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 2, 2008
Stratus
Properties Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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0-19989
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72-1211572
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification Number)
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98
San Jacinto Blvd., Suite 220
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Austin,
Texas
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78701
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(Address
of principal executive offices)
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(Zip
Code)
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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
1.01. Entry
into a Material Definitive Agreement.
Effective
May 1, 2008, Stratus Properties Inc. (“Stratus”) entered into a joint venture
with Canyon-Johnson Urban Fund II, L.P. (“Canyon-Johnson”) with respect to the
development of Block 21, a 36-story mixed-use development in downtown Austin,
Texas, anchored by a W Hotel & Residences (the “Project”). Prior
to May 1, 2008, Stratus Block 21 Investments, L.P. (“Stratus Block 21”), a
subsidiary of Stratus, was the sole member of the CJUF II Stratus Block 21 LLC
(the “Company”). Stratus Block 21’s initial capital contribution to
the Company consisted of the 1.76 acre tract of land known as “Block 21” and the
related property and development agreements.
In
connection with the formation of the joint venture, Canyon-Johnson was admitted
as a member of the Company, and Stratus Block 21 received a capital contribution
credit of approximately $32.2 million. Stratus Block 21 is the
manager of the Company and has a 40 percent interest in the
Company. Canyon-Johnson has a 60 percent interest in the
Company. Canyon-Johnson contributed initial capital and will
contribute additional capital until certain capital contribution requirements
are met. In the aggregate, Canyon-Johnson will contribute 60 percent
of the Company’s required capital and Stratus Block 21 will contribute 40
percent of the Company’s required capital. The maximum capital
contributions shall not exceed $52.0 million for Stratus Block 21 and $73.7
million for Canyon-Johnson.
A Stratus
subsidiary has been designated as the developer of Block 21 and will be paid a
$6.0 million developer’s fee over the term of construction.
On May 2,
2008, the Company entered into a Construction Loan Agreement with Corus Bank,
N.A., a national banking association, (the “Loan Agreement”) to finance the
construction of the Project. Pursuant to the Loan Agreement, the
Company may borrow up to an aggregate of $165,000,000 to fund the construction,
development and marketing costs of the Project.
The Loan
Agreement contains customary financial covenants and other restrictions. Amounts
borrowed under the Loan Agreement bear interest at
an annual rate equal to the greater of (1) the sum of 3.5 percent per year plus
the three month London Interbank Offered Rate quoted in the Money Rates section
of The Wall Street Journal or (2) 6.5 percent.
Optional
prepayments during the twelve months immediately following the execution of the
Loan Agreement are not permitted. From May 2, 2009 through November
2, 2010, optional prepayments of the loan are permitted, subject to a prepayment
premium. Optional prepayments made after November 2, 2010 are not
subject to prepayment premiums. Repayments made from proceeds of the sale of
residential condominiums or other components of the Project are permitted,
beginning after the first year of the Loan, without prepayment penalty.
Repayments under the Loan Agreement may be accelerated by the lenders upon the
occurrence of customary events of default. The Loan Agreement matures
on September 2, 2011. Certain obligations of the Company under the
Loan Agreement are guaranteed by Stratus, including construction and completion
of the Project, environmental indemnification and joint and several liability
for the payment of $20,000,000 of the principal of the loan.
Item
2.03 Creation of a Direct
Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of
a Registrant.
See Item
1.01, which is incorporated herein by reference.
Item 7.01
Regulation FD
Disclosure.
Stratus’
joint venture partner, Canyon-Johnson, issued a press release on behalf of the
Company, dated May 7, 2008, announcing that the W Austin Hotel & Residences
closed financing and officially began construction. (see Exhibit
99.1).
Item
9.01 Financial Statements and
Exhibits.
(d) Exhibits.
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
8, 2008
Stratus
Properties Inc.
Exhibit
Index
Exhibit
Number
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Press
Release dated as of May 7, 2008, titled “W Austin Hotel & Residences
Closes Financing and Officially Begins
Construction.”
