Item 1.01. Entry into a Material Definitive Agreement.
On September 1, 2021, Stratus Block 150, L.P., a Texas limited partnership (the
Limited Partnership) and subsidiary of Stratus Properties Inc. (Stratus),
completed financing transactions the proceeds of which were used to purchase the
land for Block 150, a proposed luxury high-rise rental project in downtown
Austin, Texas. The proceeds will also be used to fund additional predevelopment
costs of the project. These financing transactions included (i) the Limited
Partnership entering into a $14.0 million land acquisition loan agreement with
Comerica Bank (Comerica), as lender, and (ii) the Limited Partnership raising
$11.7 million from the sale of Class B limited partnership interests in a
private placement, along with $3.9 million in cash and pursuit costs contributed
by Stratus Block 150 GP, L.L.C., a Texas limited liability company and general
partner of the Limited Partnership (the General Partner), and Stratus Properties
Operating Co., L.P., a Texas limited partnership and the sole Class A limited
partner of the Limited Partnership (the Class A limited partner), both
wholly-owned subsidiaries of Stratus.
The Limited Partnership issued, in a private placement exempt from registration
under federal and state securities laws, Class B limited partnership interests
to a limited number of "accredited investors," as defined in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the Class B limited
partners), for $11.7 million (the Offering), resulting in the Class B limited
partners owning an aggregate of 75.0% of the equity capital interest in the
Limited Partnership. Upon completion of the Offering, Stratus holds, in the
aggregate, a 25.0% indirect equity capital interest in the Limited Partnership
through the Stratus subsidiaries serving as the General Partner and the Class A
limited partner of the Limited Partnership.
In connection with the financing transactions and purchase of land for Block
150, the General Partner, the Class A limited partner and the Class B limited
partners entered into an Amended and Restated Limited Partnership Agreement (the
Partnership Agreement), effective as of August 31, 2021. The Partnership
Agreement anticipates that Block 150 will be capitalized in a two-phase process
consisting of the initial "land partnership" and potentially followed by the
"development partnership." The land partnership phase is intended to encompass
acquiring the land (completed on September 1, 2021), obtaining downtown density
bonus approvals, site development permit approvals and other approvals necessary
to develop the project as envisioned, completing design and site planning work,
and positioning the Limited Partnership to raise the substantial additional debt
and equity capital that will be needed to enter into the development partnership
phase, start construction and complete the development of Block 150. To complete
the financing for the land partnership phase, the Limited Partnership intends to
raise an additional $5.4 million in equity capital no later than March 31, 2022,
resulting in a total of $21.0 million in equity and $14.0 million in debt
financing. If the General Partner determines to proceed with the development
partnership phase, the General Partner intends to cause the Limited Partnership
to sell additional interests in the Limited Partnership to existing or new
partners, subject to a right of first offer in favor of existing Class B limited
partners and other limitations described in the Partnership Agreement.
The Limited Partnership will be managed by the General Partner. The Class B
limited partners have limited approval rights, generally only in connection with
(i) amendments to the Partnership Agreement that would materially affect a Class
B limited partner's economic rights (excluding the sale of new interests to
raise additional capital for the Limited Partnership in accordance with the
Partnership Agreement), and (ii) a sale of Block 150 to a Stratus affiliate. The
Class B limited partnership interests are subject to substantial restrictions on
transfer under the Partnership Agreement and applicable law, including approval
by the General Partner. For the land partnership phase, capital contributions
will accrue an 8.0% annual return. The Limited Partnership will pay a loan
guaranty fee to Stratus for Status' guaranty of the Block 150 land acquisition
loan (as described in Item 8.01 below) in an amount equal to 1.0% of the
outstanding principal balance of the loan per year. If a change of control of
Stratus occurs as defined in the Partnership Agreement, each Class B limited
partner will have a put right, requiring the Class A limited partner to purchase
all, but not less than all, of such Class B limited partner's interests, for a
price generally providing a cumulative 10.0% return on capital contributions.
The anticipated size, scope and cost of Block 150 could change materially,
depending on regulatory approvals, market conditions, and the completion of
design, site planning and financing. If the General Partner were to determine
that a financially attractive project for Block 150 cannot be completed, the
development partnership would not proceed, the land for Block 150 would be sold
and the Limited Partnership would be liquidated.
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The JBM Trust, of which James R. Moffett, Jr. serves as co-trustee, purchased
Class B limited partnership interests, representing an approximately 6.4% equity
capital interest in the Limited Partnership, for a cash payment of $1.0 million,
on the same terms as other Class B limited partners. Mr. Moffett has reported
beneficial ownership of 625,000 shares (approximately 7.6%) of Stratus'
outstanding common stock by virtue of serving as sole manager of LCHM Holdings,
LLC.
The foregoing summary of the Partnership Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Partnership Agreement, a copy of which will be filed as an exhibit to Stratus'
Quarterly Report on Form 10-Q for the quarter ending September 30, 2021.
Item 8.01. Other Events.
On September 1, 2021, the Limited Partnership entered into an 18-month, $14.0
million land acquisition loan agreement with Comerica, guaranteed by Stratus and
secured by the Block 150 project.
On September 7, 2021, Stratus issued a press release, titled "Stratus Properties
Inc. Announces Purchase of Land and Plans to Develop Block 150 in Downtown
Austin." 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.
(d) Exhibits.
Exhibit Number Exhibit Title
99.1 Press release dated September 7, 2021, titled "Stratus Properties Inc.
Announces Purchase of Land and Plans to Develop Block 150 in Downtown
Austin."
104 The cover page from this Current Report on Form 8-K, formatted in
Inline XBRL.
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