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Stratus Properties Inc. Reports Second-Quarter and Six-Month 2007 Results and Updates Review of Strategic Alternatives and Development Activities.



AUSTIN, Texas -- Stratus stratus: see cloud.


(Stratus Technologies, Maynard, MA, www.stratus.com) A manufacturer of fault-tolerant computers founded in 1980. It supports both the VOS and FTX Unix operating systems on its XA/R line of i860-based systems.
 Properties Inc. (NASDAQ NASDAQ
 in full National Association of Securities Dealers Automated Quotations

U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on
: STRS STRS State Teachers Retirement System
STRS Sir Thomas Rich's School (UK)
STRS Stimulated Thermal Rayleigh Scattering
STRS Supplier Test Report System
STRS Straight Talk Retirement System (software) 
):
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Stratus Properties Inc. (NASDAQ: STRS) reported net income of $0.2 million, $0.03 per share, for the second quarter of 2007, compared to $17.8 million, $2.32 per share, for the second quarter of 2006. For the six months ended June 30, 2007, Stratus reported net income of $1.0 million, $0.13 per share, compared with $36.0 million, $4.68 per share, for the six months ended June 30, 2006. Income from continuing operations continuing operations

Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the
 for the first six months of 2006 included an $8.3 million, $1.08 per share, tax benefit resulting from the reversal of a portion of Stratus' deferred tax asset valuation allowance.

In the second quarter of 2007, Stratus committed to a plan to sell its two office buildings at 7500 Rialto Rialto, city (1990 pop. 72,388), San Bernardino co., S Calif., a residential suburb of San Bernardino; inc. 1911. The city has greatly expanded as a result of the economic and demographic growth of the southern California area.  Boulevard. Accordingly, the 2007 and 2006 periods present results of operations for 7500 Rialto Boulevard in income (loss) from discontinued operations Discontinued operations

Divisions of a business that have been sold or written off and that no longer are maintained by the business.
 in Stratus' condensed con·dense  
v. con·densed, con·dens·ing, con·dens·es

v.tr.
1. To reduce the volume or compass of.

2. To make more concise; abridge or shorten.

3. Physics
a.
 consolidated statements of income. Income (losses) from discontinued operations for 7500 Rialto Boulevard totaled $48,000 in the second quarter of 2007, $(0.1) million in the second quarter of 2006, $10,000 in the first six months of 2007 and $(0.2) million in the first six months of 2006. Stratus has received a high level of interest from prospective purchasers of these office buildings.

On March 27, 2006, Stratus sold 7000 West for $22.3 million, resulting in a net after-tax gain Net after-tax gain

Capital gain after income taxes have been paid.
 of $7.3 million, $0.96 per share, in the first six months of 2006. Other than the gain from the sale of 7000 West, income from discontinued operations for 7000 West was $0.4 million, $0.05 per share, in the first six months of 2006. The second-quarter 2006 loss from discontinued operations for 7000 West includes a provision for income taxes of $0.5 million for the allocation of Stratus' second-quarter 2006 tax provision to discontinued operations in accordance with income tax accounting rules.

Real Estate Revenues. Property sales for the second-quarter and six-month periods of 2007 and 2006 included the following (revenues in thousands):
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Stratus sold a five-acre tract at the Circle C community for $1.1 million during the first quarter of 2007 and a 7.5-acre tract in the Barton Creek Barton Creek is one of the tributaries that feeds the Texas Colorado River from the Texas Hill Country. The creek passes through some of the more scenic areas in the Austin region and forms a greenbelt that is the habitat for many indigenous species of flora and fauna.  community for $1.5 million during the first quarter of 2006. In April 2006, Stratus sold a 58-acre tract at Lantana lantana (lăntā`nə): see verbena.
lantana

Any of more than 150 shrubs that make up the genus Lantana in the verbena family, native to the New World and African tropics.
 for $21.2 million of which $0.5 million represented a reimbursement Reimbursement

Payment made to someone for out-of-pocket expenses has incurred.
 of certain costs, which was recorded as a reduction of cost of sales.

