SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                           FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

            For the Quarter Ended September 30, 2002



                Commission File Number:  0-19989



                    Stratus Properties Inc.



    Incorporated in Delaware               72-1211572
                                  (IRS Employer Identification No.)


        98 San Jacinto Blvd., Suite 220, Austin, Texas  78701


 Registrant's telephone number, including area code: (512) 478-5788


     Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X  No _


     On September 30, 2002, there were issued and outstanding
7,115,995 shares of the registrant's Common Stock, par value
$0.01 per share.





                    STRATUS PROPERTIES INC.
                       TABLE OF CONTENTS

                                                            Page

          Part I.  Financial Information

            Financial Statements:

              Condensed Consolidated Balance Sheets          3

              Consolidated Statements of Income              4

              Consolidated Statements of Cash Flows          5

              Notes to Financial Statements                  6

              Report of Independent Public Accountants       11

            Management's Discussion and Analysis
              of Financial Condition and Results of
              Operations                                     12

          Part II.  Other Information                        17

          Signature                                          18

          Certifications                                     19

          Exhibit Index                                     E-1


<PAGE>                          2

                     STRATUS PROPERTIES INC.
                 Part I.  FINANCIAL INFORMATION


Item 1.   Financial Statements

                     STRATUS PROPERTIES INC.
        CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

<TABLE>
<CAPTION>
                                          September 30, December 31,
                                              2002         2001
                                           ---------     ---------
                                               (In Thousands)
<S>                                        <C>           <C>
ASSETS
Current assets:
Cash and cash equivalents (including
  restricted cash of $0.2 million)         $   1,093     $   3,705
Accounts receivable                              673           670
Current portion of notes receivable from
  property sales                                  56            70
Prepaid expenses                                 236            73
                                           ---------     ---------
        Total current assets                   2,058         4,518
Real estate and facilities, net              110,448       110,042
Rental properties, net                        22,418          -
Investments in and advances to
  unconsolidated affiliates                      191         8,005
Notes receivable from property sales,
  net of current position                      2,361         4,083
Other assets                                   2,608         2,830
                                           ---------     ---------
Total assets                               $ 140,084     $ 129,478
                                           =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities   $   1,915     $   2,482
Accrued interest, property taxes and other     2,237         1,895
Current portion of borrowings outstanding     18,235           -
                                           ---------     ---------
  Total current liabilities                   22,387         4,377
Long-term debt                                26,680        25,576
Other liabilities                              3,259         4,866
Mandatorily redeemable preferred stock           -          10,000
Stockholders' equity                          87,758        84,659
                                           ---------     ---------
Total liabilities and stockholders' equity $ 140,084     $ 129,478
                                           =========     =========

</TABLE>

The accompanying notes are an integral part of these financial
statements.

<PAGE>                       3

                    STRATUS PROPERTIES INC.
          CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

<TABLE>
<CAPTION>

                                      Three Months Ended   Nine Months Ended
                                         September 30,       September 30,
                                      ------------------  -------------------
                                        2002      2001      2002      2001
                                      --------   -------  --------   --------
                                     (In Thousands, Except Per Share Amounts)
<S>                                   <C>        <C>      <C>        <C>
Revenues:
Real estate                           $  3,626   $ 4,090  $  7,266   $ 13,102
Rental income                              817       -       1,731        -
Other                                      136       369       903        996
                                      --------   -------  --------   --------
  Total revenues                         4,579     4,459     9,900     14,098
Cost of sales:
Real estate, net                         2,759       559     4,932      6,520
Rental                                     606       -       1,159        -
Depreciation                               244        34       571         99
                                      --------   -------  --------   --------
  Total cost of sales                    3,609       593     6,662      6,619
General and administrative expenses      1,058       920     3,414      3,395
                                      --------   -------  --------   --------
   Total costs and expenses              4,667     1,513    10,076     10,014
                                      --------   -------  --------   --------
Operating income (loss)                    (88)    2,946      (176)     4,084
Interest expense, net                     (167)      -        (379)      (456)
Interest income                            166       246       550        604
Equity in unconsolidated affiliaties'
   income (loss)                           -        (140)      372       (305)
Other income                               -           4       286        239
                                      --------   -------  --------   --------
Net income (loss)                     $    (89)  $ 3,056  $    653   $  4,166
                                      ========   =======  ========   ========

Reconciliation of net income to net
income attributable to common shareholders:
Net income (loss)                     $    (89)  $ 3,056  $    653   $  4,166
Discount on purchase of mandatorily
  redeemable preferred stock               -         -       2,367        -
                                      --------   -------  --------   --------
Net income (loss)attributable to
  common  shareholders                $    (89)  $ 3,056  $  3,020   $  4,166
                                      ========   =======  ========   ========

Net income (loss) per share of common stock:
     Basic                              $(0.01)    $0.43     $0.42      $0.58
                                        ======     =====     =====      =====
     Diluted                            $(0.01)    $0.37     $0.41      $0.51
                                        ======     =====     =====      =====
Average shares outstanding:
     Basic                               7,116     7,112     7,116      7,152
                                         =====     =====     =====      =====
     Diluted                             7,116     8,152     7,442      8,115
                                         =====     =====     =====      =====

</TABLE>

The accompanying notes are an integral part of these financial
statements.

<PAGE>                       4


                     STRATUS PROPERTIES INC.
        CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)

<TABLE>
<CAPTION>
                                                        Nine Months Ended
                                                          September 30,
                                                     ----------------------
                                                        2002        2001
                                                     ---------    ---------
                                                          (In Thousands)
<S>                                                  <C>          <C>
Cash flow from operating activities:
Net income                                           $     653    $   4,166
Adjustments to reconcile net income to net
 cash provided by operating activities:
 Depreciation and amortization                             571          100
 Cost of real estate sold                                2,950        5,830
 Equity in unconsolidated affiliates'
 (income) loss                                            (372)         305
 Gain on sale of Stratus' 50 percent interest
   in Walden Partnership                                  (286)         -
 Amortization of deferred compensation (Note 3)             32          -
 (Increase) decrease in working capital:
    Accounts receivable and other                            2         (588)
    Accounts payable and accrued liabilities              (400)       1,408
 Long-term receivable and other                          3,362       (8,356)
Distribution of unconsolidated affiliates' income          278          -
                                                     ---------    ---------
Net cash provided by operating activities                6,790        2,865
                                                     ---------    ---------

