Stratus Properties Inc. Reports Second-Quarter and Six-Month 2014 Results

Stratus Properties Inc. (NASDAQ: STRS):

SUMMARY FINANCIAL RESULTS

Stratus Properties Inc. (NASDAQ: STRS) reported net income attributable to common stock of $0.2 million, $0.03 per share, for second-quarter 2014, compared with $0.6 million, $0.08 per share, for second-quarter 2013. Results for second-quarter 2013 included income of $1.8 million related to an insurance settlement. Net income attributable to common stock for the first six months of 2014 totaled $1.3 million, $0.16 per share, compared with $1.8 million, $0.22 per share, for the first six months of 2013. Results for the first six months of 2014 included income of $0.6 million associated with insurance settlements, and results for the first six months of 2013 included a gain of $1.5 million associated with the sale of a 16-acre tract of land at Lantana and income of $1.8 million related to an insurance settlement.

William H. Armstrong III, Chairman of the Board, Chief Executive Officer and President of Stratus, stated, “Stratus is well-positioned to continue to benefit from a growing Austin-area real estate market. Our lot sales at Barton Creek remain strong, and we are aggressively executing both commercial and residential development projects in Barton Creek, Circle C and Lakeway. Our quarterly results reflected strong operating and financial performance at the W Austin Hotel & Residences, where only five of 159 condominium units remain currently available for sale. Operating performance at both the W Austin Hotel and ACL Live surpassed our plans, and Stratus’ financial results continue to benefit from lower interest costs from our debt refinancing efforts over the past year. We remained focused on advancing our development projects on schedule and within budget and continuing our positive operating performance.”

W Austin Hotel & Residences. Delivery of condominium units commenced in January 2011. As of June 30, 2014, sales of 153 of the 159 condominium units had closed for $178.7 million.

Revenue per available room at the W Austin Hotel was $284 during second-quarter 2014 and $296 for the first six months of 2014, compared with $250 during second-quarter 2013 and $264 for the first six months of 2013. The 251-room hotel, which Stratus believes sets the standard for contemporary luxury in downtown Austin, is managed by Starwood Hotels & Resorts Worldwide, Inc.

Austin City Limits Live at the Moody Theater (ACL Live) hosted 51 events during second-quarter 2014, compared with 49 events during second-quarter 2013. ACL Live hosted 96 events during the first six months of 2014 and 2013. ACL Live currently has events booked through April 2015.

The project has 39,328 square feet of leasable office space, including 9,000 square feet for Stratus' corporate office. As of June 30, 2014, occupancy for the office space was 91 percent, and the 18,362 square feet of retail space was fully leased and occupied.

Parkside Village. Parkside Village, a 90,184-square-foot retail project in the Circle C Community in southwest Austin, 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, an 8,043-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 October 2014. As of June 30, 2014, occupancy of the completed 77,641 square feet was 95 percent. The remaining buildings under development, the 8,043-square-foot building and the 4,500-square-foot building, are fully pre-leased.

Lantana. Lantana is a partially developed, mixed-use real estate development project. During March 2013, Stratus sold a 16-acre tract at Lantana for $2.1 million, which had entitlements for approximately 70,000 square feet of office space. As of June 30, 2014, Stratus had entitlements for approximately 485,000 square feet of office and retail use on the remaining 43 acres. Regional utility and road infrastructure is in place with capacity to serve Lantana at full build-out permitted under Stratus' existing entitlements.

Financial Results. Stratus is continuing its development activities and is focused on maximizing long-term property values. Stratus' developed property sales included the following (dollars in thousands):

The decrease in developed unit/lot sales and revenues in the 2014 periods primarily resulted from decreases in condominium unit sales at the W Austin Residences and lot sales at Verano Drive as inventories of both have declined, partly offset by increased Amarra Drive Phase II lot sales.

In July 2014, Stratus sold one condominium unit at the W Austin Residences for $1.0 million and as of July 31, 2014, had five condominium units available for sale. In July 2014, Stratus sold one Amarra Phase II lot and as of July 31, 2014, had six Amarra Phase II lots and six Meridian lots under contract.

