurred by Seller for the Rialto Boulevard Segment attributable to the
Property and to any Option Tracts purchased by Purchaser in accordance with
the
Option Agreements in the amounts, subject to the limitations and according
to
the terms set forth and contained in the Rialto Blvd. Cost Reimbursement
Agreement set forth on Exhibit “N” attached hereto and incorporated
herein for all purposes (the “Rialto Blvd. Cost Reimbursement Agreement”). As
stated in the Rialto Blvd. Cost Reimbursement Agreement and without intention
to
modify the same, reimbursement amounts will be paid by Purchaser attributable
to
the Property and each Option Tract upon the later to occur, if ever, of (i)
Final Completion of the Rialto Boulevard Segment, or (ii) the Closing of the
Property and each Option Tract, as applicable. Purchaser acknowledges and agrees
that the Rialto Blvd. Cost Reimbursement Agreement runs with the Property and
the Option Tracts until the reimbursement is paid for a particular property.
Accordingly, at Closing, Seller and Purchaser will execute and record a
Memorandum of Rialto Blvd. Cost Reimbursement Agreement in the form attached
hereto as Exhibit “O” (the “Memorandum of Rialto Blvd. Cost Reimbursement
Agreement”) in the Official Public Records of Travis County, Texas. Seller will
execute and record a partial release of Memorandum of Rialto Blvd. Cost
Reimbursement Agreement for the Property or any Option Tract contemporaneously
with the receipt of the reimbursement amount attributable to the Property or
such Option Tract, as applicable. In the event Purchaser does not timely
exercise the option to acquire an Option Tract, Seller shall execute and record
a partial release of Memorandum of Rialto Blvd. Cost Reimbursement Agreement
for
such Option Tract. Purchaser’s and Seller’s obligations under this Section 8.01
will survive Closing and the delivery of the Deed and will survive each closing
under an Option Agreement.
8.02
Entitlements Defense.
A.
The Property is subject to those certain agreements executed by the City of
Austin and attached hereto as Exhibit “P” establishing that the Property
is entitled to be developed pursuant to the ordinances referenced therein (the
“Entitlements”). Purchaser is acquiring the Property both with the understanding
that the Property can be developed in accordance with the Entitlements and
in
reliance upon Seller’s representation set forth in Section 6.1(x) above. In the
event, that a governmental authority or other third party or entity files a
lawsuit, whether local, state or federal, challenging the applicability and/or
enforceability of the Entitlements to the development of the Property and either
that legally prevents or delays the issuance of the Plat, the Site Development
Permit or the Building Permit, or that legally prevents the development of
Phase
I of the Project in accordance with the Plat, Site Development Permit and the
Building Permit (an “Entitlements Challenge”) prior to the issuance of a
certificate of
15
occupancy
by the City of Austin for the first building completed on the Property, then
Seller agrees, at Seller’s sole cost and expense, to vigorously defend the
Purchaser and the Seller against the Entitlements Challenge with reputable
legal
counsel chosen by Seller and reasonably acceptable to Purchaser (“Defense
Obligations”); provided, however, that Seller will not be required to incur
out-of-pocket costs and expenses after the Closing Date in connection with
Defense Obligations in an amount that exceeds the sum of $500,000.00. Once
Seller has incurred out-of-pocket Defense Obligations costs and expenses in
the
amount of $500,000.00 or more after the Closing Date, then Seller will no longer
be obligated to pursue such Defense Obligations. In such an event, and provided
that Seller determines that it is no longer going to pursue such Defense
Obligations, then Seller will notify Purchaser of such determination in writing
at least thirty (30) days prior to the date that Seller intends to withdraw
from
the Defense Obligations in order to allow Purchaser, at Purchaser’s option and
expense, to pursue the defense of such Entitlements Challenge. Purchaser agrees
that John J. (Mike) McKetta, III currently with the law firm of Graves,
Dougherty, Hearon & Moody, L.L.P., along with Bruce Scrafford of Armbrust
& Brown, L.L.P., is counsel acceptable to Purchaser that may be used by
Seller in fulfilling its defense obligations hereunder. Purchaser may, at
Purchaser’s sole cost and expense, participate in Seller’s defense of any
Entitlements Challenge and, at all times, Seller and Purchaser agree to
cooperate with one another and keep each other informed as to their respective
efforts to defend any Entitlements Challenge. In connection with the defense
of
any Entitlements Challenge, (i) Seller will not take a position that compromises
the Entitlements attributable to the Property or any Option Tract that is then
subject to an Option Agreement without the prior written consent of Purchaser,
and (ii) Purchaser will not take a position that compromises the Entitlements
attributable to any other property owned by Seller and covered by the
Preliminary Plan, including, but not limited to Option Tracts that have not
been
acquired by Purchaser, without the prior written consent of Seller; provided,
that Purchaser may agree to permit development of the Property at less than
the
maximum intensity of development and/or in compliance with water quality
standards that are more stringent than as permitted or allowable under the
Entitlements without violating this Section 8.02. Seller and Purchaser each
agree to promptly notify the other in writing when it has been notified of
a
filed Entitlements Challenge to the Property. For purposes of determining
whether an Entitlements Challenge has been filed before or after Closing, the
date of the filing of the earlier to be filed of a petition setting forth the
Entitlements Challenge and specifically referencing the Property or an
application or administrative case asserting the Entitlements Challenge will
be
the date of the Entitlements Challenge.
