STRATUS PROPERTIES INC - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - STRATUS PROPERTIES INC	a3q17exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - STRATUS PROPERTIES INC	a3q17exhibit321.htm
EX-31.2 - EXHIBIT 31.2 - STRATUS PROPERTIES INC	a3q17exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - STRATUS PROPERTIES INC	a3q17exhibit311.htm
EX-10.2 - EXHIBIT 10.2 - STRATUS PROPERTIES INC	a3q17exhibit102.htm



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 September 30, 2017
	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: 001-37716

Stratus Properties Inc.

(Exact name of registrant as specified in its charter)



Delaware	72-1211572
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

212 Lavaca St., Suite 300
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.

þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer ¨			Accelerated filer þ
Non-accelerated filer ¨ (Do not check if a smaller reporting company)			Smaller reporting company ¨
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No

On October 31, 2017, there were issued and outstanding 8,133,502 shares of the registrant’s common stock, par value $0.01 per share.

Table of Contents



STRATUS PROPERTIES INC.
TABLE OF CONTENTS


	Page

Part I. Financial Information	2

Item 1. Financial Statements	2

Consolidated Balance Sheets (Unaudited)	2

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3

Consolidated Statements of Cash Flows (Unaudited)	4

Consolidated Statements of Equity (Unaudited)	5

Notes to Consolidated Financial Statements (Unaudited)	6

Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations	13

Item 3. Quantitative and Qualitative Disclosures About Market Risk	24

Item 4. Controls and Procedures	24

Part II. Other Information	24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 6. Exhibits	24

Signature	S-1

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

STRATUS PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Thousands)



	September 30, 2017			December 31, 2016
ASSETS
Cash and cash equivalents	$	16,152		$	13,597
Restricted cash	23,751			11,892
Real estate held for sale	18,212			21,236
Real estate under development	113,408			111,373
Land available for development	14,791			19,153
Real estate held for investment, net	189,365			239,719
Deferred tax assets	18,630			17,223
Other assets	16,155			17,982
Total assets	$	410,464		$	452,175

LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	15,422		$	6,734
Accrued liabilities, including taxes	10,898			13,240
Debt	227,856			291,102
Deferred gain	11,863			—
Other liabilities	10,377			10,073
Total liabilities	276,416			321,149

Commitments and contingencies

Equity:
Stockholders’ equity:
Common stock	93			92
Capital in excess of par value of common stock	185,184			192,762
Accumulated deficit	(30,255		)	(41,143		)
Common stock held in treasury	(21,057		)	(20,760		)
Total stockholders’ equity	133,965			130,951
Noncontrolling interests in subsidiaries	83			75
Total equity	134,048			131,026
Total liabilities and equity	$	410,464		$	452,175

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

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STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In Thousands, Except Per Share Amounts)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Revenues:
Real estate operations	$	2,923		$	6,155		$	9,108		$	9,858
Leasing operations	1,923			2,567			6,015			6,761
Hotel	7,738			8,268			27,817			29,501
Entertainment	4,638			4,190			16,375			13,236
Total revenues	17,222			21,180			59,315			59,356
Cost of sales:
Real estate operations	2,204			4,075			8,048			8,173
Leasing operations	1,091			1,390			3,749			3,295
Hotel	6,676			6,891			21,277			22,248
Entertainment	3,666			3,713			12,298			10,532
Depreciation	2,031			2,189			5,928			5,854
Total cost of sales	15,668			18,258			51,300			50,102
General and administrative expenses	2,220			2,497			8,462			9,718
Profit participation in sale of The Oaks at Lakeway	—			—			2,538			—
Gain on sales of assets	(24,306		)	—			(25,421		)	—
Total	(6,418		)	20,755			36,879			59,820
Operating income (loss)	23,640			425			22,436			(464		)
Interest expense, net	(1,577		)	(2,579		)	(5,060		)	(6,894		)
Gain (loss) on interest rate derivative instruments	54			174			136			(301		)
Loss on early extinguishment of debt	—			—			(532		)	(837		)
Other income, net	6			6			24			14
Income (loss) before income taxes and equity in unconsolidated affiliates' (loss) income	22,123			(1,974		)	17,004			(8,482		)
Equity in unconsolidated affiliates' (loss) income	(5		)	(3		)	(24		)	70
(Provision for) benefit from income taxes	(7,810		)	318			(6,227		)	2,587
Net income (loss) and total comprehensive income (loss)	14,308			(1,659		)	10,753			(5,825		)
Total comprehensive income attributable to noncontrolling interests in subsidiaries	—			—			(8		)	—
Net income (loss) and total comprehensive income (loss) attributable to common stockholders	$	14,308		$	(1,659	)	$	10,745		$	(5,825	)

Basic net income (loss) per share attributable to common stockholders	$	1.76		$	(0.20	)	$	1.32		$	(0.72	)
Diluted net income (loss) per share attributable to common stockholders	$	1.75		$	(0.20	)	$	1.32		$	(0.72	)

Weighted average common shares outstanding:
Basic	8,128			8,094			8,119			8,086
Diluted	8,172			8,094			8,169			8,086

Dividends declared per share of common stock	$	—		$	—		$	1.00		$	—

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

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STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Thousands)



	Nine Months Ended
	September 30,
	2017			2016
Cash flow from operating activities:
Net income (loss)	$	10,753		$	(5,825	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation	5,923			5,854
Cost of real estate sold	5,086			4,546
Gain on sale of assets	(25,421		)	—
(Gain) loss on interest rate derivative contracts	(136		)	301
Loss on early extinguishment of debt	532			837
Debt issuance cost amortization and stock-based compensation	1,227			1,233
Equity in unconsolidated affiliates' loss (income)	24			(70		)
Deposits	(145		)	1,054
Deferred income taxes	(1,264		)	(12,827		)
Purchases and development of real estate properties	(11,196		)	(10,919		)
Municipal utility district reimbursement	2,172			12,302
Increase in other assets	(392		)	(2,675		)
(Decrease) increase in accounts payable, accrued liabilities and other	(320		)	7,071
Net cash (used in) provided by operating activities	(13,157		)	882