Cash flow from investing activities:
Real estate and facilities, net of cost of real
  estate sold                                           (9,845)     (19,540)
Net cash acquired from Barton Creek and 7000 West
  Joint Ventures                                         1,067          -
Proceeds from the sale of Stratus' 50 percent
  interest in the Walden Partnership                     3,141          -
Acquisition of Olympus' interest in the Barton Creek
  and 7000 West Joint Ventures                          (3,858)         -
Investment in Lakeway Project                            1,239       (2,000)
                                                      --------    ---------
Net cash used in investing activities                   (8,256)     (21,540)
                                                      --------    ---------

Cash flow from financing activities:
Borrowings under revolving credit facility, net          1,453        9,740
Borrowings under 7500 Rialto project loan                1,966          -
Borrowings under term loan component of
  credit facility                                        4,645          -
Payments on term loan portion of credit facility        (1,497)         -
Payments on 7000 West project loan                        (127)         -
Repurchase of mandatorily redeemable preferred stock    (7,633)         -
Proceeds from unsecured term loan                          -          5,000
Repayment of convertible debt                              -         (3,240)
Repurchases of shares of Stratus' common stock             -           (242)
Exercise of stock options and other                         47          -
                                                     ---------    ---------
Net cash provided by financing activities               (1,146)      11,258
                                                     ---------    ---------
Net decrease in cash and cash equivalents               (2,612)      (7,417)
Cash and cash equivalents at beginning of year           3,705        7,996
                                                     ---------    ---------
Cash and cash equivalents at end of period               1,093          579
Less cash restricted as to use                            (234)        (241)
                                                     ---------    ---------
Unrestricted cash and cash equivalents at
  end of period                                      $     859    $     338
                                                     =========    =========

</TABLE>


The accompanying notes are an integral part of these financial
statements.

<PAGE>                         5

                     STRATUS PROPERTIES INC.
                  NOTES TO FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31,
2001, included in the Company's annual report on Form 10-K, filed
with the Securities and Exchange Commission.  In the opinion of
management, the accompanying consolidated financial statements
reflect all adjustments (consisting only of normal recurring
items) considered necessary to present fairly the financial
position of Stratus Properties Inc. at September 30, 2002 and
December 31, 2001, and the results of operations for the three-
month and nine-month periods ended September 30, 2002 and 2001,
and the cash flows for the nine-month periods ended September 30,
2002 and 2001.  Operating results for the three-month and nine-
month periods ended September 30, 2002 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 2002.

2.   OLYMPUS TRANSACTIONS
From May 1998 through February 2002, Stratus, through its
subsidiaries, was involved with Olympus Real Estate Corporation
(Olympus) in three joint ventures: the Oly Stratus Barton Creek I
Joint Venture (Barton Creek Joint Venture), the Oly Walden
General Partnership (Walden Partnership) and the Stratus 7000
West Joint Venture (7000 West).  Each joint venture was governed
by a partnership agreement containing similar provisions,
including a "buy/sell option" that could be exercised by either
Stratus or Olympus.

    On February 27, 2002, Stratus and Olympus concluded their
business relationship in the following transactions:

   *  Stratus purchased its $10.0 million of mandatorily
      redeemable preferred stock held by Olympus for $7.6 million.
      Stratus recorded the $2.4 million discount as additional paid in
      capital (Note 5).

   *  Stratus sold its 49.9 percent ownership interest in the
      Walden Partnership to Olympus for $3.1 million.  Stratus
      recognized a $0.3 million gain on this transaction.

   *  Stratus acquired Olympus' 50.01 percent ownership interest
      in the Barton Creek Joint Venture for $2.4 million.  At the time
      of its acquisition, the Barton Creek Joint Venture's cash totaled
      $0.3 million and the joint venture received a $1.1 million
      municipal utility district reimbursement in May 2002.

    * Stratus acquired Olympus' 50.1 percent ownership interest in
      7000 West for $1.5 million. Stratus received $0.8 million of cash
      from 7000 West upon its acquisition and also assumed 7000 West's
      $12.9 million of previously unconsolidated debt (Note 6).

    The net cash cost of the transactions for Stratus totaled
approximately $7.3 million, after considering the approximate
$1.1 million in cash it received from its acquisition of the
Barton Creek and 7000 West Joint Ventures.  Stratus completed
these transactions using funds available to it under its credit
facility (see Note 5 of "Notes to Financial Statements" included
in Stratus' 2001 Annual Report on Form 10-K).

     For a detailed discussion of the Olympus relationship and
the initial formation and subsequent transactions of the joint
ventures and partnership, see Notes 2, 3, 4 and 11 of the "Notes
To Financial Statements" included in Stratus' 2001 Annual Report
on Form 10-K.  Also refer to "Transactions with Olympus Real
Estate Corporation" within Item 1 "Business"; and "Joint Ventures
With Olympus Real Estate Corporation" and "Capital Resources and
Liquidity-Olympus Relationship" included in Items 7. and 7A.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations and Disclosures of Market Risks" of
Stratus' 2001 Annual Report on Form 10-K.

    The summarized unaudited financial information of Stratus'
unconsolidated affiliates is shown below (in thousands):

<PAGE>                       6

<TABLE>
<CAPTION>
                         Barton Creek     Walden      7000
                         Joint Venture  Partnership   West     Total
                         ------------- ------------  ------   -------
<S>                      <C>           <C>           <C>      <C>
Earnings data for the
 two months ended
 February 27, 2002:
Revenues                 $       -     $     652     $  562   $ 1,214
Operating income (loss)         (22)         (64)       178        92
Net income (loss)               (22)         (34)       218       162
Stratus' equity in net
 income (loss)                  (11)          (4)a      109        94a

Earnings data for the
 three months ended
 September 30, 2001:
Revenues                 $      750     $    617     $  873   $ 2,240
Operating income (loss)         (77)        (203)       (77)     (357)
Net income (loss)               (76)        (170)       (55)     (301)
Stratus'  equity in net
 income (loss)                  (38)         (74)a      (28)     (140)a

Earnings data for the
 nine months ended
 September 30, 2001:
Revenues                 $    5,160     $    657     $  347   $ 6,164
Operating loss                1,761         (278)       (10)    1,473
Net income (loss)             1,761         (377)        (8)    1,376
Stratus' equity in net
 income (loss)                  879         (174)a       (4)      701a

</TABLE>

a. Includes recognition of deferred income totaling $12,000
   during the two months ended February 27, 2002,  $11,000 in the
   third quarter of 2001 and $34,000 for the nine months ended
   September 30, 2001, representing the difference in Stratus'
   investment in the Walden Partnership and its underlying equity
   at the date of acquisition. Through February 27, 2002, Stratus
   had recognized $164,000 of a total of $337,000 of deferred
   income associated with the Walden Partnership.  The remaining
   $0.2 million deferred amount was eliminated in determining the
   $0.3 million gain on the sale of Stratus' interest in the
   Walden Partnership.

