STRATUS PROPERTIES INC

Previous wording

From time to time, when deemed appropriate by our Board of Directors (the Board) and permitted pursuant to the terms of our debt agreements, we may return capital to stockholders, as we did in 2022 and 2017 with special cash dividends totaling approximately $40 million and $8 million, respectively, and as we did during 2022 and 2023 through our $10.0 million share repurchase program, which was completed in October 2023. In November 2023, our Board approved a new $5.0 million share repurchase program, and as of March 31, 2025, we had repurchased $2.0 million of our shares under the program.

Current wording

From time to time, when deemed appropriate by our Board of Directors (the Board) and permitted pursuant to the terms of our debt agreements, we may return capital to stockholders, as we did in 2022 and 2017 with special cash dividends totaling approximately $40 million and $8 million, respectively, and as we did during 2022 and 2023 through our $10.0 million share repurchase program, which was completed in October 2023. In November 2023, our Board approved a new $5.0 million share repurchase program, and in June 2025, our Board approved an increase in the share repurchase program to $25.0 million. As of August 8, 2025, we had repurchased $3.0 million of our shares under the program.

Previous wording

Our investment strategy focuses on projects that we believe will provide attractive long-term returns, while limiting our financial risk. We plan to continue to develop properties using project-level debt and third-party equity capital through joint ventures in which we receive development management fees and asset management fees, with our potential returns increasing above our relative equity interest in each project as negotiated return hurdles are achieved. Refer to Note 3. We expect to continue our limited use of our revolving credit facility and to retain sufficient cash to operate our business, taking into account risks associated with changing market conditions and the variability in cash flows from our business.

Current wording

Our investment strategy focuses on projects that we believe will provide attractive long-term returns, while limiting our financial risk. We plan to continue to develop properties using project-level debt and third-party equity capital through joint ventures in which we receive development management fees and asset management fees, with our potential returns increasing above our relative equity interest in certain projects as negotiated return hurdles are achieved. Refer to Note 3. We expect to continue our limited use of our revolving credit facility and to retain sufficient cash to operate our business, taking into account risks associated with changing market conditions and the variability in cash flows from our business.

Previous wording

Our main sources of revenue and cash flow are expected to be sales of our properties to third parties or distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors. We also generate cash flow from rental income in our leasing operations and from development and asset management fees received from our properties. Due to the nature of our development-focused business, we do not expect to generate sufficient recurring cash flow to cover our general and administrative expenses each period. However, we believe that the unique nature and location of our assets, and our team’s ability to execute successfully on development projects, have provided and will continue to provide us with positive cash flows and net income over time, as evidenced by our sales of The Santal and The Saint Mary in 2021 and Block 21 in 2022, the cash distribution from the Holden Hills Phase 1 partnership in 2023 and our property sales in 2024. Further, we believe our investment strategy, current liquidity and portfolio of projects provide us with many opportunities to increase value for our stockholders.

Current wording

Our main sources of revenue and cash flow are expected to be sales of our properties to third parties, debt financings and distributions from joint ventures, the timing of and proceeds from which are difficult to predict and depend on market conditions and other factors. We also generate cash flow from rental income in our leasing operations and from development and asset management fees received from our properties. Due to the nature of our development-focused business, we do not expect to generate sufficient recurring cash flow to cover our general and administrative expenses each period. However, we believe that the unique nature and location of our assets, and our team’s ability to execute successfully on development projects, have provided and will continue to provide us with positive cash flows and net income over time, as evidenced by our sales of The Santal and The Saint Mary in 2021 and Block 21 in 2022, the cash distributions from the Holden Hills Phase 1 partnership in 2023 and the Holden Hills Phase 2 partnership in June 2025 and our other property sales in 2024 and the first six months of 2025. Further, we believe our investment strategy, current liquidity and portfolio of projects provide us with many opportunities to increase value for our stockholders.

Previous wording

We do not currently have any material commitments to contribute additional cash to our joint venture projects or wholly owned development projects other than the potential additional $10.0 million of capital that we may be required to contribute to our Holden Hills Phase 1 partnership and our share (related to Holden Hills Phase 2) of the cost of the Tecoma Improvements (as defined below). As of March 31, 2025, the Holden Hills Phase 1 partnership had $3.0 million remaining to complete the Tecoma Improvements, of which our share totaled $1.8 million. However, over the past two years and in first-quarter 2025, we made operating loans and a capital contribution to our joint ventures. Refer to Note 3 herein and Note 2 of the 2024 Form 10-K for further discussion. We anticipate making future operating loans to the limited partnership for The Annie B totaling up to $2.1 million and a capital contribution to the limited partnership for The Saint George of $370 thousand over the next 12 months, including potential costs of water leak remediation and repairs to be borne by the partnership as described in Note 10. Our estimates of future operating loans and capital contributions are based on estimates of future costs of the partnerships. Refer to Note 3 and “Capital Resources and Liquidity” for further discussion. In addition, our development plans for future projects require significant additional capital.

Current wording

We do not currently have any material commitments to contribute additional cash to our joint venture projects or wholly owned development projects other than the potential additional $10.0 million of capital that we may be required to contribute to our Holden Hills Phase 1 partnership and our share (related to Holden Hills Phase 2) of the cost of the Tecoma Improvements (as defined below). As of June 30, 2025, our share of the estimated remaining costs to complete the Tecoma Improvements totaled $1.0 million. However, over the past two years and in the first six months of 2025, we made operating loans and a capital contribution to our joint ventures. Refer to Note 3 herein and Note 2 of the 2024 Form 10-K for further discussion. Over the next 12 months, we anticipate making future operating loans to the limited partnership for The Annie B totaling up to $2.8 million and a capital contribution to the limited partnership for The Saint George of $430 thousand, representing our 10 percent equity share of debt service and project costs needed by the partnership, including potential costs of water leak damage remediation and repairs as described below in “Recent Development Activities”. Our estimates of future operating loans and capital contributions are based on current estimates of future costs of the partnerships. Refer to Note 3 and “Capital Resources and Liquidity” for further discussion. In addition, our development plans for future projects require significant additional capital.

