UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): May 10, 2007
Stratus
Properties Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
0-19989
|
72-1211572
|
||
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification Number)
|
|
98
San Jacinto Blvd., Suite 220
|
|
|
Austin,
Texas
|
78701
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (512) 478-5788
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
2.02. Results
of Operations and Financial Condition.
Stratus
Properties Inc. issued a press release dated May 10, 2007, announcing its
first-quarter 2007 results and updating its development activities (see exhibit
99.1).
Item
9.01. Financial
Statements and Exhibits.
(d)
Exhibit.
The
Exhibit included as part of this Current Report is listed in the attached
Exhibit Index.
SIGNATURE
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 hereunto
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, 2007
Stratus
Properties Inc.
Exhibit
Index
Exhibit
Number
|
Press
release dated May 10, 2007, titled “Stratus Properties Inc. Reports
First-Quarter 2007 Results and Updates Development
Activities.”
|
||
|
NEWS
RELEASE
|
|
|
NASDAQ
Symbol: “STRS”
|
|
|
Stratus
Properties Inc.
|
Financial
and Media Contact:
|
|
98
San Jacinto Blvd. Suite 220
|
William
H. Armstrong III
|
|
Austin,
Texas 78701
|
(512)
478-5788
|
STRATUS
PROPERTIES INC. REPORTS
FIRST-QUARTER
2007 RESULTS AND
UPDATES
DEVELOPMENT ACTIVITIES
HIGHLIGHTS
| · |
First-quarter
2007 net income totaled $0.7 million, $0.10 per share, compared with
$18.2
million, $2.36 per share, in the year-ago
quarter.
|
| · |
First-quarter
2007 real estate revenues totaled $4.4 million, including the sale
of a
five-acre tract in the Circle C community for $1.1 million, compared
with
total real estate revenues of $11.0 million in the first quarter
of
2006.
|
| · |
First-quarter
2007 rental income totaled $1.6 million, including $0.9 million from
Escarpment Village which opened in May 2006, compared with total
rental
income of $0.4 million in the first quarter of
2006.
|
| · |
Stratus
is partnering with Canyon-Johnson Urban Fund II, L.P. (Canyon-Johnson)
for
the development of Block 21.
|
| · |
For
the second quarter of 2007, Stratus’ scheduled real estate sales under
existing homebuilder lot sale contracts include the
following:
|
| o |
26
lots in its Circle C community for $1.8
million
|
| o |
15
lots at its Deerfield project for $1.0
million
|
| o |
3
lots at its Wimberly Lane Phase II subdivision in the Barton Creek
community for $0.5 million
|
|
First
Quarter
|
||||||
|
2007
|
2006
|
|||||
|
(In
Thousands, Except
|
||||||
|
Per
Share Amounts)
|
||||||
|
Revenues
|
$
|
6,206
|
$
|
11,690
|
||
|
Operating
income
|
971
|
1,894
|
||||
|
Income
from continuing operations
|
738
|
9,989
|
||||
|
Income
from discontinued operations, including net gain on sale
|
||||||
|
of
7000 West of $7.8 million
|
-
|
8,187
|
||||
|
Net
income
|
$
|
738
|
$
|
18,176
|
||
|
Diluted
net income per share of common stock:
|
||||||
|
Continuing
operations
|
$
|
0.10
|
$
|
1.30
|
||
|
Discontinued
operations
|
-
|
1.06
|
||||
|
Diluted
net income per share of common stock
|
$
|
0.10
|
$
|
2.36
|
||
|
Diluted
weighted average shares of common stock outstanding
|
7,670
|
7,697
|
||||
AUSTIN,
TX, May 10, 2007 - Stratus Properties Inc. (NASDAQ: STRS) reported net income
of
$0.7 million, $0.10 per share, for the first quarter of 2007, compared to $18.2
million, $2.36 per share, for the first quarter of 2006. Income from
continuing operations totaled $10.0 million, $1.30 per share, for the first
quarter of 2006, including an $8.3 million, $1.07 per share, tax benefit
resulting from the reversal of a portion of Stratus’ deferred tax asset
valuation allowance.
