Item 2.01. Completion of Acquisition or Disposition of Assets.
OnDecember 10, 2021 ,Santal, L.L.C. , a wholly owned, indirect subsidiary ofStratus Properties Inc. (Stratus), completed the previously announced disposition of the real and personal property associated with The Santal, free and clear of all liens associated with the project loan, for$152.0 million in cash, toBerkshire Multifamily Income Realty-OP, L.P. , aDelaware limited partnership (The Santal Purchaser). The Santal was Stratus' wholly owned 448-unit garden-style, multi-family luxury apartment complex located in Section N of theBarton Creek community inAustin, Texas .
Pre-tax net cash proceeds were approximately
The sale was made pursuant to an Agreement of Sale and Purchase datedSeptember 20, 2021 betweenSantal, L.L.C. andBG-QR GP, LLC , aDelaware limited liability company, as amended by the First Amendment to Agreement of Sale and Purchase datedOctober 4, 2021 (collectively, the Original Agreement), and, after assignment of the Original Agreement to The Santal Purchaser, as further amended by the Second Amendment to Agreement of Sale and Purchase datedNovember 3, 2021 (The Santal Purchase Agreement). The foregoing description of The Santal Purchase Agreement and the transactions contemplated thereby is not intended to be complete and is qualified in its entirety by reference to The Santal Purchase Agreement, copies of which are Exhibit 2.1, Exhibit 2.2 and Exhibit 2.3 to this report and are incorporated herein by reference. Item 8.01. Other Events. OnDecember 14, 2021 , Stratus issued a press release, titled "Stratus Properties Inc. Completes Sale of The Santal for$152 Million ." A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 8.01.
Item 9.01. Financial Statements and Exhibits.
(b) Pro forma financial information.
The following unaudited pro forma financial statements were derived from Stratus' historical financial statements and are being presented to give effect to (i) the disposition of The Santal for pre-tax net cash proceeds of$74.1 million after payment of selling costs and the project loan as described above in Item 2.01 of this report (The Santal Disposition) and (ii) the probable disposition of the real and personal property associated with Block 21 for an aggregate purchase price of$260.0 million , as reported in Stratus' Current Report on Form 8-K datedOctober 26, 2021 , and reflecting a probable downward adjustment to$255.0 million (the Probable Block 21 Disposition). As previously disclosed, onOctober 26, 2021 ,Stratus Block 21, L.L.C. , aDelaware limited liability company, and Stratus Block 21Investments, L.P. , aTexas limited partnership, both wholly owned, indirect subsidiaries of Stratus, entered into agreements (collectively, the Block 21 Sales Agreements) pursuant to which they agreed to sell the real and personal property associated with Block 21 to Ryman Hospitality Properties, Inc. (the Block 21 Purchaser), subject to limited exclusions and subject to the terms and conditions specified in the Block 21 Sales Agreements. Block 21 is Stratus' wholly owned mixed-use real estate development and entertainment business in downtownAustin, Texas that contains the 251-roomW Austin Hotel and is home to ACL Live, a 2,750-seat live music and entertainment venue and production studio that serves as the location for the filming ofAustin City Limits. Block 21 also includes Class A office space, retail space and the 3TEN ACL Live entertainment venue and business, which has a capacity of approximately 350 people.
-------------------------------------------------------------------------------- The purchase price under the Block 21 Sales Agreements is$260.0 million in the aggregate, subject to downward adjustments up to$5.0 million (the Total Purchase Price) and will be payable by the assumption of the project loan, for which the Block 21 Purchaser will receive a credit against the Total Purchase Price in an amount equal to the unpaid balance of the project loan as of the closing of the Probable Block 21 Disposition plus accrued but unpaid interest, with the remainder to be paid in cash or other readily available funds. As ofSeptember 30, 2021 , the principal balance of the project loan was approximately$138 million .