Previous wording

We were challenged by difficult conditions in the real estate business over the past two years and in first-quarter 2025. Interest rates, which began rising in 2022, continued to increase during 2023, and costs remained elevated. During 2024, interest rates stabilized, and in the latter part of 2024 and first-quarter 2025, interest rates generally declined; however, costs remained elevated. We saw limited opportunities for transactions on favorable terms. Nevertheless, we made important progress executing our business strategy during 2024 and first-quarter 2025.

Current wording

We were challenged by difficult conditions in the real estate business over the past two years and in the first six months of 2025. Interest rates, which began rising in 2022, continued to increase during 2023, and costs remained elevated. During 2024, interest rates stabilized, and in the latter part of 2024 and the first six months of 2025, interest rates generally declined; however, costs remained elevated. We saw limited opportunities for transactions on favorable terms. Nevertheless, we made important progress executing our business strategy during 2024 and the first six months of 2025.

Previous wording

During first-quarter 2025, we also advanced construction on The Saint George, the last two Amarra Villas homes and the road and utility infrastructure for Holden Hills Phase 1. The first units of The Saint George were available for occupancy in April 2025. All of these projects are expected to be completed in second-quarter 2025. We have been focusing intently on the development of Holden Hills Phase 1 and on the development plans and future financing of Holden Hills Phase 2. During the quarter, we entered into a contract to sell our stabilized West Killeen Market retail property for $13.3 million. After repaying the project loan, we expect the sale to generate approximately $7.7 million of pre-tax net cash proceeds. We continued to advance entitlements on our other development projects and to operate our four stabilized retail projects. We also took steps to advance relationships and opportunities to position us to capture value when market conditions improve. In addition, during 2024 and first-quarter 2025, we returned $2.0 million to our stockholders through our share repurchase program.

Current wording

Amarra Villas for a total of $6.8 million. We also completed construction on the last two Amarra Villas homes. We substantially completed construction of the road and utility infrastructure for Holden Hills Phase 1 and are currently working on the required landscaping. We are going through the process with Travis County for the county’s acceptance of the roadway. The first units of The Saint George were available for occupancy in April 2025 and the project was completed in June 2025. We have been focusing intently on the development of Holden Hills Phase 1 and on the development plans and future financing of Holden Hills Phase 2. We continued to advance entitlements on our other development projects and to operate our three stabilized retail projects. We also took steps to advance relationships and opportunities to position us to capture value when market conditions improve. In addition, beginning in 2024 and through August 8, 2025, we returned $3.0 million to our stockholders through our share repurchase program.

Previous wording

Changes to U.S. tariffs and trade policies during first-quarter 2025 have introduced additional uncertainties regarding future U.S. real estate market conditions. Refer to Part II, Item 1A. “Risk Factors” herein. We believe we have sufficient liquidity and access to capital to sell properties when market conditions are favorable to us and to hold or refinance our properties or to continue to develop our properties, as applicable, through the market cycle. We expect to re-evaluate our strategy as sales and development progress on the projects in our portfolio and as market conditions continue to evolve.

Current wording

Changes to U.S. tariffs and trade policies during the first six months of 2025 have introduced additional uncertainties regarding future U.S. real estate market conditions. Refer to Part II, Item 1A. “Risk Factors” herein. We believe we have sufficient liquidity and access to capital to sell properties when market conditions are favorable to us and to hold or refinance our properties or to continue to develop our properties, as applicable, through the market cycle. We expect to re-evaluate our strategy as sales and development progress on the projects in our portfolio and as market conditions continue to evolve.

Previous wording

Our net loss attributable to common stockholders totaled $(2.9) million, or $(0.36) per diluted share in first-quarter 2025, compared to net income attributable to common stockholders of $4.6 million, or $0.56 per diluted share, in first-quarter 2024.

Current wording

Our net income attributable to common stockholders totaled $0.3 million, or $0.03 per diluted share in second-quarter 2025, compared to net loss attributable to common stockholders of $1.7 million, or $0.21 per diluted share, in second-quarter 2024. During the first six months of 2025 our net loss attributable to common stockholders totaled $2.6 million, or $0.32 per diluted share, compared to net income attributable to common stockholders of $2.8 million, or $0.35 per diluted share, during the first six months of 2024.

Previous wording

Amarra Villas. The Villas at Amarra Drive (Amarra Villas) project is a 20-unit development in Barton Creek. In first-quarter 2024, we sold two of the homes for a total of $7.6 million. As of March 31, 2025, we have three completed homes in inventory and construction on the last two homes continues to progress and is expected to be completed in second-quarter 2025. As of May 9, 2025, five homes remain available for sale.

Current wording

Amarra Villas. The Villas at Amarra Drive (Amarra Villas) project is a 20-unit development in Barton Creek. In first-quarter 2024, we sold two of the homes for a total of $7.6 million. In second-quarter 2024, we sold one of the homes for $3.6 million. In second-quarter 2025, we completed construction on the last two homes, and we sold two of the homes for a total of $6.8 million. As of August 8, 2025, three completed homes remain available for sale.

Previous wording

We entered into a limited partnership agreement with a third-party equity investor for Holden Hills Phase 1 in January 2023, and in February 2023 obtained construction financing for road and utility infrastructure of Holden Hills Phase 1. Construction on the road and utility infrastructure is expected to be completed in second-quarter 2025. As a result of the removal of Holden Hills Phase 1 from Austin’s extraterritorial jurisdiction (ETJ) pursuant to Texas Senate Bill 2038 (the ETJ Law), as described below, our development plans for portions of Holden Hills Phase 1 are being adjusted to benefit from the new regulatory scheme. We anticipate being in a position to start building homes and/or selling home sites in late 2025, assuming regulators timely fulfill their permit processing obligations and there are no further changes in the regulatory environment. For additional discussion, refer to Items 1. and 2. “Business and Properties” in our 2024 Form 10-K.