Cash flow from investing activities:
Capital expenditures	(14,363		)	(24,820		)
Proceeds from sale of assets	117,261			—
Payments on master lease obligations	(1,653		)	—
Site development escrow deposit and other, net	(11,676		)	(19		)
Net cash provided by (used in) investing activities	89,569			(24,839		)

Cash flow from financing activities:
Borrowings from credit facility	45,200			24,000
Payments on credit facility	(53,651		)	(19,120		)
Borrowings from project loans	8,725			174,342
Payments on project and term loans	(64,228		)	(154,584		)
Cash dividend paid	(8,133		)	—
Stock-based awards net payments	(234		)	(146		)
Financing costs	(1,536		)	(1,331		)
Net cash (used in) provided by financing activities	(73,857		)	23,161
Net increase (decrease) in cash and cash equivalents	2,555			(796		)
Cash and cash equivalents at beginning of year	13,597			17,036
Cash and cash equivalents at end of period	$	16,152		$	16,240

The accompanying Notes to Consolidated Financial Statements (Unaudited), which include information regarding noncash transactions, are an integral part of these consolidated financial statements.

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STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

(In Thousands)



	Stockholders’ Equity
										Common Stock Held in Treasury				Total Stockholders' Equity
	Common Stock			Capital in Excess of Par Value			Accum-ulated Deficit			Common Stock Held in Treasury							Noncontrolling Interests in Subsidiaries
	Number of Shares	At Par Value		Capital in Excess of Par Value			Accum-ulated Deficit			Number of Shares	At Cost						Noncontrolling Interests in Subsidiaries		Total Equity
Balance at December 31, 2016	9,203	$	92	$	192,762		$	(41,143	)	1,105	$	(20,760	)	$	130,951		$	75	$	131,026
Adjustment for cumulative effect of change in accounting for stock-based compensation	—	—		—			143			—	—			143			—		143
Cash dividend	—	—		(8,221		)	—			—	—			(8,221		)	—		(8,221		)
Exercised and issued stock-based awards	47	1		62			—			—	—			63			—		63
Stock-based compensation	—	—		581			—			—	—			581			—		581
Tender of shares for stock-based awards	—	—		—			—			12	(297		)	(297		)	—		(297		)
Total comprehensive income	—	—		—			10,745			—	—			10,745			8		10,753
Balance at September 30, 2017	9,250	$	93	$	185,184		$	(30,255	)	1,117	$	(21,057	)	$	133,965		$	83	$	134,048



Balance at December 31, 2015	9,160	$	91	$	192,122		$	(35,144	)	1,093	$	(20,470	)	$	136,599		$	75	$	136,674
Exercised and issued stock-based awards	43	1		(1		)	—			—	—			—			—		—
Stock-based compensation	—	—		523			—			—	—			523			—		523
Tax benefit for stock-based awards	—	—		144			—			—	—			144			—		144
Tender of shares for stock-based awards	—	—		—			—			12	(290		)	(290		)	—		(290		)
Total comprehensive loss	—	—		—			(5,825		)	—	—			(5,825		)	—		(5,825		)
Balance at September 30, 2016	9,203	$	92	$	192,788		$	(40,969	)	1,105	$	(20,760	)	$	131,151		$	75	$	131,226

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

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STRATUS PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


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, 2016, included in Stratus Properties Inc.’s (Stratus) Annual Report on Form 10-K (Stratus 2016 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments considered necessary for a fair statement of the results for the interim periods reported. With the exception of the accounting for the deferred gain on the sale of The Oaks at Lakeway, all such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three-month and nine-month periods ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.


2.	EARNINGS PER SHARE

Stratus’ basic net income (loss) per share of common stock was calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding during the period. A reconciliation of net income (loss) and weighted-average shares of common stock outstanding for purposes of calculating diluted net income (loss) per share (in thousands, except per share amounts) follows:




	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2017		2016			2017			2016
Net income (loss)	$	14,308	$	(1,659	)	$	10,753		$	(5,825	)
Net income attributable to noncontrolling interests in subsidiaries	—		—			(8		)	—
Net income (loss) attributable to Stratus common stockholders	$	14,308	$	(1,659	)	$	10,745		$	(5,825	)

Basic weighted-average shares of common stock outstanding	8,128		8,094			8,119			8,086

Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs)^a	44		—			50			—

Diluted weighted-average shares of common stock outstanding	8,172		8,094			8,169			8,086

Diluted net income (loss) per share attributable to common stockholders	$	1.75	$	(0.20	)	$	1.32		$	(0.72	)


a.	Excludes approximately 30 thousand shares of common stock for third-quarter 2017, 23 thousand shares for the first nine months of 2017, and 124 thousand shares for both the third-quarter 2016 and first nine months of 2016 associated with outstanding stock options with exercise prices less than the average market price of Stratus' common stock and RSUs that were antidilutive.


