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 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.

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 November 7, 2025, we had repurchased $3.9 million of our shares under the program.

Previous wording

Largely as a result of the cash distribution from the Holden Hills Phase 2 partnership and recent property sales, as of June 30, 2025, we had consolidated cash of $59.4 million and $17.7 million available under our revolving credit facility, net of $11.6 million of letters of credit committed against the facility. Refer to Note 6 for further discussion of our debt. Our Board is carefully exploring opportunities for the use of cash from the Holden Hills Phase 2 partnership and recent asset sales, which will be based on evolving market conditions and may include a combination of further share repurchases, deleveraging, reinvesting in Stratus’ project pipeline and/or other cash returns to stockholders.

Current wording

Largely as a result of the cash distribution from the Holden Hills Phase 2 partnership and recent property sales, as of September 30, 2025, we had consolidated cash of $55.0 million and $17.5 million available under our revolving credit facility, net of $11.6 million of letters of credit committed against the facility. Subsequent to the end of the third quarter, we also entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million, which, if completed, will yield significant cash proceeds after payoff of the project loan. Refer to Note 6 for further discussion of our debt. Our Board is carefully exploring opportunities for the use of cash from the Holden Hills Phase 2 partnership and recent and pending asset sales, which will be based on evolving market conditions and may include a combination of further share repurchases, deleveraging, reinvesting in Stratus’ project pipeline and/or other cash returns to stockholders.

Previous 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.

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 nine 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 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.

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 September 30, 2025, our share of the estimated remaining costs for the completed Tecoma Improvements totaled $346 thousand. However, over the past two years and in the first nine months of 2025, we made operating loans, advances and capital contributions 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 $1.8 million and a capital contribution to the limited partnership for The Saint George of $150 thousand, representing our 10 percent equity share of debt service and project costs needed by the partnership. 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 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.

Current wording

We have faced difficult conditions in the real estate business over the past two years and in the first nine 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 nine months of 2025, interest rates generally declined; however, costs remained elevated. In our markets, retail market fundamentals, such as occupancy and rents, have shown stronger performance compared to the multi-family sector. The market for new suburban multi-family development has continued to face headwinds. Nevertheless, we made important progress executing our business strategy during 2024 and the first nine months of 2025.

Previous wording

The Federal Reserve lowered interest rates in September 2024 for the first time in four years, and lowered interest rates again in November and December 2024. We took advantage of lower interest rates and the success of our projects to refinance or amend certain of our project loans. In fourth-quarter 2024, we extended the maturity of The Saint June construction loan for one year at a lower rate and generated additional cash proceeds of approximately $1.5 million after closing costs. We also refinanced the Kingwood Place construction loan with a three-year term loan at a lower rate and generated additional cash proceeds of approximately $2.0 million after partnership expenses, closing costs and distributions to noncontrolling interest holders. In January 2025, we refinanced the Lantana Place construction loan with a four-year term loan at a lower rate and generated additional cash proceeds of approximately $3.0 million after property taxes and closing costs. In March 2025, we refinanced the Jones Crossing loan with a three-year term loan at a lower rate and generated additional cash proceeds of approximately $1.2 million after closing costs. In March 2025, we also amended our revolving credit facility, extending the term and lowering the interest rate.

Current wording

The Federal Reserve lowered interest rates in September 2024 for the first time in four years, and lowered interest rates again in November and December 2024 and in September and October 2025. We took advantage of lower interest rates and the success of our projects to refinance or amend certain of our project loans. In fourth-quarter 2024 and again in September 2025, we extended the maturity of The Saint June construction loan for additional one-year terms at lower rates and generated aggregate additional cash proceeds of approximately $2.8 million after closing costs. We also refinanced the Kingwood Place construction loan with a three-year term loan at a lower rate and generated additional cash proceeds of approximately $2.0 million after partnership expenses, closing costs and distributions to noncontrolling interest holders. In January 2025, we refinanced the Lantana Place construction loan with a four-year term loan at a lower rate and generated additional cash proceeds of approximately $3.0 million after property taxes and closing costs. In March 2025, we refinanced the Jones Crossing loan with a three-year term loan at a lower rate and generated additional cash proceeds of approximately $1.2 million after closing costs. In March 2025, we amended our revolving credit facility, extending the term and lowering the interest rate.