On
March
27, 2006, Stratus sold 7000 West for $22.3 million, resulting in a net after-tax
gain of $7.8 million, $1.02 per share, in the three months ended March 31,
2006.
Other than the gain from the sale of 7000 West, income from discontinued
operations was $0.4 million, $0.04 per share, in the three months ended March
31, 2006.
Real
Estate Revenues.
Property
sales for the first-quarter periods of 2007 and 2006 included the following
(revenues in thousands):
|
First
Quarter
|
||||||||
|
2007
|
2006
|
|||||||
|
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 Estate
|
3
|
523
|
2
|
301
|
||||
|
Circle
C
|
||||||||
|
Meridian
|
28
|
1,816
|
39
|
2,287
|
||||
|
Deerfield
|
15
|
1,004
|
10
|
671
|
||||
|
Total
Residential
|
46
|
$3,343
|
63
|
$9,538
|
||||
Stratus
sold a five-acre tract at the Circle C community for $1.1 million during the
first quarter of 2007 and a 7.5-acre tract in the Barton Creek community for
$1.5 million during the first quarter of 2006.
Rental
Income.
For the
first quarter of 2007, Stratus earned $1.6 million in rental income, compared
to
$0.4 million for the 2006 period. In 2006, Stratus began earning rental income
from its Escarpment Village project that was substantially completed in the
second quarter of 2006. Rental income from Escarpment Village totaled $0.9
million in the first quarter of 2007 and less than $0.1 million in the first
quarter of 2006. The majority of the balance of Stratus’ rental income in the
first quarter of 2007 and all of the rental income in the 2006 period was
primarily from Stratus’ original 75,000-square-foot office building at 7500
Rialto Boulevard. In September 2006, Stratus began leasing its second
75,000-square-foot office building at Rialto Boulevard.
Development
Activities. Block
21
- In
April 2005, the City of Austin selected Stratus’ 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 planned for a mixture of retail,
hotel, residential and entertainment uses. In December 2006, Stratus acquired
the property for $15.1 million. Stratus has executed agreements with Starwood
Hotels & Resorts Worldwide, Inc. for the development of a W Hotel and
Residences on the site. In addition, Stratus has agreements for the new studio
for KLRU’s “Austin City Limits” program and for the Austin Children’s
Museum.
Stratus has begun the permitting process with the City of Austin and expects
construction to begin in the third quarter of 2007. On May 8, 2007, Stratus
announced its partnership with Canyon-Johnson, a joint venture between the
Los
Angeles-based Canyon Capital Realty Advisors and Earvin "Magic" Johnson, for
the
development of Block 21.
Lantana
-Lantana
is a partially developed, mixed-use project with remaining entitlements for
approximately 1.0 million square feet of office and retail use on 223 acres
as
of March 31, 2007. Regional utility and road infrastructure is in place with
capacity to serve Lantana at full build-out permitted under Stratus’ existing
entitlements.
At
March
31, 2007, Stratus’ first office building at 7500 Rialto Boulevard had an
occupancy rate of approximately 96 percent. In response to increased demand
for
office space within Lantana, in January 2006, Stratus commenced construction
of
a second 75,000-square-foot office building at 7500 Rialto Boulevard which
was
completed in September 2006. As of March 31, 2007, Stratus had leased
approximately 50 percent of the second office building.
Calera
- During
2004, Stratus began construction of courtyard homes at Calera Court within
the
Barton Creek community. Calera Court, the initial phase of the “Calera”
subdivision, will include 16 homesites 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 lots were sold. As of March 31, 2007, only 10 lots remained
unsold at Calera Drive. Development of the final phase, known as Verano Drive,
will include 71 single-family lots. Construction of the final phase of Calera
was initiated in the first quarter of 2007 and is scheduled for completion
in
September 2007.
Wimberly
Lane Phase II
- In
2004, Stratus entered into a contract with a national homebuilder to sell 41
lots within the Wimberly Lane Phase II subdivision in the Barton Creek
community. The homebuilder paid Stratus 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 by Stratus 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.
Circle
C Community
-
Stratus has commenced development activities at the Circle C community based
on
the entitlements secured in its Circle C settlement with the City of Austin.
