Item 1.01. Entry into a Material Definitive Agreement.
On
•Phase I is expected to consist of 337 luxury residence sites to be developed in nine distinct communities or "pods," and 12 single-family platted home sites or "estate lots," and includes related amenities and infrastructure. Phase I also includes the Tecoma Improvements, described below.
•Phase II is expected to consist of 63 luxury residence sites to be developed in five distinct communities or "pods," and 63 single-family platted home sites or "estate lots," and includes related amenities and infrastructure.
The luxury residences are expected to range in size from 2,000 square feet to 4,600 square feet. The estate lots are expected to range in size from 0.9 acres to 2.7 acres.
The Partnership may sell the developed pods and estate lots, or may elect to build and sell, or build and lease, homes on some or all of the pods and estate lots, depending on financing and market conditions. Pods and estate lots may also be acquired from the Partnership by a limited partner for further development under procedures approved by the partners.
Pursuant to the Partnership Agreement, the partners are required to make the
following initial capital contributions to the Partnership: (i) The Class A
Limited Partner is required to contribute the Holden Hills land and related
personal property at an agreed value of
In addition to each partner's initial capital contribution, upon the call of the
General Partner from time to time, the Class A Limited Partner and the General
Partner, together, are obligated to make capital contributions up to an
additional
The initial and potential additional equity contributions described above are
projected to constitute a sufficient amount of equity capital to develop both
Phase I and Phase II of the
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In connection with entering into the Partnership Agreement, the Class A Limited
Partner and the Partnership entered into a development agreement (Development
Agreement) that provides that, as part of Phase I, the Partnership will
construct certain street, drainage, water, sidewalk, electric and gas
improvements in order to extend the Tecoma Circle roadway on Section N land
owned by Stratus from its current terminus to
The General Partner has the authority to manage the Partnership's business, subject to approval rights given to the partners for specified "Major Decisions," including but not limited to:
•project and operating budgets, the business plan, and amendments thereto;
•sales, leases or transfers of any portion of the
•payments, transactions or agreements between the Partnership and any partner or its affiliates not already approved;
•incurring any debt, mortgage or guaranty;
•capital calls in excess of the initial capital commitment and potential
additional
•direct or indirect transfer of the General Partner or
•direct or indirect transfer of the
A "Deadlock" may be declared by any partner if any limited partner does not approve any two Major Decisions proposed by the General Partner within any 12-month period. Determinations of the Partnership regarding whether to assert, defend, or settle claims, and the terms of such claims, under any agreement between the Partnership and affiliates of Stratus are determined on behalf of the Partnership by the Class B Limited Partner.
Pursuant to the Partnership Agreement's buy-sell provision, prior to the third anniversary of the effective date of the Partnership Agreement, the buy-sell can be triggered only if there is a Deadlock. On or after the third anniversary, any partner can initiate the buy-sell at any time by written notice to the other partner, specifying the buyout price.
The Partnership interests are subject to substantial restrictions on direct and indirect transfers under the Partnership Agreement and applicable law. Generally, direct and indirect transfers other than to specified permitted transferees require partner consent and such transfer is subject to a right of first refusal by the non-transferring partners. Removal of the General Partner is limited to "cause" as described in the Partnership Agreement.
The Partnership has agreed to pay the General Partner a development management
fee of 4.0% of certain construction costs for Phase
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project, payable from available cash flow after debt service. Before
construction is completed for single-family estate lots within the
The partners have approved an initial business plan for the
In connection with the formation and initial capitalization of the Partnership,
The foregoing summary of the Partnership Agreement, the Development Agreement
and the transactions contemplated thereby does not purport to be complete and is
qualified in its entirety by reference to the full text of the Partnership
Agreement and Development Agreement, copies of which will be filed as an exhibit
to Stratus' Annual Report on Form 10-K for the year ended
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements in which Stratus discusses
factors it believes may affect its future performance. Forward-looking
statements are all statements other than statements of historical fact, such as
plans, projections or expectations related to the development plans for the
property including the potential sizes of the residences and estate lots, future
plans with respect to the developed pods and estate lots, the sufficiency of
equity financing for the project, and the partnership's ability to complete
construction financing. The words "anticipate," "may," "can," "plan," "believe,"
"potential," "estimate," "expect," "project," "target," "intend," "likely,"
"will," "should," "to be" and any similar expressions and/or statements 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, expected, 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 execute profitably on its development plan for
Holden Hills, the availability and terms of debt financing for the development
of Holden Hills, Stratus' ability to implement its business strategy
successfully, including its ability to develop, finance, construct and sell or
lease properties on its anticipated schedule and at prices its Board of
Directors considers acceptable, changes in the demand for real estate in the
select markets in
Investors are cautioned that many of the assumptions upon which Stratus' forward-looking statements are based are likely to change after the date the forward-looking statements are made. Further, Stratus may make changes to its business plans that could affect its results. Stratus cautions investors that it undertakes no obligation to update any forward-looking statements, which speak only as of the date made, notwithstanding any changes in its assumptions, business plans, actual experience, or other changes.
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