     The following unaudited selected pro forma information
presents the results of operations of Stratus as if the Olympus
transactions had occurred on January 1 of each of the nine-month
periods presented.  These unaudited pro forma results of
operations have been prepared for informational purposes only and
do not necessarily reflect the results of operations that would
have occurred had the transactions taken place on January 1 of
each of the periods presented, or that may result in the future
(amounts in thousands, except for per share data).

<TABLE>
<CAPTION>
                                 Nine Months Ended
                                   September 30,
                                --------------------
                                  2002       2001
                                --------    --------
<S>                             <C>         <C>
Revenue                         $ 10,421    $ 17,073
Operating income (loss)              (46)      3,470
Net income                           647       3,517
Diluted net income per share a  $   0.42    $   0.81
Diluted shares outstanding         7,253       7,264

</TABLE>

a. Earnings per share data includes the discount on the
   purchase of Stratus' mandatorily redeemable preferred stock (see
   above and Note 5).

3. LAKEWAY PROJECT
As previously disclosed, in January 2001 Stratus invested $2.0
million in the Lakeway project near Austin, Texas.  Since that
time, Stratus has been the manager and developer of the 552-acre
Schramm Ranch tract, receiving both management fees and sales
commissions for its services.  In the second quarter of 2001,
Stratus negotiated the sale of substantially all of the Schramm
Ranch property to a single purchaser.  In return for Stratus
securing the required entitlements, the sale was to be completed
in four planned phases.  Stratus secured all the remaining
necessary entitlements for the Schramm Ranch property in the
fourth quarter of 2001.  In the first quarter of 2002, the
purchaser closed the third of the four planned sale installments.
In the second quarter of 2002, the purchaser closed on the fourth
and final planned sale installment.  In connection with the

<PAGE>                       7

closings, Stratus received a cash distribution of $0.8 million in
May 2002 and a cash distribution of $0.7 million in July 2002.
Stratus has received a total of $2.7 million of cash
distributions from its involvement in the Lakeway Project, which
represents a $1.8 million return of its $2.0 million investment
and $0.9 million of income.  Stratus is entitled to 40 percent of
the future proceeds associated with the future sale of a 5-acre
commercial tract still remaining at the Schramm Ranch property,
which is actively being marketed.

     For more information regarding the Lakeway Project see Note
4 of "Notes To Financial Statements" included in Stratus' 2001
Annual Report on Form 10-K.

4. RESTRICTED STOCK
On  January  17,  2002,  the  Board of Directors  authorized  the
issuance  of  22,726 restricted stock units (RSUs) that  will  be
converted  into 22,726 shares of Stratus common stock ratably  on
the  anniversary date over the next four years.   Under  Stratus'
restricted  stock  program, shares of its  common  stock  may  be
granted to certain officers of Stratus at no cost.  Upon issuance
of the RSUs, unearned compensation equivalent to the market value
at  the  date of grant of approximately $0.2 million was recorded
as  deferred  compensation in stockholders' equity  and  will  be
amortized  to  expense over the four-year  period.   Stratus  has
amortized approximately $32,000 of this deferred compensation  to
expense during the nine months ended September 30, 2002.

5. EARNINGS PER SHARE
Following is a reconciliation of net income and weighted average
common shares outstanding for purposes of calculating basic and
diluted net income per share (in thousands, except per share
amounts):

<TABLE>
<CAPTION>

                                   Three Months Ended      Nine Months Ended
                                      September 30,          September 30,
                                   -------------------    -------------------
                                     2002       2001       2002        2001
                                   --------   --------    -------    --------
<S>                                <C>        <C>         <C>        <C>
Basic net income (loss)per share
of common stock:
Net income (loss)                  $    (89)  $  3,056    $   653    $  4,166
Add: Discount on purchase of
  mandatorily redeemable preferred
  stock (Note 2)                        -          -        2,367         -
                                   --------   --------    -------    --------
Net income(loss)applicable to
  common shareholders              $    (89)  $  3,056    $ 3,020    $  4,166
                                   ========   ========    =======    ========

Weighted average common shares
  outstanding                         7,116      7,112      7,116       7,152
Basic net income (loss) per share
  of  common stock                   $(0.01)     $0.43      $0.42       $0.58
                                     ======     ======      =====       =====

Diluted net income per share of
common stock:
Net income (loss)                  $    (89)  $  3,056    $   653    $  4,166
Add: Discount on purchase of
 mandatorily redeemable preferred
 stock  (Note 2)                        -          -        2,367         -
                                   --------   --------    -------    --------

Net income (loss) applicable to
 common shareholders               $    (89)  $  3,056    $ 3,020    $  4,166
                                   ========   ========    =======    ========

Weighted average common shares
 outstanding                          7,116     7,112       7,116       7,152
Dilutive stock options                  -         189         137         112
Assumed redemption of preferred
  stock                                 -         851         189         851
                                   --------   -------    --------    --------
Weighted average common shares
 outstanding for purposes of
 calculating diluted net income
 (loss) per share                     7,116     8,152       7,442       8,115
                                   --------   -------    --------    --------

Diluted net income (loss) per share
 of common stock                     $(0.01)    $0.37       $0.41       $0.51
                                     ======     =====       =====       =====

</TABLE>


    Stratus repaid all of its outstanding convertible debt in the
second quarter of 2001.  Interest accrued on the convertible debt
outstanding totaled approximately $174,000 for the nine months
ended September 30, 2001.  There were no dividends accrued or
paid on Stratus' mandatorily redeemable preferred stock through
February 27, 2002, the date Stratus purchased all the related
outstanding shares held by Olympus (Note 2).

     Outstanding stock options excluded from the computation of
diluted net income per share of common stock because their
exercise prices were greater than the average market price of the
common stock during the period are as follows:

<PAGE>                          8


<TABLE>
<CAPTION>

                                  Third Quarter        Nine Months
                                -----------------   -----------------
                                 2002      2001       2002      2001
                                -------   -------   -------   -------
<S>                             <C>       <C>       <C>       <C>
Outstanding options             275,000   142,000   275,000   399,000
Average exercise price           $10.96    $12.38    $10.96    $10.26

</TABLE>

6. DEBT OUTSTANDING
At September 30, 2002, Stratus had debt of $44.9 million compared
to debt of $25.6 million at December 31, 2001.  The increase in
debt during the nine months ended September 30, 2002 included the
debt Stratus assumed in connection with its acquisition of
Olympus' 50.1 percent ownership interest in 7000 West and the
additional borrowings under its credit facility used to fund the
Olympus transactions (Note 2). Stratus' debt outstanding at
September 30, 2002 consisted of the following:

     * $10.0 million of borrowings outstanding under its two
       unsecured $5.0 million term loans, one of which will mature in
       December 2005 and the other in July 2006.