Revenue from the Hotel segment totaled $10.7 million for second-quarter 2014 and $21.6 million for the first six months of 2014, compared with $9.9 million for second-quarter 2013 and $20.0 million for the first six months of 2013. Hotel revenues reflect revenues attributable to the W Austin Hotel and primarily include revenues from room reservations and food and beverage sales. The increase in hotel revenues in 2014 periods primarily reflects higher average room rates and food and beverage sales.

Revenue from the Entertainment segment totaled $3.5 million for second-quarter 2014 and $9.0 million for the first six months of 2014, compared with $3.4 million for second-quarter 2013 and $6.7 million for the first six months of 2013. Entertainment revenues primarily reflect the results of operations for ACL Live, including ticket sales; revenue from private events; sponsorships, personal seat license sales and suite sales; and sales of concessions and merchandise. The Entertainment segment also includes revenues and costs associated with events hosted at venues other than ACL Live, and the results of the Stageside Productions joint venture formed in October 2012. Revenues from the Entertainment segment will vary from period to period as a result of factors such as the price of tickets and number of tickets sold, as well as the type of events.

Rental revenue from the Commercial Leasing segment totaled $1.8 million for second-quarter 2014 and $3.4 million for the first six months of 2014, compared with $1.4 million for second-quarter 2013 and $2.8 million for the first six months of 2013. The increase in rental revenue in the 2014 periods primarily reflects increased leasing activity and occupancy of Parkside Village and the W Austin Hotel & Residences.

Stratus is a diversified real estate company engaged in the acquisition, development, management, operation and/or sale of commercial, hotel, entertainment, and multi- and single-family residential real estate properties located in Texas, primarily in the Austin and central-Texas areas.

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CAUTIONARY STATEMENT. This press release contains forward-looking statements in which Stratus discusses factors Stratus believes may affect its future performance. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations related to operational and financial performance, development plans and real estate sales, commercial leasing activities, timeframes for development, construction and completion of our projects, capital expenditures, liquidity and capital resources, results of our business strategy, and other plans and objectives of management for future operations and activities. The words “anticipates,” “may,” “can,” “plans,” “believes,” “potential,” “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, Stratus’ ability to service its debt and the of financing, a decrease in the demand for real estate in the Austin, Texas market, changes in economic and business conditions, reduction in discretionary spending by consumers and corporations, competition from other real estate developers, hotel operators and/or entertainment venue operators and promoters, business opportunities that may be presented to and/or pursued by Stratus, the failure of third parties to satisfy debt service obligations, the failure to complete agreements with strategic partners and/or appropriately manage relationships with strategic partners, 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 customers for its developments or such customers’ failure to satisfy their purchase commitments, increases in interest rates, declines in the market value of its assets, increases in operating costs, including real estate taxes and the cost of construction materials, changes in external perception of the W Austin Hotel & Residences, changes in consumer preferences, changes in laws, regulations or the regulatory environment affecting the development of real estate, opposition from special interest groups with respect to development projects, weather-related risks 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, 2013.

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 notwithstanding any changes in its assumptions, business plans, actual experience, or other changes, and Stratus undertakes no obligation to update any forward-looking statements, except as required by law.

A copy of this release is available on Stratus' website, www.stratusproperties.com.

BUSINESS SEGMENTS

Stratus currently has four operating segments: Real Estate Operations, Hotel, Entertainment and Commercial Leasing.

The Real Estate Operations segment is comprised of Stratus’ real estate assets (developed, under development and available for development), which consist of its properties in the Barton Creek community, the Circle C Community and Lantana, and the condominium units at the W Austin Hotel & Residences project.

The Hotel segment includes the W Austin Hotel located at the W Austin Hotel & Residences project.

The Entertainment segment includes ACL Live, a live music and entertainment venue and production studio at the W Austin Hotel & Residences project. In addition to hosting concerts and private events, this venue is the home of Austin City Limits, a television program showcasing popular music legends. The Entertainment segment also includes revenues and costs associated with events hosted at other venues, and the results of the Stageside Productions joint venture formed in October 2012.

The Commercial Leasing segment includes the office and retail space at the W Austin Hotel & Residences project, a retail building and a bank building in Barton Creek Village, and 5700 Slaughter and the Parkside Village project, which are both in the Circle C Community.

Segment data presented below was prepared on the same basis as Stratus' consolidated financial statements (in thousands).