Stratus Properties Inc. Reports Fourth-Quarter and Year Ended December 31, 2012 Results
Stratus Properties Inc. Reports Fourth-Quarter and Year Ended December 31, 2012 Results
- As of December 31, 2012, sales of 118 of the 159 condominium units at the W Austin Hotel & Residences project had closed for $126.7 million (an average of $1.1 million per unit), including nine units for $10.5 million (an average of $1.2 million per unit) in fourth-quarter 2012 and 40 units for $37.7 million (an average of $0.9 million per unit) for the year 2012, compared with nine units for $12.4 million (an average of $1.4 million per unit) in fourth-quarter 2011 and 78 units for $89.0 million (an average of $1.1 million per unit) for the year 2011. As of March 15, 2013, Stratus sold nine units in 2013 for $11.0 million and seven of the remaining units were under contract.
- Lot sales totaled eight lots for $2.5 million in fourth-quarter 2012 and 24 lots for $8.0 million during 2012, compared with five lots for $0.7 million in fourth-quarter 2011 and 23 lots for $2.7 million during 2011. As of March 15, 2013, Stratus sold six lots in 2013 for $1.9 million and had 14 lots under contract. In addition, Stratus sold a 16 acre tract at Lantana for $2.1 million in March 2013.
- Revenue per available room at the W Austin Hotel was $267 during fourth-quarter 2012 and $232 during the year 2012, compared with $194 during fourth-quarter 2011 and $184 during the year 2011.
- ACL Live hosted 54 events during fourth-quarter 2012 and 193 events during the year 2012, compared with 40 events during fourth-quarter 2011 and 151 events during the year 2011.
- Construction of the final two buildings at the Parkside Village project is expected to be completed in late 2013 and as of December 31, 2012, occupancy of the completed 77,641 square feet was 89 percent. Of the two remaining buildings under development, the 7,500-square-foot building is fully pre-leased, and leasing activities are ongoing for the 4,500-square-foot building.
- Total Stratus debt was $137.0 million at December 31, 2012, compared with $158.5 million at December 31, 2011. Effective December 31, 2012, Stratus amended its Comerica credit facility, such that the existing $45.0 million facility was replaced with a $48.0 million credit facility, comprised of a $35.0 million revolving line of credit, $8.4 million of which was available at December 31, 2012, a $3.0 million tranche for letters of credit, with no amounts outstanding ($2.9 million of letters of credit committed), and a $10.0 million construction loan, with no amounts outstanding.
- Stratus has an open market share purchase program for up to 0.7 million shares of its common stock. As of December 31, 2012, a total of 113,645 shares remained available under this program. From January 1, 2013, through March 15, 2013, Stratus purchased 36,884 shares of common stock for $0.4 million or $10.06 per share.
Stratus Properties Inc. (NAS: STRS) reported a net loss attributable to common stock of $0.1 million, $0.01 per share, for fourth-quarter 2012, compared with a net loss of $4.3 million, $0.57 per share, for fourth-quarter 2011. For the year 2012, Stratus reported a net loss attributable to common stock of $1.6 million, $0.20 per share, compared with a net loss of $10.4 million, $1.39 per share, for the year 2011. Results for the year 2012 include a gain of $4.3 million associated with the sale of eight undeveloped tracts at Lantana and a gain of $5.1 million related to the sale of the two office buildings at 7500 Rialto Boulevard.
William H. Armstrong III, Chairman of the Board, Chief Executive Officer and President of Stratus, stated, "The Austin real estate market is robust and we are optimistic about the future of our real estate assets. Sales of our Barton Creek lots have been strong, and we sold several commercial tract in 2012 and 2013. The W Austin Hotel & Residences project continues to perform very well, with approximately 80 percent of our condominium units sold to date and hotel operations continuing to reflect strong occupancy and room rates. Austin City Limits Live continues to build on its reputation as a premier choice for music industry events. The project's retail space is expected to be fully leased in early 2013 and the office space is expected to be fully leased this year. Our Parkside Village project has also been well received by the community, with construction expected to be completed in late 2013. We are pleased that we successfully restructured our credit facilities, reducing interest rates and extending maturities, in a manner that fits our current activities and gives us additional financial flexibility."
SUMMARY FINANCIAL RESULTS
|(In Thousands, Except Per Share Amounts)|
|Operating income (loss)||2,093||(3,548||)||2,781||1,681|
|Income (loss) from continuing operations||95||(6,420||)||(9,118||)||(5,424||)|
|(Loss) income from discontinued operationsa||—||(57||)||4,805||191|
|Net income (loss)||95||(6,477||)||(4,313||)||(5,233||)|
|Net loss attributable to Stratus common stock||(54||)||(4,279||)||(1,586||)||(10,388||)|
|Diluted net (loss) income per share of common stock:|
|Diluted net loss per share attributable to Stratus common stock||$||(0.01||)||$||(0.57||)||$||(0.20||)||$||(1.39||)|
|Diluted weighted average shares of common stock outstanding||8,095||7,501||7,966||7,482|
a. Includes the results of Stratus' two office buildings at 7500 Rialto Boulevard, which Stratus sold in February 2012.