3.	DISPOSITIONS

The Oaks at Lakeway. On February 15, 2017, Stratus sold The Oaks at Lakeway to FHF I Oaks at Lakeway, LLC for $114.0 million in cash. Net cash proceeds were $50.8 million after repayment of the Lakeway construction loan (see Note 5). Stratus used a portion of these net cash proceeds to pay indebtedness outstanding under the Comerica Bank credit facility. The parties entered into three master lease agreements at closing: (1) one covering unleased in-line retail space, with a 5-year term, (2) one covering four unleased pad sites, three of which have 10-year terms, and one of which has a 15-year term, and (3) one covering the hotel pad with a 99-year term. As specified conditions are met, primarily consisting of the tenant executing a lease, commencing payment of rent and taking occupancy, leases will be assigned to the purchaser and the corresponding property will be removed from the master lease, reducing Stratus' master lease payment obligations. Stratus' master lease payment obligation, which currently approximates $180 thousand per month, is expected to decline over time until leasing is complete and all leases are assigned to the purchaser.

Stratus agreed to guarantee the obligations of its selling subsidiary under the sales agreement, up to a liability cap of two percent of the purchase price. This cap does not apply to Stratus' obligation to satisfy the selling subsidiary's indemnity obligations for its broker commissions or similar compensation or Stratus' liability in guaranteeing the selling subsidiary's obligations under the master leases. To secure its obligations under the master leases, Stratus has provided a $1.5 million irrevocable letter of credit with a three-year term.

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The gain on sale of $39.7 million was deferred as a result of Stratus’ continuing involvement under the master lease agreements with the purchaser. The hotel pad was leased to a hotel operator under a ground lease at the date of sale. However, the hotel tenant had not commenced rent payments under the ground lease or construction of its building. At the date of the sale, primarily because of the uncertainty related to the hotel tenant’s performance under its ground lease, Stratus' estimated maximum probable exposure to loss using a probability-weighted assessment of future lease payments based on the master lease agreements exceeded the gain on sale. The rent payments under the master lease agreements represent continuing support obligations and are recorded as a reduction of the deferred gain.

The rent payments related to the 99-year hotel pad master lease represent the greatest exposure to loss. In May, the hotel tenant began paying rent and, in August, obtained construction financing and commenced construction of its building. The achievement of these milestones significantly reduced Stratus' probability weighted estimated maximum exposure to loss and, in third-quarter 2017, $24.3 million of the deferred gain was recognized based on the performance of services method. The following table summarizes changes to the deferred gain during the first nine months of 2017 (in thousands):



Balance as of February 15, 2017	$	39,677
Master lease payments	(1,653		)
Revisions to costs to complete	(1,855		)
Gain recognized	(24,306		)
Balance as of September 30, 2017	$	11,863

The remaining deferred gain, as reduced by future master lease payments, will be recognized in future periods under the performance of services method, when Stratus’ continuing involvement ends or substantially all of the risks and rewards of ownership have transferred to the buyer and Stratus' remaining probability weighted estimated maximum exposure to loss under the master lease agreements is less than the deferred gain.

Upon the sale of The Oaks at Lakeway, HEB Grocery Company, L.P. (HEB) earned a profit participation of $2.5 million (of which $2.2 million was paid at closing), which is presented separately in the Consolidated Statements of Comprehensive Income (Loss).

Other. On February 28, 2017, Stratus completed the sale of its 3,085-square-foot bank building and an adjacent 4.1 acre undeveloped tract of land in Barton Creek, for $3.1 million. Stratus recorded a gain on the sale of $1.1 million and paid $2.1 million on the Barton Creek Village term loan (see Note 5).


4.	FAIR VALUE MEASUREMENTS

Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

The carrying value for certain Stratus financial instruments (i.e., cash and cash equivalents, restricted cash, accounts payable and accrued liabilities) approximates fair value because of their short-term nature and generally negligible credit losses.

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A summary of the carrying amount and fair value of Stratus' other financial instruments follows (in thousands):



	September 30, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Debt	$	227,856	$	229,865	$	291,102	$	293,620
Interest rate swap agreement	291		291		427		427

Debt. Stratus' debt is recorded at cost and is not actively traded. Fair value is estimated based on discounted future expected cash flows at estimated current market interest rates. Accordingly, Stratus' debt is classified within Level 2 of the fair value hierarchy. The fair value of debt does not represent the amounts that will ultimately be paid upon the maturities of the loans.

Interest Rate Swap Agreement. The interest rate swap does not qualify for hedge accounting and changes in its fair value are recorded in the Consolidated Statements of Comprehensive Income (Loss). Stratus evaluated the counterparty credit risk associated with the interest rate swap agreement, which is considered a Level 3 input, but did not consider such risk to be significant. Therefore, the interest rate swap agreement is classified within Level 2 of the fair value hierarchy.


5.	DEBT AND EQUITY

Debt. The components of Stratus' debt are as follows (in thousands):



	September 30, 2017		December 31, 2016
Goldman Sachs loan	$	145,669	$	147,025
Lakeway construction loan	—		57,912
Santal Phase I construction loan	32,095		30,286
Comerica Bank credit facility	38,095		46,547
Amarra Villas credit facility	5,012		3,777
Barton Creek Village term loan	3,397		5,555
West Killeen Market construction loan	3,588		—
Total debt^a	$	227,856	$	291,102


a.	Includes net reductions for unamortized debt issuance costs of $1.5 million at September 30, 2017, and $2.2 million at December 31, 2016.

In February 2017, Stratus repaid the Lakeway construction loan with proceeds from the sale of The Oaks at Lakeway and paid $2.1 million on the Barton Creek Village term loan (see Note 3). As of September 30, 2017, Stratus had $6.9 million available under its $45.0 million revolving loan under its Comerica Bank credit facility.

