Good day, and welcome to the Stratus Properties Year Ended December 31, 2020 Financial and Operational Conference Call. Earlier this morning, Stratus issued a press release announcing its year ended December 31, 2020 financial results. The press release is available on Stratus’ website at stratusproperties.com. Following management’s remarks, we will host a question-and-answer session. Please note this call is being recorded and will be available for replay on Stratus’ website through March 20, 2021. Anyone listening to the taped replay should note that all information presented is current as of today, March 15, 2021 and should be considered valid only as of this date. As a reminder, today’s press release and certain comments that will be made on this call include forward-looking statements and actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements. Please review and refer to the cautionary language included in Stratus’ press release issued today and the risk factors described in Stratus’ 2020 Form 10-K that could cause actual results to differ materially from those projected by Stratus.

Thank you for joining our year-end December 31, 2020 financial and operational conference call. Our Chief Financial Officer, Erin Pickens, is also here with me today. I would like to spend some time on today’s call briefly reviewing the impact we’ve experienced over the past year due to the COVID-19 pandemic. Announcements we have recently made, including the sale of The Saint Mary, Board composition refreshment, commentary on our multi-family retail and residential properties and strategies continued exploration of a potential reap conversion. Erin will speak to our business segments and will provide an overview of our 2020 financial results. I will then close the call with some final remarks regarding our continued optimism around the Texas real estate market. Our world looks much different now than it did one year ago. At this time last year, restrictions on businesses and gatherings were being implemented across the U.S., leaving many people to work-from-home, far fewer people travelling, social distancing measures and local and state regulations to support the safety and health of our communities, employees and businesses. At the beginning of the COVID-19 pandemic, Stratus, like many other companies, quickly shifted to a near-term focus on managing its liquidity and evaluating options to support tenants by offering rent deferrals and other concessions as needed. Thankfully, our overall tenant delinquency rate during 2020 for our retail and multi-family portfolio was significantly lower than our original forecast. In fact, by supporting our existing tenants and finding new tenants, we generated record annual revenue from our leasing operations, primarily due to leases at The Saint Mary, Kingwood Place and The Santal. We also significantly increased revenue from our real estate operations compared to 2019 due to the increased interest in single-family residential properties in Texas, which we believe was a result of home-centric trends from the pandemic.

Thank you, Bill. Please refer to the press release announcing our operational and financial results for the year ended December 31, 2020 issued this morning. Stratus consolidated revenues totaled $61 million in 2020 compared with $92.2 million in 2019. The decrease in revenue in 2020 primarily reflects the decrease in revenue from our hotel and entertainment segments caused by the COVID-19 pandemic, partially offset by an increase in revenues from real estate and leasing operations. Net loss attributable to common stockholders totaled $22.8 million, or $2.78 per share in 2020, compared to $2.5 million, or $0.30 per share in 2019. Losses resulting from the COVID-19 pandemic contributed to Stratus, recording a $10.7 million non-cash tax charge in 2020 to record a valuation allowance for Stratus deferred tax assets. EBITDA totaled $9.5 million for 2020, compared with $21.1 million for 2019. I also want to provide an update on our NAV published this morning. Stratus reported an estimated after tax NAV per share of $14.65 as of December 31, 2020, compared to $45.55 as of December 31, 2019. The decrease was primarily a result of the reduced valuation of Block 21 following lower travel and entertainment demand during the COVID-19 pandemic, and the terminated sale transaction. This drop in estimated value shows how hard hit the hotel and entertainment industries have been this past year. However, we expect to see the value of this iconic property rebound as demand for travel and entertainment recovers from the pandemic.

As we had discussed, Stratus continues to advance several promising development projects. And we continue to successfully execute upon our strategy of acquiring and developing properties and holding them for lease or selling them, such as we did with the sales of The Saint Mary. Our teams knowledge and deep relationships in the Texas markets have been critical to stratus' success in identifying attractive opportunities and securing the necessary entitlements and permits. Additional support from our two new directors, Neville and Kate will prove invaluable to our Board and Stratus as we move forward Even during a pandemic that has significantly impacted our business and relevant industries, our teams have shown resiliency and have maintained strength in our strategy. Because of their hard work, dedication to our development projects and focus on maximizing shareholder value, we believe we are well-positioned as the market recovers. Austin has continued to grow, particularly in its retail single-family and multi-family markets and gain attention as a desirable place to live. Austin has always been key to our portfolio and I'm even more encouraged to see an influx of tech powerhouses and other businesses moving to Austin. Apple is expanding its 133 acre campus in 2022, and Alphabet, Amazon, Oracle and Facebook have expanded or announced plans to expand in the area. Tesla is building a new electric vehicle manufacturing plant for their popular Cybertruck and other products in Austin. Stratus indirectly benefit from these companies moving to Austin, and I'm looking forward to seeing what value we can create in the future. Thank you all for listening in. At this time, I will ask the operator to open the line for questions.

Good morning, Beau and Erin. I have a few questions for you. Is the structure of The Saint Mary that you recently sold a good example of future ownership structures and future developments?

Pardon me, this is the conference operator. It appears the speaker line has temporarily disconnected from their location, and I’ll get them back online, but please hold on to the line. Thank you. Parson me, this is the conference operator, I was able to rejoin the speakers. Mr. Burtner, could you please repeat your question for them?