B.
In the event that an Entitlements Challenge is filed prior to the Closing Date
and either the Entitlements are not upheld by the applicable court in their
entirety prior to the Closing Date or the Entitlements Challenge is not
otherwise resolved in a manner that upholds the Entitlements in their entirety
prior to the Closing Date, then:
| (i) |
the
Closing Date will be automatically extended for a period of twenty-five
(25) days and, on or before ten (10) days prior to the Closing Date
(as so
extended), Purchaser must elect by written notice to Seller to either
(a)
close the purchase of the Property pursuant to the terms of this
Agreement
on or before the Closing Date (as so extended), (b) terminate this
Agreement, or (c) extend the Closing Date for a period of an additional
three hundred sixty-five (365) days during which time Seller will
continue
to pursue resolution to the Entitlements Challenge. If Purchaser
fails to
make the election pursuant to the immediately preceding sentence,
the
Purchaser will be deemed to have elected to extend the Closing Date
for a
period of an additional three hundred sixty-five (365) days. If Purchaser
timely elects to terminate this Agreement pursuant to the terms hereof
then the Earnest Money shall be returned to Purchaser, except for
$100 of
independent consideration which will be delivered to Seller, and
thereafter neither party shall have any further rights, remedies
or
obligations hereunder,
|
16
except
for the Post Termination Obligations which
will survive such termination; and
| (ii) |
if
the Closing Date was extended for the period of three hundred sixty-five
(365) days pursuant to subparagraph A above, then (i) in the event
that
the Entitlements are either upheld by the applicable court in their
entirety prior to the Closing Date or the Entitlements Challenge
is
otherwise resolved in a manner that upholds the Entitlements in their
entirety prior to the Closing Date, then Purchaser will close the
purchase
of the Property on the Closing Date; or (ii) in the event that the
Entitlements are either not upheld by the applicable court in their
entirety prior to the Closing Date or the Entitlements Challenge
is not
otherwise resolved in a manner that upholds the Entitlements in their
entirety prior to the Closing Date, then the Closing Date will again
be
automatically extended for a period of twenty-five (25) days and,
on or
before ten (10) days prior to the Closing Date (as so extended),
Purchaser
must elect by written notice to Seller to either (a) close the
purchase of the Property with the Purchase Price reduced to the “Reduced
Purchase Price” (defined below) and the Lantana Community Contribution
reduced to the “Reduced Lantana Community Contribution” (defined below)
and otherwise pursuant to the terms of this Agreement on or before
the
Closing Date (as so extended), or (b) elect to terminate this Agreement.
As used herein, the term “Reduced Purchase Price” shall mean FIFTEEN
MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($15,200,000.00).
As used
herein, the term “Reduced Lantana Community Contribution” shall mean FOUR
HUNDRED THOUSAND AND NO/100 DOLLARS ($400,000.00). If Purchaser fails
to
deliver written notice of termination to Seller on or before Closing
Date
as so extended, Purchaser will be deemed to have elected to close
the
purchase of the Property on the Closing Date according to this Agreement
by paying the Reduced Purchase Price and Reduced Lantana Community
Contribution. If Purchaser timely elects to terminate this Agreement
pursuant to the terms hereof then the Earnest Money shall be returned
to
Purchaser, except for $100 of independent consideration which will
be
delivered to Seller, and thereafter neither party shall have any
further
rights, remedies or obligations hereunder, except for the Post Termination
Obligations which will survive such termination.
|
C.