On April 28, 2017, Lantana Place, LLC., a wholly owned subsidiary of Stratus, entered into a $26.3 million construction loan with Southside Bank (the Lantana Place construction loan) to finance the initial phase of Lantana Place, a 320,000-square-foot, mixed-use development project in southwest Austin. Construction of the first phase of Lantana Place began in June 2017. No amounts were drawn on the Lantana Place construction loan as of September 30, 2017. Interest is variable at the one-month London Interbank Offered Rate (LIBOR) plus 2.75 percent, subject to a minimum interest rate of 3.0 percent. Payments of interest only will be due and payable monthly, through November 1, 2020. The principal balance outstanding after November 1, 2020, will be payable in equal monthly installments of principal and interest based on a 30-year amortization. Outstanding amounts must be repaid in full on or before April 28, 2023, and can be prepaid without penalty. Outstanding amounts will be secured by the Lantana Place project and all subsequent improvements, including all leases and rents associated with the development. The agreement contains affirmative and negative covenants usual and customary for loan agreements of this nature, including, but not limited to, a financial covenant to maintain a debt service coverage ratio of at least 1.35 to 1.00 at all times beginning on December 31, 2019. Stratus will guarantee outstanding amounts under the loan until the development is able to maintain a debt service ratio of 1.50 to 1.00 for a period of six consecutive months.

On August 3, 2017, Stratus extended the maturity of its credit facility with Comerica Bank by three months to November 30, 2017. On November 7, 2017, Stratus further extended the maturity of its credit facility by one year to November 30, 2018 (see Note 10).

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On September 1, 2017, College Station 1892 Properties, L.L.C. (1892 Properties), a wholly owned subsidiary of Stratus, entered into a $36.8 million construction loan with Southside Bank (the Jones Crossing construction loan) to finance construction of Phases 1 and 2, the retail component, of Stratus' Jones Crossing project, a new HEB-anchored, mixed use development in College Station, Texas. Construction of the initial two phases of the Jones Crossing project began in September 2017, and the HEB grocery store is expected to open in mid-2018. No amounts were drawn on the Jones Crossing construction loan as of September 30, 2017. Interest is variable at the one-month LIBOR plus 3.75 percent, subject to a minimum interest rate of 4.0 percent. Beginning on October 1, 2017, payments of interest will be due and payable monthly, through March 1, 2021. The principal balance of the loan outstanding after March 1, 2021, will be payable in equal monthly installments of principal and interest based on a 30-year amortization. Outstanding amounts must be repaid in full on or before September 1, 2023. The loan is secured by the Jones Crossing project and all subsequent improvements, including all leases and rents associated with the development as well as related permits and other entitlements. The loan agreement and related documents contain affirmative and negative covenants usual and customary for loan agreements of this nature, including, but not limited to, a financial covenant to maintain a debt service coverage ratio of at least 1.35 to 1.00 at all times beginning on March 31, 2020. Stratus will guarantee outstanding amounts under the loan until Phases 1 and 2 of the Jones Crossing development are completed and the development is able to maintain a debt service ratio of 1.50 to 1.00 as of the end of any fiscal quarter.

On September 11, 2017, Santal I, L.L.C. (Santal), a wholly owned subsidiary of Stratus, entered into an amended and restated construction loan agreement with Comerica Bank. The amended agreement increases the original commitment amount of $34.1 million to $59.2 million, which includes $32.8 million for Santal Phase I and an additional $26.4 million for the construction of Santal Phase II. Santal Phase II is a 212-unit garden style, multi-family development located adjacent to Santal Phase I. Both the Santal Phase I and the Santal Phase II loans have a maturity date of September 11, 2020. As of September 30, 2017, a total of $32.1 million was drawn on the Santal Phase I loan and no amounts were drawn on the Santal Phase II loan. The interest rate applicable to the Santal Phase I loan is a LIBOR-based rate plus 2.5 percent per annum. The interest rate applicable to the Santal Phase II loan is a LIBOR-based rate plus 3.0 percent per annum. Payments of interest on each loan are due and payable monthly, through September 11, 2020. Outstanding amounts will be secured by Santal Phase I and Santal Phase II and all subsequent improvements, including all leases and rents associated with the developments as well as related permits and other entitlements related to Santal Phase I and Santal Phase II. The construction loan agreements and related documents contain affirmative and negative covenants usual and customary for loan agreements of this nature. Santal may extend the maturity of the loan for up to two additional 12-month periods subject to satisfaction of certain conditions, including a debt service coverage ratio of at least 1.10 to 1.00 on the date immediately preceding the commencement of the first extension period and 1.20 to 1.00 on the date immediately preceding the commencement of the second extension period.

For a description of Stratus' outstanding loans, refer to Note 7 in the Stratus 2016 Form 10-K.

Interest Expense and Capitalization. Interest costs (before capitalized interest) totaled $3.1 million in third-quarter 2017, $4.1 million in third-quarter 2016, $9.3 million for the first nine months of 2017 and $11.7 million for the first nine months of 2016. Stratus' capitalized interest costs totaled $1.5 million in third-quarter 2017, $1.5 million in third-quarter 2016, $4.3 million for the first nine months of 2017 and $4.8 million for the first nine months of 2016, primarily related to development activities at Barton Creek in 2017, and at Barton Creek and The Oaks at Lakeway in 2016.

Equity. Stratus' Comerica Bank credit facility requires the bank's prior written consent to pay a dividend on Stratus' common stock. On March 15, 2017, Stratus' Board of Directors (the Board), after receiving written consent from Comerica Bank, declared a special cash dividend of $1.00 per share ($8.1 million), which was paid on April 18, 2017, to stockholders of record on March 31, 2017. The special cash dividend was declared after the Board’s consideration of the results of the sale of The Oaks at Lakeway. Comerica Bank’s consent to the payment of this special dividend is not indicative of the bank’s willingness to consent to the payment of future dividends. The declaration of future dividends is at the discretion of the Board, subject to the restrictions under Stratus' Comerica Bank credit facility, and will depend on Stratus' financial results, cash requirements, projected compliance with covenants in its debt agreements, outlook and other factors deemed relevant by the Board.