Current wording

We entered into a limited partnership agreement with a third-party equity investor for Holden Hills Phase 1 in January 2023, and in February 2023 obtained construction financing for road and utility infrastructure of Holden Hills Phase 1. Construction of the road and utility infrastructure was substantially completed in second-quarter 2025 and we are currently working on the required landscaping. We are going through the process with Travis County for the county’s acceptance of the roadway. As a result of the removal of Holden Hills Phase 1 from Austin’s extraterritorial jurisdiction (ETJ) pursuant to Texas Senate Bill 2038 (the ETJ Law), as described below, our development plans for portions of Holden Hills Phase 1 are being adjusted to benefit from the new regulatory scheme. We anticipate being in a position to start building homes and/or selling home sites in late 2025, assuming regulators timely fulfill their permit processing obligations and there are no further changes in the regulatory environment. For additional discussion, refer to Items 1. and 2. “Business and Properties” in our 2024 Form 10-K.

Previous wording

Further, we entered into a development agreement with the Holden Hills Phase 1 partnership (Development Agreement) that provides that, as part of the road and utility infrastructure, the Holden Hills Phase 1 partnership will construct certain street, drainage, water, sidewalk, electric and gas improvements in order to extend the Tecoma Circle roadway on Holden Hills Phase 2 land owned by us from its current terminus to Southwest Parkway, estimated to cost approximately $15.6 million (the Tecoma Improvements). As of March 31, 2025, the remaining costs to complete the Tecoma Improvements totaled $3.0 million, of which our share totaled $1.8 million.

Current wording

Further, we entered into a development agreement with the Holden Hills Phase 1 partnership (Development Agreement) pursuant to which, as part of the road and utility infrastructure, the Holden Hills Phase 1 partnership has constructed certain street, drainage, water, sidewalk, electric and gas improvements in order to extend the Tecoma Circle roadway on Holden Hills Phase 2 land from its previous terminus to Southwest Parkway (the Tecoma Improvements). As of June 30, 2025, our share of the estimated costs to complete the Tecoma Improvements, primarily the required landscaping, is $1.0 million.

Previous wording

Holden Hills Phase 2. Using an entitlement strategy similar to that used for Holden Hills Phase 1, we continue to progress the development plans and future financing for Holden Hills Phase 2, our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community adjacent to Holden Hills Phase 1. We have removed the majority of Holden Hills Phase 2 from Austin’s ETJ pursuant to the ETJ Law, as described below, and are adjusting our development plans to benefit from the new regulatory scheme. Holden Hills Phase 2 is being designed as a mixed-use project, with extensive residential uses, coupled with limited entertainment and hospitality uses, surrounded by extensive outdoor recreational and greenspace amenities. The new regulatory scheme is expected to result in a significant increase in development density as compared to our prior plans.

Current wording

Holden Hills Phase 2. Our approximately 570-acre tract located along Southwest Parkway in the southern portion of the Barton Creek community, Holden Hills Phase 2, is adjacent to Holden Hills Phase 1. We are planning both Holden Hills Phase 1 and Holden Hills Phase 2 as one interconnected development branded as Holden Hills. Holden Hills Phase 2 is being designed as a mixed-use project, including a range of commercial and extensive residential uses, surrounded by extensive outdoor recreational and greenspace amenities. We have removed the majority of Holden Hills Phase 2 from Austin’s ETJ pursuant to the ETJ Law, as described below, and are adjusting our development plans to benefit from the new regulatory scheme, which is expected to result in a significant increase in development density as compared to our prior plans.

Previous wording

The Saint George is a 316-unit luxury wrap-style, multi-family project in north-central Austin. We purchased the land and entered into third-party equity financing for the project in December 2021. We entered into a construction loan for this project and began construction in third-quarter 2022. The first units were available for occupancy in April 2025 and the project is expected to be completed in second-quarter 2025. Refer to Note 10 for information regarding remediation and repairs for a water leak at the project that occurred in April 2025.

Current wording

The Saint George is a 316-unit luxury wrap-style, multi-family project in north-central Austin. We purchased the land and entered into third-party equity financing for the project in December 2021. We entered into a construction loan for this project and began construction in third-quarter 2022. The first units were available for occupancy in April 2025 and the project was completed in second-quarter 2025. As of August 8, 2025, we had signed leases for approximately 26 percent of the units.

Previous wording

In first-quarter 2024, we completed the sale of 47 acres of undeveloped land in Magnolia, Texas planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million. In connection with the sale, the Magnolia Place construction loan, which had a balance of $8.8 million was repaid. Following the sale, we retained our potential development of approximately 11 acres planned for 275 multi-family units and approximately $12 million of potential future reimbursement from the municipal utility district (MUD).

Current wording

In first-quarter 2024, we completed the sale of 47 acres of undeveloped land in Magnolia, Texas planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million. In connection with the sale, the Magnolia Place construction loan, which had a balance of $8.8 million was repaid. Following the sale, we retained our potential development of approximately 11 acres planned for 275 multi-family units and approximately $12 million of costs potentially reimbursable in the future by the Magnolia MUD.

Previous wording

Our development plans for The Annie B, Holden Hills Phase 2, The Saint Julia and multi-family projects at Lakeway and College Station will require significant additional capital, which we currently intend to pursue through project-level debt and third-party equity capital arrangements through joint ventures in which we receive development management fees and asset management fees and with our potential returns increasing above our relative equity interest in certain projects as negotiated return hurdles are achieved. We anticipate seeking additional debt to finance the future development in Holden Hills Phase 1. We are also pursuing other development projects. These potential development projects and projects in our portfolio could require extensive additional permitting and will be dependent on market conditions and financing. Because of the nature and cost of the approval and development process and uncertainty regarding market demand for a particular use, there is uncertainty regarding the nature of the final development plans and whether we will be able to successfully execute the plans.