W Austin Hotel & Residences Project. Stratus completed development of the W Austin Hotel & Residences in downtown Austin, Texas through a joint venture with Canyon-Johnson Urban Fund II, L.P., at a cost of approximately $300 million. Delivery of condominium units commenced in January 2011 and continues. As of March 15, 2013, sales of 127 of the 159 condominium units had closed for $137.7 million and seven of the remaining 32 condominium units were under contract.
The 251-room hotel, which Stratus believes sets the standard for contemporary luxury in downtown Austin, opened in December 2010 and is managed by Starwood Hotels & Resorts Worldwide, Inc. Revenue per available room at the W Austin Hotel was $267 during fourth-quarter 2012 and $232 during the year 2012, compared with $194 during fourth-quarter 2011 and $184 during the year 2011.
The project also includes Austin City Limits Live at the Moody Theater (ACL Live), a live music and entertainment venue and production studio with a maximum capacity of approximately 3,000 people. In addition to hosting concerts and private events, the venue is the home of Austin City Limits, a television program showcasing popular music legends. ACL Live opened in February 2011, hosted 193 events during 2012, compared with 151 events during 2011. As of March 15, 2013, ACL Live has events booked through November 2013.
The project has 39,328 square feet of leasable office space, of which 17,500 square feet opened in March 2011, including 9,000 square feet for Stratus' corporate office. The project also has 18,362 square feet of leasable retail space, of which 14,500 square feet opened in August 2011. As of December 31, 2012, occupancy was 64 percent for the office space and 82 percent for the retail space. Leasing activities for the remaining office and retail space are ongoing.
Parkside Village Project. In May 2011, Stratus, through its joint venture, secured a $13.7 million construction loan to finance the development of Parkside Village, a 89,641-square-foot retail project under development in the Circle C community in southwest Austin. The project consists of a 33,650-square-foot full-service movie theater and restaurant, a 13,890-square-foot medical clinic and five other retail buildings, including a 14,926-square-foot building, a 10,175-square-foot building, a 7,500-square-foot building, a 4,500-square-foot building and a stand-alone 5,000-square-foot building. Construction of the final two buildings is expected to be completed in late 2013 and as of December 31, 2012, occupancy of the completed 77,641 square feet was 89 percent. Of the two remaining buildings under development, the 7,500-square-foot building is fully pre-leased, and leasing activities are ongoing for the 4,500-square-foot building.
Lantana.Lantana is a partially developed, mixed-use real-estate development project. In August 2012, Stratus completed the sale of eight of the remaining eleven undeveloped commercial tracts of land for $15.8 million. The tracts of land sold, which totaled approximately 154 acres, have entitlements for approximately 1,131,200 square feet of office space. As of December 31, 2012, Stratus had remaining entitlements for approximately 555,000 square feet of office and retail use on 72 acres. Regional utility and road infrastructure is in place with capacity to serve Lantana at full build-out permitted under Stratus' existing entitlements. During March 2013, Stratus sold an additional 16 acre tract for $2.1 million, which had entitlements for approximately 70,000 square feet of office space.
Loan Modifications.Effective December 31, 2012, Stratus amended its Comerica credit facility, such that the existing $45.0 million facility was replaced with a $48.0 million credit facility, comprised of a $35.0 million revolving line of credit, $8.4 million of which was available at December 31, 2012, a $3.0 million tranche for letters of credit, with no amounts outstanding ($2.9 million of letters of credit committed), and a $10.0 million construction loan, with no amounts outstanding. The interest rate applicable to amounts borrowed under the credit facility is an annual rate of LIBOR plus 4.0 percent, with a minimum interest rate of 6.0 percent. The credit facility will mature on November 30, 2014.
Discontinued Operations. On February 27, 2012, Stratus sold its two office buildings at 7500 Rialto Boulevard (7500 Rialto) to Lincoln Properties and Greenfield Partners (Lincoln Properties) for $27.0 million. Lincoln Properties paid $6.7 million in cash ($5.7 million net to Stratus after closing and other costs) and assumed Stratus' outstanding nonrecourse debt (the Lantana Promissory Note) of $20.3 million secured by the property. Stratus is providing a limited guaranty of debt service and other obligations on the Lantana Promissory Note up to $5.0 million, which will be reduced to $2.5 million on May 1, 2016, until January 1, 2018 (the maturity date for the Lantana Promissory Note). Stratus does not currently expect that it will be required to perform under the guaranty. Stratus recognized $5.1 million of its $10.1 million gain on the sale in first-quarter 2012 and expects the balance to be recorded as its obligations under the limited guaranty are relieved. As required by applicable accounting rules, Stratus' financial statements reflect the results of operations of 7500 Rialto separately as discontinued operations.