In the event that an Entitlements Challenge is filed following the Closing
Date
and either the Entitlements are not upheld by the applicable court in their
entirety or the Entitlements Challenge is not otherwise resolved in a manner
that upholds the Entitlements in their entirety, then on or before ninety (90)
days following the final determination of said Entitlements Challenge, Seller
shall pay and reimburse Purchaser FOUR MILLION TWO HUNDRED THOUSAND AND NO/100
DOLLARS ($4,200,000.00) in cash, which amount equals the total by which the
Purchase Price exceeds the Reduced Purchase Price, and the Lantana Community
Contribution exceeds the Reduced Lantana Community Contribution.
D.
In the event an Entitlement Challenge is filed prior to the Closing Date and
at
Closing, Purchaser pays the Reduced Purchase Price and the Reduced Lantana
Community Contribution, as provided in B.(ii) B., above, and the Entitlements
are subsequently upheld by the applicable court in their entirety or the
Entitlement Challenge is otherwise resolved in a manner that upholds the
Entitlements in their entirety, then within ninety (90) days following the
final
determination of said Entitlement Challenge, Purchaser shall pay Seller FOUR
MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($4,200,000.00) in cash, which
amount equals the total amount by which the (i) Purchase
17
Price
exceeds the Reduced Purchase Price and (ii) the Lantana Community
Contribution exceeds the Reduced Lantana Community Contribution.
E.
The terms and provisions of this Section 8.02 will survive Closing and the
delivery of the Deed
8.03
Community and Open Space Program. At Closing, Seller and Purchaser agree
to execute the AMD/Stratus Community Trust Agreement in the form attached hereto
as Exhibit L and made a part hereof.
IX.
Miscellaneous
Provisions
9.01
Entire Agreement. This Agreement contains the entire agreement of the
parties hereto. There are no other agreements, oral or written, between the
parties regarding the Property and this Agreement can be amended only by written
agreement signed by the parties hereto, and by reference made a part
hereof.
9.02
Binding Effect. This Agreement, and the terms, covenants, and conditions
herein contained, shall be covenants running with the land and shall inure
to
the benefit of and be binding upon the heirs, personal representatives,
successors, and assigns of each of the parties hereto.
9.03
Effective Date. The “Effective Date” of this Agreement and other similar
references herein are deemed to refer to the date on which this Agreement has
been fully executed, initialed, if applicable, and dated by both Seller and
Purchaser.
9.04
Notice. Any notice, communication, request, reply or advice (severally
and collectively referred to as “Notice”) in this Agreement provided or
permitted to be given, made or accepted by either party to the other must be
in
writing. Notice may, unless otherwise provided herein, be given or served:
(i)
by depositing the same in the United States Mail, certified, with return receipt
requested, addressed to the party to be notified and with all charges prepaid;
or (ii) by depositing the same with Federal Express or another service
guaranteeing “next day delivery,” addressed to the party to be notified and with
all charges prepaid; or (iii) by delivering the same to such party, or an agent
of such party by telecopy or by hand delivery. Notice deposited in the United
States mail in the manner hereinabove described shall be deemed given the day
it
is deposited with the U.S. Postal Service. Notice given in any other manner
shall be deemed given only if and when received by the party to be notified.
For
the purposes of notice, the addresses of the parties shall, until changed as
provided below, be as follows:
|
PURCHASER:
|
With
Copy To:
|
|
Advance
Micro Devices, Inc
|
Fulbright
& Jaworski, L.L.P.
|
|
Attn:
Shaun Moore
|
Attn:
Robert G. Converse
|
|
5204
East Ben White Blvd.
|
One
American Center
|
|
M/S
562
|
600
Congress Avenue, Suite 2400
|
|
Austin,
Texas 78741
|
Austin,
Texas 78701
|
|
Telephone:
(512) 602-6533
|
Telephone:
(512) 474 5201
|
|
Fax
No.: (512) 602-4999
|
Fax
No.: (512) 536 4598
|
18
|
SELLER:
|
With
Copy To:
|
|
Stratus
Properties Inc.
|
Armbrust
& Brown, L.L.P.
|
|
Attn:
William H. Armstrong, III
|
Attn:
Kenneth N. Jones
|
|
98
San Jacinto Blvd., Suite 220
|
100
Congress Ave., Suite 1300
|
|
Austin,
Texas 78701
|
Austin,
Texas 78701
|
|
Telephone:
(512) 478-5788
|
Telephone:
(512) 435-2312
|
|
Fax
No.: (512) 478-6340
|
Fax
No.: (512) 435-2360
|
The
parties hereto shall have the right from time to time to change their respective
addresses, and each shall have the right to specify as its address any other
address within the United States of America by giving at least five (5) days
written notice to the other party. If any date or any period provided in this
Agreement ends on a Saturday, Sunday or legal holiday, the applicable period
shall be extended to the first business day following such Saturday, Sunday
or
legal holiday.