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6.	INCOME TAXES

Stratus’ accounting policy for and other information regarding its income taxes is further described in Notes 1 and 8 in the Stratus 2016 Form 10-K.

Stratus had deferred tax assets (net of deferred tax liabilities) totaling $18.6 million at September 30, 2017, and $17.2 million at December 31, 2016. Stratus’ income tax expense for the first nine months of 2017 includes current income tax expense of $7.5 million partly offset by a deferred tax benefit of $1.3 million. Stratus’ future results of operations may be negatively impacted by an inability to realize a tax benefit for future tax losses or for items that will generate additional deferred tax assets.

The difference between Stratus' consolidated effective income tax rate for the first nine months of 2017 and the first nine months of 2016, and the U.S. Federal statutory income tax rate of 35 percent, was primarily attributable to the Texas state margin tax.


7.	BUSINESS SEGMENTS

Stratus currently has four operating segments: Real Estate Operations, Leasing Operations, Hotel and Entertainment.

The Real Estate Operations segment is comprised of Stratus’ real estate assets (developed, under development and available for development), which consists of its properties in Austin, Texas (the Barton Creek community, including Santal Phase II, the Circle C community, Lantana Place and the condominium units at the W Austin Hotel & Residences); in Lakeway, Texas located in the greater Austin area (Lakeway); in College Station, Texas (Jones Crossing); and in Magnolia, Texas, located in the greater Houston area (Magnolia).

The Leasing Operations segment includes the office and retail space at the W Austin Hotel & Residences, a retail building in Barton Creek Village, Santal Phase I and the West Killeen Market in Killeen, Texas.

The Hotel segment includes the W Austin Hotel located at the W Austin Hotel & Residences in downtown Austin, Texas.

The Entertainment segment includes ACL Live, a live music and entertainment venue and production studio at the W Austin Hotel & Residences. In addition to hosting concerts and private events, this venue is the home of Austin City Limits, a television program showcasing popular music legends. The Entertainment segment also includes revenues and costs associated with events hosted at other venues, including 3TEN ACL Live, which opened in March 2016 on the site of the W Austin Hotel & Residences, and the results of the Stageside Productions joint venture with Pedernales Entertainment LLC (see Note 2 in the Stratus 2016 Form 10-K for further discussion).

Stratus uses operating income or loss to measure the performance of each segment. General and administrative expenses, which primarily consist of employee salaries, wages and other costs, are managed on a consolidated basis and are not allocated to Stratus' operating segments. The following segment information reflects management determinations that may not be indicative of what the actual financial performance of each segment would be if it were an independent entity. The following segment information was prepared on the same basis as Stratus’ consolidated financial statements (in thousands).




	Real Estate Operations^a		Leasing Operations				Hotel		Entertainment		Eliminations and Other^b			Total
Three Months Ended September 30, 2017:
Revenues:
Unaffiliated customers	$	2,923	$	1,923			$	7,738	$	4,638	$	—		$	17,222
Intersegment	115		222				57		17		(411		)	—
Cost of sales, excluding depreciation	2,204		1,100				6,678		3,799		(144		)	13,637
Depreciation	57		739				886		384		(35		)	2,031
General and administrative expenses	—		—				—		—		2,220			2,220
Gain on sales of assets	—		(24,306		)	^c	—		—		—			(24,306		)
Operating income (loss)	$	777	$	24,612			$	231	$	472	$	(2,452	)	$	23,640
Capital expenditures^d	$	3,222	$	9,066			$	15	$	182	$	—		$	12,485
Total assets at September 30, 2017	183,643		71,041				103,560		36,888		15,332			410,464

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	Real Estate Operations^a		Leasing Operations		Hotel		Entertainment			Eliminations and Other^b			Total
Three Months Ended September 30, 2016:
Revenues:
Unaffiliated customers	$	6,155	$	2,567	$	8,268	$	4,190		$	—		$	21,180
Intersegment	8		203		60		6			(277		)	—
Cost of sales, excluding depreciation	4,076		1,398		6,893		3,837			(135		)	16,069
Depreciation	55		920		873		378			(37		)	2,189
General and administrative expenses	—		—		—		—			2,497			2,497
Operating income (loss)	$	2,032	$	452	$	562	$	(19	)	$	(2,602	)	$	425
Capital expenditures^d	$	3,290	$	2,385	$	16	$	(16	)	$	—		$	5,675
Total assets at September 30, 2016	171,465		119,968		104,674		38,240			23,502			457,849



Nine Months Ended September 30, 2017:
Revenues:
Unaffiliated customers	$	9,108	$	6,015			$	27,817	$	16,375	$	—		$	59,315
Intersegment	136		653				230		142		(1,161		)	—
Cost of sales, excluding depreciation	8,048		3,773				21,323		12,756		(528		)	45,372
Depreciation	171		2,070				2,654		1,137		(104		)	5,928
General and administrative expenses	—		—				—		—		8,462			8,462
Profit participation	—		2,538				—		—		—			2,538
Gain on sales of assets	—		(25,421		)	^c	—		—		—			(25,421		)
Operating income (loss)	$	1,025	$	23,708			$	4,070	$	2,624	$	(8,991	)	$	22,436
Capital expenditures^d	$	11,196	$	13,845			$	273	$	245	$	—		$	25,559



Nine Months Ended September 30, 2016:
Revenues:
Unaffiliated customers	$	9,858	$	6,761	$	29,501	$	13,236	$	—		$	59,356
Intersegment	24		564		220		90		(898		)	—
Cost of sales, excluding depreciation	8,174		3,319		22,322		10,869		(436		)	44,248
Depreciation	169		2,162		2,570		1,084		(131		)	5,854
General and administrative expenses	—		—		—		—		9,718			9,718
Operating income (loss)	$	1,539	$	1,844	$	4,829	$	1,373	$	(10,049	)	$	(464	)
Capital expenditures^d	$	10,919	$	24,280	$	277	$	263	$	—		$	35,739


a.	Includes sales commissions and other revenues together with related expenses.


b.	Includes consolidated general and administrative expenses and eliminations of intersegment amounts.


c.	Includes $24.3 million associated with recognition of a portion of the deferred gain on the sale of The Oaks at Lakeway (see Note 3 for further discussion).


d.	Also includes purchases and development of residential real estate held for sale.