Current wording

Our development plans for The Annie B, The Saint Julia and multi-family projects at Lakeway and College Station will require significant additional capital, which we currently intend to pursue through project-level debt and third-party equity capital arrangements through joint ventures in which we may also receive development management fees and asset management fees and potential returns increasing above our relative equity interest in certain projects as negotiated return hurdles are achieved. We are working to establish a credit facility to fund initial project costs and future partnership activities for Holden Hills Phase 2 and anticipate seeking additional debt to finance the future development in Holden Hills Phase 1. We are also pursuing other development projects. These potential development projects and projects in our portfolio could require extensive additional permitting and will be dependent on market conditions and financing. Because of the nature and cost of the approval and development process and uncertainty regarding market demand for a particular use, there is uncertainty regarding the nature of the final development plans and whether we will be able to successfully execute the plans.

Previous wording

Our industry has been experiencing construction and labor cost increases, supply chain constraints, labor shortages, higher borrowing costs and tightening bank credit. Inflation increased rapidly during 2021 through June 2022. Since June 2022, the rate of inflation generally has declined but has generally remained higher than the Federal Reserve’s target rate of inflation of two percent. In response, the Federal Reserve raised the federal funds target rate multiple times from March 2022 through July 2023, by 525 basis points on a cumulative basis. As inflation began to decline, the Federal Reserve began to focus on improving the labor market and price stability. Between September 2024 and December 2024, the Federal Reserve lowered the federal funds target rate by 100 basis points on a cumulative basis. Elevated inflation and interest rates increase our costs of materials, services, labor and capital. Changing U.S. tariffs and trade policies commencing in first-quarter 2025 present additional risks to our business. Refer to Part II, Item 1A. “Risk Factors” herein.

Current wording

Our industry has been experiencing construction and labor cost increases, supply chain constraints, labor shortages, higher borrowing costs and tightening bank credit. Inflation increased rapidly during 2021 through June 2022. Since June 2022, the rate of inflation generally has declined but has generally remained higher than the Federal Reserve’s target rate of inflation of two percent. In response, the Federal Reserve raised the federal funds target rate multiple times from March 2022 through July 2023, by 525 basis points on a cumulative basis. As inflation began to decline, the Federal Reserve began to focus on improving the labor market and price stability. Between September 2024 and December 2024, the Federal Reserve lowered the federal funds target rate by 100 basis points on a cumulative basis. Elevated inflation and interest rates increase our costs of materials, services, labor and capital. Changing U.S. tariffs and trade policies commencing in the first six months of 2025 present additional risks to our business. Refer to Part II, Item 1A. “Risk Factors” herein.

Previous wording

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

Current wording

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

Previous wording

The decrease in revenues from developed property sales for first-quarter 2025, compared to first-quarter 2024, reflects the sale of two Amarra Villas homes in first-quarter 2024 compared to no sales in first-quarter 2025.

Current wording

The increase in revenues from developed property sales for second-quarter 2025, compared to second-quarter 2024, reflects the sales of two Amarra Villas homes in second-quarter 2025 for a total of $6.8 million compared to the sale of one Amarra Villas home in second-quarter 2024 for $3.6 million. The decrease in revenues for the first six months of 2025 compared to the first six months of 2024, reflects the sales of two Amarra Villas homes for $6.8 million in the 2025 period compared to the sales of three Amarra Villas homes for $11.2 million in the 2024 period.

Previous wording

Undeveloped Property Sales. In first-quarter 2024, we completed the sale of 47 acres of undeveloped land at Magnolia Place that was planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million. There were no undeveloped property sales in first-quarter 2025.

Current wording

Undeveloped Property Sales. In first-quarter 2024, we completed the sale of approximately 47 acres of undeveloped land at Magnolia Place that was planned for a second phase of retail development, all remaining pad sites and up to 600 multi-family units, for $14.5 million.

Previous wording

Real Estate Operations Expenses. Real Estate Operations expenses include cost of real estate sold, property taxes and insurance, lease expense, professional fees, allocated overhead costs, other segment items and depreciation and amortization. Other segment items primarily include advertising, property owner association fees, maintenance and utilities. Cost of real estate sold is directly related to property sales. Cost of real estate sold decreased $13.9 million in first-quarter 2025, compared to first-quarter 2024, primarily due to the sale of undeveloped property at Magnolia Place and the sales of two Amarra Villas homes in first-quarter 2024 compared to no property sales in first-quarter 2025.

Current wording

Real Estate Operations Expenses. Real Estate Operations expenses include cost of real estate sold, property taxes and insurance, lease expense, professional fees, allocated overhead costs, other segment items and depreciation and amortization. Other segment items primarily include advertising, property owner association fees, maintenance and utilities. In second-quarter 2025, we recorded a $1.0 million charge to write off receivables, included in other assets on the consolidated balance sheet, from owners of properties previously sold by us for a share of historical costs incurred to develop the land.

Previous wording

Rental Revenue. In first-quarter 2025 and first-quarter 2024, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place – Retail, Kingwood Place, Jones Crossing – Retail and West Killeen Market and our multi-family property, The Saint June. In first-quarter 2024, rental revenue also included revenue from Magnolia Place – Retail, which was sold in third-quarter 2024. The increase in rental revenue in first-quarter 2025, compared with first-quarter 2024, primarily reflects increased revenue from The Saint June, which was in the process of leasing up in first-quarter 2024, partially offset by a decrease in revenue from Magnolia Place – Retail, which was sold in third-quarter 2024.