9.05
Real Estate Commissions. If and when the Closing occurs and Seller has
received all funds required to be delivered to Seller under the terms hereof,
Seller shall pay a commission at the Closing for services rendered in connection
with this transaction in the total amount of three percent (3%) of the Purchase
Price to Staubach Company Central Texas, L.L.C. and CB Richard Ellis to the
extent provided for, and in accordance with, a separate agreement between
Staubach Company Central Texas, L.L.C. and CB Richard Ellis addressing how
such
commission will be split between such entities, an original of which agreement
must be provided to Seller. Purchaser understands and hereby acknowledges that
the foregoing named broker or brokers have no authority to bind Seller to any
warranties or representations regarding the Property, and further acknowledges
that Purchaser has not relied upon any warranties or representations of the
foregoing named broker or brokers in Purchaser’s decision to purchase the
Property. Seller and Purchaser each represent and warrant to the other that
other than as stated above, no real estate brokerage commission is payable
to
any person or entity in connection with this transaction, and each agrees to
and
does hereby indemnify and hold the other harmless against the payment of any
commission to any person or entity claiming by, through or under Seller or
Purchaser, as applicable. Purchaser acknowledges that Purchaser has been advised
by the above-stated broker, to have an abstract of title on the Property
examined by an attorney or else to acquire an owner’s policy of title insurance
on the Property.
9.06
Time. Time is of the essence in all things pertaining to the performance
of this Agreement.
9.07
Assignment. Purchaser shall have the right to transfer and assign all or
any portion of its rights and options under this Agreement to any affiliate
of
Purchaser or to any other assignee or its affiliate in connection with a
financial arrangement between said assignee or affiliate and Purchaser to enable
the Project to be constructed, occupied and used by Purchaser. This Agreement
may not otherwise be assigned by the Purchaser without the consent of
Seller.
9.08
Severability. If any provision of this Agreement is illegal, invalid, or
unenforceable under present or future laws, then, and in that event, it is
the
intention of the parties hereto that the remainder of this Agreement shall
not
be affected thereby, and it is also the intention of the parties to this
Agreement that in lieu of each provision of this Agreement that is illegal,
invalid, or unenforceable, there be added as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible, and be legal, valid, and enforceable.
9.09
Waiver. Any failure by a party hereto to insist, or any election by a
party hereto not to insist, upon strict performance by the other party of any
of
the terms, provisions, or conditions of this
19
Agreement
shall not be deemed to be a waiver thereof or of any other term, provision,
or
condition hereof, and such party shall have the right at any time or times
thereafter to insist upon strict performance of any and all of the terms,
provisions, and conditions hereof.
9.10
Applicable Law and Venue. The construction and validity of this Agreement
shall be governed by the laws of the State of Texas. Venue shall be in a court
of appropriate jurisdiction in Travis County, Texas.
9.10
Paragraph Headings. The paragraph headings contained in this Agreement
are for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several paragraphs hereof.
9.11
Grammatical Construction . Wherever appropriate, the masculine gender may
include the feminine or neuter, and the singular may include the plural, and
vice versa.
9.13
Waiver of Deceptive Trade Practices Act. TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, PURCHASER HEREBY WAIVES ALL OF THE PROVISIONS OF THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT (THE TEXAS BUSINESS AND
COMMERCE CODE; SECTION 17.41, ET SEQ.), SAVE AND
EXCEPT THE PROVISIONS OF SECTION 17.555 OF THE TEXAS BUSINESS AND COMMERCE
CODE. PURCHASER WARRANTS AND REPRESENTS TO SELLER THAT (A) PURCHASER IS NOT
IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION AS TO ANY PROVISION OF THIS
AGREEMENT OR AS TO ANY MANNER CONTAINED HEREIN, (B) PURCHASER IS A SOPHISTICATED
ENTITY AND (C) PURCHASER IS REPRESENTED BY LEGAL COUNSEL OF PURCHASER’S OWN
CHOOSING IN SEEKING, ACQUIRING, AND PURCHASING THE PROPERTY AND IN NEGOTIATING
THE TERMS OF THIS AGREEMENT. FURTHER, THE CONSIDERATION FOR THE PURCHASE OF
THE
PROPERTY IS IN EXCESS OF FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00).
THIS WAIVER IS MADE KNOWINGLY.
