Q4 2019 Earnings Call

Due to the cancellation of South by Southwest here in Austin and the current restriction on Gatherings. We recently received a significant significant number of hotel room cancellations. The situation is a m i e and we cannot get estimate the financial impact on the company. We are closely monitoring the situation working closely with the city and local health organizations and taking recommend preventive measures to keep our customers and employees safe.

Is a Diversified Real Estate Company? Our long-term strategy is to acquire develop and monetize properties in certain fast-growing Texas markets with the ultimate goal of creating value for our stockholders.

Last quarter we said that we were looking to sell a refinance our block twenty one property and in December, we announced an agreement to sell block twenty one to Ryman Hospitality properties for $270,000 representing an attractive return on our investment. We expect this transaction to close in the second quarter of 2020 subject to the satisfaction of customary closing conditions.

Our history with black 21 serves as an example of how our four-step development process drives the growth and success of attractive properties first, we identified and entered into a contract to acquire them almost twelve years ago.

Second we designed the project secure the necessary entitlements and permits secured an operator for the hotel and developed a strategy for the music venue.

Third we constructed and subsequently opened the hotel in venue space on schedule inconsistent with our plans at least the office and retail space and sold all but one of the residences.

Finally, we operated the project producing strong cash flow for ten years and positioned the property for either a sale or refinancing ultimately refinancing the property in 2016. And we recouped off of our investment at that time then as an extra step to add value for our stockholders. We announced end of last year a definitive agreement to sell the property.

The property and its components including the 251 room W Austin Hotel 159 luxury residences Austin City Limits live at the Moody Theater the 310 a still live entertainment venue in business class A office space and retail space created immense value for Stratus the project yield yielded a 13.1% return home over approximately twelve years compared to the Dow Jones industrial average 6.9% return in the S&P 500 Index 7.3% return over the same time frame through a January 31 2020.

We Believe

He was sale of block twenty one will place Us in the strongest financial position. We have held during our Twenty Eight year history.

In their most recent conference call in February and stated that it considers black 21 a coveted property and considers its acquisition critical to Rhymes long-term entertainment strategy crime and also information that they will be combining two of the most renowned music markets in the United States Austin and Nashville and are working on a range of opportunities including improving the W hotels utilization rate and maximizing the property commercial retail space as well as cross-promoting concerts content and artists.

In addition to announcing the agreement to sell block twenty one. We were pleased to complete the refinancing of the fully leased santol generating $16 of cash proceeds including reserves in reducing remaining cash investment in the property to 3 million.

We also sold Barton Creek Village for seven point seven million and the remaining completed Phase 1 temara Villas Townhomes.

Our other projects have also been progressing nicely across our development cycle.

In October the City of Austin and Travis County approved initial subdivision permit applications for Barton Creeks primarily residential sections Klo which is expected to approximately double the other development. We expect to our next important initiatives that stress too involved Barton Creek subject to financing and market conditions first. We plan to complete the permitting process for Chalo second. We are evaluating additional density and initial planning phases for Section n

Sections k l o n n are the last two remaining undeveloped land tracts we have in Barton Creek.

Our for retail projects Jones Crossing Lantana place in Kingwood plays are currently 84% least in aggregate as of December Thirty One 2019 page generating cash flow in excessive Debt Service.

All tenants are open for business at West clean Market in Killeen, Texas, and we have seen increased interest in leasing the remaining vacant retail space and Pad sites.

And our Jones Crossing development in College Station, Texas, nineteen leases have been signed for approximately 95% of the completed retail space as of December Thirty One 2019, including HEB 15 of those tenants are open for business. We have one ground lease with Chick-fil-A, which is open last September has attracted significant traffic to the site and generate a new interest in remaining pad sites. We connect you to evaluate options for the multifamily component of this project.

Atlanta place in Austin as of December Thirty One 2019. We assigned leases for approximately eighty percent of the retail space including the anchor tenant moviehouse & Eatery and a groundhog for an AC hotel by Marriott.