Current wording

Rental Revenue. For the 2025 periods, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place – Retail, Kingwood Place, Jones Crossing – Retail and West Killeen Market and our multi-family properties, The Saint June and The Saint George. In second-quarter 2025, we sold West Killeen Market. For the 2024 periods, rental revenue primarily included revenue from our retail and mixed-use projects Lantana Place – Retail, Kingwood Place, Jones Crossing – Retail, West Killeen Market and Magnolia Place – Retail and our multi-family property, The Saint June. In third-quarter 2024, we sold Magnolia Place – Retail. The increase in rental revenue in the first six months of 2025, compared with the first six months of 2024, primarily reflects revenue from The Saint June, which was in the process of leasing up in the first six months of 2024, partially offset by a decrease in revenue resulting from the sales of Magnolia Place – Retail, which was sold in third-quarter 2024, and West Killeen Market, which was sold in second-quarter 2025.

Previous wording

Interest Expense, Net. Interest costs (before capitalized interest) totaled $3.8 million in first-quarter 2025 compared with $4.0 million in first-quarter 2024. Interest costs in first-quarter 2025 were lower, compared to first-quarter 2024, primarily reflecting lower interest rates partially offset by an increase in average debt balances. As of March 31, 2025, all of our debt was variable-rate debt, and for all of such debt, the interest rates have decreased over the past year primarily from amending or refinancing loans with lower rates over the last six months as well as overall interest rates declining.

Current wording

Interest Expense, Net. Interest costs (before capitalized interest) totaled $3.9 million in second-quarter 2025 and $7.6 million for the first six months of 2025, compared with $3.9 million in second-quarter 2024 and $7.9 million for the first six months of 2024. As of June 30, 2025, all of our debt was variable-rate debt, and for all of such debt, the interest rates have decreased over the past year primarily from amending or refinancing loans with lower rates over the last nine months as well as overall interest rates declining.

Previous wording

All of our interest costs in first-quarter 2025 and first-quarter 2024 were capitalized. Capitalized interest in first-quarter 2025 is primarily related to development activities at Barton Creek (primarily Holden Hills Phases 1 and 2) and The Saint George. Capitalized interest in first-quarter 2024 is primarily related to development activities at Barton Creek (primarily Holden Hills Phases 1 and 2 and The Saint June), The Saint George and The Annie B.

Current wording

Capitalized interest totaled $3.6 million in second-quarter 2025 and $7.4 million for the first six months of 2025. All of our interest costs were capitalized for first-quarter 2025 and both 2024 periods. Capitalized interest is primarily related to development activities at our Barton Creek properties (primarily Holden Hills Phases 1 and 2) and The Saint George for the 2025 periods. Capitalized interest was primarily related to development activities at our Barton Creek properties (primarily Holden Hills Phases 1 and 2 and The Saint June) and The Saint George for the 2024 periods.

Previous wording

Provision for Income Taxes. We recorded provisions for income taxes of $30 thousand in first-quarter 2025 and $102 thousand in first-quarter 2024. Refer to Note 8 for further discussion of income taxes.

Current wording

Provision for Income Taxes. We recorded a provision for income taxes of $457 thousand in second-quarter 2025 and $487 thousand for the first six months of 2025, compared to a provision of $44 thousand in second-quarter 2024 and $146 thousand for the first six months of 2024. Refer to Note 8 for further discussion of income taxes.

Previous wording

Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries. Our partners' share of losses totaled $0.9 million in both first-quarter 2025 and first-quarter 2024.

Current wording

Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries. Our partners’ share of losses totaled $2.6 million in second-quarter 2025 and $3.4 million for the first six months of 2025, compared to $1.1 million in second-quarter 2024 and $1.9 million for the first six months of 2024. The increases in both periods were primarily due to the initial operating expenses for The Saint George Apartments, L.P., which was completed in second-quarter 2025.

Previous wording

Comparison of Cash Flows for the Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of Cash Flows for the Six Months Ended June 30, 2025 and 2024

Previous wording

Investing Activities. Cash used in investing activities totaled $4.7 million in first-quarter 2025 and $8.4 million in first-quarter 2024. Capital expenditures totaled $4.5 million in first-quarter 2025, primarily for The Saint George, and $8.1 million in first-quarter 2024, primarily for The Saint George and to a lesser extent for tenant improvements at Lantana Place – Retail.

Current wording

Investing Activities. Cash provided by (used in) investing activities totaled $5.8 million for the first six months of 2025 and $(16.5) million for the first six months of 2024. The first six months of 2025 includes proceeds after transaction costs from the sale of West Killeen Market of $13.0 million. Also, during the first six months of 2025, our investing cash flows included Barton Creek MUD reimbursements of infrastructure costs incurred for development of The Saint June. Capital expenditures totaled $7.2 million for the first six months of 2025, primarily for The Saint George, and $16.1 million for the first six months of 2024, primarily for The Saint George and to a lesser extent for tenant improvements at Lantana Place – Retail.

Previous wording

Financing Activities. Cash provided by (used in) financing activities totaled $10.0 million in first-quarter 2025 and $(9.1) million in first-quarter 2024. In first-quarter 2025, we had borrowings of $4.0 million on the Comerica Bank revolving credit facility and we had no borrowings on the facility in first-quarter 2024. In first-quarter 2025, net borrowings on project and term loans totaled $9.1 million, primarily reflecting borrowings from The Saint George and Holden Hills Phase 1 construction loans and the refinancing of the Lantana Place construction loan and the Jones Crossing loan, partially offset by paydowns on The Annie B land loan. In first-quarter 2024 net borrowings on project and term loans totaled $8.3 million, primarily reflecting the payoff of the Magnolia Place construction loan and paydowns on the Amarra Villas credit facility and the Annie B land loan, partially offset primarily by borrowings on The Saint George and Holden Hills Phase 1 construction loans and the Amarra Villas credit facility. Refer to “Revolving Credit Facility and Other Financing Arrangements” and “Debt Maturities and Other Contractual Obligations” below for a discussion of our outstanding debt at March 31, 2025.