9.14
No Recordation. Seller and Purchaser hereby acknowledge that neither this
Agreement nor any memorandum, affidavit or other instrument evidencing this
Agreement or relating hereto (other than the closing documents contemplated
hereunder) shall ever be recorded in the Official Public Records of Travis
County, Texas, or in any other public records. Should either party ever record
or attempt to record any such instrument, then, notwithstanding any provision
herein to the contrary, such recordation or attempted recordation shall
constitute a default hereunder by said party.
9.15
Confidentiality. Seller and Purchaser acknowledge that they have signed a
Nondisclosure Agreement dated effective June 1, 2004, and that until Closing,
said Nondisclosure Agreement shall remain applicable to this Agreement,
mutatis mutandis.
9.16
Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document, and all counterparts will constitute one and the same
agreement.
20
EXECUTED
by the undersigned on the dates set forth hereinbelow.
|
SELLER:
|
STRATUS
PROPERTIES OPERATING CO., L.P.,
a
Delaware limited liability partnership
By: STRS
L.L.C., a Delaware limited liability
company,
General Partner
By: STRATUS
PROPERTIES INC., a
Delaware
corporation, Sole Member
|
|
By:__________________________
Printed
Name:__________________
Title:_________________________
Date:_________________________
|
|
|
PURCHASER:
|
ADVANCED
MICRO DEVICES, INC.
a
Delaware corporation
|
|
By:________________________
Printed
Name:________________
Title:_______________________
Date:_______________________
|
|
Exhibits:
“A” - Land
“B” - Property
Description and Definitions
“C” - Option
Tracts
“D” - Option
Agreements (“D-1,” “D-2” and “D-3”)
“E” - Memorandum
of Options
“F” - Survey
Certificate
“G” - Section
10(a) Restriction
“H” - Conceptual
Plan
“I” - Preliminary
Site Work
“J” - Preliminary
Site Work License Agreement
“K” - Covenants
“L” - Special
Warranty Deed
“M” - Bill
of
Sale and Assignment
“N” - Rialto
Blvd. Cost Reimbursement Agreement
“O” - Memorandum
of Rialto Blvd. Cost Reimbursement Agreement
“P” - Entitlements
21
TITLE
COMPANY RECEIPT
Heritage
Title Insurance Company of Austin, Inc. acknowledges receipt of this Agreement,
executed and, if needed, initialed, by both Seller and Purchaser this _____
day
of _________________, 2005.
HERITAGE
TITLE INSURANCE COMPANY OF AUSTIN, INC.
By:____________________________
Printed
Name:____________________
Title___________________________
22
EXHIBIT
“A”
LAND
EXHIBIT
“B”
PROPERTY
DESCRIPTIONS AND DEFINITIONS
1. “Plans
and Reports”
shall
mean and refer to all of Seller’s right, title and interest in and to all
construction plans and specifications, engineering reports, environmental
reports, technical reports, drawings, surveys, utility studies, and/or any
other
reports or data covering or relating the Real Property which are in the
possession of Seller to the extent, and only to the extent, they relate to
the
Real Property.
2. “Governmental
Approvals and Permits”
shall
mean and refer to all of Seller’s right, title and interest in and to all
approvals, permits, licenses, and/or applications of any kind or nature which
have been issued by or which are on file with any governmental agencies,
departments or authorities to the extent, and only to the extent, they relate
to
the Real Property.
3. “Utility
Service Permits”
shall
mean and refer to all of Seller’s right, title and interest in and to all water,
wastewater, electric, gas, cable television, telephone, and other utility
service rights, permits, and/or applications to the extent, and only to the
extent, they relate to and benefit the Real Property.
4. “Utility
Service Rights”
shall
mean and refer to all of Seller’s right, title and interest in and to all
off-site waterlines, wastewater lines, and all other lines, facilities or
improvements of any kind or nature to the extent, and only to the extent, they
provide water, wastewater, electric, natural gas, cable television, telephone
and other services to the Real Property.
5. “Street
and Drainage Rights”
shall
mean and refer to all of Seller’s right, title and interest in and to all
off-site street and drainage improvements of any kind or nature to the extent
and only to the extent they provide roadway access or drainage service to the
Real Property.
