----

**LOAN      AGREEMENT**

**Agreement**
**Borrower**
**Lender**

| A. | Accounting                Terms.  Unless otherwise specified herein, all accounting                terms used herein shall be interpreted, all accounting determinations                hereunder shall be made, and all financial statements required to                be                delivered hereunder shall be prepared in accordance with GAAP and                practices consistently applied. |
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| B. | Definitions.  Capitalized                terms used herein shall have the respective meanings set forth in                Schedule 1 attached hereto when used in this Agreement (including                the Exhibits hereto) except as the context shall otherwise                require.  Schedule 1 is hereby made a part of this                Agreement. |
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| A. | Loan                Amount.  Lender agrees to provide a loan to Borrower in the                amount of **THREE****MILLION FIVE HUNDRED THOUSAND AND                00/100 DOLLARS ($3,500,000.00)** (“**Loan**”),                provided that all conditions precedent described in this Agreement                have                been met or waived by Lender and that Borrower is not otherwise in                default                as of the date of disbursement. |
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| B. | Note.  Borrower’s                obligation to repay the Loan shall be further evidenced by the                Note.  Reference is made to the Note for certain terms relating                to interest rate, payments, prepayment, Maturity Date and additional                terms                governing the Loan. |
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| A. | General.  All                payments hereunder shall be made by Borrower to Lender at the Lending                Office, or at such other place as Lender may designate in                writing.  Payments shall be made by wire                transfer. |
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| B. | Other                Outstanding Obligations.  Unless required to be paid sooner                hereunder, any and all Obligations in addition to the amounts due                under                the Note shall be due and payable in full upon the Maturity                Date. |
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|   | (1) | A                duly executed copy of this Agreement, the Note, and any and all other                Loan                Documents. |
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|   | (2) | A                favorable written opinion of counsel for Borrower, addressed to Lender                and                in form and substance acceptable to Lender and its                counsel. |
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|   | (3) | Current                financial statements of Borrower in form and substance acceptable                to                Lender. |
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|   | (4) | The                following organizational documents of                Borrower: |
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|   | (a) | Borrower’s                Certificate of Incorporation as certified by the Secretary of State                of the                state of Borrower’s organization and by the corporate secretary of                Borrower, a Certificate of Good Standing dated no less recently than                thirty (30) calendar days prior to the date of this Agreement, issued                by                the Secretary of State of the state of Borrower’s organization, stating                that Borrower is in good standing in such state, and evidence of                good                standing to transact business in the State of Texas, dated no less                recently than thirty (30) calendar days prior to the date of this                Agreement, issued by the Secretary of State of the State of                Texas. |
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|   | (b) | A                resolution of the board of directors of Borrower, certified as of                the date                of this Agreement by its corporate secretary, authorizing the execution,                delivery and performance of this Agreement and the other Loan Documents,                and all other instruments or documents to be delivered by Borrower                pursuant to this Agreement. |
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|   | (c) | A                certificate of Borrower’s corporate secretary as to the incumbency and                authenticity of the signatures of the officers of Borrower |
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| B. | All                acts, conditions, and things (including, without limitation, the                obtaining                of any necessary regulatory approvals and the making of any required                filings, recordings or registrations) required to be done and performed                and to have happened prior to the execution, delivery and performance                of                the Loan Documents to constitute the same legal, valid and binding                obligations of Borrower, enforceable in accordance with their respective                terms, subject to limitations as to enforceability which might result                from                bankruptcy, insolvency, moratorium and other similar laws affecting                creditors’ rights generally and subject to limitations on the availability                of equitable remedies, shall have been done and performed and shall                have                happened in compliance with all applicable laws or shall have been                waived                by Lender in writing. |
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| C. | All                documentation shall be satisfactory in form and substance to Lender,                and                Lender shall have received any and all further information, documents                and                opinions which Lender may reasonably have requested in connection                therewith, such documents, where appropriate, to be certified by                proper                authorities and officials of                Borrower. |
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| D. | All                representations and warranties of Borrower to Lender set forth herein                or                in any of the Loan Documents shall be accurate and complete in all                material respects. |
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| E. | There                shall not exist an Event of Default or an event which with the giving                of                notice or passage of time, or both, would be an Event of                Default. |
