Stratus Properties Inc.

What they do

Stratus entitles, develops, manages, leases and sells multi-family and single-family residential and commercial real estate in the Austin, Texas area and other select markets in Texas. Its commercial portfolio consists of stabilized retail properties and future retail and mixed-use development projects with no commercial office space. It also holds a development portfolio of approximately 1,500 acres of commercial, multi-family and single-family residential projects under development or undeveloped land held for future use. Revenues come from property sales, retail/mixed-use and multi-family leasing, and development and asset management fees.

Revenue drivers

• Developed and undeveloped property sales — Lumpy, transaction-driven sales of entitled tracts, lots with homes, and developed properties; recent examples include Lantana Place Retail for $57.5 million, West Killeen Market for $13.3 million in 2025, and Kingwood Place for $60.8 million in January 2026.
• Leasing operations — Lease of retail and mixed-use space and multi-family residences; tenants include grocery stores, restaurants, healthcare services, fitness centers and a movie theater; Q1 2026 leasing revenue was $3.7 million of $3.8 million total revenue.
• Development and asset management fees — Fees received from the company's properties, including joint ventures such as the 570-acre Holden Hills Phase 2 project formed in 2025.
• Joint venture distributions — Cash distributions from joint ventures, including $47.8 million in 2025 from Holden Hills Phase 2 and $35.8 million in 2023 from Holden Hills Phase 1.

Recent performance

First-quarter 2026 revenue was $3.8 million, down from $5.0 million in Q1 2025, primarily due to the sale of Lantana Place Retail in Q4 2025 and Kingwood Place in Q1 2026, partly offset by The Saint George lease-up beginning in Q2 2025. Net income attributable to common stockholders was $6.6 million, or $0.82 per diluted share, versus a net loss of $(2.9) million, or $(0.36) per diluted share, in Q1 2025. The Q1 2026 Kingwood Place sale for $60.8 million generated $16.2 million of proceeds to Stratus and a pre-tax gain, net of noncontrolling interests, of approximately $13.4 million. EBITDA was $17.1 million in Q1 2026 compared to $(2.3) million in Q1 2025. Full-year 2025 revenue was $29.9 million with net income of $12.0 million and diluted EPS of $1.47.

Strategy

In December 2025 the Board initiated a review of strategic alternatives, and on March 24, 2026 it approved a plan of complete liquidation and dissolution, subject to stockholder approval, with an estimated liquidating distribution range of $29.73 to $37.69 per share. Pending stockholder approval, near-term strategy is to preserve and enhance asset value, monetize properties where appropriate, continue operating and leasing stabilized properties, complete only necessary development and infrastructure activities, manage debt and obligations, and seek required lender, partner and third-party consents. The company completed the Kingwood Place sale for $60.8 million, received a $46.5 million offer for the retail component of Jones Crossing in March 2026, and entered a contract to sell New Caney land for approximately $12.7 million. If stockholders do not approve the plan, the Board expects to continue the current business strategy and may further explore strategic alternatives.

Risks

• Plan of liquidation uncertainty — The Plan of Liquidation has not been approved by stockholders and there is no assurance approval will be obtained or that it will be implemented on the contemplated terms or timetable, and historical results may not be indicative of future periods.
• Concentrated Texas real estate exposure — Operations are concentrated in the Austin, Texas area and other select Texas markets, exposing results to local real estate market conditions and demand for residential and retail properties.
• Transaction-dependent revenue — Revenues and cash flows depend heavily on property sales and joint venture distributions, which are lumpy and can vary significantly year to year, as shown by revenue ranging from $17.3 million in 2023 to $54.2 million in 2024.
• Negative operating cash flow — Operating cash flow was negative in each year from 2021 through 2025, including $(29.9) million in 2025, reflecting ongoing development and infrastructure spending.

Outlook

Management is focused on executing the Plan of Liquidation efficiently and prudently if approved, positioning remaining assets for sale through entitlement, infrastructure and development activities. The company had $73.5 million of cash and cash equivalents at March 31, 2026, and $24.7 million available under its revolving credit facility. Pending stockholder approval, Stratus intends to continue operating and leasing stabilized properties and opportunistically pursue asset sales on terms the Board believes are favorable. If stockholders do not approve the Plan of Liquidation, the Board expects to continue the current business strategy and may further explore strategic alternatives.