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| UNITED STATES                                          |
|--------------------------------------------------------|
| SECURITIES AND EXCHANGE COMMISSION                     |
| Washington, D.C. 20549                                 |
|                                                   |
| FORM 10-Q                                              |
|                                                   |
| (Mark One)                                             |
| [X]                                                    | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934                        |
| For the quarterly period ended September 30, 2010      |
| or                                                     |
| [  ]                                         | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934                        |
| For the transition period from                         |   | to |
| Commission File Number: 0-19989                        |
|                                                   |
|                                                   |
|                                                   |
| Stratus Properties Inc.                                |
| (Exact name of registrant as specified in its charter) |

| Delaware                                                      | 72-1211572                           |
|---------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction ofincorporation or organization) | (I.R.S. Employer Identification No.) |
|                                                          |                                 |
| 98 San Jacinto Blvd., Suite 220                               |                                 |
| Austin, Texas                                                 | 78701                                |
| (Address of principal executive offices)                      | (Zip Code)                           |
|                                                          |
|                                                          |
| (512) 478-5788                                                |
| (Registrant's telephone number, including area code)          |
|                                                          |

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| STRATUS PROPERTIES INC.                                                        |     |
|--------------------------------------------------------------------------------|----------|
| TABLE OF CONTENTS                                                              |     |
|                                                                           |     |
|                                                                           |     |
|                                                                           | Page     |
| Part I. Financial Information                                                  | 2        |
|                                                                           |     |
| Item 1. Financial Statements:                                                  |     |
|                                                                           |     |
| Consolidated Balance Sheets (Unaudited)                                        | 2        |
|                                                                           |     |
| Consolidated Statements of Operations (Unaudited)                              | 3        |
|                                                                           |     |
| Consolidated Statements of Cash Flows (Unaudited)                              | 4        |
|                                                                           |     |
| Consolidated Statements of Equity (Unaudited)                                  | 5        |
|                                                                           |     |
| Notes to Consolidated Financial Statements (Unaudited)                         | 6        |
|                                                                           |     |
| Item 2. Management’s Discussion and Analysis of Financial Condition      |     |
| and Results of Operations                                                      | 12       |
|                                                                           |     |
| Item 4. Controls and Procedures                                                | 22       |
|                                                                           |     |
| Part II. Other Information                                                     | 23       |
|                                                                           |     |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds            | 23       |
|                                                                           |     |
|         Item 5. Other Information |  23 |
|                                                                           |     |
| Item 6. Exhibits                                                               | 23       |
|                                                                           |     |
| Signature                                                                      | 24       |
|                                                                           |     |
| Exhibit Index                                                                  | E-1      |
|                                                                           |     |

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I

S

|                                                             | September 30, |    | December 31, |   |
|------------------------------------------------------------------|---------------|---------|--------------|--------|
|                                                             | 2010          |    | 2009         |   |
| ASSETS                                                           |          |    |         |   |   |   |
| Cash and cash equivalents                                        | $             | 12,621  |         | $      | 15,398 |   |
| Real estate held for sale – developed or under development |          | 147,628 |         |   | 124,801 |   |
| Real estate held for sale – undeveloped                    |          | 78,315  |         |   | 57,201 |   |
| Real estate held for use, net                                    |          | 158,193 |         |   | 101,863 |   |
| Investment in unconsolidated affiliate                           |          | 3,168   |         |   | 3,391 |   |
| Deferred tax assets                                              |          | 172     |         |   | 8,296 |   |
| Other assets                                                     |          | 24,082  |         |   | 17,640 |   |
| Total assets                                                     | $             | 424,179 |         | $      | 328,590 |   |
|                                                             |          |    |         |   |   |   |
| LIABILITIES AND EQUITY                                           |          |    |         |   |   |   |
| Accounts payable and accrued liabilities                         | $             | 20,927  |         | $      | 16,247 |   |
| Accrued interest and property taxes                              |          | 6,760   |         |   | 3,401 |   |
| Deposits                                                         |          | 8,772   |         |   | 7,700 |   |
| Debt                                                             |          | 171,693 |         |   | 81,105 |   |
| Other liabilities                                                |          | 2,060   |         |   | 2,224 |   |
| Total liabilities                                                |          | 210,212 |         |   | 110,677 |   |
|                                                             |          |    |         |   |   |   |
| Commitments and contingencies                                    |          |    |         |   |   |   |
|                                                             |          |    |         |   |   |   |
| Equity:                                                          |          |    |         |   |   |   |
| Stratus stockholders’ equity:                              |          |    |         |   |   |   |
| Preferred stock                                                  |          | -       |         |   | - |   |
| Common stock                                                     |          | 83      |         |   | 83 |   |
| Capital in excess of par value of common stock                   |          | 197,649 |         |   | 197,333 |   |
| Accumulated deficit                                              |          | (51,764 | )            |   | (35,999 | ) |
| Common stock held in treasury                                    |          | (17,972 | )            |   | (17,941 | ) |
| Total Stratus stockholders’ equity                         |          | 127,996 |         |   | 143,476 |   |
| Noncontrolling interest in subsidiary                            |          | 85,971  |         |   | 74,437 |   |
| Total equity                                                     |          | 213,967 |         |   | 217,913 |   |
| Total liabilities and equity                                     | $             | 424,179 |         | $      | 328,590 |   |
|                                                             |          |    |         |   |   |   |