Rental Income Noun 1. rental income - income received from rental properties
income - the financial gain (earned or unearned) accruing over a given period of time
. In 2006, Stratus began earning rental income from its Escarpment escarpment or scarp, long cliff, bluff, or steep slope, caused usually by geologic faulting (see fault) or by erosion of tilted rock layers. An example of a fault scarp is the north face of the San Jacinto Mts. in California.  Village project that was substantially completed in the second quarter of 2006. In the second quarter of 2007, Stratus earned rental income, primarily from Escarpment Village, totaling $0.9 million, compared with $0.5 million in the second quarter of 2006.

Development Activities. Block 21 - In April 2005, the City of Austin selected Stratus' proposal to develop a mixed-use project in downtown Austin immediately north of the new City Hall complex. The project includes an entire city block and is planned for a mixture of retail, hotel, residential and entertainment uses. In December 2006, Stratus acquired the property for $15.1 million. Stratus has executed agreements with Starwood Hotels & Resorts Worldwide, Inc. for the development of a W Hotel and Residences on the site. In addition, Stratus has agreements for the new studio for KLRU's "Austin City Limits Austin City Limits is an American television music program and a staple of the Public Broadcasting Service. Known for featuring country music, the show also broadcasts performances of folk, jazz, bluegrass, blues, rock and roll, alternative rock, indie rock and other genres. " program and for the Austin Children's Museum Children's museums are institutions that provide exhibits and programs that stimulate informal learning experiences for children. In contrast with traditional museums that typically have a hands-off policy regarding exhibits, children's museums feature interactive exhibits that are . On May 8, 2007, Stratus announced its partnership with Canyon-Johnson Urban Fund II, L.P., a joint venture between the Los Angeles-based Canyon Capital Realty realty n. a short form of "real estate." (See: real estate)


REALTY. An abstract of real, as distinguished from personalty. Realty relates to lands and tenements, rents or other hereditaments. Vide Real Property.
 Advisors and Earvin "Magic" Johnson, for the development of Block 21. Stratus has begun the permitting process with the City of Austin and expects construction to begin by the fourth quarter of 2007.

Lantana -Lantana is a partially developed, mixed-use project with remaining entitlements for approximately 1.0 million square feet of office and retail use on 223 acres as of June 30, 2007. Regional utility and road infrastructure is in place with capacity to serve Lantana at full build-out permitted under Stratus' existing entitlements.

In September 2006, Stratus completed a second 75,000-square-foot office building at 7500 Rialto Boulevard in response to increased demand for office space within Lantana. As of June 30, 2007, Stratus had leased approximately 50 percent of the space at the second office building and approximately 96 percent of the original office building. In the second quarter of 2007, Stratus committed to a plan to sell the office buildings at 7500 Rialto Boulevard.

Calera - During 2004, Stratus began construction of courtyard homes at Calera Court within the Barton Creek community. Calera Court, the initial phase of the "Calera" subdivision, will include 16 homesites on 16 acres. The second phase of Calera, Calera Drive, consisting of 53 single-family lots, many of which adjoin the Fazio Canyons golf course, received final plat A map of a town or a section of land that has been subdivided into lots showing the location and boundaries of individual parcels with the streets, alleys, easements, and rights of use over the land of another.  and construction permit approval in 2005. In the third quarter of 2005, development of these lots was completed and the initial lots were sold. As of June 30, 2007, only 8 lots remained unsold at Calera Drive. Development of the final phase, known as Verano Drive, will include 71 single-family lots. Construction of the final phase of Calera began in the first quarter of 2007 and is scheduled for completion in December 2007.

Wimberly Lane Phase II - In 2004, Stratus entered into a contract with a national homebuilder to sell 41 lots within the Wimberly Lane Phase II subdivision in the Barton Creek community. The homebuilder paid Stratus a non-refundable $0.6 million deposit for the right to purchase the 41 lots. The deposit was used to pay ongoing development costs of the lots. The deposit will be applied against subsequent purchases of lots by the homebuilder after certain thresholds are achieved and will be recognized by Stratus as income as lots are sold. The lots are being sold on a scheduled takedown Takedown

1. The price at which underwriters obtain securities to be offered to the public.

2. The portion of securities that each investment banker will distribute in a secondary or initial pubic offering.

Notes:
1.
 basis, with the initial six lots sold in December 2004 following completion of subdivision utilities, and then an average of three lots per quarter beginning in June 2005. The average purchase price for each of the 41 lots is $150,400, subject to a six percent annual escalator escalator

Moving staircase used as transportation between floors or levels in stores, airports, subways, and other mass pedestrian areas. The name was first applied to a moving stairway shown at the Paris Exposition of 1900.
 commencing in December 2004.