Presented below are the following unaudited pro forma financial statements:
-Condensed balance sheet as of
-Condensed statements of operations for the years endedDecember 31, 2020 and 2019, and the nine months endedSeptember 30, 2021 , as adjusted assuming The Santal Disposition and Probable Block 21 Disposition occurred onJanuary 1, 2019 . The unaudited pro forma condensed financial statements are prepared in accordance with Article 11 of Regulation S-X. The pro forma adjustments have been made solely for the purpose of providing pro forma financial information as required by theU.S. Securities and Exchange Commission (SEC) rules. Differences between these pro forma adjustments and the final accounting for The Santal Disposition and Probable Block 21 Disposition may be material. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of the filing of this report. Stratus expects to report Block 21 as a discontinued operation underU.S. generally accepted accounting principles (GAAP). As these pro forma statements of operations include only results from continuing operations, the projected pre-tax gain on the Probable Block 21 Disposition of approximately$110 million is not presented. The pro forma financial information is provided for informational purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Stratus would have been had The Santal Disposition and Probable Block 21 Disposition occurred on the dates assumed, nor are they necessarily indicative of Stratus' future consolidated results of operations or consolidated financial position. The unaudited pro forma condensed balance sheet and statements of operations should be read in conjunction with (i) the accompanying notes to the pro forma financial information (ii) the Current Reports on Form 8-K filed with theSEC onSeptember 21, 2021 , andOctober 15, 2021 (for reporting The Santal Purchase Agreement), and onOctober 26, 2021 (for reporting the Block 21 Sales Agreements), (iii) the audited consolidated financial statements and accompanying notes of Stratus contained in its Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSEC onMarch 15, 2021 , and (iv) the unaudited condensed consolidated financial statements and accompanying notes of Stratus contained in its Quarterly Report on Form 10-Q for the quarterly period endedSeptember 30, 2021 , filed with theSEC onNovember 15, 2021 (Third Quarter 2021 Form 10-Q). Stratus' Board of Directors and management are engaged in a strategic planning process, which includes consideration of the use of proceeds from The Santal Disposition and Probable Block 21 Disposition and of Stratus' long-term business strategy. The potential uses of proceeds may include a combination of further deleveraging, returning cash to shareholders and investing in Stratus' project pipeline. These factors may impact Stratus' evaluation of a potential conversion to a real estate investment trust. In the interim, Stratus used approximately$56 million of the pre-tax net cash proceeds to pay the full outstanding balance on its revolving credit facility withComerica Bank . -------------------------------------------------------------------------------- Although the Probable Block 21 Disposition is being reflected in this report as a probable disposition, no assurance can be given that the sale will be completed. The closing is subject to the timely satisfaction or waiver of a number of specified closing conditions, including the consent of the loan servicer for the project loan to the Block 21 Purchaser's assumption of the project loan, the consent of the hotel operator, an affiliate of Marriott, to the Block 21 Purchaser's assumption of the hotel operating agreement, the absence of a material adverse effect with respect to the results of operations or condition of Block 21 and other customary closing conditions. STRATUS PROPERTIES INC. UNAUDITED PRO FORMA CONDENSED BALANCE SHEET SEPTEMBER 30, 2021 (In Thousands) Adjustments Historical (1) The Santal (2) Block 21 (3) Other (4) Pro Forma ASSETS Cash, cash equivalents, and restricted cash$ 59,621 $ 74,107 $ 104,055 $ -$ 237,783 Real estate held for sale 1,773 - - - 1,773 Real estate under development 144,666 - - - 144,666 Land available for development 42,564 - - - 42,564 Real estate held for investment, net 211,972 - (121,010) - 90,962 Lease right-of-use assets 10,634 - (64) - 10,570 Other assets 20,606 - (2,119) - 18,487 Assets held for sale 67,264 (67,264) - - - Total assets$ 559,100 $ 6,843$ (19,138) $ -$ 546,805 LIABILITIES AND EQUITY Accounts payable and accrued liabilities$ 20,607 $ -$ (6,865) $ 3,974 $ 17,716 Debt 295,394 - (137,885) - 157,509 Lease liabilities 13,888 - (64) - 13,824 Other liabilities and deferred gain 26,635 - (7,300) - 19,335 Liabilities held for sale 75,174 (75,174) - - - Total liabilities 431,698 (75,174) (152,114) 3,974 208,384 Total equity 127,402 82,017 116,093 (3,974) 321,538 Total liabilities and equity$ 559,100 $ 6,843$ (36,021) $ -$ 529,922
-------------------------------------------------------------------------------- NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET (1) Stratus' historical financial information has been derived from its Third Quarter 2021 Form 10-Q. The assets and liabilities of The Santal were classified as held for sale on Stratus'September 30, 2021 , balance sheet. (2) Pro forma adjustments reflect The Santal Disposition for pre-tax net cash proceeds of$74.1 million after the use of a portion of the pre-tax net cash proceeds to pay the full outstanding balance of the project loan ($75.0 million ). The pre-tax net cash proceeds exclude any settlement prorations upon closing of the transaction. The pro forma adjustments do not reflect the use of approximately$56 million of pre-tax net cash proceeds to pay the full outstanding balance on Stratus' revolving credit facility withComerica Bank .