     * $13.5 million of borrowings under its $25.0 million ($23.8
       million currently available, see below) revolver component of the
       Comerica Bank- Texas (Comerica) credit facility, which matures in
       April 2004.

     * $3.1 million of net borrowings under the $5.0 million term
       loan component of the Comerica facility.  Stratus borrowed $4.6
       million under the term loan during the second quarter of 2002 and
       subsequently repaid $1.5 million of the balance, including $1.1
       million during the third quarter of 2002.   Some of the Mirador
       subdivision lots within the Barton Creek community are currently
       serving as collateral for the term loan component of the credit
       facility.

     * $12.8 million of borrowings under the 7000 West project loan
       that were previously unconsolidated until the purchase of
       Olympus' 50.1 percent ownership interest in 7000 West.  This
       project loan was scheduled to mature on August 24, 2002; however,
       Stratus exercised its option to extend the maturity of the loan
       by one year to August 24, 2003.  The borrowings under this
       project loan are reflected as a current liability in the
       accompanying balance sheet.

     * $5.5 million of borrowings under its 7500 Rialto Drive
       project loan, which matures in June 2003, with an option to
       extend the loan for one year, if Stratus meets certain leasing
       and other criteria.  Stratus does not currently meet the required
       conditions to exercise the option to extend the maturity of the
       project loan.  Accordingly, the balance of the loan is reflected
       as a current liability in the accompanying balance sheet.

     The availability under the $30 million Comerica credit
facility was reduced to $28.8 million to satisfy the $1.2 million
interest reserve account requirement at September 30, 2002.  For
a discussion of Stratus' bank credit facilities see Note 5
included in the "Notes To Financial Statements" included in its
2001 Annual Report on Form 10-K.

7.  CIRCLE C DEVELOPMENT PLAN AGREEMENT
On August 1, 2002, the City of Austin (the City) granted final
approval of a development agreement and permanent zoning for
Stratus' 1,273 acres located within the Circle C community in
southwest Austin.   These approvals permit development of one
million square feet of commercial space and 1,730 residential
units. The City also provided Stratus $15 million of incentives
in connection with its future development of its Circle C and
other Austin-area properties, including waivers of fees and
reimbursement for certain infrastructure costs.  In addition,
Stratus can elect to sell up to $1.5 million of the incentives
per year to other developers for their use in paying City fees
related to their projects.  As of September 30, 2002, Stratus has
used less than $0.1 million of its City-based incentives.  This
development agreement firmly establishes all essential municipal
development regulations applicable to Stratus' Circle C
properties for thirty years.  The Circle C development agreement
and related documents were signed and became effective on August
15, 2002.

8.  RECLASSIFICATIONS, RESTRICTED CASH AND INTEREST COST
Reclassifications.  Certain prior year amounts have been
reclassified to conform to the year 2002 presentation.


<PAGE>                       9

Restricted Cash.  At September 30, 2002, Stratus had restricted
cash deposits totaling $0.2 million, which reflects the deposited
funds used to purchase the fractional shares of Stratus' common
stock resulting from its stock split transactions (see Note 8 of
"Notes To Financial Statements" included in Stratus' 2001 Annual
Report on Form 10-K).

Interest Costs.  Interest expense excludes capitalized interest
of $0.5 million in the third quarter of 2002, $0.4 million in the
third quarter of 2001, $1.4 million for the nine months of 2002
and $0.9 million for the nine months of 2001.

9. BUSINESS SEGMENTS
As a result of completing transactions between Stratus and
Olympus in February 2002 (Note 2), Stratus now has two operating
segments, "Real Estate Operations" and "Commercial Leasing."
Stratus' commercial leasing segment was established when Stratus
acquired Olympus' 50.1 percent interest in 7000 West in February
2002.  The commercial leasing segment currently consists of the
140,000-square foot Lantana Corporate Center office complex,
which includes two fully-leased 70,000-square foot office
buildings.   During the third quarter of 2002, Stratus completed
its 75,000 square-foot office building at Rialto Drive and began
including the associated results within the commercial leasing
segment.  Stratus' real estate operations segment is comprised of
all of its developed and undeveloped properties in Austin, Texas,
which consist of its properties in the Barton Creek community,
including those acquired from the Barton Creek Joint Venture, its
Circle C community properties and the properties in Lantana other
than its office buildings.

     The segment data presented below was prepared on the same
basis as the Stratus consolidated condensed financial statements.
Real estate was Stratus' only operating segment until February
27, 2002 as discussed above.

<TABLE>
<CAPTION>

                              Real Estate   Commercial
                              Operations a   Leasing     Total
                               ---------    --------   ---------
<S>                            <C>          <C>        <C>
Third Quarter 2002:
Revenues                       $   3,762    $    817   $   4,579
Cost of sales                     (2,759)       (606)     (3,365)
Depreciation                         (28)       (216)       (244)
General and administrative
  expense                           (947)       (111)     (1,058)
                               ---------    --------   ---------
Operating income (loss)        $      28    $   (116)  $     (88)
                               =========    ========   =========
Total assets                   $ 116,294    $ 23,790   $ 140,084
                               =========    ========   =========
Capital expenditures           $   2,826    $    574   $   3,400
                               =========    ========   =========

Nine Months Ended September
30, 2002:
Revenues                       $   8,169    $  1,731   $   9,900
Cost of sales                     (4,932)     (1,159)     (6,091)
Depreciation                         (87)       (484)       (571)
General and administrative
  expense                         (3,056)       (358)     (3,414)
                               ---------    --------   ---------
Operating income (loss)        $      94    $   (270)  $    (176)
                               =========    ========   =========
Capital expenditures           $   8,136    $  1,709   $   9,845
                               =========    ========   =========

</TABLE>

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


<PAGE>                             10




                Report of Independent Accountants



To the Board of Directors and Shareholders of
Stratus Properties Inc.:

We have reviewed the accompanying condensed consolidated balance
sheet of Stratus Properties Inc. (the "Company") as of September
30, 2002, and the related consolidated statements of income for
each of the three-month and nine-month periods ended September
30, 2002 and the consolidated statement of cash flows for the
nine-month period ended September 30, 2002.  These financial
statements are the responsibility of the Company's management.
The financial statements of Stratus Properties Inc. as of
December 31, 2001, and for the year then ended were audited by
other independent accountants who have ceased operations.  Those
independent accountants expressed an unqualified opinion on those
financial statements in their report dated February 4, 2002.