Circle C Community - Stratus has commenced development activities at the Circle C community based on the entitlements secured in its Circle C settlement with the City of Austin. The Circle C settlement, as amended in 2004, permits development of 1.16 million square feet of commercial space and 1,334 residential units, including 504 multi-family units and 830 single family residential lots. Meridian Meridian (mərĭd`ēən), city (1990 pop. 41,036), seat of Lauderdale co., E Miss., near the Ala. line; settled 1831, inc. 1860.  is an 800-lot residential development at the Circle C community. In January 2005, the first phase of construction commenced. During the first quarter of 2005, Stratus contracted to sell a total of 494 lots in its Meridian project to three national homebuilders in four phases. Sales for each of the four phases commence upon substantial completion of development for that phase, and continue every quarter until all of the lots have been sold. The first and second phases each consisted of 134 lots. The first phase was substantially completed at the end of 2005. Development of the second phase commenced in the third quarter of 2005 and was substantially completed in March 2006. Development of the 108-lot third phase of Meridian has commenced and is expected to be completed by September 2007. The 118-lot fourth phase will commence by the end of 2007 and completion is expected in 2008.

In 2006, Stratus signed another contract with a national homebuilder for 42 additional lots. Development of those lots commenced in April 2007 and substantial completion is expected in November 2007. Development of the final phase of Meridian, which consists of 57 one-acre lots, is expected to commence in 2008.

Stratus estimates its sales from the first two phases of Meridian will total at least 26 lots for $1.8 million during the third quarter of 2007.

The grand opening of Escarpment Village, a 168,000-square-foot retail project anchored by a grocery store at the Circle C community, occurred in May 2006. As of June 30, 2007, Escarpment Village had leases for 151,600 square feet or 90 percent of its available space.

In July 2007, Christopher Investment Company, Inc. (the Purchaser) initiated discussions with Stratus regarding its interest in purchasing Escarpment Village, which Stratus reports as a component of its commercial leasing segment. Effective July 19, 2007, Stratus' wholly owned subsidiary Wholly Owned Subsidiary

A subsidiary whose parent company owns 100% of its common stock.

Notes:
In other words, the parent company owns the company outright and there are no minority owners.
, Escarpment Village, L.P., entered into a Purchase and Sale Agreement (the Agreement) with the Purchaser, under which Stratus agreed to sell Escarpment Village for approximately $46.6 million. The Purchaser has deposited $500,000 in an escrow escrow

Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition.
 account, which will be credited to the purchase price payable at closing. Both parties have agreed to a review period during which the Purchaser has the right to inspect the property and conduct due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired.  and may elect to terminate the Agreement. The Agreement contains customary covenants, representations and warranties. Subject to customary closing conditions, including the Purchaser's assumption of Stratus' $22.8 million loan from Teachers Insurance and Annuity Association of America (TIAA TIAA Teachers Insurance and Annuity Association
TIAA Travel Industry Association of America
TIAA This Is An Acronym
TIAA Texas Insurance Advisory Association (statistical reporting agency in Texas)
TIAA Total Inactive Aircraft Authorization
), the sale is scheduled to close by the fourth quarter of 2007. The $500,000 escrow deposit is refundable during the review period and in the event TIAA fails to approve the Purchaser's assumption of the TIAA loan.