Previous 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.

Current wording

During the first nine months of 2025, we received a $47.8 million cash distribution from the Holden Hills Phase 2 partnership. In addition, we sold our stabilized West Killeen Market retail project for $13.3 million and two homes at 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, including the required landscaping, enabling us to proceed with Travis 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 pursue opportunities related to our development pipeline, positioning ourselves to capture value, subject to market conditions. In October 2025, we sold an Amarra Villa home for $3.7 million. We also entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million, which subject to satisfaction of closing conditions, is expected to close in fourth-quarter 2025. In addition, beginning in 2024 and through November 7, 2025, we returned $3.9 million to our stockholders through our share repurchase program.

Previous 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.

Current wording

Changes to U.S. tariffs and trade policies during the first nine 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 Real Estate Operations segment encompasses our activities associated with our entitlement, development, and sale of real estate. The current focus of our real estate operations is multi-family and single-family residential properties and residential-centric mixed-use properties. We may sell or lease the properties we develop, depending on market conditions. Multi-family and retail rental properties that we develop are reclassified to our Leasing Operations segment when construction is completed and they are ready for occupancy. Revenue in our Real Estate Operations segment may be generated from the sale of properties that are developed, undeveloped or under development, depending on market conditions. Developed property sales can include an individual tract of land that has been developed and permitted for residential use, or a developed lot with a residence already built on it. In addition to our developed properties, we have a development portfolio that consists of approximately 1,500 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use. Our Real Estate Operations segment does not have exposure to office space.

Current wording

Our Real Estate Operations segment encompasses our activities associated with our entitlement, development, and sale of real estate. The current focus of our Real Estate Operations segment is multi-family and single-family residential properties and residential-centric mixed-use properties. We may sell or lease the properties we develop, depending on market conditions. Multi-family and retail rental properties that we develop are reclassified to our Leasing Operations segment when construction is completed and they are ready for occupancy. Revenue in our Real Estate Operations segment may be generated from the sale of properties that are developed, undeveloped or under development, depending on market conditions. Developed property sales can include an individual tract of land that has been developed and permitted for residential use, or a developed lot with a residence already built on it. In addition to our developed properties, we have a development portfolio that consists of approximately 1,500 acres of commercial and multi-family and single-family residential projects under development or undeveloped land held for future use. Our Real Estate Operations segment does not have exposure to office space.

Previous wording

Summary Financial Results for the Second-Quarter and First Six Months of 2025. Our revenues totaled $11.6 million in second-quarter 2025 and $16.6 million for the first six months of 2025, compared with $8.5 million in second-quarter 2024 and $35.0 million for the first six months of 2024. The $3.2 million increase in revenues in our Real Estate Operations segment in second-quarter 2025, compared to second-quarter 2024, is primarily a result of the sales of two Amarra Villas homes for an aggregate of $6.8 million in second-quarter 2025 compared to the sale of one Amarra Villas home for $3.6 million in second-quarter 2024. The $18.9 million decrease in revenues from our Real Estate Operations segment in the first six months of 2025, compared to the first six months of 2024, was primarily a result of the sales of approximately 47 acres of undeveloped land at Magnolia Place for $14.5 million and three Amarra Villas homes for an aggregate of $11.2 million in the first six months of 2024, compared with the sales of two Amarra Villas homes in the first six months of 2025 for $6.8 million.