Sure. Is the structure - the sale of The Saint Mary is structure typical of what we'll see in terms of future developments?

Good morning, Fred. I'm sorry, I got cut off and I was just droning on with my answer and we just were alerted that we were offline. So I apologies for the delay. Good question, Fred. So let me at least take a moment to kind of recap the transaction. So that was a -- that Circle C multi-family land asset was something that the company acquired in the, I guess early 90s. It goes back a long way with that Circle C acquisition. But we've obviously held it for many years waiting for the right moment to proceed with development. In that particular instance, we raised third-party equity capital on a promoted basis as we'd like to call it, and the returns ultimately to Stratus were -- I’m going from memory here, but I want to say from an equity multiple perspective, it was about a 3.9 equity multiple. And I believe our internal rate of return was somewhere mid-60s, which are pretty extraordinary returns. So I think that is a good model for us. We would like to do that again and again and again. And I think we have the team and the wherewithal to do that. But that would have been potentially an asset that you've may want to hold for longer-term. So we ran a dual process to refinance or sell it. And ultimately, after evaluating both options determined, and in this particular instance, it made more sense to sell. Now, of course, we will have a -- we will have about a, I guess, about a $14 million gain on this. And so we will be subject to C Corp taxation on that. But even in light of that, we felt that this made good sense. And again, to answer your question, I do believe that this is potentially a template for us going forward.

Thank you. My next question is, you spoke about how the Austin market is strengthening with all these tech companies moving in. How is that impacting Stratus' operations and future development opportunities?

Well, the headlines that I spoke about are quite compelling names like Facebook, Google, Tesla, indeed those are obviously huge growth companies, and these are the type of businesses that really all cities are trying to attract. So we are -- it's good for Austin and I think Austin has historically been clearly a growth market and I think this is just continuing with that. As far as how it impacts the various kind of what we call food groups, 2020 was a very challenging year, if I were just kind of go through each of the kind of the segments. If you look at office, office was, I think, a down year. I mean, obviously, if people weren't going to the office, and so I think leasing was anemic at best. I think our - even for the year, I want to say that we had negative absorption, there were some sublease deals. But for the most part, I would say that office, the office market in Austin in 2020 was not a good year. Retail was probably flat overall. I think much like us, I think most people were able to hang on to their tenants through concessions or just working with them on some basis. So I think retail was flat. Again, it depends on the type of property. But if you had, for example, grocery store, like we've had, I think you did pretty well. But I think the retail has been quicker to come back than the office. Obviously, hospitality and hotel is just terrible. I mean, that's unlikely to be a challenge. Certainly some of these larger city center hotels, I think, will face challenges through this year until the big events come back. The W is a little different in that we have…

With some of the airline companies in the U.S are talking about advanced bookings are looking somewhat better, are you seeing any evidence of that in advance bookings at the hotel?

We are. We -- one of the things that we monitor pretty closely are these pace reports and we have had a lot of people that have had an event on the books last year, defer or move the event to 2021. And so that -- and there was a lot of just kicking the can down the road, if you will, as the pandemic raged on. But now as it appears that there is some -- even though there's obviously a lot of suffering and fortunately there's still to come, I think that there is light at the end of the tunnel. And people are in earnest booking, rebooking these events. And we're also seeing on our private events side at the venue large corporate events are now rebooking and doing what we haven't seen, which are on site tours. So that's almost picked up and I see that really beginning to impact us financially in the third and fourth quarter.

Thank you. In terms of the REIT conversion, could you elaborate beyond what you've already said about why the conversion is good for Stratus?

Well, I want to be cautious in that. We are still going through an evaluation process. And it is a bit of a complicated accounting exercise. But again, so far we're still optimistic that it could be a good option for the company. And again, it would be something that would be voted on by the shareholders. So ultimately, shareholders will determine whether it's the right thing to do or not. I think our job at this point is to frame up the opportunity and then bring it forward to the shareholders. But the one thing that just sticks out to me, Fred, is this just the corporate, the C Corporate -- C Corp tax rate, it's currently a 21% and I just read this morning that there's some discussions around raising that to 28%. That's just non-competitive for a real estate company like us. The REITs, which we really don't necessarily compete with, but we kind of do, and they just don't have that level of taxation. That just is a bit, in my view, anyways, it just puts us at a disadvantage. So we would like nothing more than to eliminate that second layer of taxation for our shareholders. And there are things that come with that the requirement to distribute income and all the things we know about REITs, but we, at this point feel like it is certainly worth continuing to pursue that option. So we'll be able to report more on that to our shareholders in the weeks and months ahead. But again, it's something that just from a pure tax standpoint, seems to make a lot of sense.

Okay. My last question is, is adding diverse directors a priority for the company?

Fred, that's a very good question. I will tell you that the company's philosophy is that there is strength and diversity, and that a variety of perspectives, backgrounds, life experiences, et cetera leads to really good decision making. So in a word, yes, that is something that we as a Company, as a Board, believe strongly in. As it pertains to Neville and Kate, our two newest directors, they are both very thoughtful, well educated, seasoned real estate investor operators. And we're excited to have them to -- excited to have them joined the Board. But thank you, that’s a very topical question and something that we feel very strongly about Stratus.

Thank you. I appreciate that. Keep going on. Keep doing the good work for us.

Thank you, Fred. Nice to hear your voice sir.

This concludes our question-and-answer session, and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.