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strs2q09_8k.htm

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):  August 10, 2009

Stratus Logo

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 8.01 Other Events.

Stratus Properties Inc. issued a press release dated August 10, 2009, announcing its second-quarter and six-month 2009 results and updating its W Austin Hotel & Residences 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/ Erin D. Pickens
----------------------------------------
Erin D. Pickens
Senior Vice President and
Chief Financial Officer
(authorized signatory and
Principal Financial Officer)
Date:  August 10, 2009
 
 
 
 

Stratus Properties Inc.
Exhibit Index

Exhibit
Number

Press release dated August 10, 2009, titled “Stratus Properties Inc. Reports Second-Quarter and Six-Month 2009 Results and Updates W Austin Hotel & Residences Development Activities.”
 
 
 
 

ex99-1.htm

 
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
SECOND-QUARTER AND SIX-MONTH 2009 RESULTS
AND UPDATES W AUSTIN HOTEL & RESIDENCES DEVELOPMENT ACTIVITIES
 
HIGHLIGHTS
·  
Stratus’ joint venture with Canyon-Johnson Urban Fund II, L.P. continues to be within the scheduled time and cost on the $300 million project to develop the mixed-use W Austin Hotel & Residences in downtown Austin, Texas. Efforts to obtain replacement project financing are ongoing.
·  
At June 30, 2009, Stratus had $33.5 million of cash and cash equivalents and $33.7 million in available borrowing capacity under its revolving credit facility.

 
Second Quarter
  
Six Months
  
 
2009
  
2008
  
2009
  
2008
  
 
(In Thousands, Except Per Share Amounts)
  
Revenues
$
3,490
  
$
4,088
  
$
5,022
  
$
9,155
  
Operating loss
  
(2,650
)
  
(1,849
)
  
(5,529
)
  
(3,123
)
Net loss
  
(1,548
)
  
(1,312
)
  
(3,391
)
  
(1,468
)
Net loss attributable to Stratus common stock
  
(1,444
)
  
(1,248
)
  
(3,181
)
  
(1,404
)
                         
Diluted net loss per share attributable to Stratus common stock:
                        
Continuing operations
$
(0.19
)
$
(0.15
)
$
(0.43
)
$
(0.17
)
Discontinued operations
  
-
    
(0.01
)
  
-
    
(0.01
)
Diluted net loss per share attributable to Stratus common stock
$
(0.19
)
$
(0.16
)
$
(0.43
)
$
(0.18
)
                         
Diluted weighted average shares of common stock
                        
outstanding
  
7,435
    
7,631
    
7,441
    
7,599
  
                         
 

AUSTIN, TX, August 10, 2009 – Stratus Properties Inc. (NASDAQ: STRS) reported a net loss attributable to Stratus common stock of $1.4 million, $0.19 per share, for the second quarter of 2009, compared to $1.2 million, $0.16 per share, for the second quarter of 2008. For the six months ended June 30, 2009, Stratus reported a net loss attributable to Stratus common stock of $3.2 million, $0.43 per share, compared to $1.4 million, $0.18 per share, for the six months ended June 30, 2008.

Stratus sold one courtyard home at Calera Court and 20 lots at its Meridian development in the second quarter of 2009, compared with one courtyard home at Calera Court and 22 lots at Meridian in the second quarter of
 
 
 
 
 
2008. For the first six months of 2009, Stratus sold one courtyard home and 23 lots at Meridian, compared with one courtyard home and 77 total lots at Meridian, Deerfield and Wimberly Lane during the first six months of 2008. Rental income from commercial leasing properties decreased to $1.0 million in the second quarter of 2009 from $1.2 million in the second quarter of 2008 primarily because of a decrease in occupancy at Stratus’ original office building at 7500 Rialto Boulevard. Stratus is actively pursuing tenants to fill the available office space at 7500 Rialto Boulevard.

W Austin Hotel & Residences. As previously announced, in May 2008, Stratus entered into a joint venture with Canyon-Johnson Urban Fund II, L.P. (Canyon-Johnson) for the development of the W Austin Hotel & Residences in downtown Austin. Stratus, the manager of the project, has an approximate 40 percent interest in the joint venture and Canyon-Johnson has an approximate 60 percent interest in the joint venture. As of June 30, 2009, capital contributions totaled $35.3 million for Stratus and $48.7 million for Canyon-Johnson. For the remaining capital contributions, Stratus will fund 40 percent and Canyon-Johnson will fund 60 percent of project costs until the required capital contributions totaling approximately $128 million are made, after which project costs originally were expected to be funded by construction financing borrowings (see below).