Current wording

Summary Financial Results for the Third-Quarter and First Nine Months of 2025. Our revenues totaled $5.0 million in third-quarter 2025 and $21.6 million for the first nine months of 2025, compared with $8.9 million in third-quarter 2024 and $43.9 million for the first nine months of 2024. The decreases in revenues for the three and nine-month periods were due to decreases in revenues in our Real Estate Operations segment, as revenues from our Leasing Operations segment were consistent for these periods. The $3.9 million decrease in revenues in our Real Estate Operations segment in third-quarter 2025, compared to third-quarter 2024, was primarily a result of the sale of one Amarra Villas home for $4.0 million in third-quarter 2024 compared to no sales in third-quarter 2025. The $22.9 million decrease in revenues from our Real Estate Operations segment in the first nine months of 2025, compared to the first nine months of 2024, was primarily a result of the sales of approximately 47 acres of undeveloped land at Magnolia Place for $14.5 million and four Amarra Villas homes for an aggregate of $15.2 million in the first nine months of 2024, compared with the sales of two Amarra Villas homes in the first nine months of 2025 for $6.8 million.

Previous wording

During the three and six months ended June 30, 2025, we recorded an approximately $5.0 million pre-tax gain on the sale of West Killeen Market. Professional fees and allocated overhead costs in our real estate operations segment increased compared to the comparable 2024 periods primarily related to the impact of the formation of the Holden Hills Phase 2 partnership. In addition, in second-quarter 2025, we recorded a $1.0 million charge in our real estate operations segment related to a write-off as described further below. Refer to “Results of Operations” below for further discussion of our segments.

Current wording

During the nine months ended September 30, 2025, we recorded an approximately $5.0 million pre-tax gain on the sale of West Killeen Market. In third-quarter 2024, we recorded an approximately $1.6 million pre-tax gain on the sale of Magnolia Place – Retail. In third-quarter 2025, we terminated a lease for a potential development project in Austin, Texas, and recorded a charge to professional fees of approximately $2.8 million representing previously capitalized architectural, engineering and consulting fees incurred in connection with planning and evaluating the potential project and fees previously paid to the lessor to extend the review period. In third-quarter 2024, we recorded a charge to professional fees of approximately $721 thousand to write off previously capitalized costs related to a change in development plans for one property. The formation of the Holden Hills Phase 2 partnership also contributed to the increase in professional fees and allocated overhead costs in our Real Estate Operations segment in the first nine months of 2025, compared to the first nine months of 2024. In addition, in second-quarter 2025, we recorded a $1.0 million charge in our Real Estate Operations segment related to a write-off as described further below. Refer to “Results of Operations” below for further discussion of our segments.

Previous 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.

Current wording

Our net loss attributable to common stockholders totaled $(5.0) million, or $(0.62) per diluted share in third-quarter 2025, compared to net loss attributable to common stockholders of $(0.4) million, or $(0.05) per diluted share, in third-quarter 2024. During the first nine months of 2025 our net loss attributable to common stockholders totaled $(7.6) million, or $(0.94) per diluted share, compared to net income attributable to common stockholders of $2.5 million, or $0.30 per diluted share, during the first nine months of 2024.

Previous wording

During second-quarter 2025, our cash and cash equivalents increased substantially, primarily due to the receipt of a $47.8 million distribution from the newly-formed Holden Hills Phase 2 partnership. Refer to Note 3 for further discussion.

Current wording

During the first nine months of 2025, our cash and cash equivalents increased substantially, primarily due to the receipt of a $47.8 million distribution from the formation of the Holden Hills Phase 2 partnership. Refer to Note 3 for further discussion.

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. 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.

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 third-quarter 2024, we sold one of the homes for $4.0 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. In October 2025, we sold one of the homes for $3.7 million. As of November 7, 2025, two 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 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.

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. We have substantially completed the initial road and utility infrastructure, including the required landscaping, enabling us to proceed with Travis County’s acceptance of the roadway. The County’s acceptance of the roadway will then permit us to continue efforts to replat the initial portion of Holden Hills Phase 1 to take advantage of changes in regulations, which we believe will result in improved home sites. 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 2026, 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) 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.

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 September 30, 2025, our share of the estimated remaining costs of the completed Tecoma Improvements, primarily the required landscaping, is $346 thousand.

