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Analogies:

• A regional Howard Hughes Corporation, focused on master-planned communities and diverse property development in Texas.
• A smaller, Texas-focused Brookfield Properties, developing and owning a variety of real estate assets.

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• Master-Planned Community Development: Acquiring land, obtaining entitlements, and developing large-scale, mixed-use communities that integrate residential, retail, and office spaces.
• Multi-family Residential Development: Developing, constructing, and managing apartment communities for lease.
• Retail Development: Developing, constructing, and managing retail properties, including shopping centers and retail components within mixed-use projects.
• Office Development: Developing, constructing, and managing office properties primarily for lease to businesses.
• Hotel Operations: Owning and operating upscale hotels, providing hospitality services and event spaces.

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1. Real Estate Buyers (Companies and Individuals)

• Companies: This category includes institutional investors, other real estate developers, private equity firms, and various businesses that acquire large-scale developed properties such as multi-family apartment communities, commercial buildings (office and retail), or significant land parcels for further development. These are typically the buyers in substantial asset sales made by Stratus.
• Individuals: This includes individual homebuyers purchasing single-family homes or residential lots, as well as individuals acquiring condominium units within Stratus's developed residential projects.

2. Leasing Tenants (Businesses and Individuals)

• Businesses: These are commercial tenants, including retailers, office-based companies, and industrial users, who lease space in Stratus's income-producing retail, office, multi-family, and industrial properties.
• Individuals: This category encompasses residents who lease apartments or other residential units within Stratus's multi-family properties.

3. Hospitality Guests (Individuals and Businesses)

• Individuals: This primarily consists of leisure and business travelers who stay at Stratus's luxury hotels, such as Hotel ZaZa Austin and The W Austin Hotel.
• Businesses: This includes companies booking rooms, meeting spaces, or event venues within Stratus's hotel properties for corporate events, conferences, or business travel.

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William H. Armstrong III

Chairman of the Board, President and Chief Executive Officer

William H. Armstrong III has served as Chairman of the Board, President, and Chief Executive Officer of Stratus Properties Inc. since 1998. He was previously President, Chief Operating Officer, and Chief Financial Officer of the company from 1996 to 1998, having been employed by Stratus since its inception in 1992. Prior to joining Stratus Properties, he served as a Vice President for a nationally recognized real estate investment banking and advisory firm. Mr. Armstrong has also served as an Independent Director of Moody National REIT II, Inc. since September 2017, and of Moody National REIT I, Inc. from September 2008 to September 2017, both publicly traded real estate investment trusts. He holds a B.A. in Economics from The University of Colorado.

Erin D. Pickens

Senior Vice President, Principal Accounting Officer and Chief Financial Officer

Erin D. Pickens has served as Senior Vice President of Stratus Properties Inc. since May 2009 and as Chief Financial Officer since June 2009. Before joining Stratus, Ms. Pickens was the Executive Vice President and Chief Financial Officer of Tarragon Corporation from November 1998 until April 2009. Her tenure at Tarragon Corporation and its predecessors also included roles as Vice President and Chief Accounting Officer from September 1996 to November 1998, and as Accounting Manager from June 1995 to August 1996. Ms. Pickens is a licensed Certified Public Accountant and a member of both the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants.

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The key risks to Stratus Properties (symbol: STRS) are primarily centered on the cyclical nature of the real estate market, its capital-intensive development model, and the regulatory environment in which it operates.

1. Austin and Texas Real Estate Market Conditions

   Stratus Properties is a real estate company focused on residential and retail properties, with its primary operations in the Austin, Texas area and other select markets within Texas. Consequently, the company's financial performance is highly dependent on the overall economic conditions and demand within these specific real estate markets. Any significant downturn in the Austin and Texas real estate markets, including decreases in property values, sales volumes, or leasing demand, could materially and adversely affect Stratus Properties' business, results of operations, and financial condition.

2. Interest Rate Fluctuations and Debt Exposure

   As a real estate development company, Stratus Properties relies significantly on financing for its projects. The company's ability to manage its debt, refinance existing loans, and secure new financing at favorable terms is crucial. Fluctuations in interest rates directly impact borrowing costs, which can affect the profitability of development projects and the affordability of properties for potential buyers. While recent reports indicate a relatively conservative debt-to-equity ratio of approximately 0.61 as of the third quarter of 2025, the overarching risk associated with interest rate changes and the continuous need for debt management and refinancing remains significant for a capital-intensive real estate business.

3. Regulatory and Entitlement Challenges

   Stratus Properties' development projects are subject to various governmental regulations, zoning laws, and the need to obtain numerous entitlements and permits. Changes in these laws, regulations, or the regulatory environment can significantly impact the feasibility, timeline, and cost of development projects. Specific regulatory challenges, such as those related to Texas Senate Bill 2038 (the ETJ Law) and associated litigation, also pose risks by potentially altering development plans and increasing legal complexities. Opposition from special interest groups or local governments regarding development projects can also lead to delays or increased expenses.

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Stratus Properties Inc. (STRS) is a diversified real estate company primarily engaged in real estate development, leasing, and hotel operations, with a significant focus on the Austin, Texas area and other select markets in Texas. The addressable markets for their main products and services are as follows:

Real Estate Development and Sales (Residential and Commercial)

• U.S. Residential Real Estate Market: The U.S. residential real estate market was valued at approximately $2.64 trillion in 2025 and is projected to reach $3.11 trillion by 2030, growing at a compound annual growth rate (CAGR) of 3.33%. The Southern U.S., which includes Texas, accounted for 40% of the U.S. residential real estate market share in 2024.