The
Circle C settlement, as amended in 2004, permits development of 1.16 million
square feet of commercial space and 1,334 residential units, including 504
multi-family units and 830 single family residential lots. Meridian is an
800-lot residential development at the Circle C community. In January 2005,
the
first phase of construction commenced. During the first quarter of 2005, Stratus
contracted to sell a total of 494 lots in its 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 and second phases each consisted
of 134 lots. The first phase was substantially completed at the end of 2005.
Development of the second phase commenced in the third quarter of 2005 and
was
substantially completed in March 2006. Development of the 108-lot third phase
of
Meridian has commenced and is expected to be
completed
by September 2007. The 118-lot fourth phase will commence by the end of 2007
and
completion is expected in 2008.
In
2006,
Stratus signed another contract with a national homebuilder for 42 additional
lots. Development of those lots will commence in April 2007 and substantial
completion is expected during the third quarter of 2007. Development of the
final phase of Meridian, which consists of 57 one-acre lots, is expected to
commence by the end of 2007.
Stratus
estimates its sales from the first two phases of Meridian will total at least
26
lots for $1.8 million during the second quarter of 2007.
The
grand
opening of Escarpment Village, a 168,000-square-foot retail project anchored
by
a grocery store at the Circle C community, occurred in May 2006. As of March
31,
2007, Escarpment Village had leases for 156,100 square feet or 93 percent of
its
available space.
Deerfield
- In
January 2004, Stratus 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. Stratus executed agreements with a national
homebuilder, whereby the homebuilder paid Stratus $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 Stratus as income as lots are sold. Stratus
agreed to pay up to $5.2 million of the homebuilder’s development costs. The
homebuilder must pay all property taxes and maintenance costs. The initial
lot
sale occurred in November 2004 and subsequent lot sales are on schedule. In
October 2005, Stratus 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. Stratus expects 15 lot sales for $1.0 million to be completed
during the second quarter of 2007.
Crestview
Station
- In
November 2005, Stratus formed a joint venture with Trammell Crow Central Texas
Development, Inc. to acquire an approximate 74-acre tract at the intersection
of
Airport Boulevard and Lamar Boulevard in Austin, Texas, for $7.7 million. With
its joint venture partner, Stratus has commenced brown-field remediation and
permitting of the property, known as Crestview Station, which is located on
the
commuter rail line recently approved by City of Austin voters. Crestview station
is planned for single-family, multi-family and retail development, with closings
on the single-family and multi-family components and portions of the retail
component expected to occur in 2007, subject to completion of the remediation
process.
The
joint
venture partnership has contracted with a nationally recognized remediation
firm
to demolish the existing buildings and remediate the property in preparation
for
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 maintain 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.
As previously announced, Stratus is exploring strategic alternatives for enhancing shareholder value, including a possible sale of the company. Stratus has retained JPMorgan as its financial advisor to assist in this process. There can be no assurance that any transaction will occur or, if one is undertaken, its terms or timing.
Stratus
does not expect to disclose developments with respect to the exploration of
strategic alternatives unless and until its Board of Directors has approved
a
definitive transaction.
Stratus
is a diversified real estate company engaged in the acquisition, development,
management and sale of commercial, multi-family and residential real estate
properties located primarily in the Austin, Texas area.
____________________________
CAUTIONARY
STATEMENT. This press release contains certain forward-looking statements
regarding proposed real estate sales and development activities at Block 21,
the
Lantana community, the Barton Creek community, the Circle C community, Deerfield
and Crestview Station. Important factors that might cause future results to
differ from those projections include economic and business conditions, the
availability of financing, regulatory approvals and environmental regulations,
which are described in more detail in Stratus’ 2006 Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
A
copy of
this release is available on our web site,
www.stratusproperties.com.
# # #
STRATUS
PROPERTIES INC.
CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
(In
Thousands, Except Per Share Amounts)
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
|
2007
|
2006
|
|||||
|
Revenues:
|
||||||
|
Real
estate
|
$
|
4,426
|
$
|
11,038
|
||
|
Rental
income
|
1,559
|
387
|
||||
|
Commissions,
management fees and other
|
221
|
265
|
||||
|
Total
revenues
|
6,206
|
11,690
|
||||
|
Cost
of sales:
|
||||||
|
Real
estate, net
|
1,593
|
7,547
|
||||
|
Rental
|
1,102
|
324
|
||||
|
Depreciation
|
539
|
a
|
186
|
|||
|
Total
cost of sales
|
3,234
|
8,057
|
||||
|
General
and administrative expenses
|
2,001
|
1,739
|
||||
|
Total
costs and expenses
|
5,235
|
9,796
|
||||
|
Operating
income
|
971
|
1,894
|
||||
|
Interest
expense, net
|
(333
|
)
|
(179
|
)
|
||
|
Interest
income
|
529
|
14
|
||||
|
Income
from continuing operations before income taxes
|
1,167
|
1,729
|
||||
|
(Provision
for) benefit from income taxes
|
(429
|
)
|
8,260
|
b
|
||
|
Income
from continuing operations
|
738
|
9,989
|
||||
|
Income
from discontinued operations (including a gain on sale of
|
||||||
|
$7,834,
net of taxes of $1,928)
|
-
|
8,187
|
c
|
|||
|
Net
income
|
$
|
738
|
$
|
18,176
|
||
|
Basic
net income per share of common stock:
|
||||||
|
Continuing
operations
|
$
|
0.10
|
$
|
1.38
|
||
|
Discontinued
operations
|
-
|
1.13
|
c
|
|||
|
Basic
net income per share of common stock
|
$
|
0.10
|
$
|
2.51
|
||
|
Diluted
net income per share of common stock:
|
||||||
|
Continuing
operations
|
$
|
0.10
|
$
|
1.30
|
||
|
Discontinued
operations
|
-
|
1.06
|
c
|
|||
|
Diluted
net income per share of common stock
|
$
|
0.10
|
$
|
2.36
|
||
|
Weighted
average shares of common stock outstanding:
|
||||||
|
Basic
|
7,549
|
7,242
|
||||
|
Diluted
|
7,670
|
7,697
|
||||
| a. |
Includes
depreciation on Escarpment Village which opened in May
2006.
|
| b. |
Reflects
the tax benefit resulting from the reversal of a portion of Stratus’
deferred tax asset valuation
allowance.
|
| c. |
Relates
to the operations of 7000 West, which Stratus sold on March 27,
2006.
|
I
STRATUS
PROPERTIES INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In
Thousands)
|
March
31,
|
December
31,
|
|||||
|
2007
|
2006
|
|||||
|
ASSETS
|
||||||
|
Current
assets:
|
||||||
|
Cash
and cash equivalents, including restricted cash of
|
||||||
|
$115
and $116, respectively
|
$
|
1,304
|
$
|
1,955
|
||
|
Accounts
receivable
|
1,194
|
934
|
||||
|
Deposits,
prepaid expenses and other
|
3,558
|
3,700
|
||||
|
Deferred
tax asset
|
1,161
|
1,144
|
||||
|
Total
current assets
|
7,217
|
7,733
|
||||
|
Real
estate, commercial leasing assets and facilities, net:
|
||||||
|
Property
held for sale - developed or under development
|
121,604
|
116,865
|
||||
|
Property
held for sale - undeveloped
|
16,270
|
16,345
|
||||
|
Property
held for use, net
|
46,284
|
46,702
|
||||
|
Investment
in Crestview
|
3,800
|
3,800
|
||||
|
Deferred
tax asset
|
6,997
|
7,105
|
||||
|
Other
assets
|
5,445
|
5,400
|
||||
|
Total
assets
|
$
|
207,617
|
$
|
203,950
|
||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||
|
Current
liabilities:
|
||||||
|
Accounts
payable and accrued liabilities
|
$
|
5,353
|
$
|
5,988
|
||
|
Accrued
interest, property taxes and other
|
4,245
|
6,290
|
||||
|
Current
portion of long-term debt
|
316