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|                                                                         | Three Months Ended |   | Nine Months Ended |   |
|------------------------------------------------------------------------------|--------------------|--------|-------------------|--------|
|                                                                         | September 30,      |   | September 30,     |   |
|                                                                         | 2010               |   | 2009              |   | 2010 |   | 2009 |   |
| Revenues:                                                                    |               |   |              |   |   |   |   |   |   |   |   |   |
| Real estate                                                                  | $                  | 561    |              | $      | 2,116 |   | $ | 2,030 |   | $ | 4,201 |   |
| Rental income                                                                |               | 1,340  |              |   | 1,163 |   |   | 3,769 |   |   | 3,296 |   |
| Commissions, management fees and other                                       |               | 357    |              |   | 65 |   |   | 524 |   |   | 869 |   |
| Total revenues                                                               |               | 2,258  |              |   | 3,344 |   |   | 6,323 |   |   | 8,366 |   |
| Cost of sales:                                                               |               |   |              |   |   |   |   |   |   |   |   |   |
| Real estate, net                                                             |               | 1,788  |              |   | 2,710 |   |   | 5,538 |   |   | 6,806 |   |
| Rental                                                                       |               | 704    |              |   | 788 |   |   | 2,115 |   |   | 2,405 |   |
| Other                                                                        |               | 778    |              |   | - |   |   | 965 |   |   | - |   |
| Depreciation                                                                 |               | 381    |              |   | 403 |   |   | 1,210 |   |   | 1,227 |   |
| Total cost of sales                                                          |               | 3,651  |              |   | 3,901 |   |   | 9,828 |   |   | 10,438 |   |
| General and administrative expenses                                          |               | 1,495  |              |   | 1,818 |   |   | 4,898 |   |   | 5,832 |   |
| Total costs and expenses                                                     |               | 5,146  |              |   | 5,719 |   |   | 14,726 |   |   | 16,270 |   |
| Operating loss                                                               |               | (2,888 | )                 |   | (2,375 | ) |   | (8,403 | ) |   | (7,904 | ) |
| Interest income                                                              |               | 6      |              |   | 66 |   |   | 30 |   |   | 327 |   |
| Other income                                                                 |               | -      |              |   | - |   |   | 228 |   |   | 567 |   |
| Loss on extinguishment of debt                                               |               | -      |              |   | - |   |   | - |   |   | (182 | ) |
| (Loss) gain on interest rate cap agreement                                   |               | -      |              |   | (37 | ) |   | (25 | ) |   | 33 |   |
| Loss before income taxes and equity in unconsolidated affiliate’s loss |               | (2,882 | )                 |   | (2,346 | ) |   | (8,170 | ) |   | (7,159 | ) |
| Equity in unconsolidated affiliate’s loss                              |               | (89    | )                 |   | (95 | ) |   | (238 | ) |   | (277 | ) |
| (Provision for) benefit from income taxes                                    |               | (18    | )                 |   | 844 |   |   | (8,013 | ) |   | 2,448 |   |
| Net loss                                                                     |               | (2,989 | )                 |   | (1,597 | ) |   | (16,421 | ) |   | (4,988 | ) |
| Net loss attributable to noncontrolling interest in subsidiary               |               | 467    |              |   | 44 |   |   | 656 |   |   | 254 |   |
| Net loss attributable to Stratus common stock                                | $                  | (2,522 | )                 | $      | (1,553 | ) | $ | (15,765 | ) | $ | (4,734 | ) |
|                                                                         |               |   |              |   |   |   |   |   |   |   |   |   |
| Net loss per share attributable to Stratus common stock:                     |               |   |              |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                            | $                  | (0.34  | )                 | $      | (0.21 | ) | $ | (2.11 | ) | $ | (0.64 | ) |
|                                                                         |               |   |              |   |   |   |   |   |   |   |   |   |
| Weighted average shares of common stock outstanding:                         |               |   |              |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                            |               | 7,470  |              |   | 7,435 |   |   | 7,464 |   |   | 7,439 |   |
|                                                                         |               |   |              |   |   |   |   |   |   |   |   |   |

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|                                                        | Nine Months EndedSeptember 30, |    |
|-------------------------------------------------------------|--------------------------------|---------|
|                                                        | 2010                           |    | 2009 |   |
| Cash flow from operating activities:                        |                           |    |   |   |   |
| Net loss                                                    | $                              | (16,421 | ) | $ | (4,988 | ) |
| Adjustments to reconcile net loss to net cash               |                           |    |   |   |   |   |
| used in operating activities:                               |                           |    |   |   |   |   |
| Depreciation                                                |                           | 1,210   |   |   | 1,227 |   |
| Loss (gain) on interest rate cap agreement                  |                           | 25      |   |   | (33 | ) |
| Loss on extinguishment of debt                              |                           | -       |   |   | 182 |   |
| Cost of real estate sold                                    |                           | 1,569   |   |   | 2,912 |   |
| Deferred income taxes                                       |                           | 7,971   |   |   | (1,303 | ) |
| Stock-based compensation                                    |                           | 445     |   |   | 552 |   |
| Equity in unconsolidated affiliate’s loss             |                           | 238     |   |   | 277 |   |
| Deposits                                                    |                           | (2,173  | ) |   | (802 | ) |
| Purchases and development of real estate properties         |                           | (46,638 | ) |   | (32,653 | ) |
| Municipal utility district reimbursements                   |                           | -       |   |   | 4,551 |   |
| (Increase) decrease in other assets                         |                           | (1,457  | ) |   | 615 |   |
| Increase in accounts payable, accrued liabilities and other |                           | 2,049   |   |   | 3,249 |   |
| Net cash used in operating activities                       |                           | (53,182 | ) |   | (26,214 | ) |
|                                                        |                           |    |   |   |   |   |
| Cash flow from investing activities:                        |                           |    |   |   |   |   |
| Development of commercial leasing properties                |                           | (4,896  | ) |   | (2,786 | ) |
| Other development activities                                |                           | (46,350 | ) |   | (24,476 | ) |
| Proceeds from matured U.S. treasury securities              |                           | -       |   |   | 15,391 |   |
| Investment in unconsolidated affiliate                      |                           | (15     | ) |   | (1,462 | ) |
| Other                                                       |                           | -       |   |   | 53 |   |
| Net cash used in investing activities                       |                           | (51,261 | ) |   | (13,280 | ) |
|                                                        |                           |    |   |   |   |   |
| Cash flow from financing activities:                        |                           |    |   |   |   |   |
| Borrowings from credit facility                             |                           | 20,359  |   |   | 15,000 |   |
| Payments on credit facility                                 |                           | (1,608  | ) |   | (4,769 | ) |
| Borrowings from project and term loans                      |                           | 76,157  |   |   | 4,700 |   |
| Payments on project and term loans                          |                           | (4,320  | ) |   | (488 | ) |
| Noncontrolling interest contributions                       |                           | 12,190  |   |   | 33,380 |   |
| Net payments for stock-based awards                         |                           | (7      | ) |   | (96 | ) |
| Purchases of Stratus common shares                          |                           | -       |   |   | (404 | ) |
| Financing costs                                             |                           | (1,105  | ) |   | - |   |
| Net cash provided by financing activities                   |                           | 101,666 |   |   | 47,323 |   |
| Net (decrease) increase in cash and cash equivalents        |                           | (2,777  | ) |   | 7,829 |   |
| Cash and cash equivalents at beginning of year              |                           | 15,398  |   |   | 17,097 |   |
| Cash and cash equivalents at end of period                  | $                              | 12,621  |   | $ | 24,926 |   |
|                                                        |                           |    |   |   |   |   |