Current wording

Financing Activities. Cash provided by (used in) financing activities totaled $48.6 million for the first six months of 2025 and $(0.2) million for the first six months of 2024. During the first six months of 2025, we borrowed and repaid $4.0 million on the Comerica Bank revolving credit facility. During the first six months of 2024, we had no borrowings or repayments on the Comerica Bank revolving credit facility. During the first six months of 2025, net borrowings on other project and term loans totaled $4.0 million, primarily reflecting borrowings from The Saint George and Holden Hills Phase 1 construction loans and the refinancing of the Lantana Place construction loan and the Jones Crossing loan, partially offset by the payoff of the West Killeen construction loan and the Amarra Villas credit facility and paydowns on The Annie B land loan. During the first six months of 2024, net repayments on other project and term loans totaled $0.5 million, primarily reflecting borrowings on The Saint George and Holden Hills Phase 1 construction loans and the Amarra Villas credit facility partially offset by the payoff of the Magnolia Place construction loan and paydowns on the Amarra Villas credit facility and the Annie B land loan. Refer to “Revolving Credit Facility and Other Financing Arrangements” below for a discussion of our outstanding debt at June 30, 2025.

Previous wording

In first-quarter 2025, in connection with the refinancing of the Kingwood Place construction loan in November 2024, which generated additional cash proceeds, we paid distributions of $856 thousand to noncontrolling interest holders.

Current wording

During the first six months of 2025, we received a contribution of $47.8 million from a noncontrolling interest holder related to the Holden Hills Phase 2 partnership. Also, during the first six months of 2025, in connection with the refinancing of the Kingwood Place construction loan in November 2024, which generated additional cash proceeds, we paid distributions of $856 thousand to noncontrolling interest holders.

Previous wording

On September 1, 2022, with written consent from Comerica Bank, our Board declared a special cash dividend of $4.67 per share (totaling $40.0 million) on our common stock, which was paid on September 29, 2022 to stockholders of record as of September 19, 2022. During first-quarter 2024, $0.4 million of accrued dividends for unvested restricted stock units (RSUs) were paid to the holders upon the vesting of the RSUs, and during first-quarter 2025, $236 thousand of accrued dividends for unvested RSUs were paid to the holders upon the vesting of the RSUs, leaving $28 thousand of dividends accrued for unvested RSUs presented in accrued liabilities as of March 31, 2025. The remaining accrued dividends will be paid to the holders of the RSUs as the RSUs vest.

Current wording

On September 1, 2022, after receiving written consent from Comerica Bank, our Board declared a special cash dividend of $4.67 per share (totaling $40.0 million) on our common stock, which was paid on September 29, 2022 to stockholders of record as of September 19, 2022. During the first six months of 2025, $0.2 million of accrued dividends for unvested RSUs were paid to the holders upon the vesting of the RSUs, leaving $28 thousand of dividends accrued for unvested RSUs presented in accrued liabilities as of June 30, 2025. The remaining accrued dividends will be paid to the holders of the RSUs as the RSUs vest.

Previous wording

In November 2023, with written consent from Comerica Bank, our Board approved a new share repurchase program, which authorizes repurchases of up to $5.0 million of our common stock. The repurchase program authorizes us, in management’s and the Capital Committee of the Board’s discretion, to repurchase shares from time to time, subject to market conditions and other factors. The timing, price and number of shares that may be repurchased under the program will be based on market conditions, applicable securities laws and other factors considered by management and the Capital Committee of the Board. Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market, in privately negotiated transactions or by other means in accordance with securities laws. The share repurchase program does not obligate us to repurchase any specific amount of shares, does not have an expiration date, and may be suspended, modified or discontinued at any time without prior notice. In first-quarter 2025, we acquired 20,694 shares of our common stock for a total cost of $0.4 million at an average price of $19.78 per share. As of March 31, 2025, we have acquired 83,380 shares of our common stock for a total cost of $2.0 million at an average price of $23.98 per share, and $3.0 million remains available for repurchases under the program.

Current wording

In November 2023, with written consent from Comerica Bank, our Board approved a new share repurchase program, which authorized repurchases of up to $5.0 million of our common stock. In June 2025, with written consent from Comerica Bank, our Board approved an increase in the share repurchase program from up to $5.0 million to up to $25.0 million of our common stock. The repurchase program authorizes us, in management’s and the Capital Committee of the Board’s discretion, to repurchase shares from time to time, subject to market conditions and other factors. The timing, price and number of shares that may be repurchased under the program will be based on market conditions, applicable securities laws and other factors considered by management and the Capital Committee of the Board. Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market, in privately negotiated transactions or by other means in accordance with securities laws. The share repurchase program does not obligate us to repurchase any specific amount of shares, does not have an expiration date, and may be suspended, modified or discontinued at any time without prior notice. In the first six months of 2025, we acquired 26,819 shares of our common stock for a total cost of $0.5 million at an average price of $19.59 per share. As of August 8, 2025, we have acquired 135,620 shares of our common stock for a total cost of $3.0 million at an average price of $22.13 per share, and $22.0 million remains available for repurchases under the program.

Previous wording

As of March 31, 2025, we had $12.0 million in cash and cash equivalents and restricted cash of $1.0 million. We had borrowings of $4.0 million under our revolving credit facility. Of the $12.0 million in consolidated cash and cash equivalents at March 31, 2025, $2.7 million held at certain consolidated subsidiaries is subject to restrictions on distribution to the parent company pursuant to project loan agreements. In first-quarter 2025 and first-quarter 2024, development and asset management fees of $299 thousand and $580 thousand, respectively, were paid by the limited partnerships to Stratus. The payments of these intercompany fees resulted in increases in cash available to the parent company, and the income to Stratus and cost to the partnerships have been eliminated in the consolidated financial statements.