We  conducted our review in accordance with standards established
by  the  American Institute of Certified Public  Accountants.   A
review  of interim financial information consists principally  of
applying  analytical  procedures to  financial  data  and  making
inquiries  of  persons responsible for financial  and  accounting
matters.  It  is  substantially  less  in  scope  than  an  audit
conducted   in   accordance  with  generally  accepted   auditing
standards, the objective of which is the expression of an opinion
regarding   the   financial  statements   taken   as   a   whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated financial statements for them to be in conformity
with accounting principles generally accepted in the United
States of America.





/s/ PricewaterhouseCoopers LLP

Austin, Texas
November  4, 2002




<PAGE>                            11



Item 2.  Management's Discussion and Analysis of Financial
Condition and Results of Operations.

                              OVERVIEW

   Management's discussion and analysis presented below should be
read in conjunction with our discussion and analysis of financial
results contained in our 2001 Annual Report on Form 10-K. The
operating results summarized in this report are not necessarily
indicative of our future operating results.

    We acquire, develop, manage and sell commercial and
residential real estate almost exclusively in the Austin, Texas
area.  In February 2002, as a result of completing certain
transactions (see "Transactions with Olympus Real Estate
Corporation" below), we acquired the remaining 50 percent of  a
140,000-square-foot office complex that consists of two office
buildings located in Austin, Texas.  During the third quarter of
2002, we completed a 75,000-square-foot office building in
Austin, Texas, which is now ready for occupancy.

                         DEVELOPMENT ACTIVITIES

     On August 1, 2002, the City of Austin (the City) granted
final approval of a development agreement and permanent zoning
for our 1,273 acres located within the Circle C community in
southwest Austin.   These approvals permit development of one
million square feet of commercial space and 1,730 residential
units.  The City also provided us $15 million of incentives in
connection with our future development of our Circle C and other
Austin-area properties, including waivers of fees and
reimbursement for certain infrastructure costs.  In addition, we
can elect to sell up to $1.5 million of the incentives per year
to other developers for their use in paying City fees related to
their projects.  As of September 30, 2002, we have used less than
$0.1 million of our City-based incentives.  This development
agreement firmly establishes all essential municipal development
regulations applicable to our Circle C properties for thirty
years.  The Circle C development agreement and related documents
were signed and became effective on August 15, 2002.

     Since January 2002, we have secured subdivision plat
approval for three new residential subdivisions within the Barton
Creek Community, including:  Versant Place - 54 lots; Wimberly
Lane II - 47 lots; and "Calera Drive" - 155 lots.  We commented
development of the initial phase of Calera Drive, which includes
17 condominium units on 19 acres.  Development of the second
phase, which will include 53 single-family lots, some of which
adjoin the Fazio Canyons golf course, is currently planned for
2003.  Development of the third and last phase, which will
include approximately 70 single-family lots, is not anticipated
until after 2003.

            TRANSACTIONS WITH OLYMPUS REAL ESTATE CORPORATION

     In May 1998, we formed a strategic alliance with Olympus
Real Estate Corporation (Olympus) to develop certain of our
existing properties and to pursue new real estate acquisition and
development opportunities.  Under the terms of the agreement,
Olympus purchased $10 million of our mandatorily redeemable
preferred stock, provided us a $10 million convertible debt
facility and agreed to make available up to $50 million of
additional capital representing its share of direct investments
in joint Stratus/Olympus projects.

     We subsequently entered into three joint ventures with
Olympus, the Oly Stratus Barton Creek I Joint Venture (Barton
Creek Joint Venture), the Stratus 7000 West Joint Venture (7000
West) and the Oly Walden General Partnership (Walden
Partnership).  We owned approximately 49.9 percent of each joint
venture and Olympus owned the remaining 50.1 percent. We also
served as the developer and manager for each of the joint venture
projects.  Accordingly, in addition to partnership distributions,
we received various development fees, sales commissions and other
management fees for our services.

      In February 2002 we concluded our business relationship
with Olympus, completing the following transactions:

 * We purchased our $10.0 million of mandatorily redeemable
   preferred stock held by Olympus for $7.6 million.
 * We acquired Olympus' ownership interest in the Barton Creek
   Joint Venture for $2.4 million.
 * We acquired Olympus' ownership interest in 7000 West for
   $1.5 million. In connection with this acquisition, we assumed
   $12.9 million of debt and included it in our balance sheet at

<PAGE>                        12

   March 31, 2002. We subsequently repaid approximately $0.1 million
   of these borrowings and our balance for this loan totaled $12.8
   million at September 30, 2002.
 * We sold our ownership interest in the Walden Partnership to
   Olympus for $3.1 million.

     At the time of the transactions, the Barton Creek Joint
Venture assets included an inventory of 21 estate-sized single-
family lots within the Escala Drive subdivision and one single-
family lot within the Wimberly Lane subdivision.  The 7000 West
assets included a 140,000 square-foot office complex consisting of
two 70,000 square-foot office buildings that are currently fully
leased.  The Walden Partnership's assets at the time of the sale
included 378 single-family lots and 80 acres of undeveloped real
estate.

     The net cash cost for these transactions was approximately
$7.3 million, after considering the approximate $1.1 million in
cash we received by acquiring the Barton Creek Joint Venture and
7000 West.  We completed the transactions through borrowings
available to us under our revolving credit facility agreement (see
"Capital Resources and Liquidity" below).

     For a detailed discussion of our Olympus transactions see
"Joint Ventures with Olympus Real Estate Corporation" and
"Olympus Relationship" located within Items 7. and 7A. and Notes
2, 3, 4 and 11 located in our 2001 Annual Report on Form 10-K.

                      RESULTS OF OPERATIONS

    Summary operating results follow (in thousands):


<TABLE>
<CAPTION>

                                        Third Quarter       Nine Months
                                      -----------------  -----------------
                                        2002     2001      2002     2001
                                      -------   -------  -------  --------
<S>                                   <C>       <C>      <C>      <C>
Revenues:
Undeveloped properties:
 Unrelated parties                    $ 2,068   $ 3,250  $ 3,983  $  9,623
 Recognition of deferred revenues         -         840      -       3,479
                                      -------   -------  -------  --------
   Total undeveloped properties         2,068     4,090    3,983    13,012
Developed properties                    1,558       -      3,283       -
Rental income                             817       -      1,731       -
Commissions, management fees and other    136       369      903       996
                                      -------   -------  -------  --------
Total revenues                        $ 4,579   $ 4,459  $ 9,900  $ 14,098
                                      =======   =======  =======  ========

Operating income (loss)               $   (88)  $ 2,946  $  (176) $  4,084
                                      =======   =======  =======  ========
Net income                            $   (89)  $ 3,056  $   653  $  4,166
                                      =======   =======  =======  ========
</TABLE>