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|                                    | Stratus Stockholders’ Equity |   |   |   |      |   |       |
|-----------------------------------------|------------------------------------|--------|--------|--------|-----------|--------|------------|
|                                    |                               |   |   |   |      |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    |                               |   |   |   |      |   |       |   |   |   |   |   | Accum- |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    |                               |   |   |   |      |   |       |   |   |   |   |   | ulated |   | Common Stock |   | Total |   |   |   |   |   |
|                                    | Common Stock                       |   |   |   |      |   |       |   | Other |   | Held in Treasury |   | Stratus |   | Non- |   |   |   |
|                                    |                               |   |   |   |      |   | Capital in |   | Accum- |   | Compre- |   | Number |   |   |   |   | Stock- |   | controlling |   |   |   |
|                                    | Number                             |   | At Par |   | Excess of |   | ulated     |   | hensive |   | of |   | At |   | holders’ |   | Interest in |   | Total |   |
|                                    | of Shares                          |   | Value  |   | Par Value |   | Deficit    |   | Loss |   | Shares |   | Cost |   | Equity |   | Subsidiary |   | Equity |   |
|                                    |                               |   |   |   |      |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2009            |                               | 8,315  |   | $      | 83        |   | $          | 197,333 |   | $ | (35,999 | ) | $ | - |   | 873 |   | $ | (17,941 | ) | $ | 143,476 |   | $ | 74,437 |   | $ | 217,913 |   |
| Exercised and issued stock-based awards |                               |   |   |   |      |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and other                               |                               | 32     |   |   | -         |   |       | (129 | ) |   | - |   |   | - |   | - |   |   | - |   |   | (129 | ) |   | - |   |   | (129 | ) |
| Stock-based compensation                |                               | -      |   |   | -         |   |       | 445 |   |   | - |   |   | - |   | - |   |   | - |   |   | 445 |   |   | - |   |   | 445 |   |
| Tender of shares for stock-based awards |                               | -      |   |   | -         |   |       | - |   |   | - |   |   | - |   | 4 |   |   | (31 | ) |   | (31 | ) |   | - |   |   | (31 | ) |
| Noncontrolling interest contributions   |                               | -      |   |   | -         |   |       | - |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | 12,190 |   |   | 12,190 |   |
| Comprehensive income (loss):            |                               |   |   |   |      |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                |                               | -      |   |   | -         |   |       | - |   |   | (15,765 | ) |   | - |   | - |   |   | - |   |   | (15,765 | ) |   | (656 | ) |   | (16,421 | ) |
| Other comprehensive income              |                               | -      |   |   | -         |   |       | - |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Total comprehensive income (loss)       |                               | -      |   |   | -         |   |       | - |   |   | (15,765 | ) |   | - |   | - |   |   | - |   |   | (15,765 | ) |   | (656 | ) |   | (16,421 | ) |
| Balance at September 30, 2010           |                               | 8,347  |   | $      | 83        |   | $          | 197,649 |   | $ | (51,764 | ) | $ | - |   | 877 |   | $ | (17,972 | ) | $ | 127,996 |   | $ | 85,971 |   | $ | 213,967 |   |
|                                    |                               |   |   |   |      |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Balance at December 31, 2008              |   | 8,282  |   | $      | 83     |   | $      | 196,692 |   | $      | (30,095 | )      | $      | (3     | )      | 819    |   | $      | (17,441 | )      | $      | 149,236 |   | $      | 25,286 |   | $      | 174,522 |   |
|-------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|---------|--------|
| Exercised and issued stock-based awards   |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |    |   |
| and other                                 |   | 26     |   |   | -      |   |   | -       |   |   | -       |   |   | -      |   | -      |   |   | -       |   |   | -       |   |   | -      |   |   | -       |   |
| Stock-based compensation                  |   | -      |   |   | -      |   |   | 593     |   |   | -       |   |   | -      |   | -      |   |   | -       |   |   | 593     |   |   | -      |   |   | 593     |   |
| Tender of shares for stock-based awards   |   | -      |   |   | -      |   |   | -       |   |   | -       |   |   | -      |   | 5      |   |   | (96     | )      |   | (96     | )      |   | -      |   |   | (96     | )      |
| Purchases of Stratus common shares        |   | -      |   |   | -      |   |   | -       |   |   | -       |   |   | -      |   | 49     |   |   | (404    | )      |   | (404    | )      |   | -      |   |   | (404    | )      |
| Noncontrolling interest contributions     |   | -      |   |   | -      |   |   | -       |   |   | -       |   |   | -      |   | -      |   |   | -       |   |   | -       |   |   | 33,380 |   |   | 33,380  |   |
| Comprehensive income (loss):              |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |    |   |
| Net loss                                  |   | -      |   |   | -      |   |   | -       |   |   | (4,734  | )      |   | -      |   | -      |   |   | -       |   |   | (4,734  | )      |   | (254   | )      |   | (4,988  | )      |
| Other comprehensive income, net of taxes: |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |    |   |
| Unrealized gain on U.S. treasury          |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |    |   |
| securities                                |   | -      |   |   | -      |   |   | -       |   |   | -       |   |   | 3      |   | -      |   |   | -       |   |   | 3       |   |   | -      |   |   | 3       |   |
| Total comprehensive income (loss)         |   | -      |   |   | -      |   |   | -       |   |   | (4,734  | )      |   | 3      |   | -      |   |   | -       |   |   | (4,731  | )      |   | (254   | )      |   | (4,985  | )      |
| Balance at September 30, 2009             |   | 8,308  |   | $      | 83     |   | $      | 197,285 |   | $      | (34,829 | )      | $      | -      |   | 873    |   | $      | (17,941 | )      | $      | 144,598 |   | $      | 58,412 |   | $      | 203,010 |   |
|                                      |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |    |   |   |    |   |   |   |   |   |    |   |