8.	NEW ACCOUNTING STANDARDS

In May 2014, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) that provides a single comprehensive revenue recognition model, which will replace most existing revenue recognition guidance, and also requires expanded disclosures. The core principle of the model is that revenue is recognized when control of goods or services has been transferred to customers at an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. For public entities, this ASU is effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, and interim reporting periods within that reporting period. Stratus will adopt this ASU January 1, 2018. Stratus currently expects the largest impact of the adoption of this ASU to be related to the gain on the sale of The Oaks at Lakeway. Stratus continues to review the impact of the new guidance on its financial reporting and disclosures.

In March 2016, FASB issued an ASU that simplifies various aspects of the accounting for share-based payment transactions, including the income tax consequences, statutory tax withholding requirements, an accounting policy election for forfeitures and the classification on the statement of cash flows. Stratus adopted this ASU on January 1, 2017, on a modified retrospective basis and recorded a cumulative effect adjustment of $143 thousand to its 2017 opening accumulated deficit balance.

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9.	COMMITMENTS AND CONTINGENCIES

Operating Leases. In August 2017, a wholly owned subsidiary of Stratus finalized a 99-year ground lease agreement for the Jones Crossing project (see Note 5). The annual contractual payments under this noncancelable long-term operating lease total $39 thousand in 2017, $155 thousand for 2018, $233 thousand for 2019, $295 thousand for 2020, $419 thousand for the 2021 period and $111.5 million thereafter.


10.	SUBSEQUENT EVENTS

On November 7, 2017, Stratus’ credit facility with Comerica Bank was amended to extend the maturity date by one year to November 30, 2018, and to eliminate the minimum interest rate of 6 percent so that the interest rate applicable to amounts borrowed under each tranche is equal to an annual rate of LIBOR plus 4.0 percent. Stratus is continuing to negotiate a modification and a longer-term extension of the credit facility with Comerica Bank.

Stratus evaluated events after September 30, 2017, and through the date the financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us,” “our” and "Stratus" refer to Stratus Properties Inc. and all entities owned or controlled by Stratus Properties Inc. You should read the following discussion in conjunction with our financial statements, the related MD&A and the discussion of our business and properties included in our Annual Report on Form 10-K for the year ended December 31, 2016 (2016 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results, and future results could differ materially from those anticipated in forward-looking statements (refer to "Cautionary Statement" for further discussion). All subsequent references to “Notes” refer to Notes to Consolidated Financial Statements (Unaudited) located in Part I, Item 1. “Financial Statements” of this Form 10-Q, unless otherwise stated.

We are a diversified real estate company engaged primarily in the acquisition, entitlement, development, management, operation and sale of commercial, hotel, entertainment, and multi- and single-family residential real estate properties, primarily located in the Austin, Texas area, but including projects in certain other select markets in Texas. We generate revenues and cash flows from the sale of developed properties, rental income from our leased properties and our hotel and entertainment operations. See Note 7 for further discussion of our operating segments.

Developed property sales can include an individual tract of land that has been developed and permitted for residential use, a developed lot with a home already built on it or condominium units at the W Austin Residences. We may sell properties under development, undeveloped properties or commercial properties, if opportunities arise that we believe will maximize overall asset value as part of our business plan. See "Business Strategy" below.

Acreage under development and undeveloped as of September 30, 2017, that comprise our real estate development operations are presented in the following table.



	Under Development				Undeveloped
	Single Family	Multi- family	Commercial	Total	Single family	Multi-family	Commercial	Total	Total Acreage
Austin:
Barton Creek	4	47	—	51	512	289	394	1,195	1,246
Circle C	—	—	—	—	—	36	216	252	252
Lantana	—	—	11	11	—	—	44	44	55
W Austin Residences	—	—	—	—	—	—	—	—	—
Other		—	—	—	7	—	—	7	7
Lakeway^a	—	—	—	—	35	—	—	35	35
Magnolia	—	—	—	—	—	—	124	124	124
Jones Crossing		—	72	72	—	—	—	—	72
San Antonio:
Camino Real	—	—	—	—	—	—	2	2	2
Total	4	47	83	134	554	325	780	1,659	1,793


a.	On February 15, 2017, we sold The Oaks at Lakeway, which included 52 acres of land under development at December 31, 2016, but we retained 34.7 acres of undeveloped land adjacent to the project.

In third-quarter 2017, our revenues totaled $17.2 million and our net income attributable to common stockholders totaled $14.3 million, compared with revenues of $21.2 million and a net loss attributable to common stockholders of $1.7 million for third-quarter 2016. For the first nine months of 2017, our revenues totaled $59.3 million and our net income attributable to common stockholders totaled $10.7 million, compared with revenues of $59.4 million and a net loss attributable to common stockholders of $5.8 million for the first nine months of 2016.