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| A. | Capacity.  Borrower                is duly organized, validly existing, and in good standing under the                laws                of the state of its organization (as described herein) and is authorized                to do business in the State of Texas and in any and all other                jurisdictions in which its ownership of Property or conduct of business                legally requires such authorization and the failure to do so would                have a                Material Adverse Effect, and has full power, authority, and legal                right to                own its properties and assets and to conduct its business as presently                conducted or proposed to be conducted, and the consummation of the |
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| B. | Authority.  Borrower                has full power, authority and legal right to execute and deliver,                and to                perform and observe the provisions of the Loan Documents to be executed                by                Borrower.  The execution, delivery and performance of the Loan                Documents have been duly authorized by all necessary action, and                when duly                executed and delivered, will be legal, valid, and binding obligations                of                Borrower enforceable in accordance with their respective terms, subject                to                limitations as to enforceability which might result from bankruptcy,                insolvency, moratorium and other similar laws affecting creditors’ rights                generally and subject to limitations on the availability of equitable                remedies. |
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| C. | Compliance.  The                execution and delivery of the Loan Documents and compliance with                their                terms will not violate any provision of applicable law and will not                result                in a breach of any of the terms or conditions of, or result in the                imposition of any lien, charge, or encumbrance upon any properties                of                Borrower pursuant to, or constitute a default (with due notice or                lapse of                time or both) or result in an occurrence of an event pursuant to                which any                holder or holders of Indebtedness may declare the same due and                payable. |
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| D. | Financial                Statements.  The financial statements provided by Borrower                to Lender pursuant to subsection 4.A(3) are correct and complete                as of the                dates indicated in such statements and fairly present the financial                condition and results of operations of Borrower for the fiscal periods                indicated therein. |
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| E. | Material                Adverse Events.  Since the Statement Dates, neither any                event nor the passage of time has resulted in a Material Adverse                Effect. |
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| F. | Litigation.  Except                as heretofore disclosed by Borrower to Lender in writing, there are                no                actions or proceedings pending, or to the knowledge of Borrower                threatened, against or affecting Borrower which, if adversely determined,                could reasonably be expected to have a Material Adverse                Effect.  Borrower is not in default with respect to any                applicable laws or regulations which materially affect the operations                or                financial condition of Borrower, nor is it in default with respect                to any                other writ, injunction, demand, or decree or in default under any                indenture, agreement, or other instrument to which Borrower is a                party or                by which Borrower may be bound where any such default would have                a                Materially Adverse Effect. |
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| G. | Taxes.  Borrower                has filed or caused to be filed all tax returns which are required                to be                filed by it.  Borrower has paid, or made provision for the                payment of, all taxes which have or may have become due pursuant                to said                returns or otherwise or pursuant to an assessment received by Borrower,                except such taxes, if any, as are being contested in good faith and                as to                which adequate reserves have been provided.  The charges,                accruals, and reserves in respect of income taxes on the books of                Borrower                are adequate.  Borrower knows of no proposed material tax                assessment against it and no |
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| H. | Accurate                Information.  All written information supplied to Lender by                or on behalf of Borrower is and shall be true and correct in all                material                respects, and all financial projections or forecasts of future results                or                events supplied to Lender by or on behalf of Borrower have been prepared                in good faith and based on good faith estimates and assumptions of                the                management of Borrower, and Borrower has no reason to believe that                such                projections or forecasts are not                reasonable. |
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| I. | Use                of Loan Proceeds.  Borrower is not engaged principally in,                nor does it have as one of its important activities, the business                of                extending credit for the purpose of purchasing or carrying any margin                stock (within the meaning of Regulation U of the Board of Governors                of the                Federal Reserve System), and no part of any advance made hereunder                will be                used to purchase or carry margin stock, extend credit to others for                the                purpose of purchasing or carrying any margin stock, or used for any                purpose which violates Regulation U or Regulation X of the Board                of                Governors of the Federal Reserve System or any other provision of                law. |