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| 1.   | GENERAL |
|----------------|---------|

| 2.   | EARNINGS PER SHARE |
|----------------|--------------------|

| 3.   | JOINT VENTURE WITH CANYON-JOHNSON URBAN FUND II, L.P. |
|----------------|-------------------------------------------------------|

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| 4.   | FAIR VALUE MEASUREMENTS |
|----------------|-------------------------|

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|                              | September 30, 2010 |    |   | December 31, 2009 |    |
|-----------------------------------|--------------------|---------|--------|-------------------|---------|
|                              | Carrying           |    | Fair   |              |    | Carrying |   |   | Fair |   |
|                              | Value              |    | Value  |              |    | Value |   |   | Value |   |
|                              |               |    |   |              |    |   |   |   |   |   |   |   |
| Cash and cash equivalentsa        | $                  | 12,621  |   | $                 | 12,621  |   | $ | 15,398 |   | $ | 15,398 |   |
| Accounts and notes receivablea    |               | 517     |   |              | 517     |   |   | 1,734 |   |   | 1,734 |   |
| Interest rate cap agreementb      |               | -       | c      |              | -       | c |   | 25 |   |   | 25 |   |
| Accounts payable, accrued         |               |    |   |              |    |   |   |   |   |   |   |   |
| liabilities, accrued interest and |               |    |   |              |    |   |   |   |   |   |   |   |
| property taxesa                   |               | 27,687  |   |              | 27,687  |   |   | 19,648 |   |   | 19,648 |   |
| Debtd                             |               | 171,693 |   |              | 170,534 |   |   | 81,105 |   |   | 78,571 |   |
|                              |               |    |   |              |    |   |   |   |   |   |   |   |

| a.   | Fair value approximates the carrying amounts because of the short-term nature of these instruments. |
|----------------|-----------------------------------------------------------------------------------------------------|

| b.   | Recorded at fair value. Observable inputs, such as LIBOR, are used to determine fair value (see below). |
|----------------|---------------------------------------------------------------------------------------------------------|

| c.   | Rounds to less than $1 thousand. |
|----------------|----------------------------------|

| d.   | Generally recorded at cost. Fair value of substantially all of Stratus’ debt is estimated based on discounted future expected cash flows at estimated current interest rates. The fair value of debt does not represent the amounts that will ultimately be paid upon the maturities of the loans. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | DEBT TRANSACTIONS |
|----------------|-------------------|

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| 6.   | INCOME TAXES |
|----------------|--------------|

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| 7.   | BUSINESS SEGMENTS |
|----------------|-------------------|

|                                  | Real Estate Operationsa |    | Commercial Leasing |   | Other  |   | Total  |    |
|---------------------------------------|-------------------------|---------|--------------------|--------|--------|--------|--------|---------|
|                                  | (In Thousands)          |    |
| Three Months Ended September 30, 2010 |                    |    |               |   |   |   |   |    |   |   |   |   |
| Revenues                              | $                       | 918     |               | $      | 1,340  |   | $      | -       |   | $ | 2,258 |   |
| Cost of sales, excluding depreciation |                    | (1,788  | )                  |   | (704   | )      |   | (778    | )b |   | (3,270 | ) |
| Depreciation                          |                    | (49     | )                  |   | (332   | )      |   | -       |   |   | (381 | ) |
| General and administrative expenses   |                    | (849    | )                  |   | (646   | )      |   | -       |   |   | (1,495 | ) |
| Operating loss                        | $                       | (1,768  | )                  | $      | (342   | )      | $      | (778    | ) | $ | (2,888 | ) |
|                                  |                    |    |               |   |   |   |   |    |   |   |   |   |
| Capital expenditures                  | $                       | 21,555  |               | $      | 2,177  |   | $      | 22,345  | c | $ | 46,077 |   |
| Total assets at September 30, 2010    | $                       | 245,019 |               | $      | 49,472 |   | $      | 129,688 | c | $ | 424,179 |   |
|                                  |                    |    |               |   |   |   |   |    |   |   |   |   |