The decrease in revenues for the 2017 periods primarily reflects lower developed property sales and decreased revenues from the Hotel segment, partly offset by an increase in revenues from the Entertainment segment. The results for third-quarter 2017 and the first nine months of 2017 include a gain on the sale of assets totaling $24.3 million ($15.7 million to net income attributable to common stockholders) associated with recognition of a portion of

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the deferred gain on the sale of The Oaks at Lakeway (see Note 3). The results for the first nine months of 2017 also include a $1.1 million gain on sales of assets ($0.7 million to net income attributable to common stockholders) associated with a bank building and an adjacent undeveloped 4.1 acre tract of land in Barton Creek (see Note 3), a charge of $2.5 million ($1.6 million to net income attributable to common stockholders) for profit participation costs and a loss of $0.5 million ($0.3 million to net income attributable to common stockholders) on early extinguishment of debt, both related to our sale of The Oaks at Lakeway. The results for the first nine months of 2016 include a loss on early extinguishment of debt totaling $0.8 million ($0.5 million to net loss attributable to common stockholders) associated with the refinancing of the W Austin Hotel & Residences and a $0.3 million loss ($0.2 million to net loss attributable to common stockholders) related to interest rate derivative instruments.

We used the proceeds from the sale of The Oaks at Lakeway to repay the Lakeway construction loan and our outstanding balances under the Comerica Bank credit facility. A portion of the proceeds from the sale of the Barton Creek property was used to repay a portion of the Barton Creek term loan (see "Development Activities - Commercial" and Note 3 for further discussion).

At September 30, 2017, we had total debt of $227.9 million and total cash and cash equivalents of $16.2 million, compared with total debt of $291.1 million and cash and cash equivalents of $13.6 million at December 31, 2016. We have significant recurring costs, including property taxes, maintenance and marketing, and we believe we will have sufficient sources of debt financing and cash from operations to meet our cash requirements. See "Capital Resources and Liquidity" below regarding debt repayments and “Risk Factors” included in Part 1, Item 1A. of our 2016 Form 10-K for further discussion.

BUSINESS STRATEGY

Our strategy has been to manage our diverse asset base of residential, commercial, hotel and entertainment real estate located in the premier Austin, Texas market and in other select, fast-growing Texas markets. We enhance the value of our residential, multi-family and commercial properties by securing and maintaining development entitlements and developing and building real estate projects on these properties for sale or investment. Our hotel and ACL Live venue, which are central to Austin’s world renowned, vibrant music scene, are located in downtown Austin.

We are continuing our successful program of actively developing our properties and strategically marketing and selling developed assets at appropriate times in order to maximize stockholder value. Our active development plan includes completion of both residential and commercial development projects. Our development portfolio consists of approximately 1,700 acres of undeveloped land with development plans that include necessary regulatory approvals, entitlements and utility capacity. We believe that our portfolio, along with management’s extensive experience in Austin-area real estate development, support our ability to obtain project financing and/or seek joint venture partners including on the development projects described in "Development Activities - Commercial".

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DEVELOPMENT ACTIVITIES

Residential. As of September 30, 2017, the number of our multi-and single-family residential developed lots/units, lots under development and lots for potential development by area are shown below:



	Residential Lots/Units
	Developed	Under Development	Potential Development^a	Total
Barton Creek:
Amarra Drive:
Phase II	12	—	20	32
Phase III	40	4	150	194
Amarra Villas	—	19	—	19
Section N:
Santal multi-family Phase I	236	—	—	236
Santal multi-family Phase II	—	212	—	212
Other Section N multi-family	—	—	1,412	1,412
Other Barton Creek sections	—	—	156	156
Circle C:
Meridian	2	—	—	2
The St. Mary multi-family	—	—	240	240
Tract 102 multi-family	—	—	56	56
Lakeway	—	—	100	100
Other	—	—	7	7
W Austin Residences	2	—	—	2
Total Residential Lots/Units	292	235	2,141	2,668

Our development of the properties identified under the heading “Potential Development” is dependent upon the approval of our development plans and permits by governmental agencies, including the City of Austin (the City). Those governmental agencies may not approve one or more development plans and permit applications related to such properties or may require us to modify our development plans. Accordingly, our development strategy with respect to those properties may change in the future. While we may be proceeding with approved infrastructure projects or planning activities for some of these properties, they are not considered to be “under development” for disclosure in this table until construction activities have begun.

Current Activities.

During third-quarter 2017, we sold one Phase II lot at Amarra Drive for $0.6 million, two Phase III lots at Amarra Drive for $1.5 million and three Meridian lots for $0.8 million. We also began construction of four homes on Phase III lots at Amarra Drive during third-quarter 2017, moving four lots from the developed category to under development. During the first nine months of 2017, we sold one Amarra Villa townhome for $2.2 million, one Phase II lot at Amarra Drive for $0.6 million, four Phase III lots at Amarra Drive for $2.8 million and ten Meridian lots for $2.8 million (see "Results of Operations - Real Estate Operations"). As of October 31, 2017, two Phase II lots at Amarra Drive, four Phase III lots at Amarra Drive and the last two lots at Meridian were under contract. Also, as of October 31, 2017, two Amarra Villas townhomes were under contract, both of which are under construction.

As of October 31, 2017, nearly 100 percent of the 236 units at our Santal Phase I multi-family project were leased. On September 11, 2017, we entered into an amended loan agreement that increased the original commitment of $34.1 million to $59.2 million, which includes a $32.8 million loan for Santal Phase I and an additional $26.4 million for construction of Santal Phase II, a 212-unit garden style, multi-family development located adjacent to Santal Phase I (see Note 5). We began construction of Santal Phase II in September 2017.

For further discussion of our multi- and single-family residential properties listed in the table above, see MD&A in our 2016 Form 10-K.