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| J. | ERISA.  No                plan (as that term is defined in the Employee Retirement                Income  Security Act of 1974 (“**ERISA**”))                of the Borrower (a “**Plan**”) which is subject to                Part 3 of Subtitle B of Title 1 of ERISA had an accumulated funding                deficiency (as such term is defined in ERISA) as of the last day                of the                most recent fiscal year of such Plan ended prior to the date hereof,                or                would have had such an accumulated funding deficiency on such date                if such                year were the first year of such Plan, and no material liability                to the                Pension Benefit Guaranty Corporation has been, or is expected by                the                Borrower to be, incurred with respect to any such Plan.  No                Reportable Event (as defined in ERISA) has occurred and is continuing                in                respect to any such Plan. |
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| A. | Financial                Statements, Reports and Certifications. Borrower will furnish to                Lender, in form and substance satisfactory to                Lender: |
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|   | (1) | As                soon as possible after the end of each fiscal year of Borrower, and                in any                event within ninety (90) Business Days thereafter, (i) a complete                copy of                its annual audit which shall include the balance sheet of Borrower                as of                the close of the fiscal year and an income statement for such year,                certified by the Auditors without material qualification, (ii) a                statement                of changes in partners’ equity and cash flows for the period ended on such                date, certified by the Auditors, and (iii) a statement certified                by the                chief financial officer of Borrower that no act or omission has occurred                which has resulted in an Event or Default or, if not |
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|   | (2) | No                later than thirty (30) Business Days after the close of each Accounting                Period, (i) Borrower’s balance sheet as of the close of such Accounting                Period and its income statement for that portion of the then current                fiscal year through the end of such Accounting Period prepared in                accordance with GAAP and certified as being complete, correct, and                fairly                representing its financial condition and results of operations by                the                chief financial officer of Borrower, subject to the absence of footnotes                and year-end adjustments, (ii) a statement of changes in equity and                cash                flows for the period ended on such date, certified by the chief financial                officer of Borrower, (iii) the calculation of the Debt Service Coverage                Ratio demonstrating compliance with Subsection 8.G. of this Agreement,                together with any supporting calculations used to arrive at such                calculation, certified by the chief financial officer of Borrower,                and                (iv) a completed Borrower’s Officer’s Compliance                Certificate; |
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|   | (3) | Promptly                upon the filing or receiving thereof, copies of all reports which                the                Borrower files under ERISA or which the Borrower receives from the                Pension                Benefit Guaranty Corporation if such report shows any material violation                or potential violation by the Borrower of its obligations under ERISA;                and |
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|   | (4) | Such                other information concerning Borrower as Lender may reasonably                request. |
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| B. | Other                Information.  Borrower will (1) maintain accurate books and                records concerning its business in a manner consistent with Borrower’s                current bookkeeping and record-keeping practices (provided such practices                result in accurate books and records), (2) upon request, furnish                to Lender                such information, statements, lists of Property and accounts, budgets,                forecasts, or reports as Lender may reasonably request with respect                to the                business, affairs, and financial condition of Borrower, and (3) permit                Lender or representatives thereof, upon at least forty-eight (48)                hours                prior written notice to Borrower, to inspect during Borrower’s usual                business hours, the properties of Borrower and to inspect, audit,                make                copies of, and make extracts from the books or accounts of                Borrower. |
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| C. | Expenses.  Borrower                shall pay all reasonable out-of-pocket expenses of Lender (including,                but                not limited to, fees and disbursements of Lender’s counsel) incident to                (1) preparation and negotiation of the Loan Documents and any amendments,                extensions and renewals thereof, (2) following an Event of Default,                the                protection and exercise of the rights of Lender under the Loan Documents,                or (3) defense by Lender against all claims against Lender relating                to any                acts of commission or omission directly or indirectly relating to                the Loan                Documents, all whether by judicial proceedings or otherwise, but                excluding                claims related to Lender’s gross negligence or intentional                misconduct.  Borrower will also pay and save Lender harmless                from any and all liability |
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| D. | Taxes                and Expenses Regarding Borrower’s Property.  Borrower shall                make due and timely payment or deposit of all taxes, assessments                or                contributions required of it, except such deposits, assessments or                contributions which are being contested in good faith and as to which,                in                the reasonable determination of Lender, adequate reserves have been                provided. |
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| E. | Notice                of Events.  Promptly after the later of (i) the occurrence                thereof or (ii) such time as Borrower has knowledge of the occurrence                thereof, Borrower will give Lender written notice of any Event of                Default                or any event which with the giving of notice or passage of time,                or both,                would become an Event of Default; provided, however, in the event                that the                respective Event of Default is subsequently cured as permitted herein,                such failure to give notice shall also be deemed to be                cured. |