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|                                  | Real Estate Operationsa |    | Commercial Leasing |   | Other  |   | Total  |   |
|---------------------------------------|-------------------------|---------|--------------------|--------|--------|--------|--------|--------|
|                                  | (In Thousands)          |    |
| Three Months Ended September 30, 2009 |                    |    |               |   |   |   |   |   |   |   |   |   |
| Revenues                              | $                       | 2,181   |               | $      | 1,163  |   | $      | -      |   | $ | 3,344 |   |
| Cost of sales, excluding depreciation |                    | (2,710  | )                  |   | (788   | )      |   | -      |   |   | (3,498 | ) |
| Depreciation                          |                    | (50     | )                  |   | (353   | )      |   | -      |   |   | (403 | ) |
| General and administrative expenses   |                    | (1,134  | )                  |   | (684   | )      |   | -      |   |   | (1,818 | ) |
| Operating loss                        | $                       | (1,713  | )                  | $      | (662   | )      | $      | -      |   | $ | (2,375 | ) |
|                                  |                    |    |               |   |   |   |   |   |   |   |   |   |
| Capital expenditures                  | $                       | 12,079  |               | $      | 1,491  |   | $      | 10,533 | c | $ | 24,103 |   |
| Total assets at September 30, 2009    | $                       | 191,703 |               | $      | 47,435 |   | $      | 64,551 | c | $ | 303,689 |   |
|                                  |                    |    |               |   |   |   |   |   |   |   |   |   |

| Nine Months Ended September 30, 2010  |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Revenues                              | $      | 2,554  |   | $      | 3,769  |   | $      | -      |   | $      | 6,323  |   |
| Cost of sales, excluding depreciation |   | (5,538 | )      |   | (2,115 | )      |   | (965   | )b     |   | (8,618 | )      |
| Depreciation                          |   | (151   | )      |   | (1,059 | )      |   | -      |   |   | (1,210 | )      |
| General and administrative expenses   |   | (2,781 | )      |   | (2,117 | )      |   | -      |   |   | (4,898 | )      |
| Operating loss                        | $      | (5,916 | )      | $      | (1,522 | )      | $      | (965   | )      | $      | (8,403 | )      |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                  | $      | 46,638 |   | $      | 4,896  |   | $      | 46,350 | c      | $      | 97,884 |   |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |

| Nine Months Ended September 30, 2009  |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Revenues                              | $      | 5,070  |   | $      | 3,296  |   | $      | -      |   | $      | 8,366  |   |
| Cost of sales, excluding depreciation |   | (6,806 | )      |   | (2,405 | )      |   | -      |   |   | (9,211 | )      |
| Depreciation                          |   | (176   | )      |   | (1,051 | )      |   | -      |   |   | (1,227 | )      |
| General and administrative expenses   |   | (3,636 | )      |   | (2,196 | )      |   | -      |   |   | (5,832 | )      |
| Operating loss                        | $      | (5,548 | )      | $      | (2,356 | )      | $      | -      |   | $      | (7,904 | )      |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                  | $      | 32,653 |   | $      | 2,786  |   | $      | 24,476 | c      | $      | 59,915 |   |
|                                  |   |   |   |   |   |   |   |   |   |   |   |   |

| a.   | Includes sales commissions, management fees and other revenues together with related expenses. |
|----------------|------------------------------------------------------------------------------------------------|

| b.   | Primarily includes personnel and marketing costs for the hotel and entertainment venue at the W Austin Hotel & Residences project. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Primarily includes estimated capital expenditures and assets associated with the hotel and entertainment venue at the W Austin Hotel & Residences project. Total assets also include deferred tax assets totaling $0.2 million at September 30, 2010, and $8.6 million at September 30, 2009. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | NEW ACCOUNTING STANDARD |
|----------------|-------------------------|

| 9.   | SUBSEQUENT EVENTS |
|----------------|-------------------|

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|             |      |   | Acreage                        |   |        |
|------------------|-----------|--------|--------------------------------|--------|-------------|
|             |      |   | Developed or Under Development |   | Undeveloped |   |   |
|             | Developed |   | Single                         |   | Multi-      |   |   |   |   |   | Single |   |   |   |   |   | Total |
|             | Lots      |   | Family                         |   | Family      |   | Commercial |   | Total |   | Family |   | Commercial |   | Total |   | Acreage |
| Austin           |      |   |                           |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Barton Creek     | 121       |   | 119                            |   | 249         |   | 368 |   | 736 |   | 749 |   | 28 |   | 777 |   | 1,513 |
| Lantana          | -         |   | -                              |   | -           |   | - |   | - |   | - |   | 223 |   | 223 |   | 223 |
| Circle C         | 25        |   | -                              |   | -           |   | 35 |   | 35 |   | 148 |   | 352 |   | 500 |   | 535 |
| W Austin Hotel   |      |   |                           |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| & Residences | -         |   | -                              |   | -           |   | 2 | a | 2 |   | - |   | - |   | - |   | 2 |
| San Antonio      |      |   |                           |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Camino Real      | -         |   | -                              |   | -           |   | - |   | - |   | - |   | 2 |   | 2 |   | 2 |
| Total            | 146       |   | 119                            |   | 249         |   | 405 |   | 773 |   | 897 |   | 605 |   | 1,502 |   | 2,275 |
|             |      |   |                           |   |        |   |   |   |   |   |   |   |   |   |   |   |   |

| a.   | Represents a city block in downtown Austin planned for a mixture of hotel, residential, retail, office and entertainment uses. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------|