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Commercial. As of September 30, 2017, the number of square feet of our commercial property developed, under development and our remaining entitlements for potential development (excluding property associated with our unconsolidated joint venture with Tramell Crow Central Texas Development, Inc. relating to Crestview Station in Austin, and the W Austin Hotel and ACL Live entertainment venue) are shown below:



	Commercial Property
	Developed	Under Development	Potential Development^a	Total
	(in square feet)
Barton Creek:
Barton Creek Village	22,366	—	—	22,366
Entry corner	—	—	5,000	5,000
Amarra retail/office	—	—	83,081	83,081
Section N	—	—	1,500,000	1,500,000
Circle C	—	—	674,942	674,942
Lantana:
Lantana Place	—	99,663	220,337	320,000
Tract G07	—	—	160,000	160,000
W Austin Hotel & Residences:
Office	38,316	—	—	38,316
Retail	18,327	—	—	18,327
Magnolia	—	—	351,000	351,000
West Killeen Market	44,000	—	—	44,000
Jones Crossing	—	153,250	104,750	258,000
Total Square Feet	123,009	252,913	3,099,110	3,475,032

Our development of the properties identified under the heading “Potential Development” is dependent upon the approval of our development plans and permits by governmental agencies, including the City. Those governmental agencies may not approve one or more development plans and permit applications related to such properties or may require us to modify our development plans. Accordingly, our development strategy with respect to those properties may change in the future. While we may be proceeding with approved infrastructure projects or planning activities for some of these properties, they are not considered to be “under development” for disclosure in this table until construction activities have begun.

Current Activities.

In September 2017, we entered into a $36.8 million construction loan to finance the construction of Phases 1 and 2, the retail component, of Stratus' Jones Crossing project, a new HEB Grocery Company, L.P. (HEB)-anchored, mixed use development in College Station, Texas. The Jones Crossing project is expected to total approximately 258,000 square feet of commercial space, including a 106,000 square-foot HEB grocery store. Construction of the retail component of the Jones Crossing project began in September 2017, and the HEB grocery store is expected to open in mid-2018.

As of September 30, 2017, leases for 60 percent of the space at West Killeen Market have been executed and leasing activities for the remaining space continues. Construction at Lantana Place is in progress.

In February 2017, we completed the sale of The Oaks at Lakeway for $114.0 million and we sold the 3,085-square-foot bank building and the adjacent undeveloped 4.1 acre tract of land in Barton Creek for $3.1 million (see Note 3 and "Results of Operations - Leasing Operations").

For further discussion of our commercial properties listed in the table above, see MD&A in our 2016 Form 10-K.

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RESULTS OF OPERATIONS

We are continually evaluating the development and sale potential of our properties and will continue to consider opportunities to enter into transactions involving our properties, including possible joint ventures or other arrangements. 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.

The following table summarizes our results (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Operating income (loss):
Real estate operations	$	777		$	2,032		$	1,025		$	1,539
Leasing operations	24,612			452			23,708			1,844
Hotel	231			562			4,070			4,829
Entertainment	472			(19		)	2,624			1,373
Corporate, eliminations and other	(2,452		)	(2,602		)	(8,991		)	(10,049		)
Operating income (loss)	$	23,640		$	425		$	22,436		$	(464	)
Interest expense, net	$	(1,577	)	$	(2,579	)	$	(5,060	)	$	(6,894	)
Net income (loss) attributable to common stockholders	$	14,308		$	(1,659	)	$	10,745		$	(5,825	)

We have four operating segments: Real Estate Operations, Leasing Operations, Hotel and Entertainment (see Note 7 for further discussion). The following is a discussion of our operating results by segment.

Real Estate Operations

The following table summarizes our Real Estate Operations results (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Revenues:
Developed property sales	$	2,860	$	6,063	$	8,436	$	9,428
Undeveloped property sales	—		—		544		73
Commissions and other	178		100		264		381
Total revenues	3,038		6,163		9,244		9,882
Cost of sales, including depreciation	2,261		4,131		8,219		8,343
Operating income	$	777	$	2,032	$	1,025	$	1,539

Operating income from the Real Estate Operations segment decreased in the 2017 periods, compared to the 2016 periods, primarily as a result of fewer developed property sales.

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Developed Property Sales. The following tables summarize our developed property sales (dollars in thousands):



	Three Months Ended September 30,
	2017					2016
	Lots/Units	Revenues		Average Cost Per Lot/Unit		Lots	Revenues		Average Cost Per Lot
Barton Creek
Amarra Drive:
Phase II	1	$	560	$	193	—	$	—	$	—
Phase III	2	1,475		$	316	5	3,913		363

Circle C
Meridian	3	825		156		8	2,150		151
Total Residential	6	$	2,860			13	$	6,063



	Nine Months Ended September 30,
	2017					2016
	Lots/Units	Revenues		Average Cost Per Lot/Unit		Lots	Revenues		Average Cost Per Lot
Barton Creek
Amarra Drive:
Phase II	1	$	560	$	193	1	$	550	$	190
Phase III	4	2,840		304		5	3,913		363
Amarra Villas	1	2,193		2,004		—	—		—

Circle C
Meridian	10	2,843		160		18	4,965		155
Total Residential	16	$	8,436			24	$	9,428

Cost of Sales. Cost of sales includes costs of property sold, project operating and marketing expenses and allocated overhead costs, partly offset by reductions for certain municipal utility district (MUD) reimbursements. Real estate cost of sales decreased in third-quarter 2017, compared to third-quarter 2016, primarily as a result of fewer developed property sales. Real estate cost of sales decreased for the first nine months of 2017, compared to the first nine months of 2016, primarily as a result of fewer developed property sales, mostly offset by higher costs associated with the sale of the Amarra Villas townhome.

Leasing Operations

The following table summarizes our Leasing Operations results (in thousands):

STRATUS PROPERTIES INC - FORM 10-Q - November 9, 2017

Attached files