A reconciliation of the sale price to net cash proceeds follows (in millions): Sale price
$ 152.0 Repair and other credits (0.7) Selling costs (0.7)
The Santal project loan principal balance (75.0) Prepayment fee
(1.5) Net cash proceeds$ 74.1 (3) Pro forma adjustments reflect the Probable Block 21 Disposition for expected pre-tax net cash proceeds of$104.1 million and assumption of the existing Block 21 project loan of$137.7 million by the Block 21 Purchaser. The pre-tax net cash proceeds exclude any settlement prorations upon closing of the transaction. A reconciliation of the sale price to expected net cash proceeds follows (in millions): Sale price$ 255.0 Estimated selling costs (1.8) Block 21 project loan balance (137.7)
Restricted cash to be acquired by the purchaser (11.4) Net cash proceeds
$ 104.1
(4) Adjustment reflects an increase to the accrued liability under Stratus' Profit Participation Incentive Plan (PPIP) associated with The Santal Disposition.
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STRATUS PROPERTIES INC. UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS (In Thousands, except per share amounts) Nine
Months Ended
Adjustments Historical (1) The Santal (2) Block 21 (3) Other (4) Pro Forma Revenues$ 41,571 $
(6,826)
40,747 (5,611) (21,640) - 13,496 General and administrative expenses 16,365 - (568) - 15,797 Impairment of real estate 625 - - - 625 Gain on sale of assets (22,931) - - - (22,931) Operating income (loss) 6,765 (1,215) 3,910 - 9,460 Interest expense, net (8,666) 2,418 5,976 (566) (838) Net gain on extinguishment of debt 3,454 - - - 3,454 Other income, net 74 - - - 74 (Provision for) benefit from income taxes (5) (351)
(224) (1,895) 119 (2,351) Equity in unconsolidated affiliates' loss
(11) - - - (11) Net income (loss) and total comprehensive income (loss) 1,265 979 7,991 (447) 9,788 Total comprehensive income attributable to noncontrolling interest in subsidiaries (6,248) - - - (6,248) Net (loss) income and total comprehensive (loss) income attributable to common stockholders$ (4,983) $
979
Basic and diluted net loss (income) per share attributable to common stockholders $ (0.61)$ 0.43 Weighted-average common shares outstanding (6) Basic 8,232 8,232 Diluted 8,232 8,303
-------------------------------------------------------------------------------- Year Ended December 31, 2020 Adjustments Historical (1) The Santal (2) Block 21 (3) Other (4) Pro Forma Revenues$ 61,015 $
(8,697)
67,020 (7,259) (29,610) - 30,151 General and administrative expenses 15,036 - (1,457) - 13,579 Income from forfeited earnest money (15,000) - 15,000 - - Operating loss (6,041) (1,438) (615) - (8,094) Interest expense, net (14,827) 4,044 8,130 (444) (3,097) Other income (losses), net 227 3 (27) - 203 (Provision for) benefit from income taxes (5) (3,818) (512) (1,270) 93 (5,507) Equity in unconsolidated affiliates' loss (16) - - - (16) Net (loss) income and total comprehensive (loss) income (24,475) 2,097 6,218 (351) (16,511) Total comprehensive income attributable to noncontrolling interest in subsidiaries 1,685 - - - 1,685 Net (loss) income and total comprehensive (loss) income attributable to common stockholders$ (22,790) $
2,097
Basic and diluted net loss per share attributable to common stockholders $ (2.78)$ (1.81) Basic and diluted weighted-average common shares outstanding (6) 8,211 8,211
-------------------------------------------------------------------------------- Year Ended December 31, 2019 Adjustments Historical (1) The Santal (2) Block 21 (3) Other (4) Pro Forma Revenues$ 92,178 $
(7,672)
75,314 (7,169) (52,188) - 15,957 General and administrative expenses 12,384 - (1,040) 3,974 15,318 Gain on sale of assets (5,683) (83,328) - - (89,011) Operating income (loss) 10,163 82,825 (8,947) (3,974) 80,067 Interest expense, net (12,483) 3,480 8,235 (630) (1,398) Net loss on extinguishment of debt (247) (1,660) - - (1,907) Other income, net 236 - - - 236 (Provision for) benefit from income taxes (5) (117) (18,089) 392 967 (16,847) Equity in unconsolidated affiliates' loss (19) - - - (19) Net (loss) income and total comprehensive (loss) income (2,467) 66,556 (320) (3,637) 60,132 Total comprehensive loss attributable to noncontrolling interest in subsidiaries 3 - - - 3 Net (loss) income and total comprehensive (loss) income attributable to common stockholders$ (2,464) $