Previous wording

We capitalize infrastructure costs and may be eligible to receive Travis County municipal utility district (MUD) reimbursements for certain infrastructure costs incurred in the Barton Creek area. Portions of the costs incurred in connection with the Holden Hills Phase 1 project and the Tecoma Improvements totaling approximately $9.7 million and $6.9 million, respectively, are expected to be eligible to be reimbursed in the future by MUDs. All MUD reimbursements that the Holden Hills Phase 1 partnership receives and is entitled to retain at the partnership level must be applied as payments of principal on the Holden Hills Phase 1 construction loan. The Holden Hills Phase 1 partnership has agreed to deliver to Stratus 60 percent of any MUD reimbursements for Tecoma Improvement costs when such reimbursements are received by the partnership. The amount and timing of MUD reimbursements depends upon each MUD having a sufficient tax base within its district to issue bonds, obtaining the necessary state approval for the sale of the bonds and the successful sale of the bonds, among other things. Accordingly, the amount and timing of the receipt of MUD reimbursements is uncertain. MUD reimbursements received for infrastructure costs are recorded as reductions of the related asset’s carrying amount.

Current wording

We capitalize infrastructure costs and may be eligible to receive Travis County municipal utility district (MUD) reimbursements for certain infrastructure costs incurred in the Barton Creek area. Portions of the costs incurred in connection with the Holden Hills Phase 1 project and the Tecoma Improvements totaling approximately $9.3 million and $6.9 million, respectively, are expected to be eligible to be reimbursed in the future by MUDs. All MUD reimbursements that the Holden Hills Phase 1 partnership receives and is entitled to retain at the partnership level must be applied as payments of principal on the Holden Hills Phase 1 construction loan. The Holden Hills Phase 1 partnership has agreed to deliver to Stratus 60 percent of any MUD reimbursements for Tecoma Improvement costs when such reimbursements are received by the partnership. The amount and timing of MUD reimbursements depends upon each MUD having a sufficient tax base within its district to issue bonds, obtaining the necessary state approval for the sale of the bonds and the successful sale of the bonds, among other things. Accordingly, the amount and timing of the receipt of MUD reimbursements is uncertain. MUD reimbursements received for infrastructure costs are recorded as reductions of the related asset’s carrying amount.

Previous wording

The Holden Hills Phase 2 partnership is working to establish a separate revolving credit facility for the Holden Hills Phase 2 project, which is expected to be sized as needed for future operating costs. The Holden Hills Phase 2 partnership intends to use the facility to reimburse Stratus for the initial project costs of approximately $0.8 million, fund the approved operating budget for 2025 and fund future partnership activities approved by the partners. Refer to Note 2 for further discussion.

Current wording

The Holden Hills Phase 2 partnership is working to establish a separate revolving credit facility for the Holden Hills Phase 2 project, which is expected to be sized as needed for future operating costs. The Holden Hills Phase 2 partnership intends to use the facility to reimburse Stratus for approximately $1.6 million of project costs, including certain initial project costs of approximately $0.8 million, fund the approved operating budget for 2025 and fund future partnership activities approved by the partners. Refer to Note 2 for further discussion.

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 was completed in second-quarter 2025. As of August 8, 2025, we had signed leases for approximately 26 percent of the units.

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 November 7, 2025, we had signed leases for approximately 39 percent of the units.

Previous wording

After extensive negotiation with the City of Lakeway, utility suppliers and neighboring property owners, during 2023 we secured the right to develop a multi-family project on approximately 35 acres of undeveloped property in Lakeway, Texas located in the greater Austin area. The multi-family project is expected to utilize the road, drainage and utility infrastructure we are required to build, subject to certain conditions, which is secured by a $2.3 million letter of credit under our revolving credit facility. Refer to Note 6 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” below for additional discussion.

Current wording

After extensive negotiation with the City of Lakeway, utility suppliers and neighboring property owners, we secured the right in 2023 to develop a multi-family project on approximately 35 acres of undeveloped property in Lakeway, Texas located in the greater Austin area. The multi-family project is expected to utilize the road, drainage and utility infrastructure we are required to build, subject to certain conditions, which is secured by a $2.3 million letter of credit under our revolving credit facility. Construction of the required road infrastructure is scheduled to commence in fourth-quarter 2025. Refer to Note 6 and “Capital Resources and Liquidity – Revolving Credit Facility and Other Financing Arrangements” below for additional discussion.