The joint venture originally obtained a $165 million construction loan with Corus Bank, N.A. (Corus) to finance project costs after the required capital contributions were made. On June 26, 2009, the loan agreement with Corus was assigned to a subsidiary of Stratus, which is jointly managed by Stratus and Canyon-Johnson, in exchange for a pay down of $250,000 of the outstanding principal balance of $2.1 million. As a result, Corus is no longer the lender and in the second quarter of 2009 Stratus recognized a $0.2 million loss on extinguishment of debt, which includes the write-off of unamortized deferred loan costs in the amount of $2.1 million.

The joint venture is aggressively pursuing other options for financing the future construction costs of the W Austin Hotel & Residences project after the required capital contributions are made. Such options may include additional equity contributions by Stratus and Canyon-Johnson, financing from other financial institutions, admitting new equity partners, or a combination of these alternatives. If the joint venture does not secure project financing from a third-party lender, or if Stratus or Canyon-Johnson is unable to make required additional future capital contributions to the joint venture, the joint venture may be required to delay further construction of the project until additional financing is available.

Stratus is a diversified real estate company engaged in the acquisition, development, management, operations 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 W Austin Hotel & Residences. Important factors that might cause future results to differ from those projections include economic and business conditions, the availability of financing, regulatory approvals, environmental regulations and other factors which are described in more detail in Stratus’ 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

A copy of this release is available on Stratus’ web site, www.stratusproperties.com.
#           #           #

 
2
 

STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands, Except Per Share Amounts)

 
Three Months Ended
  
Six Months Ended
  
 
June 30,
  
June 30,
  
 
2009
  
2008
  
2009
  
2008
  
Revenues:
                        
Real estate
$
1,894
  
$
2,399
  
$
2,085
  
$
6,303
  
Rental income
  
960
    
1,169
    
2,133
    
2,120
  
Commissions, management fees and other
  
636
    
520
    
804
    
732
  
Total revenues
  
3,490
    
4,088
    
5,022
    
9,155
  
Cost of sales:
                        
Real estate, net
  
3,035
    
2,724
    
4,096
    
6,209
  
Rental
  
786
    
923
    
1,617
    
1,739
  
Depreciation
  
384
    
393
    
824
    
776
  
Total cost of sales
  
4,205
    
4,040
    
6,537
    
8,724
  
General and administrative expenses
  
1,935
    
1,897
    
4,014
    
3,554
  
Total costs and expenses
  
6,140
    
5,937
    
10,551
    
12,278
  
Operating loss
  
(2,650
)
  
(1,849
)
  
(5,529
)
  
(3,123
)
Interest income and other
  
582
a
  
154
    
828
a
  
1,103
  
Loss on extinguishment of debt
  
(182
)b
  
-
    
(182
)b
  
-
  
Gain on interest rate cap agreement
  
103
    
-
    
70
    
-
  
Loss from continuing operations before income taxes and equity in
                        
unconsolidated affiliate’s (loss) income
  
(2,147
)
  
(1,695
)
  
(4,813
)
  
(2,020
)
Equity in unconsolidated affiliate’s (loss) income
  
(108
)
  
149
    
(182
)
  
266
  
Benefit from income taxes
  
707
    
339
    
1,604
    
391
  
Loss from continuing operations
  
(1,548
)
  
(1,207
)
  
(3,391
)
  
(1,363
)
Loss from discontinued operations
  
-
    
(105
)c
  
-
    
(105
)c
Net loss
  
(1,548
)
  
(1,312
)
  
(3,391
)
  
(1,468
)
Net loss attributable to noncontrolling interest in subsidiaryd
  
104
    
64
    
210
    
64
  
Net loss attributable to Stratus common stock
$
(1,444
)
$
(1,248
)
$
(3,181
)
$
(1,404
)
                         
Net loss per share attributable to Stratus common stock:
                        
Continuing operations
$
(0.19
)
$
(0.15
)
$
(0.43
)
$
(0.17
)
Discontinued operations
  
-
    
(0.01
)
  
-
    
(0.01
)
Net loss per share attributable to Stratus common stock:
                        
Basic and diluted
$
(0.19
)
$
(0.16
)
$
(0.43
)
$
(0.18
)
                         
Weighted average shares of common stock outstanding:
                        
Basic and diluted
  
7,435
    
7,631
    
7,441
    
7,599
  
                         
a.  Includes $0.6 million related to a forfeited homebuilder deposit for contract termination.
b.  Relates to assignment of W Austin Hotel & Residences project construction loan to a Stratus subsidiary.
c.  Relates to the revised amount of Texas Margin Tax accrued on Escarpment Village income earned during 2007.
d.  Relates to the operations of W Austin Hotel & Residences, Stratus’ consolidated subsidiary.
 