EXHIBIT
“C”
OPTION
TRACTS
EXHIBIT
“D-1”
“D-2” and “D-3”
OPTION
AGREEMENTS
EXHIBIT
“E”
MEMORANDUM
OF OPTIONS
EXHIBIT
“F”
SURVEY
CERTIFICATE
EXHIBIT
“G”
SECTION
10(a) RESTRICTION
EXHIBIT
“H”
CONCEPTUAL
PLAN
EXHIBIT
“I”
PRELIMINARY
SITE WORK
EXHIBIT
“J”
PRELIMINARY
SITE WORK LICENSE AGREEMENT
EXHIBIT
“K”
COVENANTS
EXHIBIT
“l”
SPECIAL
WARRANTY DEED
THE
STATE
OF TEXAS §
§ KNOW
ALL
MEN BY THESE PRESENTS: THAT
COUNTY
OF
TRAVIS §
_______________________________,
a __________________ (“Grantor”), for and in consideration of the sum of TEN AND
NO/100 DOLLARS ($10.00) and other good and valuable consideration to Grantor
in
hand paid by _____________________________, a ___________________________
(“Grantee”), whose mailing address is ____________
_________________________________________________________________ the receipt
and sufficiency of which consideration is hereby acknowledged and confessed,
has
GRANTED, SOLD AND CONVEYED, and by these presents does GRANT, SELL AND CONVEY,
unto Grantee, subject to all of the reservations, exceptions and other matters
set forth or referred to herein, the following described real property, together
with all improvements thereon and appurtenances related thereto, if any (the
“Property”), to-wit:
That
certain real property in _______ County, Texas, which is described on
Exhibit
“A”
attached
hereto and incorporated herein by reference.
TO
HAVE AND TO HOLD
the
Property, together with all and singular the rights and appurtenances thereto
in
anywise belonging unto Grantee, and Grantee’s successors or assigns, forever;
and, subject to all of the matters set forth or referred to herein, Grantor
does
hereby bind itself and its successors to WARRANT AND FOREVER DEFEND all and
singular the Property unto Grantee, Grantee’s successors and assigns, against
every person whomsoever lawfully claiming or to claim the same, or any part
thereof, by, through, or under Grantor, but not otherwise; provided, however
that this conveyance is made by Grantor and accepted by Grantee subject to:
(a)
all of the title exceptions revealed in or by the recorded documents and other
matters listed on Exhibit
“B”
attached
hereto and incorporated herein by reference; (b) all regulations, restrictions,
laws, statutes, ordinances, obligations or other matters which affect the
Property and which are imposed by or exist by reason of any regulatory,
governmental, or quasi-governmental districts, entities, agencies, authorities
or other bodies of any kind or nature (“Governmental Authorities”); and (c) all
standby fees, taxes and assessments by any taxing authority for the current
and
all subsequent years, and all liens securing the payment of any of the
foregoing. Ad valorem taxes with respect to the Property for the current year
have been prorated as of the date hereof. By acceptance of this deed, Grantee
assumes and agrees to pay and indemnifies and agrees to hold Grantor harmless
from and against all ad valorem taxes relating to the Property, for the current
and all subsequent years.
EXECUTED
AND DELIVERED the ______ day of _____________, 2005.
_____________________________________,
a
_________________________
By:________________________
Printed
Name:________________
Title:_______________________
RECEIVED,
ACCEPTED AND AGREED
TO
BY
GRANTEE:
_____________________________
a
___________________________
By:__________________________
Printed
Name:________________
Title:_______________________
THE
STATE
OF _________ §
§
COUNTY
OF
____________ §
This
instrument was acknowledged before me this ______ day of ____________, 2005,
by
_______________________________, __________________ of _________________
_____________________________, a _________________________, on behalf of said
________________________.
(SEAL)
______________________________________
Notary
Public Signature
THE
STATE
OF _________ §
§
COUNTY
OF
____________ §
This
instrument was acknowledged before me this ______ day of ____________, 2005,
by
_______________________________, __________________ of _________________
_____________________________, a _________________________, on behalf of said
________________________.
(SEAL)
Notary
Public Signature
EXHIBIT
“M”
BILL
OF SALE AND ASSIGNMENT
EXHIBIT
“N”
RIALTO
BLVD. COST REIMBURSEMENT AGREEMENT
EXHIBIT
“O”
MEMORANDUM
OF RIALTO BLVD. COST REIMBURSEMENT AGREEMENT
EXHIBIT
“P”
ENTITLEMENTS
FIRST
AMENDMENT TO
AGREEMENT
OF SALE AND PURCHASE
THE
STATE
OF TEXAS §
§
COUNTY
OF
TRAVIS §
This
First Amendment to Agreement of Sale and Purchase (“First Amendment”) is made by
and between STRATUS
PROPERTIES OPERATING CO., L.P.,
a
Delaware limited partnership (“Seller”), and ADVANCED
MICRO DEVICES, INC.,
a
Delaware corporation (“Purchaser”), and is as follows:
R
E C I T A L S:
A. Seller
and Purchaser entered into that one certain Agreement
of Sale and Purchase
dated
effective November 23, 2005 (the “Original Agreement”), covering certain
property in Travis County, Texas, more fully described therein.
