Stratus Properties Inc. Reports Operating Results (10-Q)
Stratus Properties Inc. has a market cap of $65.4 million; its shares were traded at around $8.76 with and P/S ratio of 6.
Highlight of Business Operations:The continued softness in the Austin area real estate market, among other factors, has significantly impacted our consolidated financial results. In addition, we recorded valuation allowances in the amount of $9.8 million in second-quarter 2010 and $0.8 million in third-quarter 2010 against our net deferred tax assets upon concluding that it was not more likely than not that these assets will be realized. In the third quarter of 2010, our revenues totaled $2.3 million and our net loss attributable to common stock totaled $2.5 million, compared with revenues of $3.3 million and a net loss attributable to common stock of $1.6 million for the third quarter of 2009. For the first nine months of 2010, our revenues totaled $6.3 million and our net loss attributable to common stock totaled $15.8 million, compared with revenues of $8.4 million and a net loss attributable to common stock of $4.7 million for the first nine months of 2009.
W Austin Hotel & Residences. In 2005, the City selected our proposal to develop a mixed-use project in downtown Austin immediately north of the new City Hall complex. The W Austin Hotel & Residences project includes an entire city block and is planned for a mixture of hotel, residential, retail, office and entertainment uses. In 2006, we acquired the property for $15.1 million. We have executed agreements with Starwood Hotels & Resorts Worldwide, Inc. for the development of a W Hotel & Residences on the site. Effective May 1, 2008, we entered into a joint venture with Canyon-Johnson Urban Fund II, L.P. (Canyon-Johnson) for the development of the W Austin Hotel & Residences project (see Note 3). Construction of the approximate $300 million project commenced in the second quarter of 2008. The exterior of the building and mechanical systems are substantially complete and interior finish work is progressing on schedule. We anticipate the hotel will open in December 2010. Condominium residences will be completed on a floor-by-floor basis with delivery of the first condominium residences expected in January 2011 and continuing through mid-2011. As of September 30, 2010, we had 82 of the 159 condominium residences under contract. The sales contracts are generally secured with nonrefundable buyer deposits of 10 percent of the
Crestview Station. In 2005, we formed a joint venture with Trammell Crow to acquire an approximate 74-acre tract at the intersection of Airport Boulevard and Lamar Boulevard in Austin, Texas, for $7.7 million. The property, known as Crestview Station, is a single-family, multi-family, retail and office development, which is located on the site of a commuter rail line. With Trammell Crow, we have completed environmental remediation, which the State of Texas certified as complete in 2007, and permitting of the property. The initial phase of utility and roadway infrastructure is complete. Crestview Station sold substantially all of its multi-family and commercial properties in 2007 and one commercial site in the first quarter of 2008. The joint venture retained the single-family component of Crestview Station and one commercial site. The joint venture has obtained permits to develop Crestview Station as a 450-unit transit-oriented neighborhood. At September 30, 2010, our investment in the Crestview Station project totaled $3.2 million and the joint venture partnership had $8.2 million of outstanding debt, of which we guarantee $1.4 million. A reserve for interest and property taxes through May 2011 has been established with the lender. Scheduled principal payments begin in June 2011, and the loan matures in May 2012. We account for our 50 percent interest in the Crestview Station joint venture under the equity method.
In 2006, we signed another contract with a national homebuilder for 42 additional lots. Development of those lots was substantially completed in April 2008. In June 2009, the contract was terminated by the homebuilder. As of the date the contract was terminated, there were 30 remaining lots. In connection with the termination, the homebuilder forfeited a deposit of $0.6 million, which we recorded as other income in the second quarter of 2009. We are currently pursuing contracts with other homebuilders for the sale of the remaining lots. One lot was sold in August 2009 for $0.1 million, four lots were sold in September 2010 for $0.6 million and 25 lots remained unsold as of September 30, 2010. The final phase of Meridian is expected to consist of 57 one-acre lots.
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