|
311
|
||||
|
Total
current liabilities
|
9,914
|
12,589
|
||||
|
Long-term
debt
|
55,608
|
50,364
|
||||
|
Other
liabilities
|
6,655
|
7,051
|
||||
|
Total
liabilities
|
72,177
|
70,004
|
||||
|
Stockholders’
equity:
|
||||||
|
Preferred
stock
|
-
|
-
|
||||
|
Common
stock
|
81
|
81
|
||||
|
Capital
in excess of par value of common stock
|
190,130
|
188,873
|
||||
|
Accumulated
deficit
|
(41,918
|
)
|
(42,655
|
)
|
||
|
Common
stock held in treasury
|
(12,853
|
)
|
(12,353
|
)
|
||
|
Total
stockholders’ equity
|
135,440
|
133,946
|
||||
|
Total
liabilities and stockholders' equity
|
$
|
207,617
|
$
|
203,950
|
||
II
STRATUS
PROPERTIES INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
(In
Thousands)
|
Three
Months Ended
|
||||||
|
March
31,
|
||||||
|
2007
|
2006
|
|||||
|
Cash
flow from operating activities:
|
||||||
|
Net
income
|
$
|
738
|
$
|
18,176
|
||
|
Adjustments
to reconcile net income to net cash provided
|
||||||
|
by
operating activities:
|
||||||
|
Income
from discontinued operations
|
-
|
(8,187
|
)
|
|||
|
Depreciation
|
539
|
186
|
||||
|
Cost
of real estate sold
|
2,610
|
6,559
|
||||
|
Deferred
income taxes
|
91
|
(8,260
|
)
|
|||
|
Stock-based
compensation
|
527
|
447
|
||||
|
Deposits
|
(327
|
)
|
18
|
|||
|
Other
|
(10
|
)
|
(534
|
)
|
||
|
(Increase)
decrease in working capital:
|
||||||
|
Accounts
receivable and prepaid expenses
|
(239
|
)
|
(289
|
)
|
||
|
Accounts
payable, accrued liabilities and other
|
(2,663
|
)
|
(2,813
|
)
|
||
|
Net
cash provided by continuing operations
|
1,266
|
5,303
|
||||
|
Net
cash provided by discontinued operationsa
|
-
|
374
|
||||
|
Net
cash provided by operating activities
|
1,266
|
5,677
|
||||
|
Cash
flow from investing activities:
|
||||||
|
Purchases
and development of real estate properties
|
(9,176
|
)
|
(6,039
|
)
|
||
|
Development
of commercial leasing properties and other
|
||||||
|
expenditures
|
(122
|
)
|
(96
|
)
|
||
|
Municipal
utility district reimbursements
|
2,000
|
-
|
||||
|
Net
cash used in continuing operations
|
(7,298
|
)
|
(6,135
|
)
|
||
|
Net
cash provided by discontinued operationsa
|
-
|
10,022
|
||||
|
Net
cash (used in) provided by investing activities
|
(7,298
|
)
|
3,887
|
|||
|
Cash
flow from financing activities:
|
||||||
|
Borrowings
from revolving credit facility
|
10,950
|
7,500
|
||||
|
Payments
on revolving credit facility
|
(5,625
|
)
|
(9,507
|
)
|
||
|
Payments
on TIAA mortgage
|
(76
|
)
|
-
|
|||
|
Borrowings
from project loans
|
-
|
2,236
|
||||
|
Repayments
on project loans
|
-
|
(3,101
|
)
|
|||
|
Net
(payments for) proceeds from exercised stock options
|
(38
|
)
|
725
|
|||
|
Excess
tax benefit from exercised stock options
|
323
|
-
|
||||
|
Purchases
of Stratus common shares
|
(153
|
)
|
(254
|
)
|
||
|
Net
cash provided by (used in) financing activities
|
5,381
|
(2,401
|
)
|
|||
|
Net
(decrease) increase in cash and cash equivalents
|
(651
|
)
|
7,163
|
|||
|
Cash
and cash equivalents at beginning of year
|
1,955
|
1,901
|
||||
|
Cash
and cash equivalents at end of period
|
1,304
|
9,064
|
||||
|
Less
cash restricted as to use
|
(115
|
)
|
(301
|
)
|
||
|
Unrestricted
cash and cash equivalents at end of period
|
$
|
1,189
|
$
|
8,763
|
||
| a. |
Relates
to 7000 West, which
Stratus sold on March 27, 2006.
|
III