Carve American Grill had its grand opening in December. Well past open for business and construction of the AC hotel by Marriott is underway.

H-E-B at Kingwood Place had a successful grand opening in November 2019 at December Thirty One 2019. We had two additional tennis open for business in the January. We construction of the third retail building which includes Starbucks and Pacific Dental.

As of December Thirty One 2019 we had signed leases for approximately eighty percent of the inline shop space including HEB and we have to sign ground leads to the Chase Bank in H-E-B home delivery program. We are currently evaluating plans to develop the multi-family component.

We completed construction of the 214 at Saint Mary in December of last year as of December Thirty One Two thousand nineteen sixty percent of the units released.

And is this has since increased to 65% we expect to explore opportunities to sell the same area pain stabilization subject to market conditions.

We began cycling work for the first phase of our next HEB Shadow anchored project Magnolia place located in Magnolia, Texas, which will consist of approximately 33000 square feet of retail space for lease and three pads to be held for sale.

Plans for future face include to limited service hotels Ninety Six single-family Lots 588 multi-family units and one hundred thousand square feet of additional commercial space in a broad latitude on use under the existing entitlements which will allow us to react to changing market conditions. We are currently evaluating various options for the multifamily component of this property.

I will now turn the call over to our Chief Financial Officer Erin Pickens for a review of the financial details Aaron.

Thank you, though.

Earlier this morning. We issued a press release announcing our operational and financial results for year-end 2019. Our results for Block Twenty One are reported as discontinued operations due to the pending sale month for the full year our financial results from continuing operations include revenues totaling Thirty million dollars in 2019 up from 25 million dollars, the prior-year an increase in leasing operations revenues was partially offset by a reduction in real estate revenues a net loss attributable to Common stockholders of two point five million dollars or Thirty cents per share for 2019 compared to a loss of four million dollars or $0.49 per share in 2018 and ebitda of 6.8 million dollars for 2019 compared to a loss of three million dollars for 2018.

Those amounts are adjusted to exclude the results from the Block 21 discontinued operations the impact of accounting for the pinion block Twenty One sale as a discontinued operation reduced by fourteen point four million dollars in 2019 and 15.2 million dollars in 2018.

Historically, we have reported for operating segments real estate operations leasing operations hotel and entertainment moving forward due to the pending sale of block Twenty One our combat operations include our real estate and leasing segments while are discontinued operations include Hotel entertainment and a portion of Leasing.

Revenue in our real estate

Operation segment in 2019 total of 13.8 million dollars down from 16.8 million dollars last year.

Decrease primarily reflects the lower revenues from the sale of higher-priced residential units, including a marvelous town homes and a W Austin Hotel & residences condominium sold in 2018 month operating income in the segment totaled 4.1 million dollars in 2019, which was an increase from 1.1 million dollars in 2018. The increase is primarily reflects the whole point four million dollars of income related to Travis County MUD reimbursements of infrastructure costs incurred for the development of Barton Creek.

We sold to Mr. Drive phase two lot 14 tomorrow Drive phase three lots and to a marvelous town homes for a total of 13.5 million dollars during 2019.

Revenue in our leasing operations segment totaled 16.2 million dollars in 2019 up from eight point two million dollars last year the increase primarily reflects the commencement of leases that are recently completed properties.

Operating income in a segment in 2019 increased to eight point three million dollars from 1.9 million dollars last year which primarily reflects the 2019 recognition of five or seven million dollars a pre-tax games on sales of Barton Creek Village and a retail pad subject to a ground lease located in the circle c community.

The decrease in income from discontinued operations in 2019 compared with 2018 was primarily a result of lower Hotel Revenue.

Hotel revenues in 2019 compared to thirty seven point nine million dollars in 2018. The decrease was primarily a result of reduced group business and Thursday. We can business and lower food and beverage sales revenue per available room was $235 in 2019 compared to $245 in 2018.