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CONTACT: Stuart
Rosenberg
Studio
Communications
713-524-2800
stuartr@studiocommunications.net
FOR
IMMEDIATE RELEASE
W
AUSTIN HOTEL & RESIDENCES CLOSES FINANCING AND OFFICIALLY BEGINS
CONSTRUCTION
Pre-Sales
and Independent Study Showcase Strength of Austin’s Downtown Condo
Market
AUSTIN, TX – May 7, 2008 –
Austin-based Stratus Properties Inc. (NASDAQ: STRS www.stratusproperties.com)
and the Canyon-Johnson Urban Fund (www.cjuf.com) have commenced construction on
the W Austin Hotel & Residences (www.block21residences.com). The
team recently secured $165 million in construction financing from Corus Bank,
N.A. In fewer than six months, approximately 40% of the project’s
residential units are under contract with another 20% in the process of being
converted to contract. The landmark $295-million mixed-use project,
located on a prime site in the heart of downtown’s 2nd Street
District overlooking Lady Bird Lake, is seeking LEED certification and is slated
for completion in early 2011.
“We are
thrilled to be playing an active role in supporting Mayor Will Wynn’s goal of
25,000 residents in downtown by 2015. From the diversity of cultural,
dining, retail and entertainment options in and around the 2nd Street
District to the proximity of outdoor recreation areas just steps away, downtown
Austin continues to grow as a dynamic place to call home,” said Beau Armstrong,
Chief Executive Office of Stratus Properties Inc.
The
Downtown Austin Alliance (www.downtownaustin.com) recently commissioned an
independent study by Capitol Market Research, an Austin-based real estate
consulting firm. According to the study, Austin, and particularly its
urban core, continues to defy national real estate trends. Major
findings showed that condo demand is matching the increase in supply and that
68% of buyers are local, with more than two-thirds relocating from within
Austin. The study also showed that 70% of buyers do not work
downtown, but are making a lifestyle choice in their decision to move to the
area.
“The W
Austin Hotel & Residences is exactly the type of project our fund invests
in. It is located in a densely-populated urban neighborhood and will
employ thousands of local residents over the long term,” said Earvin “Magic”
Johnson, Canyon-Johnson’s Managing Director and Chief Executive Officer of Magic
Johnson Enterprises.
Canyon-Johnson’s
Director of Acquisitions Neville Rhone added, “This project will become the
cultural anchor for Austin’s revitalization of 2nd Street in the heart of
downtown. We couldn’t be more pleased to have Stratus Properties Inc.
as our partner.”
Initially
designed with 198 residential units, the final count is expected to be closer to
165 homes as demand has been strongest for larger floorplans, and a number of
buyers have opted to purchase multiple units in order to combine
them. The project has been carefully configured to create private
indoor and outdoor spaces, including a dedicated swimming pool with food and
beverage service for homeowners while still allowing easy access to hotel venues
and amenities.
Page 2
Residences
will be located on floors 18 to 37, providing each level with superb views over
surrounding buildings to Lady Bird Lake, the Hill Country and the city
skyline. Units on floors 18 to 33 begin at 643 square feet and
include one-, two- and three-bedroom floorplans, while the three- and
four-bedroom penthouse units with over 4,000 square feet of living space and
14-foot ceilings are situated on floors 34 through 37. Residence
highlights include limestone, marble, luxury carpet and imported European
wide-plank wood flooring; floor-to-ceiling windows; Bulthaup cabinetry; Miele
kitchen appliances; Vola and Grohe faucets; Philippe Starck-designed Duravit
bathtubs; and honed black slate, honed granite or Carrara marble
countertops.
In
addition to 252 guestrooms and suites, W Austin Hotel & Residences will
feature all of the brand’s celebrated comforts including its signature Living
Room experience and Whatever/Whenever®, the hotel’s 24-hour concierge service
that provides guests with the ultimate in amenities at any hour (from a pair of
running shoes at 2 a.m. to private jet service). The property will
also boast several innovative restaurants and clubs; a street-level plaza; an
elevated garden incorporating a hotel swimming pool and bar; 5,000 square feet
of meeting space; 4,300 square feet of banquet rooms; and an 8,000-square-foot
spa plus fitness offerings including yoga and pilates studios, juice bar, steam
rooms, saunas and on-site personal training services. Owners of W
Austin Residences will enjoy exclusive use of the residents’ pool and terrace,
full use of all the hotel’s facilities as well as access to 24-hour room
service, daily housekeeping service and concierge services.
