Stratus(STRS) - 2023 Q3 - Quarterly Report

Financial Performance - Total revenues for Q3 2023 were $3.7 million, down from$10.0 million in Q3 2022, and $13.0 million for the first nine months of 2023 compared to$24.2 million in the same period of 2022[109]. - Net loss attributable to common stockholders was $2.8 million, or$0.35 per diluted share in Q3 2023, compared to a net loss of $2.4 million, or$0.29 per diluted share in Q3 2022[110]. - The company recorded a net loss of $13.9 million, or$1.69 per diluted share for the first nine months of 2023, contrasting with a net income of $96.5 million, or$11.50 per diluted share in the same period of 2022, which included a $119.7 million pre-tax gain from the sale of Block 21[110]. - As of September 30, 2023, the company reported an operating loss of$3.329 million for the quarter, compared to a loss of $2.830 million in the same period last year[144]. - The company experienced a net loss from continuing operations of$3.217 million for the three months ended September 30, 2023[144]. - Operating income for the first nine months of 2023 was $3.9 million, down from$8.4 million in the same period of 2022, largely due to a gain on sale of assets recognized in 2022[152]. Cash and Debt Management - As of September 30, 2023, cash and cash equivalents totaled $35.2 million, with an additional$40.5 million available under the revolving credit facility[105]. - The company aims to reduce reliance on its revolving credit facility while maximizing cash flow from stabilized assets and managing capital expenditures in a challenging market environment[105]. - Cash used in operating activities was $39.3 million for the first nine months of 2023, down from$49.3 million in the same period of 2022[163]. - Cash provided by financing activities totaled $66.9 million for the first nine months of 2023, compared to cash used of$9.7 million in the same period of 2022[166]. - As of September 30, 2023, total debt increased to $158.5 million from$123.9 million at December 31, 2022[172]. - The maximum borrowing capacity under the Comerica Bank revolving credit facility was $53.8 million, with$40.5 million available after accounting for $13.3 million in letters of credit[172]. - The company had firm commitments totaling approximately$54 million for construction projects as of September 30, 2023[186]. - The company was in compliance with all financial covenants as of September 30, 2023, despite the Jones Crossing project not passing the debt service coverage ratio test in previous quarters[176]. - The company anticipates sufficient cash flow from stabilized commercial properties to cover debt service over the next 12 months[187]. - The company expects to successfully extend or refinance its debt maturing in the next 12 months[188]. Development Projects - The Holden Hills partnership was established with a land contribution valued at $70.0 million from the company and$40.0 million in cash from a partner, resulting in a cash distribution of $35.8 million to the company[111]. - The company plans to develop 475 unique residences in the Holden Hills project, with Phase I expected to consist of 337 luxury residence sites and 12 single-family platted home sites[118]. - Construction on The Saint June, a 182-unit luxury multi-family project, was completed in November 2023, with approximately 25$14.7 million, with a reimbursement of 60% of costs to the Holden Hills partnership[122]. - As of September 30, 2023, the company had $9.2 million remaining to complete the Tecoma Improvements[122]. - The company is progressing development plans for Section N, a 570-acre tract, aiming for a dense, mid-rise, mixed-use project[124]. - The Saint George project, a 316-unit luxury multi-family project, is expected to achieve substantial completion by mid-2024[125]. - The Annie B project is planned as a luxury high-rise with 316 residential units, with construction commencement dependent on financing and market conditions[126]. - The retail component of Magnolia Place has signed leases for all retail space in the first phase, totaling 18,582 square feet[132]. Interest and Taxation - Interest expense increased to$3.4 million in third-quarter 2023 from $1.8 million in third-quarter 2022, driven by rising interest rates and higher average debt balances[156]. - The Federal Reserve raised the federal funds target interest rate by 525 basis points during 2022 and through September 2023, impacting the company's borrowing costs due to variable rate debt[137]. - The company recorded a provision for income taxes of$(0.4) million in third-quarter 2023, consistent with the prior year[158]. Share Repurchase and Stock Management - The company executed a $10.0 million share repurchase program completed in October 2023, and a new$5.0 million share repurchase program was approved in November 2023[101]. - The company repurchased 389,378 shares of common stock for a total cost of $10.0 million at an average price of$25.68 per share[169]. - The company is restricted from repurchasing common stock in excess of $1.0 million without prior consent from Comerica Bank[199]. Risks and Forward-Looking Statements - Forward-looking statements are subject to various risks, including economic downturns and changes in market conditions[200]. - The company cautions that actual results may differ materially from anticipated results due to numerous factors[200]. - Future significant development projects will not incur material costs until adequate financing is secured[188]. - The main source of revenue is anticipated to come from property sales and joint venture distributions, which are difficult to predict[188]. - The company generates cash flow from rental revenue and development fees, but does not expect sufficient recurring cash flow to cover general and administrative expenses[188]. - The unique nature and location of the company's assets are expected to provide positive cash flows and net income over time[188]. - Future operating and financial performance will depend on the ability to sell or lease properties profitably and manage debt obligations[189]. - There have been no changes in critical accounting estimates from those discussed in the 2022 Form 10-K[191].