• Austin Multifamily Development: Austin's multifamily market is experiencing substantial growth, with 36,585 units projected for delivery in 2024, setting a new record for the market. As of 2024, there were approximately 30,000 multifamily units under construction in Austin, ranking it third nationally for units delivered. Through May 2025, 10,641 units were delivered in Austin, with an additional 35,902 units underway.

• U.S. Master-Planned Communities: In 2023, the top 50 U.S. master-planned communities sold over 34,600 new homes. Texas represented a 34% share of these sales in 2023. Although new home sales in the top 50 master-planned communities declined by 6.6% year-over-year in mid-2025, they still sold over 34,000 new homes in 2024. The Houston metropolitan area, within Texas, was a top-performing region, with 14 communities in the top 50 and over 5,000 sales in the first half of 2023.

Leasing Operations (Retail and Mixed-Use Commercial Properties)

• U.S. Commercial Real Estate Lease Industry: The broader U.S. real estate market, which includes commercial properties, was estimated at $130.02 billion in 2024 and is expected to reach $135.37 billion in 2025. The lease industry within this market is projected to grow at a CAGR of 4.3% from 2025 to 2030.

• Texas Office Market: The Texas office market comprises approximately 1.2 billion square feet of leasable space. In 2024, this inventory saw an increase of nearly eight million square feet.

• Austin Retail Leasing: As of Q3 2024, Austin's retail market had a low overall vacancy rate of 3.4%. Leasing activity for Q3 2024 reached 461,057 square feet. Average retail lease rates in Austin were around $29 per square foot as of December 2023, with high-demand areas seeing rates as high as $50-$90 per square foot.

Hotel Operations

• Austin Hotel Market: As of January 2025, Austin had 20,329 hotel rooms, with an additional 896 rooms under construction. In 2024, Austin added 1,300 hotel rooms across 14 properties, and 17 more projects are nearing completion, set to deliver 1,800 rooms. The downtown Austin market alone had approximately 8,500 hotel rooms as of 2017, representing nearly 25% of the city's total supply. The Austin Convention Center is undergoing a $1.6 billion expansion beginning in 2025, which will nearly double its rentable space by 2029, creating opportunities for increased group travel.

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Stratus Properties Inc. (STRS) is expected to drive future revenue growth over the next 2-3 years through several key initiatives in its real estate operations and leasing segments:

1. Sales of Developed Residential Properties: A significant driver for Stratus Properties continues to be the sale of developed residential properties, particularly homes within the Amarra Villas community. Recent earnings reports consistently highlight sales of Amarra Villas homes as a primary contributor to revenue increases. For example, the sale of one Amarra Villas home contributed significantly to Q3 2024 revenues, and multiple sales drove revenue in the first nine months of 2024 and Q2 2025. The company is also advancing construction of the last two Amarra Villas homes, with completion expected in Q2 2025, indicating continued sales in the near term.
2. Growth in Rental Income from Stabilizing and New Multifamily Properties: Increased rental revenue from properties like The Saint June, which commenced operations in mid-2023 and has been leasing up, is a consistent growth driver. The Saint June showed increased rental revenue in Q3 2024, the first nine months of 2024, and Q1 2025. Additionally, the first units at The Saint George became available for occupancy in April 2025, and this project is expected to be completed in Q2 2025, further contributing to future rental income.
3. Sales of Undeveloped Land and Retail Properties: Stratus Properties has historically generated substantial revenue from the opportunistic sale of undeveloped land, such as the 47 acres at Magnolia Place sold in 2024, and retail properties like Magnolia Place – Retail and West Killeen Market. The sale of West Killeen Market was contracted in Q1 2025 and expected to close in Q2 2025, contributing to revenue. While these are transactional, the company's strategy includes leveraging such sales from its portfolio.
4. Development and Monetization of New Residential and Mixed-Use Projects: The ongoing development of projects like Holden Hills Phase 1 (a 495-acre residential development) and the recently formed joint venture for Holden Hills Phase 2 (an approximately 570-acre mixed-use development) are expected to drive future revenue. Holden Hills Phase 1's road and utility infrastructure is expected to be completed in Q2 2025, paving the way for future lot or home sales. The company's focus on residential and mixed-use projects in Austin and other select Texas markets, often leveraging project-level debt and third-party equity, indicates a pipeline for future revenue generation.

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Share Repurchases

• In September 2022, Stratus Properties' Board approved a share repurchase program authorizing up to $10.0 million of common stock, which was completed in October 2023.
• A new $5.0 million share repurchase program was authorized by the Board in November 2023.
• In June 2025, the share repurchase program was increased from $5.0 million to up to $25.0 million, with $3.0 million repurchased as of August 8, 2025, and $22.0 million remaining available.

Inbound Investments

• In 2023, Stratus formed a joint venture to develop the 495-acre Holden Hills Phase 1 residential project, resulting in a cash distribution and payment of $35.8 million to the company.
• Stratus entered into third-party equity financing in December 2021 for The Saint George, a multi-family project.
• In June 2025, a partnership was formed for the 570-acre Holden Hills Phase 2 mixed-use project, with a Class B Limited Partner contributing approximately $47.9 million in cash.

Capital Expenditures

• Capital expenditures and purchases and development of real estate properties totaled $79.3 million in 2022, primarily focused on Barton Creek properties (including The Saint June and Amarra Villas), The Saint George, and The Annie B.
• In 2024, capital expenditures and purchases and development of real estate properties amounted to $90.4 million.
• For the first six months of 2025, these expenditures totaled $21.6 million, primarily directed towards the development of Holden Hills Phase 1 and The Saint George.