Entertainment revenues totaled twenty four point six million dollars in 2019 compared to twenty two point five million dollars in 2018. The increase was due to the increase in the number of events hosted and higher event attendance at ACL Live ACL. I've hosted 264 events and sold approximately 260000 tickets in 2019 up from 230 events and the sale of approximately 214000 tickets in 2018 moving forward to our Capital Management at December 31st, 2019, excluding debt and cash included in the block 21 discontinued operations consolidated debt increased by seventy two point three million dollars to two hundred twenty four point six million dollars off Consolidated cash totals eight point eight million dollars compared with consolidated debt F-150 2.3 million dollars and Consolidated cash of 7.9 million dollars at December 31st to Thursday.

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Purchases and development of real estate properties included in operating cash flows and capital expenditures included in investing cash flows total 73.8 million dollars for 2019 primarily related to the development of the Saint Mary King would place the santal and other Barton green properties. This compares to one hundred five point six million dollars for 2018 month primarily related to the purchase of the Kingwood Place land and development of the saint tal Lantana Place Jones Crossing and the Saint Mary.

We expect to stay on a block twenty one to generate net proceeds before taxes of approximately 120 million dollars and after-tax proceeds of approximately one hundred million dollars after using some of these proceeds to fully pay the balance of our $60 Comerica Bank credit facility. We expect to have approximately sixty million dollars of cash and the full sixty million dollars of availability under the revolver. Which matures in June of this year.

Thank you. I will now turn the call back to be over his closing remarks.

Thank you, Aaron.

We believe the 2019 years was a good year for Stratus cuz I've mentioned we refinanced the santaland signed a definitive agreement to sell block Twenty-One. These two transactions are a testament to the success of our developers cycle Stratus in our devotion to returning value to our shareholders stability and reliability are key to our strategy. I'm excited for all the opportunities that lie ahead for Stratus took several new awesome area opportunities with H-E-B as an anchor as well as further add on development opportunities at all of our projects. Finally the cobit nineteen outbreak is a rapidly evolving and challenging situation that makes forecasting the future very difficult, especially in the short-term. We have been through difficult times before and are focused. I'm working with our customers employees suppliers and Community to address the month for us today successfully.

At this time, I will ask the operator open the line for questions. Thank you for participating.

Thank you, please press * then two at this time. We'll pause momentarily to assemble our roster.

And our first question will come from partner of partner Investments, please go ahead I bow and Aaron I have it just a couple of questions. Once the deal was rhymin closes.

Should we expect overtime a growth rate of your net asset value the corporations start accelerating as you do an accelerated number of new projects?

Well, that's a that's a good question Fred. Good morning. I hope I hope you're helping and taking care of yourself.

Expect I would expect rnav to continue to grow I wouldn't expect any any any acceleration out of the norm. And as you know, we we continue to work on plans for our remaining assets at Barton Creek, which will require a significant amount of capital. We have our ongoing developments with H-E-B. All of those are our office funded at the moment, but I I wouldn't expect anything out of the ordinary other than just normal course of business growth within our portfolio. I hope I answered that correctly.

Yeah, well, that's a good answer and then a question related to your stock itself. If that would use co-operation when they put themselves up for sale within the last year could not get a buyer at an acceptable price and they're a larger company. Why will your stock ever go up dead?

I don't mean that negatively. I'm just trying to learn. Well, I think you raise a good point. I think if you look at the universe of public development companies, it is traditionally been a challenging space. I'm not I'm not as conversing with the particulars of Howard Hughes. I think they have great assets in particular markets. I think it's a well-run company, but I'm not I'm not a morose show me the details of the other company, but I do think that stress is a little different in that. You know, we're we're much smaller we have I think there's visibility into into all of our properties. Um, so I think because of that that that perhaps gives us, you know, perhaps makes us a little different but it is as you point out is Thursday is a public development companies have historically been been a challenge our goal around here is to you know, turn these assets into Into Cash, you know, yep.

Approving basis, but but do that quickly and then determine the best way to return that to the shareholders.

Okay. Thank you very much. Thank you friend and keep up the good work. Thank you, sir.

This concludes our question-and-answer as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.