66,556
Net (loss) income per share attributable to common stockholders Basic $ (0.30)$ 7.35 Diluted $ (0.30)$ 7.31 Weighted-average common shares outstanding (6) Basic 8,182 8,182 Diluted 8,182 8,221 NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS (1) Stratus' historical financial information has been derived from its Third Quarter 2021 Form 10-Q and Annual Report on Form 10-K for the year endedDecember 31, 2020 , as applicable. (2) Pro forma adjustments reflect The Santal Disposition, including an estimated gain of$83.3 million in 2019, and use of a portion of the pre-tax net cash proceeds to pay the full outstanding balance of the project loan. The estimated gain was calculated based onSeptember 30, 2021 , balances. The pro forma adjustments do not reflect the use of approximately$56 million of pre-tax net cash proceeds to pay the full outstanding balance on Stratus' revolving credit facility withComerica Bank . (3) Pro forma adjustments reflect the Probable Block 21 Disposition and assumption of the existing Block 21 project loan by the Block 21 Purchaser. Stratus expects to report Block 21 as a discontinued operation under GAAP. As these pro forma statements of operations include only results from continuing operations, the projected gain on the Probable Block 21 Disposition is not presented. Based onSeptember 30, 2021 , balances, Stratus expects to record an approximate pre-tax gain of$110 million upon the closing of the Probable Block 21 Disposition. (4) The year 2019 includes an adjustment for an increase to the accrued liability under Stratus' PPIP associated with The Santal Disposition. All periods presented also include adjustments to capitalized interest. -------------------------------------------------------------------------------- (5) The effect on income taxes of the pro forma adjustments have been computed based on the statutory rates in effect during the periods presented. (6) The historical weighted-average shares of common stock outstanding exclude approximately 134 thousand shares for the first nine months of 2021, 86 thousand shares for the year 2020 and 88 thousand shares for the year 2019 associated with restricted stock units (RSUs) and outstanding stock options that were anti-dilutive as a result of the net losses for the periods. The pro forma diluted weighted-average shares of common stock outstanding exclude approximately 7 thousand shares for the first nine months of 2021 and 21 thousand shares for the year 2019 associated with RSUs that were anti-dilutive. (d) Exhibits. Exhibit Number Exhibit Title 2.1 Agreement of Sale and Purchase, by and between Santal, L.L.C., as seller, and BG-QR GP, LLC, as purchaser, dated as of September 20, 2021 (incorporated herein by reference to Exhibit 2.2 to Stratus' Quarterly Report on Form 10-Q filed on November 15, 2021). 2.2 First Amendment to Agreement of Sale and Purchase, by and between Santal, L.L.C., as seller, and BG-QR GP, LLC, as purchaser, effective as of October 13, 2021 (incorporated herein by reference to Exhibit 2.3 to Stratus' Quarterly Report on Form 10-Q filed on November 15, 2021). 2.3 Second Amendment to Agreement of Sale and Purchase, by and between Santal, L.L.C., as seller, and Berkshire
Multifamily Income Realty-OP,
L.P., as purchaser, dated as ofNovember 3 ,
2021 (incorporated herein
by reference to Exhibit 2.4 to Stratus'
Quarterly Report on Form 10-Q
filed onNovember 15, 2021 ). 99.1 Press release datedDecember 14, 2021 , titled "Stratus Properties Inc. Completes Sale of The Santal for$152 Million ." 104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.
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