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 costs potentially reimbursable in the future by the Magnolia 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 these sales, 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

•Lantana Placeis part of our mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas. As of June 30, 2025, we had signed leases for substantially all of the 99,377-square-foot retail space, including the anchor tenant, Moviehouse & Eatery, and a ground lease for an AC Hotel by Marriott that opened in November 2021.

Current wording

•Lantana Placeis part of our mixed-use development project within the Lantana community south of Barton Creek in Austin, Texas. As of September 30, 2025, we had signed leases for substantially all of the 99,377-square-foot retail space, including the anchor tenant, Moviehouse & Eatery, and a ground lease for an AC Hotel by Marriott that opened in November 2021. In October 2025, we entered into an agreement, as amended, to sell Lantana Place – Retail for approximately $57.4 million. Subject to satisfaction of closing conditions, the sale is expected to close in fourth-quarter 2025. Using the proceeds from the sale, we expect to repay the project loan with an approximately $29.8 million principal balance as of September 30, 2025. Following the sale, we would retain the property planned for The Saint Julia (discussed above).

Previous 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.

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 certain 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 the first six months of 2025 present additional risks to our business. Refer to Part II, Item 1A. “Risk Factors” herein.

Current wording

Our industry has experienced construction and labor cost increases, supply chain constraints, labor shortages, higher borrowing costs and tightened 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 September 2025, the Federal Reserve lowered the federal funds target rate by 125 basis points on a cumulative basis, and in October 2025, the Federal Reserve lowered the federal funds target rate by another 25 basis points. 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 nine months of 2025 present additional risks to our business. Refer to Part II, Item 1A. “Risk Factors” herein.

Previous wording

To manage the risks of rising construction and labor costs, we go through extensive pricing exercises culminating with competitive bids from reputable contractors based on final plans and specifications. Because we typically engage third-party general contractors to construct our projects on a fixed-price or guaranteed maximum price basis, our exposure to construction and labor cost increases on projects under construction is limited; however, rising costs and delays in delivery of materials may increase the risk of default by contractors and subcontractors. Also, as discussed elsewhere in this report, higher costs and project delays have required us to make operating loans and an equity contribution to some of our joint ventures, and we expect to make additional operating loans and capital contributions during the next 12 months. Refer to Part I, Item 1A. “Risk Factors” of our 2024 Form 10-K and Part II, Item 1A. “Risk Factors” herein for more information regarding our risk factors.

Current wording

To manage the risks of rising construction and labor costs, we go through extensive pricing exercises culminating with competitive bids from reputable contractors based on final plans and specifications. Because we typically engage third-party general contractors to construct our projects on a fixed-price or guaranteed maximum price basis, our exposure to construction and labor cost increases on projects under construction is limited; however, rising costs and delays in delivery of materials may increase the risk of default by contractors and subcontractors. Also, as discussed elsewhere in this report, higher costs and project delays have required us to make operating loans and equity contributions to some of our joint ventures, and we expect to make additional operating loans and capital contributions during the next 12 months. Refer to Part I, Item 1A. “Risk Factors” of our 2024 Form 10-K and Part II, Item 1A. “Risk Factors” herein for more information regarding our risk factors.

Previous wording

Austin, our primary market, has experienced significant growth in demand for residential projects in recent years, particularly due to growth in the technology-related sector in the region and, during 2020 and 2021 related in part to COVID-19 pandemic-influenced in-migration. The expanding economy resulted in rising demand for residential housing and retail services. This surge in population growth spurred a rapid increase in multi-family construction which caused rental rates in 2024 to drop from the previous year while occupancy rates have remained high. Despite macroeconomic challenges, we continue to see reasons for optimism regarding real estate market conditions in our Texas markets over the next 12 months, as rents have been strong at The Saint June, absorption of new downtown Austin multi-family units has been encouraging and we continue to see some opportunities for sales transactions for our properties.