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| F. | Notice                of Litigation.  In addition to any regularly scheduled                reporting required to be delivered with the Borrower’s Officer’s                Certificate, Borrower will promptly give notice to Lender in writing                of                (i) any litigation or other proceedings against Borrower involving                claims                for amounts in excess of $250,000 that Borrower does not reasonably                expect                are covered by insurance, (ii) any labor controversy resulting in                or                threatening to result in a strike against Borrower, or (iii) any                proposal                by any public authority to acquire a material portion of the assets                or                business of Borrower. |
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| G. | Other                Debt.  Borrower will promptly pay and discharge any and all                Indebtedness when due (where the failure to do so either individually                or                in the aggregate with any such other unpaid Indebtedness would have                a                Material Adverse Effect), and lawful claims which, if unpaid, might                become                a lien or charge upon the Property of Borrower, except such as may                in good                faith be contested or disputed or for which arrangements for deferred                payment have been made, provided appropriate reserves are maintained                to                the satisfaction of Lender for the eventual payment thereof in the                event                it is found that such Indebtedness is an Indebtedness payable by                Borrower,                and when such dispute or contest is settled and determined, will                promptly                pay the full amount then due. |
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| H. | Cooperation.  Borrower                will execute and deliver to Lender any and all documents, and do                or cause                to be done any and all other acts reasonably deemed necessary by                Lender,                in its reasonable discretion, to effect the provisions and purposes                of                this Agreement. |
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| I. | Maintenance                of Insurance; Notice of Loss.  Borrower shall maintain such                insurance with reputable insurance carriers as is normally carried                by                companies engaged in similar businesses and owning similar                Property.  Upon request from Lender, Borrower will provide                Lender with certificates indicating that such insurance is in effect                and                all premiums due have been paid. |
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| J. | Location                of Business.  Borrower will give Lender written notice                immediately upon forming an intention to change the location of its                chief                place of business. |
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| K. | Maintenance                of Existence.  Borrower will preserve and maintain its legal                existence and all rights, privileges and franchises necessary or                desirable                in the normal conduct of its business, will conduct its business                in an                orderly, efficient and regular manner, and will comply with all applicable                laws and regulations and the terms of any indenture, contract or                other                instrument to which it may be a party or under which it or its properties                may be bound, in each instance where the failure to do so would have                a                Material Adverse Effect. |
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| L. | Compliance                with ERISA.  Cause each Plan to comply and be administered                in accordance with those provisions of ERISA which are applicable                to such                Plan. |
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| A. | Sale                of Assets.  Borrower will not sell, abandon, or otherwise                dispose of any of its assets except in the ordinary course of                business. |
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| B. | Consolidation,                Merger, etc.  Borrower will not consolidate with, merge                into, or sell (whether in a single transaction or in a series of                transactions) all or substantially all of its assets to any                Person. |
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| C. | Change                in Business.  Borrower will not make any change in the                nature of the business of Borrower or a Subsidiary which would result                in a                material change in the character of the business of Borrower, taken                as a                whole. |
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| D. | Transactions                with Affiliates. Borrower will not enter into any transaction with any                Person affiliated with Borrower on terms materially less favorable                to                Borrower, than at the time could be available to Borrower, from any                Person                not affiliated with Borrower. |
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| E. | Plans.  Borrower                will not sponsor or contribute to any other Plan or other defined                benefit                pension plan or contributes to any multi-employer pension                plan. |
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| F. | Dividends,                Redemptions. |
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| (1) | Borrower                will not, except as allowed below, declare or pay any dividend on,                or                declare or make any other distribution on account of, any stock interest                or other ownership interest. |
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| (2) | Borrower                will not, except as allowed below, directly or indirectly redeem,                retire,                purchase, or otherwise acquire beneficially any shares of any class                of its                own stock now or hereafter outstanding or set apart any sum for any                such                purpose.  The foregoing notwithstanding, Borrower may redeem,                retire, purchase or otherwise acquire beneficially shares of common                stock                of Borrower in an aggregate amount that does not exceed                $5,000,000. |
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| G. | Indebtedness.                Borrower will not incur any Indebtedness other than Permitted                Debt. |
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**Change in Control      Prepayment Premium**