Operating Results
     Our revenues during the third quarter of 2002 totaled $4.6
million, which included the sale of 11 acres of undeveloped
commercial real estate in Houston, Texas ($1.4 million) and a
nine-acre fire station site in the Circle C community ($0.7
million), the sale of two developed residential estate lots at
the Mirador subdivision ($1.2 million) and one at the Escala
subdivision ($0.4 million) within the Barton Creek community in
Austin, Texas and management fees and sales commissions.  Our
rental income during the third quarter of 2002 included rental
income from the two fully-leased office buildings held by 7000
West, which was acquired in the Olympus transactions (see
"Transactions with Olympus Real Estate Corporation" above).  Our
revenues for the third quarter of 2001 totaled $4.5 million,
which included the sale of a 41-acre tract in Austin Texas.  Our
revenues during the third quarter of 2001 also included the
recognition of previously deferred revenues primarily associated
with the sale of the multi-family tract at Rialto Drive within
the Lantana Project in southwest Austin as discussed further
below, and management fees and sales commissions.  See below for
a discussion regarding our commissions, management fees and other
revenues.

     Our revenues for the nine months ended September 30, 2002
totaled $9.9 million compared with $14.1 million during the
comparable period in 2001.  In addition to our third-quarter
sales discussed above, our revenues during the nine months ended
September 30, 2002 included the sale of 19 acres of undeveloped
multi-family estate in San Antonio, Texas in the second quarter
of 2002, two Mirador subdivision lots in the second quarter of
2002 and two Escala Drive residential estate lots during the
first quarter of 2002.  We have recorded rental income subsequent
to our acquisition of 7000 West in February 2002.  In addition to
the third-quarter revenues discussed above, our revenues during
the nine months ended September 30, 2001 included the second-

<PAGE>                      13

quarter 2001 sale of 112 acres of undeveloped residential
property in Houston, Texas ($2.7 million), the sale of 10 acres
of undeveloped multi-family property in Dallas, Texas ($1.7
million) and one 17-acre tract sale in Austin, Texas ($2.0
million).  Our revenues during the nine-month period in 2001 also
included the recognition of $3.5 million of previously deferred
revenues, as further discussed below, and $0.6 million of
management fees and sales commissions during the first half of
2001.

      The majority of the deferred revenue recognized during the
nine months ended September 30, 2001 was associated with the sale
of a 36.4-acre multi-family Lantana tract in December 2000.  In
this transaction we sold the property for $5.3 million, but
deferred $3.5 million of the revenues and $1.6 million of the
related operating income.  We recognized a pro rata portion of
these deferred amounts as the required infrastructure
construction was completed.  During the nine-month period of
2001, our construction activities resulted in our recognizing
$3.3 million of the deferred revenues and $1.6 million of the
operating income during that period.   See "Results of
Operations" included within Items 7. and 7A. of our 2001 Annual
Report on Form 10-K for a discussion regarding the completion of
construction and full recognition of this deferred revenue and
related gain during 2001.   The remainder of deferred revenue
recognized during the nine-month period of 2001 reflects lot
sales by the Barton Creek Joint Venture (see below).

      When we sold real estate to an entity we jointly owned with
Olympus, we deferred recognizing revenues from the sale related
to our ownership interest until sales were made to unrelated
parties.  The sale of two Wimberly Lane single-family homesites
by the Barton Creek Joint Venture during the first quarter of
2001 resulted in our recognition of previously deferred revenues
of less than $0.1 million for the period.  During the third
quarter of 2001 we sold one Escala Drive subdivision lot
resulting in the recognition of less than $0.1 million of
previously deferred revenues for that period. There were no sales
by the Barton Creek Joint Venture during the second quarter of
2001.  In connection with our transactions with Olympus in
February 2002, we reduced the carrying amount of the related real
estate by $1.1 million of deferred gain associated with our
previous land sales to the Barton Creek Joint Venture and by $0.8
million of deferred gain associated with our previous land sales
to 7000 West.

    Commissions, management fees and other revenues totaled $0.1
million during the third quarter of 2002 and $0.9 million for the
nine months ended September 30, 2002 compared with $0.4 million
and $1.0 million during the comparable periods of 2001.  The
decreases during the 2002 periods from the comparable  periods
last year primarily reflects the termination of our joint venture
arrangements with Olympus.  Prior to February 2002, we received
sales commissions and management fees from the Barton Creek Joint
Venture, the Walden Partnership and 7000 West.  Our sales
commissions from the joint ventures totaled $0.1 million for both
the third quarter and nine months ended September 30, 2001.  Our
management fees also include fees associated with our management
of the 2,200-acre Lakeway Project, near Austin, Texas (see
"Capital Resources and Liquidity" below).

    Cost of sales totaled $3.6 million during the third quarter
of 2002 compared with $0.6 million during the third quarter of
2001.  The increase between the comparable periods reflects the
higher costs associated with the undeveloped property sales
during the third quarter of 2002, compared with the approximate
$0.1 million cost associated with the sale of the 41-acre tract
during the third quarter of 2001.  The increase in cost of sales
during the third quarter of 2002 also reflects the costs of the
lot sales at the Mirador and Escala subdivisions as well as the
costs associated with the two office buildings we acquired in
February 2002.  The results of both the Barton Creek Joint
Venture and 7000 West were unconsolidated before February 27,
2002.  Our cost of sales for each of the nine months periods
ended September 30, 2002 and 2001 totaled $6.6 million.  Our cost
of sales during the nine months ended September 30, 2002 included
$1.2 million of costs associated with 7000 West following its
acquisition in February 2002.  These rental costs and the higher
costs of the properties sold during the third quarter of 2002
(see above) were offset by the substantial costs of the
undeveloped properties we sold during the second quarter of 2001
(see above).

    Our general and administrative expense totaled $1.1 million
during the third quarter of 2002 and $3.4 million for the nine
months ended September 30, 2002, compared with $0.9 million
during the third quarter of 2001 and $3.4 million for the nine
months ended September 30, 2001.  The increase between the
comparable third quarter periods reflects certain payments of
franchise taxes and increased insurance costs reflecting the
completion of our new 75,000 square-foot office building at 7500
Rialto Drive and increased premium costs over the prior year.
Our general and administrative expense during the nine months
ended September 30, 2002 included certain costs associated with
completing the transactions with Olympus.

<PAGE>                      14

Non-Operating Results
    Interest expense, net of capitalized interest, totaled $0.2
during the third quarter of 2002 and $0.4 million for the nine
months ended September 30, 2002 compared with $0.4 million during
the nine months ended September 30, 2001.  All our interest
expense during the third quarter of 2001 was capitalized.
Capitalized interest totaled $0.5 million in the third quarter of
2002 and $1.4 million for the nine months ended September 30,
2002.  Capitalized interest totaled $0.4 million in the third
quarter of 2001 and $0.9 million for the nine months ended
September 30, 2001.  The increase in capitalized interest
reflects the higher average balance of our borrowings outstanding
during 2002 over amounts outstanding during the comparable 2001
periods, partially offset by a decrease in our current
development activities (see "Capital Resources and Liquidity"
below).