Current wording

As of June 30, 2025, we had $59.4 million in cash and cash equivalents and restricted cash of $1.0 million, and no amount was borrowed under our revolving credit facility. Of the $59.4 million in consolidated cash and cash equivalents at June 30, 2025, $2.4 million held at certain consolidated subsidiaries was subject to restrictions on distribution to the parent company pursuant to project loan agreements. In the second quarters of 2025 and 2024, development and asset management fees of $242 thousand and $443 thousand, respectively, were paid by the limited partnerships to Stratus. In the first six months of 2025 and 2024, development and asset fees of $541 thousand and $1.0 million, respectively, were paid by the limited partnerships to Stratus. The payments of these intercompany fees resulted in increases in cash available to the parent company, and the income to Stratus and cost to the partnerships have been eliminated in the consolidated financial statements.

Previous wording

As of March 31, 2025, we had total debt of $210.0 million based on the principal amounts outstanding compared with $196.7 million at December 31, 2024. As of March 31, 2025, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $54.1 million, resulting in availability of $34.5 million, net of letters of credit totaling $15.6 million issued under the revolving credit facility and borrowings of $4.0 million. Letters of credit have been issued under the revolving credit facility, $13.3 million of which secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2 and $2.3 million of which secure Stratus’ obligations, which are subject to certain conditions, to construct and pay for certain utility infrastructure in Lakeway, Texas, which is expected to be utilized by the planned multi-family project on Stratus’ remaining land in Lakeway. Refer to “Debt Maturities and Other Contractual Obligations” below for a table illustrating the timing of principal payments due on our outstanding debt as of March 31, 2025.

Current wording

As of June 30, 2025, we had total debt of $201.3 million based on the principal amounts outstanding compared with $196.7 million at December 31, 2024. As of June 30, 2025, the maximum amount that could be borrowed under the Comerica Bank revolving credit facility was $29.3 million, resulting in availability of $17.7 million, net of letters of credit totaling $11.6 million issued under the revolving credit facility. In June 2025, the Holden Hills Phase 2 property was removed from the borrowing base for the revolving credit facility in anticipation of a potential separate revolving credit facility for the property, and the maximum amount that could be borrowed was reduced. Also, in June 2025, after the Amarra Villas credit facility was fully repaid and terminated, the remaining three Amarra Villas homes were added to the borrowing base for the Comerica Bank revolving credit facility. The net effect of these changes was a decrease of $24.8 million to the maximum amount that could be borrowed. Letters of credit have been issued under the revolving credit facility, $9.0 million of which secure Stratus’ obligation to build certain roads and utilities facilities benefiting Holden Hills Phases 1 and 2 and $2.3 million of which secure Stratus’ obligations, which are subject to certain conditions, to construct and pay for certain utility infrastructure in Lakeway, Texas, which is expected to be utilized by the planned multi-family project on Stratus’ remaining land in Lakeway. Refer to “Debt Maturities and Other Contractual Obligations” below for a table illustrating the timing of principal payments due on our outstanding debt as of June 30, 2025.

Previous wording

Stratus has made operating loans to Stratus Block 150, L.P. to facilitate the partnership’s ability to pay ongoing costs, including debt service, of The Annie B project during the pre-construction period. The loans bear interest at one-month Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent, are subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners. In first-quarter 2024, Stratus made an operating loan of $2.4 million. In first-quarter 2025, Stratus made an operating loan of $1.5 million. As of March 31, 2025, Stratus’ operating loans outstanding to Stratus Block 150, L.P. totaled $7.2 million.

Current wording

We have made operating loans to Stratus Block 150, L.P. to facilitate the partnership’s ability to pay ongoing costs, including debt service, of The Annie B project during the pre-construction period. The loans bear interest at one-month Term Secured Overnight Financing Rate (SOFR) plus 5.00 percent, are subordinate to The Annie B land loan and must be repaid before distributions may be made to the partners. In first-quarter 2024, we made an operating loan of $2.4 million. In first-quarter 2025, we made an operating loan of $1.5 million. No loans were made in second-quarter 2024 or 2025. As of June 30, 2025, our operating loans outstanding to Stratus Block 150, L.P. totaled $7.2 million.

Previous wording

Stratus and the Class B limited partner have made operating loans to The Saint June, L.P. to support the partnership’s ability to pay its construction loan interest, which has exceeded the amount budgeted due to interest rate increases. The loans bear interest at one-month Term SOFR plus 5.00 percent, are subordinate to The Saint June construction loan and, unless approved by all partners, no distributions may be made to the partners until the operating loans are repaid. In first-quarter 2024, Stratus made an operating loan of $339 thousand, and the Class B limited partner made an operating loan of $339 thousand. No loans were made in first-quarter 2025. As of March 31, 2025, Stratus’ and the Class B limited partner’s operating loans outstanding to The Saint June, L.P. totaled $962 thousand and $493 thousand, respectively.

Current wording

Stratus and the Class B limited partner have made operating loans to The Saint June, L.P. to support the partnership’s ability to pay its construction loan interest, which has exceeded the amount anticipated because of interest rate increases. The loans bear interest at one-month Term SOFR plus 5.00 percent, are subordinate to The Saint June construction loan and, unless approved by all partners, no distributions may be made to the partners until the operating loans are repaid. In first-quarter 2024, Stratus made an operating loan of $339 thousand, and the Class B limited partner made an operating loan of $339 thousand. In second-quarter 2024, Stratus made an operating loan of $85 thousand, and the Class B limited partner made an operating loan of $165 thousand. No loans were made in the first six months of 2025. As of June 30, 2025, Stratus’ and the Class B limited partner’s operating loans outstanding to The Saint June, L.P. totaled $962 thousand and $493 thousand, respectively.