B. Seller
and Purchaser desire to amend the Original Agreement as set forth
below.
C. The
Original Agreement, as amended by this First Amendment, is referred to as the
“Agreement.”
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is acknowledged, Seller and Purchaser agree as follows:
1. Closing
Date.
Notwithstanding anything in Section 5.01 or elsewhere to the contrary, this
transaction shall close on April 26, 2006; provided, however, that if an
Entitlement Challenge is filed prior to April 26, 2006, the Closing Date may
be
extended as provided in Section 8.02.B.
2. Detention
Pond Maintenance Indemnity.
That
certain Declaration
of Easements and Restrictive Covenants Regarding the Maintenance of Detention
Pond Facilities - The Lantana Regional Detention Pond (Williamson Creek
Watershed),
dated
June 14, 2000, recorded under Document No. 2000109088 of the Official Public
Records of Travis County, Texas (“Detention Pond Maintenance Covenant”)
encumbers the Property. Pursuant to the Detention Pond Maintenance Covenant,
Purchaser, as the owner of the Property, may be liable to the City for certain
maintenance charges related to Detention Facilities, as defined and set forth
in
the Detention Pond Maintenance Covenant. Prior to Closing, Seller will execute
an indemnity pursuant to which Seller will indemnify Purchaser for any
maintenance costs charged by and owing to the City of Austin by Purchaser
pursuant the Detention Pond Maintenance Covenant until the later to occur of
(i) the date Seller no longer owns any property in Lantana, or
(ii) the date which is five (5) years after Closing. In addition, at
Closing, Seller will provide Purchaser the same indemnity issued by the Lantana
Commercial Community, Inc. which will remain in effect in
perpetuity.
1
3. No
Joint Community and Open Space Program.
Section
8.03 and Exhibit
“L”
in the
Agreement are deleted in their entirety. Stratus will publicly acknowledge
that,
following the recent litigation with the S.O.S. Alliance, it elected not to
contribute $2,000,000 to the AMD/Stratus open space program and shall not object
to Purchaser announcing publicly Seller’s election to withdraw such
contribution.
4. Option
Tracts - Negotiated Development Agreement.
From
the date of this First Amendment and continuing through November 1, 2006,
Purchaser may pursue a negotiated development agreement (“AMD Development
Agreement”) with the City of Austin concerning the three Option Tracts and a
fourth tract described on Exhibit
“A”,
attached to this Amendment (“Tract LO4”). The three Option Tracts and Tract LO4,
are collectively referred to as the “Four Option Tracts.” Seller consents to
Purchaser’s attempt to negotiate an AMD Development Agreement with the City of
Austin provided any agreement must be approved by Seller prior to execution
by
AMD, which approval will not be unreasonably withheld or delayed provided
(i) the proposed agreement does not encumber or adversely impact any of
Seller’s property other than the Four Option Tracts, (ii) does not impose
on Seller any expense or liability, and (iii) Purchaser is unconditionally
committed to close the purchase of the Four Option Tracts for an aggregate
purchase price of FIFTEEN MILLION ONE HUNDRED TWENTY-FIVE THOUSAND AND NO/100
DOLLARS ($15,125,000.00), which amount will be in addition to (a) the
Lantana Community Contribution for each of the three Option Tracts as set forth
in the three Option Agreements, and (b) the amounts due under Rialto
Boulevard Cost Reimbursement Agreement for the Three Option Agreements. There
will be no Lantana Community Contribution, Rialto Boulevard cost reimbursement,
or similar charge for Tract LO4. Seller and Purchaser agree to work diligently
and in good faith to document their agreement concerning the sale of the Four
Option Tracts, including, without limitation, the mechanism for establishing
Purchaser’s unconditional commitment to close in the event an AMD Development
Agreement is approved by Stratus, AMD and the City. Stratus and AMD will
complete the documentation required by this Paragraph 4 prior to Purchaser
submitting a proposed AMD Development Agreement to Seller for Seller’s
approval.
5. Effect
of Amendment.
Except
as specifically amended by the provisions hereof, the terms and provisions
stated in the Original Contract shall continue to govern the rights and
obligations of the parties thereunder, and all provisions and covenants of
the
Original Contract, as amended hereby, shall remain in full force and effect.