    Other income totaled $0.3 million during the nine months
ended September 30, 2002, which represented the gain from the
sale of our interest in the Walden Partnership (see "Transactions
with Olympus Real Estate Corporation" above).  Other income
during the nine months ended September 30, 2001 totaled $0.2
million, which resulted from an adjustment to our workers
compensation insurance accrual.

                 CAPITAL RESOURCES AND LIQUIDITY

     Net cash provided by operating activities totaled $6.8
million during the nine months ended September 30, 2002 and $2.9
million during the nine months ended September 30, 2001.  The
increase between the comparable nine-month periods primarily
reflects a $1.7 million payment on a note receivable from an
Austin property sale, the receipt of a $1.1 million Barton Creek
municipal utility district reimbursement payment, and
distributions from the Lakeway Project (see below).  Cash used in
investing activities totaled $8.3 million during the nine months
ended September 30, 2002 compared with $21.5 million during the
same period last year, reflecting a decrease in our net real
estate and facilities expenditures because of the current
reduction of our development activities.  Also, during the first
quarter of 2001 we made a $2.0 million investment in the Lakeway
project, near Austin, Texas.  During the nine months ended
September 30, 2002, we received cash disbursements from the
Lakeway Project totaling $1.5 million, which resulted in the
return of $1.2 million of our investment in the project (see
below).  Our investing activities during 2002 also reflect the
receipt of $0.4 million of net cash proceeds in connection with
the closing of the Olympus transactions in February 2002 (see
"Transactions with Olympus Real Estate Corporation" above).

     Our financing activities used cash of $1.1 million during
the nine months ended September 30, 2002 compared with providing
cash of $11.3 million during the same period last year.   During
the nine months ended September 30, 2002 our financing activities
reflected $4.6 million of net borrowings under our Comerica
credit facility, which included the $7.3 million required to fund
the closing of the transactions with Olympus in February 2002
(see "Transactions with Olympus Real Estate Corporation" above).
We borrowed $2.0 million under our 7500 Rialto Drive project loan
and repaid $0.1 million on our 7000 West project loan during the
nine months ended September 30, 2002.   We also purchased our
mandatorily redeemable preferred stock held by Olympus for $7.6
million.   The cash provided by our financing activities during
the nine months ended September 30, 2001 represented $9.7 million
of net borrowings under our revolving line of credit, $5.0
million borrowing under an unsecured term loan offset in part by
the repayment of the entire $3.2 million balance under our
previous convertible debt facility with Olympus (see Note 2 of
"Notes To Financial Statements included in our 2001 Annual Report
on Form 10-K).

     At September 30, 2002, we had debt of $44.9 million compared
to debt of $25.6 million at December 31, 2001.  The increase in
debt during the first nine months of 2002 included the $12.9
million of debt we assumed in connection with our acquisition of
Olympus' 50.1 percent ownership interest in 7000 West and the
additional borrowings under our revolving line of credit used to
fund the Olympus transactions (see "Transactions with Olympus
Real Estate Corporation" above).  Our debt outstanding at
September 30, 2002 consisted of the following:

   *  $10.0 million of borrowings outstanding on our two unsecured
      $5.0 million term loans, one of which will mature in December
      2005 and the other in July 2006.

   *  $13.5 million of borrowings under our $25.0 million ($23.8
      million currently available, see below) revolver component of the
      Comerica Bank-Texas (Comerica) credit facility, which matures in
      April 2004.

<PAGE>                          15

   *  $3.1 million of net borrowings under the $5.0 million term
      loan component of the Comerica facility. During the second
      quarter of 2002, we borrowed $4.6 million under the term loan and
      subsequently we have repaid $1.5 million of the balance,
      including $1.1 million during the third quarter of 2002.  Some of
      the Mirador lots are currently serving as collateral for the term
      loan component of the credit facility.

   *  $12.8 million of borrowings under the 7000 West project loan
      that were previously unconsolidated until we purchased Olympus'
      50.1 percent ownership interest in 7000 West.  This project loan
      is scheduled to mature on August 24, 2003.  Accordingly, the
      balance of the loan is reflected as a current liability in the
      accompanying balance sheet.

  *   $5.5 million of borrowings under our 7500 Rialto Drive
      project loan, which matures in June 2003, with an option to
      extend the loan for one year, if we meet certain leasing and
      other criteria.  We do not currently meet the required conditions
      to exercise the option to extend the maturity of the project
      loan.  Accordingly, the balance of the loan is reflected as a
      current liability in the accompanying balance sheet.

     The total availability under the $30.0 million Comerica
credit facility was reduced to $28.8 million to satisfy the $1.2
million interest reserve account requirement at September 30,
2002.  With respect to the $12.8 million of borrowings under the 7000
West project loan, which matures in August 2003, and the $5.5
million of borrowings under the 7500 Rialto Drive project loan,
which matures in June 2003; we plan to enter into negotiations
with the existing lender to extend the maturities of these
obligations or to otherwise obtain new financings to fund the
obligations, at their maturities.  Maintaining our financial
liquidity is dependent on our extending or refinancing these
obligations.  For a discussion of our bank credit facilities, see
Note 5 included in the "Notes To Financial Statements" of our 2001
Annual Report on Form 10-K.

     Since mid-1998, we have provided development, management,
operating and marketing services for the Lakeway project near
Austin, Texas, which is owned by Commercial Lakeway Limited
Partnership, an affiliate of Credit Suisse First Boston, for a
fixed monthly fee.  In January 2001, we entered into an expanded
development management agreement with Commercial Lakeway Limited
Partnership covering a 552-acre portion of the Lakeway
development known as Schramm Ranch, and we contributed $2.0
million as an investment in this project.  Under the agreement,
we receive enhanced management and development fees and sales
commissions, as well as a net profits interest in the project.
Lakeway project distributions are made to us as sales
installments close.

     In the second quarter of 2001, we negotiated the sale of
substantially all the Schramm Ranch property to a single
purchaser.  In return for our securing the required entitlements,
the sale was to be completed in four planned phases.   We secured
all the remaining necessary entitlements for the Schramm Ranch
property in the fourth quarter of 2001.  During the first half of
2002, the purchaser closed on the third sale installment in March
2002 and on the fourth and final sale installment in June 2002.
In connection with the third sales installment, we received a
cash distribution of $0.8 million in May 2002 and we received a
cash distribution of $0.7 million associated with the fourth
sales installment in July 2002.   We have now received a total of
$2.7 million of cash distributions from the Lakeway project,
which represents a $1.8 million return of our original $2.0
million investment and $0.9 million of income.  We are entitled
to 40 percent of the future proceeds associated with the future
sale of a 5-acre commercial tract still remaining at the Schramm
Ranch property, which is being actively marketed.