**Change of Control**

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**Incumbent Board**

**Business Combination**

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**Affiliate**

**Beneficial Owner**

**Company Voting Stock**

**Majority Shares**

**Person**

**Post-Transaction Corporation**
**Post-Transaction**
**Corporation**

**Threshold Percentage**

**Event of      Default**

| A. | Borrower                shall fail to make any payment of principal, interest or other amount                under the Note, when due whether at maturity, upon acceleration,                or                otherwise, and such default shall continue for three (3) Business                Days                after written notice to Borrower from Lender (except that Borrower                shall                not be entitled to said three (3) Business Day notice period more                than                twice in any twelve (12) calendar month period);                or |
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| B. | Borrower                shall default in the payment of any of the other Obligations when                due, and                such default shall continue for ten (10) Business Days after written                notice to Borrower from Lender; or |
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| C. | An                order for relief shall be entered against Borrower or any Subsidiary                by                any United States Bankruptcy Court; or Borrower or any Subsidiary                shall                generally not pay its debts as they become due (within the meaning                of 11                U.S.C. 303(h) as at any time amended or any successor statute thereto)                or                make an assignment for the benefit of creditors; or Borrower or any                Subsidiary shall apply for or consent to the appointment of a custodian,                receiver, trustee, or similar officer for it or for all or any substantial                part of its Property; or such custodian, receiver, trustee, or similar                officer shall be appointed without the application or consent of                Borrower                or such Subsidiary and such appointment shall continue undischarged                for a                period of sixty (60) calendar days; or Borrower or such Subsidiary                shall                institute (by petition, application, answer, consent, or otherwise)                any                bankruptcy, insolvency, reorganization, moratorium, arrangement,                readjustment of debt, dissolution, liquidation or similar proceeding                relating to it under the laws of any jurisdiction; or any such proceeding                shall be instituted (by petition, application, or otherwise) against                Borrower or such Subsidiary and shall remain undismissed for a period                of                sixty (60) calendar days; or any judgment, writ, warrant of attachment,                execution, or similar process shall be issued or levied against a                substantial part of the Property of Borrower or such Subsidiary and                such                judgment, writ, or similar process shall not be released, vacated,                or                fully bonded within sixty (60) calendar days after its issue or levy;                or |
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| D. | Borrower                shall be in breach of any other agreement, covenant, obligation,                representation or warranty hereunder or with respect to any of the                Loan                Documents, and such breach shall continue for twenty (20) Business                Days                after whichever of the following dates is the earliest: (i) the date                on                which Borrower gives notice of such breach to Lender, and (ii) the                date on                which Lender gives notice of such breach to Borrower; provided, however,                such twenty (20) Business Day period may be extended for up to an                additional thirty (30) calendar days if and only if Lender extends                such                time period in writing following Lender’s good faith determination that                (X) Borrower is continuously and diligently taking action to cure                such                breach, and (Y) such breach cannot be cured within the initial twenty                (20)-day cure period; or |
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| E. | The                aggregate book value of the Borrower’s assets shall at any time be less                than (1) $80,000,000 minus (2) the product of $80,000,000 multiplied                by                the Cash Collateral Factor. |
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| F. | The                aggregate market value of the Borrower’s assets shall at any time be less                than (1) $160,000,000 minus (2) the product of $160,000,000 multiplied                by                the Cash Collateral Factor. |
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| G. | The                Debt Service Coverage Ratio measured on a quarterly basis for the                previous                twelve (12) months shall be less than (1) (a) 5.0 minus (b) the product                of                5.0 multiplied by the Cash Collateral Factor, to (2)                1.0. |
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| H. | The                ratio of (1) the Borrower’s Indebtedness to (2) the aggregate market value                of the Borrower’s assets shall at any time exceed (a) sixty percent                (60.0%) minus (b) the product of sixty percent (60.0%) multiplied                by the                Cash Collateral Factor. |
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| I. | The                ratio of (1) the Borrower’s Secured Indebtedness to (2) the aggregate                market value of the Borrower’s assets shall at any time exceed (1) forty                percent (40.0%) minus (2) forty percent (40.0%) multiplied by the                Cash                Collateral Factor. |
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| J. | An                “Event of Default” as defined in the Comerica Loan Agreement shall                occur. |
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| K. | Any                Reportable Event (as defined in ERISA) shall have occurred and continue                for 30 days; or any Plan shall have been terminated by the Borrower                not in                compliance with ERISA, or a trustee shall have been appointed by                a court                to administer any Plan, or the Pension Benefit Guaranty Corporation                shall                have instituted proceedings to terminate any Plan or to appoint a                trustee                to administer any Plan. |
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**Borrower agrees to hold Lender harmless from and      indemnify Lender against all liabilities, losses, damages, judgments, costs      and      expenses of any kind which may be imposed on, incurred by or asserted against      Lender (collectively, the “**
**Costs**
**”)      relating to or arising out of this Agreement, any other Loan Document, or any      transaction contemplated hereby or thereby, or any amendment, supplement or      modification of, or any waiver or consent under or in respect of, this      Agreement, any other Loan Document, or any transaction contemplated hereby      or      thereby, that, in each case, results from anything other than Lender’s gross      negligence or willful **