Current wording

Austin, our primary market, has experienced significant growth in demand for residential projects in recent years, particularly due to growth in the technology-related sector in the region and, during 2020 and 2021 related in part to COVID-19 pandemic-influenced in-migration. The expanding economy resulted in rising demand for residential housing and retail services. This surge in population growth spurred a rapid increase in multi-family construction which caused rental rates in 2024 to drop from the previous year while occupancy rates have remained high. Retail market fundamentals, such as occupancy and rents, have shown stronger performance compared to the multi-family sector. The market for new suburban multi-family development has continued to face headwinds. Despite macroeconomic challenges, we continue to see reasons for optimism regarding real estate market conditions in our Texas markets over the next 12 months, as rents have been strong at The Saint June, absorption of new downtown Austin multi-family units has been encouraging and we continue to see some opportunities for sales transactions for our properties.

Previous wording

a. Includes sales commissions and other revenues together with related expenses. The three- and six-month periods ended June 30, 2025 include 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.

Current wording

a. Includes sales commissions and other revenues together with related expenses. The three and nine-month periods ended September 30, 2025 include a charge of approximately $2.8 million representing previously capitalized architectural, engineering and consulting fees incurred in connection with planning and evaluating a potential project that was terminated in third-quarter 2025. The nine-month period ended September 30, 2025 includes 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

b. Second-quarter 2025 includes an approximately $5.0 million pre-tax gain on the sale of the West Killeen Market retail project and the six months ended June 30, 2025 also includes a portion of a previously deferred gain of $0.2 million related to The Oaks at Lakeway in first-quarter 2025. Refer to Note 4 for further discussion.

Current wording

b. The nine-month period ended September 30, 2025 includes an approximately $5.0 million pre-tax gain on the sale of the West Killeen Market retail project and a portion of a previously deferred gain of $0.2 million related to The Oaks at Lakeway. The three- and nine-month periods ended September 30, 2024 include a pre-tax gain on the sale of Magnolia Place – Retail for $1.6 million. Refer to Note 4 for further discussion.

Previous wording

We use operating (loss) income before general and administrative expenses to measure the performance of our business segments. 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.

Current wording

We use operating loss before general and administrative expenses to measure the performance of our business segments. 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.

Previous 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.

Current wording

The decrease in revenues from developed property sales for third-quarter 2025, compared to third-quarter 2024, reflects the sale of one Amarra Villas homes in third-quarter 2024 for $4.0 million compared to no sales in third-quarter 2025. The decrease in revenues for the first nine months of 2025 compared to the first nine months of 2024, reflects the sales of two Amarra Villas homes for $6.8 million in the 2025 period compared to the sales of four Amarra Villas homes for a total of $15.2 million in the 2024 period.

Previous wording

Cost of real estate sold is directly related to property sales. Cost of real estate sold increased $3.1 million in second-quarter 2025, compared to second-quarter 2024, primarily due to the sales of two Amarra Villas homes in second-quarter 2025 compared to the sale of one Amarra Villas home in second-quarter 2024. Cost of real estate sold decreased $10.9 million in the first six months of 2025, compared to the first six months of 2024, primarily due to the sales of two Amarra Villas homes in the 2025 period compared to the sale of undeveloped property at Magnolia Place and the sales of three Amarra Villas homes in the 2024 period.

Current wording

Cost of real estate sold is directly related to property sales. Cost of real estate sold decreased $3.3 million in third-quarter 2025, compared to third-quarter 2024, primarily due to the sale of one Amarra Villas home in third-quarter 2024 compared to no sales in third-quarter 2025. Cost of real estate sold decreased $14.1 million in the first nine months of 2025, compared to the first nine months of 2024, primarily due to the sales of two Amarra Villas homes in the 2025 period compared to the sale of undeveloped property at Magnolia Place and the sales of four Amarra Villas homes in the 2024 period.

Previous 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.

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 and began recognizing rental revenue from The Saint George. 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 nine months of 2025, compared with the first nine months of 2024, primarily reflects revenue from The Saint June, which was in the process of leasing up in the first nine months of 2024, and The Saint George, which began leasing up in second-quarter 2025, 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. In October 2025, we entered into an agreement, as amended, to sell Lantana Place – Retail, which, subject to satisfaction of closing conditions, is expected to close in fourth-quarter 2025. The Lantana Place – Retail project made up approximately 26 percent of the rental revenue for each period presented.