Deerfield - In January 2004, Stratus acquired the Deerfield property in Plano, Texas Plano (IPA: /ˈpleɪnoʊ/) is a wealthy suburb of Dallas, Texas, located to the north, mainly within Collin County, but also extending into Denton County. According to the 2000 U.S. , for $7.0 million. The property was zoned and subject to a preliminary subdivision plan for 234 residential lots. Stratus executed agreements with a national homebuilder, whereby the homebuilder paid Stratus $1.4 million for an option to purchase all 234 lots over 36 monthly take-downs. The net purchase price for each of the 234 lots was $61,500, subject to certain terms and conditions. The $1.4 million option payment is non-refundable, but will be applied against subsequent purchases of lots by the homebuilder after certain thresholds are achieved and will be recognized by Stratus as income as lots are sold. Stratus agreed to pay up to $5.2 million of the homebuilder's development costs. The homebuilder must pay all property taxes and maintenance costs. The initial lot sale occurred in November 2004 and subsequent lot sales are on schedule. In October 2005, Stratus executed a revised agreement with the homebuilder, increasing the lot sizes and average purchase price to $67,150 based on a new total of 224 lots. Stratus expects 15 lot sales for $1.0 million to be completed during the third quarter of 2007.

Crestview Station - In November 2005, Stratus formed a joint venture with Trammell Crow F. Trammell Crow (born June 11, 1914, in Dallas, Texas) is an American property developer who created several famous projects, including Dallas Market Center, Peachtree Center (Atlanta, Georgia), and San Francisco's Embarcadero Center.  Central Texas Development, Inc. to acquire an approximate 74-acre tract at the intersection of Airport Boulevard and Lamar Boulevard in Austin, Texas, for $7.7 million. With its joint venture partner, Stratus has commenced brown-field remediation and permitting of the property, known as Crestview Station, which is located on the commuter rail line recently approved by City of Austin voters. Crestview station is planned for single-family, multi-family and retail development, with closings on the single-family and multi-family components and portions of the retail component expected to occur in 2007, subject to completion of the remediation process.

The joint venture partnership has contracted with a nationally recognized remediation firm to demolish de·mol·ish  
tr.v. de·mol·ished, de·mol·ish·ing, de·mol·ish·es
1. To tear down completely; raze.

2. To do away with completely; put an end to.

3.
 the existing buildings and remediate re·me·di·a·tion  
n.
The act or process of correcting a fault or deficiency: remediation of a learning disability.



re·me
 the property in preparation for permitting. Under the terms of the remediation contract, the joint venture partnership will pay the contractor approximately $4.9 million upon completion of performance benchmarks and certification by the State of Texas that the remediation is complete. The contractor is required to pay all costs associated with the remediation and to maintain an environmental liability policy with $10.0 million of coverage remaining in place for a 10-year term. Pursuant to the agreement with the contractor, all environmental and legal liability was assigned to and assumed by the contractor effective November 30, 2005.

As previously announced, Stratus was exploring strategic alternatives for enhancing shareholder value, including a possible sale of the company. Stratus retained JPMorgan as its financial advisor to assist in this process. Stratus has terminated the process of exploring the possible sale of the company, but expects to continue to review various alternatives to enhance shareholder value.

William H. Armstrong William H. Armstrong (1911-1999) was an American author, most noted for his Newbery Medal-winning novel, Sounder.

Armstrong grew up on a farm in Lexington, Virginia.
 III, President, Chairman and Chief Executive Officer of Stratus stated, "The Board has decided not to continue to explore the possible sale of the Company at this time. We believe there are significant opportunities for our Company going forward. Accordingly, we are continuing to evaluate other alternatives to maximize shareholder value. We are enthusiastic about the opportunities we see in the real estate market in the Austin, Texas area."

Stratus is a diversified diversified (di·verˑ·s  real estate company engaged in the acquisition, development, management and sale of commercial, multi-family and residential real estate properties located primarily in the Austin, Texas area.

CAUTIONARY STATEMENT. This press release contains certain forward-looking statements forward-looking statement

A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections.
 regarding proposed real estate sales and development activities at Block 21, the Lantana community, the Barton Creek community, the Circle C community, Deerfield and Crestview Station. Important factors that might cause future results to differ from those projections include economic and business conditions, the availability of financing, regulatory approvals and environmental regulations, which are described in more detail in Stratus' 2006 Annual Report on Form 10-K Form 10-K

A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information.


Form 10-K

See 10-K.
 filed with the Securities and Exchange Commission.

A copy of this release is available on our web site, www.stratusproperties.com.
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Date:Aug 8, 2007
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