Also
unique to the project, a 2,480-person capacity state-of-the-art theater and
music venue to be managed by Live Nation will serve as the new home of the
venerable Austin CityLimits
(ACL) (www.austincitylimits.org),
the longest running televised concert series which is produced by KLRU-TV and Austin PBS. Austin City
Limits Studio Theater, which will have more than five times the capacity of the
current soundstage, is being developed in partnership with the iconic Willie
Nelson and his nephew, Freddy Fletcher, of Pedernales Records. Live
Nation was selected to oversee a range of ongoing entertainment programming for
the more than 300 nights a year when it will not be in use by
ACL. Austin City Limits Studio Theater further enhances the
burgeoning cultural district surrounding the project. Ballet Austin
is one block away, the Austin Museum of Art is nearing construction on an
adjacent facility and the recently completed Long Center for the Performing Arts
is just across Lady Bird Lake.
The W
Austin Welcome Center is located on site at 200 Lavaca at the corner of 2nd
Street. Created by Arthur Andersson, a principal of the W Austin’s
award-winning design architectural firm Andersson•Wise Architects
(www.AnderssonWise.com), the two-story structure incorporates a full-floor,
fully-furnished model unit. The Welcome Center is available for daily
tours and has also been the site of numerous community and non-profit
events. For more information, call 512-322-9221.
Page 3
About
Canyon-Johnson Urban Funds
The
Canyon-Johnson Urban Funds (CJUF) are the country’s largest private real estate
funds focused on the development of urban properties in underserved
neighborhoods. A joint venture between Canyon Capital Realty Advisors
and an entity of Earvin “Magic” Johnson’s Magic Johnson Enterprises, the funds
were formed to identify, enhance and capture value through the development and
redevelopment of real estate in densely populated, ethnically diverse urban
communities. The funds’ objectives are to seek current income and
capital appreciation and, in addition to meeting investment goals, the funds are
committed to providing for and fostering economic opportunities for the
residents of the urban neighborhoods in which Canyon-Johnson
invests. With nearly $2 billion in committed equity capital, the
funds are positioned to facilitate more than $8 billion in development and
revitalization in major U.S. metropolitan areas. For more information, visit
www.cjuf.com.
About
Corus Bank, N. A.
CORUS
BANKSHARES, Inc., a part of the NASDAQ Financial-100 Index and the KBW Regional
Banking Index, is a one-bank holding company headquartered in Chicago,
Illinois. Corus Bank, N.A., is an active lender nationwide,
specializing in condominium construction, conversion, and inventory
loans. Corus also provides financing for hotel, office, and apartment
projects. Its outstanding commercial real estate loans and
construction commitments total approximately $7.6 billion. Corus Bank
and its holding company, Corus Bankshares, will hold loans of up to $165
million.
About
Stratus Properties Inc.
Stratus
Properties Inc. 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, TX
area. Stratus Properties Inc. is a publicly traded company and is
listed on the NASDAQ under the symbol STRS. Learn more at
www.stratusproperties.com.
About
W Hotels Worldwide
W Hotels
is a global lifestyle brand with 22 properties in the most vibrant cities around
the world. Inspiring and indulging its guests with thoughtful,
refreshing and stylish experiences, signature restaurants, bars and destination
spas, W has become the fastest growing luxury hotel brand in the
world. Each hotel offers a unique mix of innovative design, comfort,
and cultural influences from fashion and design to music and art and everything
in between. W’s first residential property, W Dallas-Victory, opened
in June of 2006, and soon thereafter was named a Forbes Magazine “Top Business
Hotel.” In North America and Latin America, W Hotels have been
announced in Austin, Downtown Atlanta, Midtown Atlanta, Buckhead Atlanta,
Boston, Fort Lauderdale, Hoboken, Hollywood, Huntington Beach, Minneapolis,
Downtown New York, Santiago, Scottsdale, South Beach, and Washington,
D.C. In Europe, W Hotels have been announced in Athens, Barcelona,
Milan and St. Petersburg. In Asia, W has announced properties in
Bangkok, Guangzhou, Hong Kong, Macao-Studio City, Shanghai and
Yokohama. In Africa and the Middle East, W has announced properties
in Amman, Doha, Dubai-Festival City, Dubai-The Palm and
Marrakech. W’s first Retreat & Spa, W Maldives, opened in
September of 2006. In 2007, W Maldives received the prestigious
Travel + Leisure Design Award for Best Resort. W has plans to open
Retreat & Spa hotels in Bali, Koh Samui, Vieques and Verbier, the latter of
which will serve as W’s first ski retreat. For more information, visit
www.whotels.com.