Previous wording

Leasing Operations Expenses. Leasing Operations expenses include property taxes and insurance, maintenance and repairs, property management fees and payroll, utilities, other segment items and depreciation. Other segment items primarily includes amortization of leasing costs, property owner association fees, professional and consulting fees, and office and computer equipment.

Current wording

Leasing Operations Expenses. Leasing Operations expenses include property taxes and insurance, maintenance and repairs, property management fees and payroll, utilities, other segment items and depreciation. Other segment items primarily includes amortization of leasing costs, property owner association fees, professional and consulting fees, and office and computer equipment. Increases in property taxes and insurance and depreciation in the 2025 periods were primarily attributable to the commencement of leasing operations at The Saint George in second-quarter 2025. Approximately 18 percent and 24 percent of Leasing Operations expenses (excluding gain on sale of assets) were attributable to Lantana Place – Retail for third-quarter 2025 and 2024, respectively, and approximately 20 percent for the first nine months of both 2025 and 2024.

Previous wording

Gain on Sale of Assets. In second-quarter 2025, we closed on the sale of the West Killeen Market project for $13.3 million. The sale generated a pre-tax gain of approximately $5.0 million. The six months ended June 30, 2025 also includes a portion of a previously deferred gain of $0.2 million related to The Oaks at Lakeway in first-quarter 2025. Refer to Note 4 for further discussion.

Current wording

Gain on Sale of Assets. In second-quarter 2025, we closed on the sale of the West Killeen Market project for $13.3 million. The sale generated a pre-tax gain of approximately $5.0 million. The nine months ended September 30, 2025 also includes a portion of a previously deferred gain of $0.2 million related to The Oaks at Lakeway in first-quarter 2025. In third-quarter 2024, we closed on the sale of Magnolia Place – Retail for $8.9 million. The sale generated a pre-tax gain of approximately $1.6 million. Refer to Note 4 for further discussion.

Previous 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.

Current wording

Interest Expense, Net. Interest costs (before capitalized interest) totaled $3.8 million in third-quarter 2025 and $11.5 million for the first nine months of 2025, compared with $4.0 million in third-quarter 2024 and $11.9 million for the first nine months of 2024. As of September 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

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.

Current wording

Capitalized interest totaled $3.1 million in third-quarter 2025 and $10.4 million for the first nine months of 2025. All of our interest costs were capitalized for both 2024 periods. Capitalized interest for the 2025 periods is primarily related to development activities at Holden Hills Phases 1 and 2. The first nine months of 2025 also included capitalized interest related to the development of The Saint George before it was completed in second-quarter 2025. Capitalized interest for the 2024 periods was primarily related to development activities at our Barton Creek properties (primarily Amarra Villas and Holden Hills Phases 1 and 2) and The Saint George.

Previous wording

Other (Loss) Income, Net. Other (loss) income, net in both 2025 periods includes a $1.0 million charge to record the estimated cost to The Saint George Apartments, L.P., of the repair of the damage caused by a water leak in second-quarter 2025.

Current wording

Other (Loss) Income, Net. Other (loss) income, net in the first nine months of 2025 includes a $1.0 million charge to record the estimated cost to The Saint George Apartments, L.P., of the repair of the damage caused by a water leak in second-quarter 2025.

Previous 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.

Current wording

Benefit from (Provision for) Income Taxes. We recorded a benefit from income taxes of $321 thousand in third-quarter 2025 and provision for income taxes of $166 thousand for the first nine months of 2025, compared to a provision of $58 thousand in third-quarter 2024 and $204 thousand for the first nine 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 $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.

Current wording

Total Comprehensive Loss Attributable to Noncontrolling Interests in Subsidiaries. Our partners’ share of losses totaled $3.0 million in third-quarter 2025 and $6.5 million for the first nine months of 2025, compared to $1.1 million in third-quarter 2024 and $3.0 million for the first nine 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 Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of Cash Flows for the Nine Months Ended September 30, 2025 and 2024