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**misconduct.   Borrower      also agrees to reimburse Lender as and when billed by Lender for all Lender’s      reasonable costs and expenses incurred in connection with the enforcement or      the      preservation of Lender’s rights under this Agreement, any other Loan Document,      or any transaction contemplated hereby or thereby, including without limitation      the reasonable fees and disbursements of its counsel. Borrower’s obligations      under this Section 11 shall survive repayment of the Loan.**

| A. | Entire                Agreement.   The Loan Documents embody the entire                agreement and understanding between the parties hereto and supersede                all                prior agreements and understandings relating to the subject matter                hereof.  No course of prior dealings between the parties, no                usage of the trade, and no parole or extrinsic evidence of any nature,                shall be used or be relevant to supplement, explain or modify any                term                used herein. |
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| B. | No                Waiver.  No failure to exercise and no delay in exercising                any right, power, or remedy hereunder or under the Loan Documents                shall                impair any right, power, or remedy which Lender may have, nor shall                any                such delay be construed to be a waiver of any of such rights, powers,                or                remedies, or any acquiescence in any breach or default under the                Loan                Documents; nor shall any waiver of any breach or default of Borrower                hereunder be deemed a waiver of any default or breach subsequently                occurring.  The rights and remedies specified in the Loan                Documents are cumulative and not exclusive of each other or of any                rights                or remedies which Lender would otherwise                have. |
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| C. | Survival.  All                representations, warranties and agreements herein contained on the                part of                Borrower shall survive the making of advances hereunder and all such                representations, warranties and agreements shall be effective so                long as                the Obligations arising pursuant to the terms of this Agreement remain                unpaid or for such longer periods as may be expressly stated                therein. |
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| D. | Notices.                   All notices of any type hereunder shall be effective as against                  Borrower                  or Lender, as the case may be, upon the first to occur of (a) three                  (3)                  Business Days after deposit in a receptacle under the control of                  the                  United States Postal Service, (b) one (1) Business Day after being                  transmitted by electronic means to a receiver under the control                  of the                  receiving party, provided there is an electronic confirmation of                  receipt,                  or (c) actual receipt by an employee or agent of the receiving                  party.  For the purposes hereof, the addresses are as                  follows: |
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| DEBTOR:                                                                                                                                                                       | with                a copy to:                                                                                                                                        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Stratus                Properties Inc.98                San Jacinto Boulevard, Suite 220Austin,                TX 78791Attention:                Mr. William H. Armstrong III | Armbrust                & Brown, L.L.P.100                Congress Avenue, Suite 1300Austin,                TX 78701Attention:                Kenneth Jones, Esq. |
| Phone:  (512)                478-5788Fax:      (512)                478-6340                                                          | Phone:  (512)                435-2312Fax:      (512)                435-2360                                                  |