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|                         | Residential Lots |
|------------------------------|------------------|
|                         | Developed        |   | Under Development |   | Potential Development a |   | Total |
| Barton Creek:                |             |   |   |   |   |   |   |
| Calera:                      |             |   |   |   |   |   |   |
| Calera Court Courtyard Homes | 1                |   | - |   | - |   | 1 |
| Calera Drive                 | 8                |   | - |   | - |   | 8 |
| Verano Drive                 | 67               |   | - |   | - |   | 67 |
| Amarra Drive:                |             |   |   |   |   |   |   |
| Phase I Lots                 | 7                |   | - |   | - |   | 7 |
| Phase II Lots                | 35               |   | - |   | - |   | 35 |
| Townhomes                    | -                |   | - |   | 221 |   | 221 |
| Phase III                    | -                |   | 89 |   | - |   | 89 |
| Mirador Estate               | 2                |   | - |   | - |   | 2 |
| Wimberly Lane Phase II       | 1                |   | - |   | - |   | 1 |
| Section N Multi-family       | -                |   | - |   | 1,860 |   | 1,860 |
| Other Barton Creek Sections  | -                |   | - |   | 154 |   | 154 |
|                         |             |   |   |   |   |   |   |
| Circle C:                    |             |   |   |   |   |   |   |
| Meridian                     | 25               |   | - |   | 57 |   | 82 |
| Total Residential Lots       | 146              |   | 89 |   | 2,292 |   | 2,527 |
|                         |             |   |   |   |   |   |   |

| a.   | Our development of the properties identified under the heading “Potential Development” is dependent upon the approval of our development plans and permits by governmental agencies, including the City. Those governmental agencies may either not approve one or more development plans and permit applications related to such properties or require us to modify our development plans. Accordingly, our development strategy with respect to those properties may change in the future. While we may be proceeding with approved infrastructure projects on some of these properties, they are not considered to be “under development” for disclosure in this table unless other development activities necessary to fully realize the properties’ intended final use are in progress or scheduled to commence in the near term. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                          | Commercial Property |
|-------------------------------|---------------------|
|                          | Developed           |   | Under Development |   | Potential Development a |   | Total |
| Barton Creek:                 |                |   |   |   |   |   |   |
| Barton Creek Village Phase I  | 22,000              |   | - |   | - |   | 22,000 |
| Barton Creek Village Phase II | -                   |   | - |   | 18,000 |   | 18,000 |
| Entry Corner                  | -                   |   | - |   | 5,000 |   | 5,000 |
| Amarra Retail/Office          | -                   |   | - |   | 90,000 |   | 90,000 |
| Section N                     | -                   |   | - |   | 1,500,000 |   | 1,500,000 |
|                          |                |   |   |   |   |   |   |
| Circle C:                     |                |   |   |   |   |   |   |
| Chase Ground Lease            | 4,000               |   | - |   | - |   | 4,000 |
| 5700 Slaughter                | 21,000              |   | - |   | - |   | 21,000 |
| Parkside Village              | -                   |   | 92,440 |   | - |   | 92,440 |
| Tract 110                     | -                   |   | - |   | 760,000 |   | 760,000 |
| Tract 101                     | -                   |   | - |   | 90,000 |   | 90,000 |
| Tract 102                     | -                   |   | - |   | 25,000 |   | 25,000 |
| Tract 114                     | -                   |   | - |   | 5,000 |   | 5,000 |
|                          |                |   |   |   |   |   |   |
| Lantana:                      |                |   |   |   |   |   |   |
| 7500 Rialto                   | 150,000             |   | - |   | - |   | 150,000 |
| Tract G06                     | -                   |   | - |   | 400,000 |   | 400,000 |
| Tract GR1                     | -                   |   | - |   | 325,000 |   | 325,000 |
| Tract G05                     | -                   |   | - |   | 260,000 |   | 260,000 |
| Tract CS5                     | -                   |   | - |   | 175,000 |   | 175,000 |
| Tract G07                     | -                   |   | - |   | 160,000 |   | 160,000 |
| Tract CS1-CS3                 | -                   |   | - |   | 134,200 |   | 134,200 |
| Tract L03                     | -                   |   | - |   | 99,800 |   | 99,800 |
| Tract L04                     | -                   |   | - |   | 70,000 |   | 70,000 |
| Tract LR1                     | -                   |   | - |   | 62,200 |   | 62,200 |
|                          |                |   |   |   |   |   |   |
| Austin 290 Tract              | -                   |   | - |   | 20,000 |   | 20,000 |
| Total Square Feet             | 197,000             |   | 92,440 |   | 4,199,200 |   | 4,488,640 |
|                          |                |   |   |   |   |   |   |