Previous wording

During first-quarter 2025, we increased borrowings under our revolving credit facility, and The Saint George and Holden Hills Phase 1 construction loans. We also increased the principal amounts outstanding in connection with refinancing the Lantana Place construction loan and the Jones Crossing loan. Refer to Note 6 for further discussion.

Current wording

During the first six months of 2025, we increased borrowings under The Saint George and Holden Hills Phase 1 construction loans. We also increased the principal amounts outstanding in connection with refinancing the Lantana Place construction loan and the Jones Crossing loan. We paid off the Amarra Villas credit facility and the West Killeen construction loan and paid down The Annie B land loan. Refer to Note 6 for further discussion.

Previous wording

Stratus’ and its subsidiaries’ debt arrangements, including Stratus’ guaranty agreements, contain significant limitations that may restrict Stratus’ and its subsidiaries’ ability to, among other things: borrow additional money or issue guarantees; pay dividends, repurchase equity or make other distributions to equity holders; make loans, advances or other investments; create liens on assets; sell assets; enter into sale-leaseback transactions; enter into transactions with affiliates; permit a change of control or change in management; sell all or substantially all of its assets; and engage in mergers, consolidations or other business combinations. Our Comerica Bank revolving credit facility, Amarra Villas credit facility, The Annie B land loan, The Saint George construction loan and the Holden Hills Phase 1 construction loan require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend payments, which was obtained in connection with our current $5.0 million share repurchase program. Any future declaration of dividends or decision to repurchase our common stock is at the discretion of our Board, subject to restrictions under our Comerica Bank debt agreements, and will depend on our financial results, cash requirements, projected compliance with covenants in our debt agreements, outlook and other factors deemed relevant by our Board. Our future debt agreements, future refinancings of or amendments to existing debt agreements or other future agreements may restrict our ability to declare dividends or repurchase shares.

Current wording

Stratus’ and its subsidiaries’ debt arrangements, including Stratus’ guaranty agreements, contain significant limitations that may restrict Stratus’ and its subsidiaries’ ability to, among other things: borrow additional money or issue guarantees; pay dividends, repurchase equity or make other distributions to equity holders; make loans, advances or other investments; create liens on assets; sell assets; enter into sale-leaseback transactions; enter into transactions with affiliates; permit a change of control or change in management; sell all or substantially all of its assets; and engage in mergers, consolidations or other business combinations. Our Comerica Bank revolving credit facility, The Annie B land loan, and The Saint George and the Holden Hills Phase 1 construction loans require Comerica Bank’s prior written consent for any common stock repurchases in excess of $1.0 million or any dividend payments, which was obtained in connection with our current $25.0 million share repurchase program. Any future declaration of dividends or decision to repurchase our common stock is at the discretion of our Board, subject to restrictions under our Comerica Bank debt agreements, and will depend on our financial results, cash requirements, projected compliance with covenants in our debt agreements, outlook and other factors deemed relevant by our

Previous wording

Our project loans are generally secured by all or substantially all of the assets of the project, and our Comerica Bank revolving credit facility is secured by substantially all of our assets other than those encumbered by separate project level financing. In addition, we, as the parent company, are typically required to guarantee all or a significant portion of the payment of our project loans, in some cases until certain development milestones and/or financial conditions are met, in some cases on a full recourse basis and in other cases on a more limited recourse basis. As of March 31, 2025, we, as the parent company, guaranteed the payment of all of the project loans, except for the Kingwood Place loan, the Jones Crossing loan, the Lantana Place loan and the West Killeen Market construction loan. Our guarantees of the Kingwood Place loan, the Jones Crossing loan and the Lantana Place loan are generally limited to non-recourse carve-out obligations. Our payment guarantee on The Saint June construction loan is limited to 50.0 percent and on The Saint George construction loan is limited to 25.0 percent, in each case until certain conditions are met. Refer to Note 6 to our consolidated financial statements in our 2024 Form 10-K for additional discussion.

Current wording

Our project loans are generally secured by all or substantially all of the assets of the project, and our Comerica Bank revolving credit facility is secured by substantially all of our assets other than those encumbered by separate project level financing. In anticipation of a separate revolving credit facility for the Holden Hills Phase 2 project, Comerica Bank released the Holden Hills Phase 2 property from the collateral pool for the Comerica Bank revolving credit facility. In addition, we, as the parent company, are typically required to guarantee all or a significant portion of the payment of our project loans, in some cases until certain development milestones and/or financial conditions are met, in some cases on a full recourse basis and in other cases on a more limited recourse basis. As of June 30, 2025, we, as the parent company, guaranteed the payment of all of the project loans, except for the Kingwood Place, Jones Crossing and Lantana Place loans. Our guarantees of the Kingwood Place, Jones Crossing and Lantana Place loans are generally limited to non-recourse carve-out obligations. Our payment guarantee on The Saint June construction loan is limited to 50.0 percent and on The Saint George construction loan is limited to 25.0 percent, in each case until certain conditions are met. Refer to Note 6 to our consolidated financial statements in our 2024 Form 10-K for additional discussion.

Previous wording

b. Includes operating loans from our third-party partner of $493 thousand. The maturity date of The Saint June construction loan is October 2, 2025.

Current wording

b. Includes operating loans from our third-party partner of $493 thousand. The maturity date of The Saint June construction loan is October 2, 2025. We have the option to extend the maturity for an additional 12-month term. We are currently evaluating options to refinance the loan and expect to extend or refinance the loan on or before the maturity date.

Previous wording

The following table summarizes the weighted-average interest rate of each loan, all of which have variable rates, for the periods presented, and reflects the interest rate terms of loan agreements as in effect during the periods presented, as described in Note 6 of this report and in our 2024 Form 10-K:

Current wording

The following table summarizes the weighted-average interest rate of each loan, all of which have variable rates, for the periods presented: