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Dispositions | 6 Months Ended
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Jun. 30, 2023
Discontinued Operations and Disposal Groups [Abstract] |
Dispositions | ASSET SALES Block 21 - Discontinued Operations. Block 21 was Stratus’ wholly owned mixed-use real estate property in downtown Austin, Texas containing the 251-room W Austin Hotel and Austin City Limits Live at the Moody Theater, a 2,750-seat entertainment venue, Class A office space, retail space and the 3TEN ACL Live entertainment venue. 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 escrowed at closing and disbursed in full to Stratus in June 2023). Stratus recorded a pre-tax gain on the sale of $119.7 million in second-quarter 2022. In accordance with accounting guidance, Stratus reported the results of operations of Block 21 as discontinued operations in the consolidated statement of comprehensive income for second-quarter 2022 and the first six months of 2022 because the disposal represents a strategic shift that had a major effect on operations. 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. Block 21’s results of operations in the consolidated statements of comprehensive (loss) income consist of the following (in thousands):
|  | Two Months Ended |  | Five Months Ended |  |  |  |
|  | May 31, 2022 |  |  |  |
Revenues: a |  |  |  |  |  |  |  |
Hotel |  | $ | 6,782 |  |  | $ | 12,653 |  |  |  |  |
Entertainment |  | 4,650 |  |  | 9,990 |  |  |  |  |
Leasing operations and other |  | 206 |  |  | 932 |  |  |  |  |
Total revenue |  | 11,638 |  |  | 23,575 |  |  |  |  |
Cost of sales: |  |  |  |  |  |  |  |
Hotel |  | 4,487 |  |  | 9,230 |  |  |  |  |
Entertainment |  | 3,624 |  |  | 7,763 |  |  |  |  |
Leasing operations and other |  | 331 |  |  | 802 |  |  |  |  |
Depreciation b |  | — |  |  | — |  |  |  |  |
Total cost of sales |  | 8,442 |  |  | 17,795 |  |  |  |  |
General and administrative expenses |  | 136 |  |  | 236 |  |  |  |  |
Gain on sale of assets |  | (119,695) |  |  | (119,695) |  |  |  |  |
Operating income |  | 122,755 |  |  | 125,239 |  |  |  |  |
Interest expense, net |  | (1,291) |  |  | (3,236) |  |  |  |  |
Provision for income taxes |  | (25,539) |  |  | (25,703) |  |  |  |  |
Net income from discontinued operations |  | $ | 95,925 |  |  | $ | 96,300 |  |  |  |  |
a.In accordance with accounting guidance, amounts are net of eliminations of intercompany sales totaling $189 thousand for the two months ended May 31, 2022 and $510 thousand for the five months ended May 31, 2022. 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 $31 thousand in second-quarter 2022 and $213 thousand the first six months of 2022. 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). 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 $73 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 pre-tax gain in first-quarter 2022. A contract liability is presented as a deferred gain in the consolidated balance sheets in the amount of $3.1 million at June 30, 2023 and $3.5 million at December 31, 2022. 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.

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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 -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//360/tableOfContent + Details
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