 
I
 

STRATUS PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands)

 
June 30,
  
December 31,
  
 
2009
  
2008
  
ASSETS
            
Cash and cash equivalents
$
33,549
  
$
17,097
  
Investment in U.S. treasury securities
  
-
    
15,388
  
Real estate, commercial leasing assets and facilities, net:
            
Property held for sale – developed or under development
  
127,820
    
115,966
  
Property held for sale – undeveloped
  
31,895
    
27,514
  
Property held for use, net
  
71,784
    
56,919
  
Investment in unconsolidated affiliate
  
2,360
    
2,283
  
Deferred tax asset
  
9,000
    
7,330
  
Other assets
  
7,059
    
10,049
  
Total assets
$
283,467
  
$
252,546
  
             
LIABILITIES AND EQUITY
            
Accounts payable and accrued liabilities
$
9,740
  
$
6,585
  
Accrued interest and property taxes
  
2,020
    
3,203
  
Deposits
  
554
    
1,301
  
Debt
  
74,241
    
63,352
  
Other liabilities
  
2,890
    
3,583
  
Total liabilities
  
89,445
    
78,024
  
             
Equity:
            
Stratus stockholders’ equity:
            
Preferred stock
  
-
    
-
  
Common stock
  
83
    
83
  
Capital in excess of par value of common stock
  
197,080
    
196,692
  
Accumulated deficit
  
(33,276
)
  
(30,095
)
Accumulated other comprehensive loss
  
-
    
(3
)
Common stock held in treasury
  
(17,941
)
  
(17,441
)
Total Stratus stockholders’ equity
  
145,946
    
149,236
  
Noncontrolling interest in subsidiary
  
48,076
a
  
25,286
a
Total equity
  
194,022
    
174,522
  
Total liabilities and equity
$
283,467
  
$
252,546
  
             
a.  
Relates to Canyon-Johnson’s interest in W Austin Hotel & Residences.
 
 
II
 
 
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)

 
Six Months Ended June 30,
  
 
2009
  
2008
  
Cash flow from operating activities:
          
Net loss
$
(3,391
)
$
(1,468
)
Adjustments to reconcile net loss to net cash
            
used in operating activities:
            
Loss from discontinued operations
  
-
    
105
a
Depreciation
  
824
    
776
  
Gain on interest rate cap agreement
  
(70
)
  
-
  
Loss on extinguishment of debt
  
182
    
-
  
Cost of real estate sold
  
1,520
    
4,624
  
Deferred income taxes
  
(1,670
)
  
(623
)
Stock-based compensation
  
346
    
483
  
Equity in unconsolidated affiliate’s loss (income)
  
182
    
(266
)
Distribution of unconsolidated affiliate’s income
  
-
    
1,266
  
Deposits
  
(747
)
  
(1,148
)
Purchases and development of real estate properties
  
(20,574
)
  
(17,456
)
Municipal utility district reimbursements
  
3,387
    
3,753
  
Decrease in other assets
  
730
    
159
  
Increase (decrease) in accounts payable, accrued liabilities and other
  
567
    
(98
)
Net cash used in operating activities
  
(18,714
)
  
(9,893
)
             
Cash flow from investing activities:
            
Development of commercial leasing properties and other expenditures
  
(15,238
)
  
(8,171
)
(Investment in) return of investment in unconsolidated affiliate
  
(260
)
  
2,374
  
Proceeds from matured U.S. treasury securities
  
15,391
    
-
  
Other
  
40
    
25
  
Net cash used in investing activities
  
(67
)
  
(5,772
)
             
Cash flow from financing activities:
            
Borrowings from revolving credit facility
  
10,000
    
-
  
Payments on revolving credit facility
  
(1,569
)
  
-
  
Borrowings from project and term loans
  
4,700
    
2,022
  
Payments on project and term loans
  
(398
)
  
(109
)
Noncontrolling interest contributions
  
23,000
    
10,678
  
Net payments for stock-based awards
  
(96
)
  
(114
)
Excess tax benefit from stock-based awards
  
-
    
281
  
Purchases of Stratus common shares
  
(404
)
  
(428
)
Financing costs
  
-
    
(2,845
)
Net cash provided by financing activities
  
35,233
    
9,485
  
Net increase (decrease) in cash and cash equivalents
  
16,452
    
(6,180
)
Cash and cash equivalents at beginning of year
  
17,097
    
40,873
  
Cash and cash equivalents at end of period
$
33,549
  
$
34,693
  
             
a.  
Relates to the revised amount of Texas Margin Tax accrued on Escarpment Village income earned during 2007.
 
 
III