Financial Results. Stratus is continuing its high-priority development activities and is focused on maximizing long-term property values. Stratus' developed property sales included the following (dollars in thousands):
|W Austin Hotel & Residences|
|W Austin Hotel & Residences|
|Calera Court Courtyard Homes||—||—||—||1||490||501|
|Phase I Lots||2||745||313||1||550||198|
|Phase II Lots||2||953||201||—||—||—|
a. Includes a fourth-quarter 2011 margin reduction charge total ing $5.8 million, to reflect the revised estimates of projected aggregate profit margin on the condominium units at the W Austin Hotel & Residences project. Excluding the margin reduction charge, fourth-quarter 2011 average costs for the condominium units were $1.1 million.
The decrease in developed property sales revenues in 2012 primarily resulted from fewer sales of condominium units at the W Austin Hotel & Residences project because the sales for 2011 included presales from prior years that closed and were delivered as the units were completed during 2011. In addition, the inventory of condominium units has declined because of sales, leaving a remaining inventory of 32 units at March 15, 2013, from the original inventory of 159 units. The decrease in condominium unit sales in 2012 was partly offset by an increase in lot sales at Barton Creek.
As discussed above, during 2012 Stratus sold eight undeveloped commercial tracts of land at Lantana for $15.8 million in cash. During fourth-quarter 2011, Stratus sold a 12-acre tract of undeveloped land at Barton Creek for $2.2 million and in third-quarter 2011 Stratus sold a 28-acre tract of undeveloped land at Circle C for $2.0 million.
Revenue from the hotel segment totaled $10.2 million for fourth-quarter 2012 and $35.4 million for the year 2012, compared with $7.8 million for fourth-quarter 2011 and $28.1 million for the year 2011. Hotel revenues reflect revenues for the W Austin Hotel and primarily include revenues from room reservations and food and beverage sales. The increase in hotel revenues in 2012, compared with 2011, primarily reflects higher average occupancy and room rates.
Revenue from the entertainment venue segment totaled $4.5 million for fourth-quarter 2012 and $13.8 million for the year 2012, compared with $2.8 million for fourth-quarter 2011 and $9.0 million for the year 2011. Entertainment venue revenues include revenues for ACL Live, which opened in February 2011 and primarily include ticket sales; sponsorships, personal seat license sales and suite sales; and sales of concessions and merchandise. Entertainment venue revenues increased in 2012, compared with 2011, primarily reflecting an increased number of events hosted, sponsorship, personal seat license and suite revenue, and ancillary revenue per attendee.
Rental revenue from the commercial leasing segment, excluding the results of 7500 Rialto which Stratus sold in 2012, totaled $1.2 million for fourth-quarter 2012 and $4.4 million for the year 2012, compared with $0.7 million for fourth-quarter 2011 and $2.3 million for the year 2011. The increase in rental revenue in 2012, compared with 2011, primarily reflects increased occupancy at W Austin Hotel and Residences and Parkside Village, both of which opened during 2011.
Stratus is a diversified real estate company engaged in the acquisition, development, management, operation and sale of commercial, hotel, entertainment, and multi- and single-family residential real estate properties, including the W Austin Hotel & Residences project, located primarily in the Austin, Texas area.
CAUTIONARY STATEMENT.This press release contains forward-looking statements in which Stratus discusses certain of its expectations regarding future performance. Forward-looking statements are all statements other than statements of historical facts, such as those statements regarding anticipated real estate sales and commercial leasing activities.The words "anticipates," "may," "can," "plans," "believes," "estimates," "expects," "projects," "intends," "likely," "will," "should," "to be" and any similar expressions and/or statements that are not historical facts are intended to identify those assertions as forward-looking statements.
Stratus cautions readers that forward-looking statements are not guarantees of future performance, and its actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements.Important factors that can cause Stratus' actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, changes in economic and business conditions, business opportunities that may be presented to and/or pursued by Stratus, the availability of financing, increases in foreclosures and interest rates, the termination of sales contracts or letters of intent due to, among other factors, the failure of one or more closing conditions or market changes, the failure to attract homebuilding customers for Stratus' developments or their failure to satisfy their purchase commitments, the failure to complete agreements with strategic partners and/or appropriately manage relationships with strategic partners, a decrease in the demand for real estate in the Austin, Texas market, competition from other real estate developers, increases in operating costs, including real estate taxes and the cost of construction materials, changes in laws, regulations or the regulatory environment affecting the development of real estate and other factors described in more detail under the heading "Risk Factors" in Stratus' Annual Report on Form 10-K for the year ended December 31, 2012.
Investors are cautioned that many of the assumptions on which Stratus' forward-looking statements are based are subject to change after its forward-looking statements are made. Further, Stratus may make changes to its business plans that could or will affect its results. Stratus cautions investors that it does not intend to update its forward-looking statements more frequently than quarterly notwithstanding any changes in its assumptions, changes in its business plans, its actual experience, or other changes, and Stratus undertakes no obligation to update any forward-looking statements.
A copy of this release is available on Stratus' website, www.stratusproperties.com.
STRATUS PROPERTIES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
(In Thousands, Except Per Share Amounts)
|Three Months Ended||Years Ended|
|December 31,||December 31,|
|Cost of sales:|
|Real estate, net||10,847||19,573||56,125||86,095|