Unload or Refi? Stratus seeks solutions for three Texas developments

Mix-use properties could generate plenty of investor interest

Stratus Properties' three HEB-anchored developments in West Killeen Market (top left), Kingwood Place (middle right), and Jones Crossing (bottom right) with Stratus Properties CEO Beau Armstrong (Stratus Properties, Getty Images, LinkedIn)
Stratus Properties' three HEB-anchored developments in West Killeen Market (top left), Kingwood Place (middle right), and Jones Crossing (bottom right) with Stratus Properties CEO Beau Armstrong (Stratus Properties, Getty Images, LinkedIn)

Stratus Properties is at a crossroads with three mixed-use developments.

The company is deciding between selling or refinancing the Texas properties currently anchored by H-E-B grocery stores, according to its second-quarter report filed to the SEC.

All three sites have a multifamily component, which are desirable offerings to investors enamored with the state’s long-term economic and housing forecasts.

Stratus could fetch a pretty penny for its mixed-use H-E-B sites. So far, multifamily dealmaking in Texas’ major markets has shown no signs of letting up. They range in price from the AMLI’s $472 million mixed-use development in the Dallas suburb of Addison, to San Francisco-based Fowler Property Acquisitions $182 million pick up of Houston’s Arrive Kirby, in one of the Bayou’s city’s most desirable neighborhoods.

The properties are located at Kingwood Place in the North Houston suburb of Kingwood; West Killeen Market, in Central Texas, where U.S. Army base Fort Hood is located; and Jones Crossing in College Station, home to Texas A&M University, the largest university in the Lone Star State.

The decision to sell or refinance these properties would allow the Austin-based real estate firm to follow its stated goal of quickly returning cash to company shareholders in the form of share repurchases, dividends or a combination.

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Stratus’ Board of Directors approved paying out $50 million to shareholders during the second quarter of 2022.

The shareholders’ returns are subject to Comerica Bank’s approval due to outstanding debt obligations. Stratus borrowed $11 million from Comerica through a $60 million credit facility and one of its subsidiaries took out a $57 million construction loan for The Saint George, a 270,000 square foot, 316-unit multifamily project in north-central Austin. Construction is expected to begin in the third quarter of 2022.

Stratus is already under contract to sell a portion of the properties, according to its filing.

Kingwood Place is the largest development up for grabs, which is still under construction. The mixed-use project sits on a 54-acre lot that will include 144,000-square-foot of retail space and 300 multifamily units. A sale is pending for a portion of the lot.

The project in West Killeen also has a portion of land pending sale.

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