The
terms of and provisions of the Original Contract, as amended by this First
Amendment, are hereby ratified and confirmed, and this First Amendment and
the
Original Contract shall be construed as one instrument. In that regard, this
First Amendment and the Original Contract, including all exhibits to such
documents, constitute the entire agreement between the parties relative to
the
subject matter hereof and supersede all prior and contemporaneous agreements
and
understandings of the parties in connection therewith. In the event of any
inconsistency, the terms and provisions of this First Amendment shall control
over and modify the terms and provisions of the Original Contract.
6. Counterpart
Execution.
This
agreement may be executed in any number of counterparts, including execution
by
facsimile, with the same effect as if all parties hereto had signed the same
document, and all counterparts, either original and/or facsimile, will
constitute one and the same agreement.
2
EXECUTED
to be effective the _____ day of April, 2006.
SELLER: STRATUS
PROPERTIES OPERATING CO., L.P.,
a
Delaware limited liability partnership
By: STRS
L.L.C., a Delaware limited liability
company,
General Partner
By: STRATUS
PROPERTIES INC., a
Delaware
corporation, Sole Member
By:________________________
Printed
Name: ________________
Title:_______________________
Date:__________
PURCHASER: ADVANCED
MICRO DEVICES, INC.,
a
Delaware corporation
By:________________________
Printed
Name:________________
Title:_______________________
Date:___________________
Exhibit
“A”
to
First Amendment:
Description
of Tract LO(4)
3
TITLE
COMPANY RECEIPT
Heritage
Title Insurance Company of Austin, Inc. acknowledges receipt of this Agreement,
executed and, if needed, initialed, by both Seller and Purchaser this _____
day
of _________________, 2006.
HERITAGE
TITLE INSURANCE COMPANY OF AUSTIN, INC.
By:_______________________________
Printed
Name:_______________________
Title:______________________________
4
Exhibit
15.1
May
10,
2006
Securities
and Exchange Commission
450
Fifth
Street, N.W.
Washington,
D.C. 20549
Commissioners:
We
are
aware that our report dated May 10, 2006 on our review of interim financial
information of Stratus Properties Inc. for the three-month
periods ended March 31, 2006 and 2005 and
included in the Company's quarterly report on Form 10-Q for the quarter ended
March 31, 2006, is incorporated by reference in its Registration Statements
on
Form S-8 (File Nos. 33-78798, 333-31059, 333-52995 and 333-104288).
Yours
very truly,
/s/
PricewaterhouseCoopers LLP
Exhibit
31.1
CERTIFICATION
I,
William H. Armstrong III, certify that:
1. I
have
reviewed this quarterly report on Form 10-Q of Stratus Properties
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
May
10, 2006
/s/
William H. Armstong III
William
H. Armstrong III
Chairman
of the Board, President
and
Chief
Executive Officer
Exhibit
31.2
CERTIFICATION
I,
John
E. Baker, certify that:
1. I
have
reviewed this quarterly report on Form 10-Q of Stratus Properties
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
May
10, 2006
/s/
John E.
Baker
John
E.
Baker
Senior
Vice President &
Chief
Financial Officer
Exhibit
32.1
Certification
Pursuant to 18 U.S.C. Section 1350
(Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In
connection with the Quarterly Report on Form 10-Q of Stratus Properties Inc.
(the “Company”) for the quarter ending March 31, 2006, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), William H.
Armstrong III, as Chairman of the Board, President and Chief Executive Officer
of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his
knowledge:
(1)
The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2)
The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Dated:
May 10, 2006
/s/
William H. Armstrong III
William
H. Armstrong III
Chairman
of the Board, President and
Chief
Executive Officer
A
signed
original of this written statement required by Section 906 has been provided
to
the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.
This
certification shall not be deemed filed by the Company for purposes of § 18 of
the Securities Exchange Act of 1934, as amended.
Exhibit
32.2
Certification
Pursuant to 18 U.S.C. Section 1350
(Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In
connection with the Quarterly Report on Form 10-Q of Stratus Properties Inc.
(the “Company”) for the quarter ending March 31, 2006, as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), John E.
Baker, as Senior Vice President & Chief Financial Officer of the Company,
hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of
the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1)
The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2)
The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Dated:
May 10, 2006
/s/
John E. Baker
John
E.
Baker
Senior
Vice President &
Chief
Financial Officer
A
signed
original of this written statement required by Section 906 has been provided
to
the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.
This
certification shall not be deemed filed by the Company for purposes of § 18 of
the Securities Exchange Act of 1934, as amended.