| a.   | Our development of the properties identified under the heading “Potential Development” is dependent upon the approval of our development plans and permits by governmental agencies, including the City. Those governmental agencies may either not approve one or more development plans and permit applications related to such properties or require us to modify our development plans. Accordingly, our development strategy with respect to those properties may change in the future. While we may be proceeding with approved infrastructure projects on some of these properties, they are not considered to be “under development” for disclosure in this table unless other development activities necessary to fully realize the properties’ intended final use are in progress or scheduled to commence in the near term. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                          | Third Quarter |   | Nine Months |   |
|-----------------------------------------------|---------------|--------|-------------|--------|
|                                          | 2010          |   | 2009        |   | 2010 |   | 2009 |   |
| Revenues:                                     |          |   |        |   |   |   |   |   |
| Real estate operations                        | $             | 918    |        | $      | 2,181 |   | $ | 2,554 |   | $ | 5,070 |   |
| Commercial leasing                            |          | 1,340  |        |   | 1,163 |   |   | 3,769 |   |   | 3,296 |   |
| Total revenues                                | $             | 2,258  |        | $      | 3,344 |   | $ | 6,323 |   | $ | 8,366 |   |
|                                          |          |   |        |   |   |   |   |   |   |   |   |   |
| Operating loss                                | $             | (2,888 | )           | $      | (2,375 | ) | $ | (8,403 | ) | $ | (7,904 | ) |
|                                          |          |   |        |   |   |   |   |   |   |   |   |   |
| (Provision for) benefit from income taxes     | $             | (18    | )           | $      | 844 |   | $ | (8,013 | ) | $ | 2,448 |   |
|                                          |          |   |        |   |   |   |   |   |   |   |   |   |
| Net loss attributable to Stratus common stock | $             | (2,522 | )           | $      | (1,553 | ) | $ | (15,765 | ) | $ | (4,734 | ) |
|                                          |          |   |        |   |   |   |   |   |   |   |   |   |

|                                   | Third Quarter |   | Nine Months |   |
|----------------------------------------|---------------|--------|-------------|--------|
|                                   | 2010          |   | 2009        |   | 2010 |   | 2009 |   |
| Revenues:                              |          |   |        |   |   |   |   |   |
| Developed property sales               | $             | 561    |        | $      | 2,116 |   | $ | 2,030 |   | $ | 4,201 |   |
| Commissions, management fees and other |          | 357    |        |   | 65 |   |   | 524 |   |   | 869 |   |
| Total revenues                         |          | 918    |        |   | 2,181 |   |   | 2,554 |   |   | 5,070 |   |
|                                   |          |   |        |   |   |   |   |   |   |   |   |   |
| Cost of sales, including depreciation  |          | (1,837 | )           |   | (2,760 | ) |   | (5,689 | ) |   | (6,982 | ) |
| General and administrative expenses    |          | (849   | )           |   | (1,134 | ) |   | (2,781 | ) |   | (3,636 | ) |
|                                   |          |   |        |   |   |   |   |   |   |   |   |   |
| Operating loss                         | $             | (1,768 | )           | $      | (1,713 | ) | $ | (5,916 | ) | $ | (5,548 | ) |
|                                   |          |   |        |   |   |   |   |   |   |   |   |   |

|                         | Third Quarter |   |
|------------------------------|---------------|--------|
|                         | 2010          |   | 2009 |   |
|                         | Lots          |   | Revenues |   | Lots |   | Revenues |   |
| Barton Creek                 |          |   |   |   |   |   |   |   |
| Calera Court Courtyard Homes | -             |   | $                                     - |   | 1 |   | $                                 549 |   |
| Verano Drive                 | -             |   | - |   | 1 |   | 450 |   |
|                         |          |   |   |   |   |   |   |   |
| Circle C                     |          |   |   |   |   |   |   |   |
| Meridian                     | 4             |   | 561 |   | 16 |   | 1,117 |   |
| Total Residential            | 4             |   | $                                 561 |   | 18 |   | $                              2,116 |   |
|                         |          |   |   |   |   |   |   |   |

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|                         | Nine Months |   |
|------------------------------|-------------|--------|
|                         | 2010        |   | 2009 |   |
|                         | Lots        |   | Revenues |   | Lots |   | Revenues |   |
| Barton Creek                 |        |   |   |   |   |   |   |   |
| Calera Court Courtyard Homes | 1           |   | $                                 595 |   | 2 |   | $                             1,149 |   |
| Verano Drive                 | -           |   |   |   | 1 |   | 450 |   |
|                         |        |   |   |   |   |   |   |   |
| Circle C                     |        |   |   |   |   |   |   |   |
| Meridian                     | 17          |   | 1,435 |   | 39 |   | 2,602 |   |
| Total Residential            | 18          |   | $                              2,030 |   | 42 |   | $                             4,201 |   |
|                         |        |   |   |   |   |   |   |   |

|                                | Third Quarter |   | Nine Months |   |
|-------------------------------------|---------------|--------|-------------|--------|
|                                | 2010          |   | 2009        |   | 2010 |   | 2009 |   |
| Rental income                       | $             | 1,340  |        | $      | 1,163 |   | $ | 3,769 |   | $ | 3,296 |   |
| Rental property costs               |          | (704   | )           |   | (788 | ) |   | (2,115 | ) |   | (2,405 | ) |
| Depreciation                        |          | (332   | )           |   | (353 | ) |   | (1,059 | ) |   | (1,051 | ) |
| General and administrative expenses |          | (646   | )           |   | (684 | ) |   | (2,117 | ) |   | (2,196 | ) |
| Operating loss                      | $             | (342   | )           | $      | (662 | ) | $ | (1,522 | ) | $ | (2,356 | ) |
|                                |          |   |        |   |   |   |   |   |   |   |   |   |

