W Austin Closes Financing and Begins Construction

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. October 14, 2008

MAY 9, 2008. Austin-based Stratus Properties Inc. (NASDAQ: STRS) and the Canyon-Johnson Urban Fund have commenced construction on the W Austin Hotel & Residences. The team recently secured $165 million in construction financing from Corus Bank, N.A. In fewer than six months, approximately 40% of the project's residential units are under contract with another 20% in the process of being converted to contract. The landmark $295-million mixed-use project, located on a prime site in the heart of downtown's 2nd Street District overlooking Lady Bird Lake, is seeking LEED certification and is slated for completion in early 2011.

"We are thrilled to be playing an active role in supporting Mayor Will Wynn's goal of 25,000 residents in downtown by 2015. From the diversity of cultural, dining, retail and entertainment options in and around the 2nd Street District to the proximity of outdoor recreation areas just steps away, downtown Austin continues to grow as a dynamic place to call home," said Beau Armstrong, Chief Executive Officer of Stratus Properties Inc.

The Downtown Austin Alliance recently commissioned an independent study by Capitol Market Research, an Austin-based real estate consulting firm. According to the study, Austin, and particularly its urban core, continues to defy national real estate trends. Major findings showed that condo demand is matching the increase in supply and that 68% of buyers are local, with more than two-thirds relocating from within Austin. The study also showed that 70% of buyers do not work downtown, but are making a lifestyle choice in their decision to move to the area.

"The W Austin Hotel & Residences is exactly the type of project our fund invests in. It is located in a densely-populated urban neighborhood and will employ thousands of local residents over the long term," said Earvin "Magic" Johnson, Canyon-Johnson's Managing Director and Chief Executive Officer of Magic Johnson Enterprises.

Canyon-Johnson's Director of Acquisitions Neville Rhone added, "This project will become the cultural anchor for Austin's revitalization of 2nd Street in the heart of downtown. We couldn't be more pleased to have Stratus Properties Inc. as our partner."

Initially designed with 198 residential units, the final count is expected to be closer to 165 homes as demand has been strongest for larger floorplans, and a number of buyers have opted to purchase multiple units in order to combine them. The project has been carefully configured to create private indoor and outdoor spaces, including a dedicated swimming pool with food and beverage service for homeowners while still allowing easy access to hotel venues and amenities.

Residences will be located on floors 18 to 37, providing each level with superb views over surrounding buildings to Lady Bird Lake, the Hill Country and the city skyline. Units on floors 18 to 33 begin at 643 square feet and include one-, two- and three-bedroom floorplans, while the three- and four-bedroom penthouse units with over 4,000 square feet of living space and 14-foot ceilings are situated on floors 34 through 37. Residence highlights include limestone, marble, luxury carpet and imported European wide-plank wood flooring; floor-to-ceiling windows; Bulthaup cabinetry; Miele kitchen appliances; Vola and Grohe faucets; Philippe Starck-designed Duravit bathtubs; and honed black slate, honed granite or Carrara marble countertops.

In addition to 252 guestrooms and suites, W Austin Hotel & Residences will feature all of the brand's celebrated comforts including its signature Living Room experience and Whatever/Whenever(R), the hotel's 24-hour concierge service that provides guests with the ultimate in amenities at any hour (from a pair of running shoes at 2 a.m. to private jet service). The property will also boast several innovative restaurants and clubs; a street-level plaza; an elevated garden incorporating a hotel swimming pool and bar; 5,000 square feet of meeting space; 4,300 square feet of banquet rooms; and an 8,000-square-foot spa plus fitness offerings including yoga and pilates studios, juice bar, steam rooms, saunas and on-site personal training services. Owners of W Austin Residences will enjoy exclusive use of the residents' pool and terrace, full use of all the hotel's facilities as well as access to 24-hour room service, daily housekeeping service and concierge services.