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Dispositions | 9 Months Ended
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Sep. 30, 2022
Discontinued Operations and Disposal Groups [Abstract] |
Dispositions | ASSET SALES Block 21 - Discontinued Operations. On May 31, 2022, Stratus completed the previously announced sale of Block 21 to Ryman Hospitality Properties, Inc. (Ryman) for $260.0 million, subject to certain purchase price adjustments, and including Ryman’s assumption of $136.2 million of existing mortgage debt, with the remainder paid in cash. Stratus’ net proceeds of cash and restricted cash totaled $112.3 million (including $6.9 million of post-closing escrow amounts to be held for 12 months after the closing, subject to a longer retention period with respect to any required reserve for pending claims). Stratus recorded a pre-tax gain on the sale of $119.7 million in second-quarter 2022 included in net (loss) income from discontinued operations. Block 21 was Stratus’ wholly owned mixed-use real estate property in downtown Austin, Texas. Block 21 contains the 251-room W Austin Hotel and is home to Austin City Limits Live at the Moody Theater, a 2,750-seat entertainment venue that serves as the location for the filming of Austin City Limits, the longest running music series in American television history. Block 21 also includes Class A office space, retail space and the 3TEN ACL Live entertainment venue and business. In accordance with accounting guidance, Stratus reported the results of operations of Block 21 as discontinued operations in the consolidated statements of comprehensive (loss) income because the disposal represents a strategic shift that had a major effect on operations, and presented the assets and liabilities of Block 21 as held for sale - discontinued operations in the consolidated balance sheets for all periods presented. Block 21 did not have any other comprehensive income and Stratus' consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations. The carrying amounts of Block 21's major classes of assets and liabilities in the consolidated balance sheet at December 31, 2021, follow (in thousands):
Assets: |
Cash and cash equivalents | $ | 9,172 |
Restricted cash a | 18,444 |
Real estate held for investment, net | 120,452 |
Other assets | 2,985 |
Total assets | $ | 151,053 |
Liabilities: |
Accounts payable and accrued liabilities, including taxes | $ | 6,200 |
Debt | 136,684 |
Other liabilities | 10,213 |
Total liabilities | $ | 153,097 |
a.Most restricted cash was received by Ryman upon the closing of the sale. Block 21’s results of operations in the consolidated statements of comprehensive (loss) income consist of the following (in thousands):
| Three Months Ended |  | Nine Months Ended |  |  |  |
| September 30, |  | September 30, |  |  |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |
Revenues: a |  |  |  |  |  |  |  |  |  |  |
Hotel | $ | — |  |  | $ | 5,199 |  |  | $ | 12,653 |  |  | $ | 11,251 |  |  |  |  |
Entertainment | — |  |  | 3,657 |  |  | 9,990 |  |  | 5,923 |  |  |  |  |
Leasing operations and other | — |  |  | 356 |  |  | 932 |  |  | 1,124 |  |  |  |  |
Total revenue | — |  |  | 9,212 |  |  | 23,575 |  |  | 18,298 |  |  |  |  |
Cost of sales: |  |  |  |  |  |  |  |  |  |  |
Hotel | — |  |  | 4,312 |  |  | 9,230 |  |  | 11,076 |  |  |  |  |
Entertainment | — |  |  | 2,749 |  |  | 7,763 |  |  | 5,559 |  |  |  |  |
Leasing operations and other | — |  |  | 196 |  |  | 802 |  |  | 871 |  |  |  |  |
Depreciation b | — |  |  | 1,360 |  |  | — |  |  | 4,134 |  |  |  |  |
Total cost of sales | — |  |  | 8,617 |  |  | 17,795 |  |  | 21,640 |  |  |  |  |
General and administrative expenses | — |  |  | 170 |  |  | 236 |  |  | 568 |  |  |  |  |
Gain on sale of assets | — |  |  | — |  |  | (119,695) |  |  | — |  |  |  |  |
Operating income (loss) | — |  |  | 425 |  |  | 125,239 |  |  | (3,910) |  |  |  |  |
Interest expense, net | — |  |  | (2,005) |  |  | (3,236) |  |  | (5,976) |  |  |  |  |
Benefit from (provision for) income taxes | — |  |  | 39 |  |  | (25,703) |  |  | (61) |  |  |  |  |
Net (loss) income from discontinued operations | $ | — |  |  | $ | (1,541) |  |  | $ | 96,300 |  |  | $ | (9,947) |  |  |  |  |