| LENDER:                                                                                                                                                                                | with                a copy to:                                                                                                                                                        |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Holliday                Fenoglio Fowler, L.P.8401                North Central Expressway,Suite                700Dallas,                TX 75225Attn:                Whitaker Johnson | Leonard,                Street and DeinardSuite                2300, 150 S. Fifth StreetMinneapolis,                Minnesota 55402Attention:  Andrew                P. Lee |
| Phone:  (214)                265-0880Fax:      (469)                232-1955                                                                   | Phone:  (612)                335-1881Fax:      (612)                335-1657                                                                  |

| E. | Separability                of Provisions.  In the event that any one or more of the                provisions contained in this Agreement should be invalid, illegal                or                unenforceable in any respect, the validity, legality, and enforceability                of the remaining provisions contained herein shall not in any way                be                affected or impaired thereby. |
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| F. | Successors                and Assigns.  This Agreement shall be binding upon and inure                to the benefit of Borrower, Lender, and their respective successors                and                assigns, provided, however, that Borrower may not transfer its rights                or                obligations under any of the Loan Documents without the prior written                consent of Lender which may be withheld in its sole and absolute                discretion.  Lender may assign its interest in the Loan                Documents, in whole, or in part, without any consent from, or notice                to,                Borrower. |
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| G. | Counterparts.  This                Agreement may be executed in any number of counterparts all of which                taken                together shall constitute one agreement and any party hereto may                execute                this Agreement by signing any such                Counterpart. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| H. | Choice                of Law; Location of Loan.  This Agreement shall be governed                by and construed in accordance with the laws of the State of                Minnesota.  Lender and Borrower agree that the Loan will be                negotiated, funded and closed in the State of                Minnesota. |
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| I. | Amendment                and Waiver.  Neither this Agreement nor any provisions                hereof may be changed, waived, discharged or terminated orally, but                only                by an |
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| J. | Plural.  When                permitted by the context, the singular includes the plural and vice                versa. |
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| K. | Retention                of Records.  Lender shall retain any documents, schedules,                invoices or other papers delivered by Borrower only for such period                as                Lender, at its sole discretion, may determine                necessary. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| L. | Headings.  Section                and paragraph headings and numbers have been set forth for convenience                only. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------|

| M. | Information                to Participants.  Borrower agrees that Lender may furnish                any financial or other information concerning Borrower or any of                its                Subsidiaries heretofore or hereafter provided by Borrower to Lender,                pursuant to this Agreement or otherwise, to any prospective or actual                purchaser of any participation or other interest in any of the loans                made                by Lender to Borrower (whether under this Agreement or otherwise),                or to                any prospective purchaser of any securities issued or to be issued                by                Lender; provided, however, any such delivery shall be delivered on                the                condition that such information is delivered on a confidential                basis. |
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| N.. | Acknowledgments.                   Borrower hereby acknowledges that: (i) it has been advised by counsel                  in                  the negotiation, execution and delivery of this Agreement and the                  other                  Loan Documents; (ii) Lender has no fiduciary relationship to Borrower,                  and                  the relationship between Borrower and Lender is solely that of                  debtor and                  creditor; and (iii) no joint venture exists between Lender and                  Borrower. |
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**LOAN      AGREEMENT**

| BORROWER:                                                                                                                                                                                                                     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **STRATUS                PROPERTIES INC.,**a                Delaware corporationBy:                /s/ John E. BakerName:  John                E. BakerTitle:   Senior                Vice President |

| LENDER:                                                                                                                                                                                                                                                                                                                                        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **HOLLIDAY                FENOGLIO FOWLER, L.P**., a Texas limited partnership, by Holliday                GP Corp., a Delaware corporation, its General PartnerBy:                 /s/ Nancy GoodsonName:   Nancy                GoodsonIts:        Vice                President |

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| (i) | the                ability of Borrower to perform its obligations under the Agreement,                the                Note, or any other Loan Document;                or |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | the                validity, enforceability or collectibility of the Note, the Agreement                or                any other Loan Document. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------|

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| Re | Loan                Agreement dated as of June 1, 2007 between Stratus Properties Inc.                (“**Borrower**”) and Holliday Fenoglio Fowler, L.P.                (“**Lender**”) (the “**Loan                Agreement**”) (capitalized terms not defined herein have the                respective meanings contained in the Loan                Agreement) |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                              |
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| **STRATUS                PROPERTIES INC.,**a                Delaware corporationBy:___________________________Name:  John                E. BakerTitle:  Senior                Vice President |