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| ·   | $45.0 million of borrowings outstanding under the Beal Bank loan agreement is secured by the assets in the W Austin Hotel & Residences project. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $36.0 million of borrowings outstanding under seven unsecured term loans, which include two $5.0 million loans, an $8.0 million loan, a $7.0 million loan, a $4.0 million loan and two $3.5 million loans. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $30.8 million of borrowings outstanding, $2.9 million of letters of credit issued, and $11.3 million of availability under our credit facility with Comerica. The credit facility includes a $35.0 million revolving loan under which $1.3 million is available and a $10.0 million term loan, all of which is available.  We used the proceeds from these borrowings for general corporate purposes, including overhead and development costs. The credit facility is secured by assets at Barton Creek, Lantana and Circle C. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $30.0 million of borrowings outstanding under the Ford loan agreement is secured by a second lien on the W Austin Hotel & Residences project assets. Additionally, the Ford loan agreement provides for a profits interest in our joint venture with Canyon-Johnson (see Note 3). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $20.8 million of borrowings outstanding under the Lantana promissory note, which matures in January 2018 and is secured by our buildings at 7500 Rialto Boulevard. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $4.6 million of borrowings outstanding under a term loan is secured by Barton Creek Village. |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | $4.5 million of borrowings under a $5.4 million term loan, which matures in January 2015 and is secured by 5700 Slaughter. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

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|                      | Fourth-quarter2010 |   | 2011   |   | 2012   |   | 2013   |   | 2014   |   |   Thereafter |   | Total  |   |
|---------------------------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------------------|--------|--------|--------|
| Beal Bank Loan            | $                  | -      |   | $      | -      |   | $      | -      |   | $      | -                      |   | $      | 45,030 |   | $ | - |   | $ | 45,030 | a |
| FAAM Loans                |               | -      |   |   | 9,000  | b      |   | 3,500  |   |   | 15,000                 |   |   | 8,500  |   |   | - |   |   | 36,000 |   |
| Comerica Credit Facility  |               | -      |   |   | -      |   |   | 30,854 |   |   | -                      |   |   | -      |   |   | - |   |   | 30,854 |   |
| Ford Loan                 |               | -      |   |   | -      |   |   | 30,000 |   |   | -                      |   |   | -      |   |   | - |   |   | 30,000 |   |
| Lantana Promissory Note   |               | -      |   |   | -      |   |   | -      |   |   | -                      |   |   | -      |   |   | 20,758 |   |   | 20,758 |   |
| Barton Creek Village Loan |               | -      |   |   | -      |   |   | -      |   |   | -                      |   |   | 4,588  |   |   | - |   |   | 4,588 |   |
| 5700 Slaughter Loan       |               | -      |   |   | -      |   |   | -      |   |   | -                      |   |   | -      |   |   | 4,463 |   |   | 4,463 |   |
| Total                     | $                  | -      |   | $      | 9,000  |   | $      | 64,354 |   | $      | 15,000                 |   | $      | 58,118 |   | $ | 25,221 |   | $ | 171,693 |   |
|                      |               |   |   |   |   |   |   |   |   |   |                   |   |   |   |   |   |   |   |   |   |   |

| a.   | Additional advances were made under the Beal Bank loan agreement in October 2010 totaling $10.7 million, resulting in a balance of $55.7 million at October 29, 2010. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Loan matures in December 2011. |
|----------------|--------------------------------|

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|                    |   | (a) Total |   |        |   | (c) Total Number of      |   | (d) Maximum Number     |
|-------------------------|--------|-----------|--------|-------------|--------|--------------------------|--------|------------------------|
|                    |   | Number    |   | (b) Average |   | Shares Purchased as Part |   | of Shares That May     |
|                    |   | of Shares |   | Price Paid  |   | of Publicly Announced    |   | Yet Be Purchased Under |
| Period                  |   | Purchased |   | Per Share   |   | Plans or Programsa       |   | the Plans or Programsa |
| July 1 to 31, 2010      |   | -         |   | -           |   | -                        |   | 161,145                |
| August 1 to 31, 2010    |   | -         |   | -           |   | -                        |   | 161,145                |
| September 1 to 30, 2010 |   | -         |   | -           |   | -                        |   | 161,145                |
| Total                   |   | -         |   | -           |   | -                        |   |                   |
|                    |   |      |   |        |   |                     |   |                   |

| a.   | In February 2001, our Board of Directors approved an open market share purchase program for up to 0.7 million shares of our common stock. The program does not have an expiration date. Our modified unsecured term loans prohibit common stock purchases while any of the loans are outstanding. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|          |   |                                                                               |   |                      |   | Incorporated by Reference |
|---------------|--------|------------------------------------------------------------------------------------|--------|---------------------------|--------|---------------------------|
| ExhibitNumber |   | Exhibit Title                                                                      |   | Filed with this Form 10-Q |   | Form                      |   | File No. |   | Date Filed |
| 3.1           |   | Composite Certificate of Incorporation of Stratus.                                 |   |                      |   | 8-A/A                     |   | 000-19989 |   | 08/26/2010 |
|          |   |                                                                               |   |                      |   |                      |   |   |   |   |
| 3.2           |   | By-laws of Stratus, as amended as of November 6, 2007.                             |   |                      |   | 10-Q                      |   | 000-19989 |   | 08/11/2008 |
|          |   |                                                                               |   |                      |   |                      |   |   |   |   |
| 10.1*         |   | Stratus 2010 Stock Incentive Plan.                                                 |   |                      |   | 8-K                       |   | 000-19989 |   | 08/12/2010 |
|          |   |                                                                               |   |                      |   |                      |   |   |   |   |
| 31.1          |   | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |   | X                         |   |                      |   |   |   |   |
|          |   |                                                                               |   |                      |   |                      |   |   |   |   |
| 31.2          |   | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |   | X                         |   |                      |   |   |   |   |
|          |   |                                                                               |   |                      |   |                      |   |   |   |   |
| 32.1          |   | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.   |   | X                         |   |                      |   |   |   |   |
|          |   |                                                                               |   |                      |   |                      |   |   |   |   |
| 32.2          |   | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.   |   | X                         |   |                      |   |   |   |   |

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