a.In accordance with accounting guidance, amounts are net of eliminations of intercompany sales totaling $286 thousand in third-quarter 2021, $510 thousand for the first nine months of 2022, and $822 thousand for the first nine months of 2021. b.In accordance with accounting guidance, depreciation is not recognized subsequent to classification as assets held for sale, which occurred in the fourth quarter of 2021. Capital expenditures associated with discontinued operations totaled $210 thousand in third-quarter 2021, $213 thousand for the first nine months of 2022 and $475 thousand the first nine months of 2021. The Oaks at Lakeway. In 2017, Stratus sold The Oaks at Lakeway to FHF I Oaks at Lakeway, LLC for $114.0 million in cash. The Oaks at Lakeway is an H-E-B, L.P.-anchored retail project located in Lakeway, Texas. The parties entered into three master lease agreements at closing: (1) one covering unleased in-line retail space, with a 5-year term (the In-line Master Lease), (2) one covering the hotel pad with a 99-year term (the Hotel Master Lease) and (3) one covering four unleased pad sites, three of which have 10-year terms, and one of which has a 15-year term (the Pad Site Master Lease). For additional information, refer to Note 9 in the Stratus 2021 Form 10-K under the heading “Deferred Gain on Sale of The Oaks at Lakeway.” The In-Line Master Lease expired in February 2022 and the Hotel Master Lease was terminated in November 2020. As such, Stratus has no further obligations under these two master leases. With respect to the Pad Site Master Lease, Stratus has leased the one pad site with a 15-year term, reducing the monthly rent payment net of rent collections for this pad site to approximately $2,500. Stratus may assign this lease to the purchaser and terminate the obligation under the Pad Site Master Lease for this pad site with a payment of $560 thousand to the purchaser. The lease for the remaining three unleased pad sites under the Pad Site Master Lease expires in February 2027. To the extent leases are executed for the remaining three unleased pad sites, tenants open for business, and the leases are then assigned to the purchaser, the master lease obligation could be reduced further. In first-quarter 2022, Stratus reassessed its plans with respect to construction of the remaining buildings on the three remaining unleased pad sites and determined that, rather than execute leases and build the buildings, it is less costly to continue to pay the monthly rent (approximately $71 thousand per month) pursuant to the Pad Site Master Lease until the lease expires in February 2027. In connection with this determination, Stratus reversed an accrual of costs to lease and construct these buildings, resulting in recognition of an additional $4.8 million of gain during the first nine months of 2022. A contract liability of $3.7 million is presented as a deferred gain in the consolidated balance sheets at September 30, 2022, compared with $4.8 million at December 31, 2021. The reduction in the deferred gain balance primarily reflects Pad Site Master Lease payments. The remaining deferred gain balance is expected to be reduced primarily by future Pad Site Master Lease payments. The Saint Mary. In January 2021, The Saint Mary, L.P. sold The Saint Mary for $60.0 million. After closing costs and payment of the outstanding construction loan, the sale generated net proceeds of approximately $34 million. In first-quarter 2021, after establishing a reserve for remaining costs of the partnership, Stratus received $20.9 million from the subsidiary in connection with the sale and $12.9 million of the net proceeds were distributed to the noncontrolling interest owners. Stratus recognized a pre-tax gain on the sale of $22.9 million ($16.2 million net of noncontrolling interests) for the first six months of 2021. Stratus also recognized a $63 thousand loss on extinguishment of debt for the first six months of 2021 related to the repayment of The Saint Mary construction loan. The Saint Mary had rental revenue of $0.1 million in first-quarter 2021 prior to the sale. Interest expense, net of capitalized amounts, related to The Saint Mary construction loan was less than $0.1 million in first-quarter 2021. Kingwood Place Land. In September 2021, Stratus entered into a contract to sell the multi-family tract of land at Kingwood Place, which was planned for approximately 275 multi-family units, for $5.5 million. The sale closed in October 2022. Upon entering into the contract, Stratus recorded a $625 thousand impairment charge in third-quarter 2021 to reduce the carrying value of the land to its fair value based on the contractual sale price less estimated selling costs. In third-quarter 2022, Stratus recorded a $70 thousand impairment charge due to selling costs in excess of the previous estimate. Amarra Villas. In February 2021, Stratus entered into a contract to sell one of the Amarra Villas homes for $2.4 million. The sale, if consummated, is set to close in first-quarter 2023. Stratus recorded a $650 thousand impairment charge in third-quarter 2022 because the estimated total project costs and costs of sale for the home under construction exceed its contractual sale price.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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