     Our future operating cash flows and, ultimately, our ability
to develop our properties and expand our business will be largely
dependent on the level of our real estate sales.  In turn, these
sales will be significantly affected by future real estate
values, regulatory issues, development costs, interest rate
levels and our ability to continue to protect our land use and
development entitlements. Significant development expenditures
remain to be incurred for our Austin-area properties prior to
their eventual sale.  As a result of our settlement of certain
entitlement and reimbursement issues with the City during 2000,
we initiated a plan to develop a significant portion of our
Austin-area properties and incurred capital expenditures for 2001
totaling $23.1 million.  Capital expenditures for the nine months
ended September 30, 2002 totaled $9.8 million compared to $19.5
million during the same period in 2001.

      As a result of our development activities and our
acquisition of the Barton Creek Joint Venture, we now have an
adequate inventory of developed lots to satisfy the near-term
demand for estate lots in Austin, as well as an additional 75,000
square feet of office space ready for leasing as the Austin
economy starts its eventual recovery.   Accordingly, although we
may continue to develop our Austin-area properties during the
next year, we expect to do so at a much more conservative pace as
we continue to monitor the economic environment in Austin.


<PAGE>                       16

We are continuing to actively pursue additional development and
management fee opportunities, both individually and through our
existing relationships with institutional capital sources.  We
also believe we can obtain bank financing at a reasonable cost
for developing our properties. However, obtaining land
acquisition financing is generally expensive and uncertain.

                      CAUTIONARY STATEMENT

     Management's discussion and analysis of financial  condition
and  results  of  operations contains forward-looking  statements
regarding    anticipated   sales,   debt    repayments,    future
reimbursement for infrastructure costs, future events related  to
financing  and  regulatory matters, the expected results  of  our
business  strategy and other plans and objectives  of  management
for  future  operations and activities.   Important factors  that
could  cause  actual  results  to  differ  materially  from   our
expectations  include economic and business conditions,  business
opportunities that may be presented to and pursued by us, changes
in  laws  or  regulations and other factors, many  of  which  are
beyond  our control, that are described in more detail under  the
heading "Risk Factors" in our Annual Report on Form 10-K for  the
year ended December 31, 2001.

Item 4.  Controls and Procedures.

     (a)  Evaluation of disclosure controls and procedures.  Our
chief executive officer and chief financial officer, with the
participation of management, have evaluated the effectiveness of
our "disclosure controls and procedures" (as defined in Rules 13a-
14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as
of a date within 90 days prior to the filing of this quarterly
report on Form 10-Q.  Based on their evaluation, they have
concluded that our disclosure controls and procedures are
effective in timely alerting them to material information
relating to Stratus Properties Inc. (including our consolidated
subsidiaries) required to be disclosed in our periodic Securities
and Exchange Commission filings.

     (b)  Changes in internal controls.  There were no
significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the
date of their evaluation.

                  PART II. - OTHER INFORMATION

Item 1.  Legal Proceedings.
SOS LITIGATION:  The Save Our Springs Alliance and Circle C
Neighborhood Association vs. The City of Austin, Circle C Land
Corp., and Stratus Properties Inc., Cause No. GN 202018 (Travis
County 261st Judicial District Court of Texas filed June 24,
2002).  In an effort to prevent the City of Austin and Stratus
Properties Inc. from reaching a settlement concerning development
of the Circle C Project, the Save Our Springs Alliance, a non-
profit public-interest corporation, and the Circle C Neighborhood
Association, an unincorporated association, filed a lawsuit
against the City of Austin, Stratrus Properties Inc., and its
subsidiary, Circle C Land Corp. on June 24, 2002.  In their
petition, Plaintiffs request judicial declarations that (i) the
City of Austin's Save Our Springs Ordinance is exempt from
Chapter 245 of the Texas Local Government Code ("Chapter 245");
(ii) Chapter 245 is an unconstitutional intrusion of the
municipal authority of Texas home-rule cities; (iii) under the
Texas Constitution, the City of Austin has the authority and duty
to apply the SOS Ordinance and its zoning authority to Stratus'
Circle C properties; and (iv) residents of the Circle C
community, including Plaintiffs, are entitled to full application
of the City's current watershed protection ordinances and the
City's zoning powers.  Stratus believes that the Plaintiffs'
claims have either been previously adjudicated or are moot as a
result of the City and Stratus reaching a settlement and will
vigorously defend its position.


Item 6.  Exhibits and Reports on Form 8-K.

 (a) The exhibits to this report are listed in the Exhibit
     Index beginning on page E-1 hereof.

 (b) During the period covered by this Quarterly Report
     on Form 10-Q and through November 13, 2002, the
     registrant filed two Current Reports on Form 8-K
     reporting events under Item 4 dated July 15, 2002 and
     August 14, 2002.

<PAGE>                          17




                          SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                     STRATUS PROPERTIES INC.

                     By:  /s/ John E. Baker
                        -------------------------
                              John E. Baker
                        Senior Vice President and
                         Chief Financial Officer

Date:  November 14, 2002


<PAGE>                             18



                          CERTIFICATIONS

I, William H. Armstrong III, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of
Stratus Properties Inc.;

2.   Based on my knowledge, this quarterly report does not
     contain any untrue statement of a material fact or omit to
     state a material fact necessary to make the statements made,
     in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered
     by this quarterly report;

3.   Based on my knowledge, the financial statements, and other
     financial information included in this quarterly report,
     fairly present in all material respects the financial
     condition, results of operations and cash flows of the
     registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are
     responsible for establishing and maintaining disclosure
     controls and procedures (as defined in Exchange Act Rules
     13a-14 and 15d-14) for the registrant and we have:

       a) designed such disclosure controls and procedures to ensure
          that material information relating to the registrant, including
          its consolidated subsidiaries, is made known to us by others
          within those entities, particularly during the period in which
          this quarterly report is being prepared;
      b)  evaluated the effectiveness of the registrant's disclosure
          controls and procedures as of a date within 90 days prior to the
          filing date of this quarterly report (the "Evaluation Date"); and
      c)  presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on
          our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have
     disclosed, based on our most recent evaluation, to the
     registrant's auditors and the audit committee of
     registrant's board of directors (or persons performing the
     equivalent function):

       a)  all significant deficiencies in the design or operation of
           internal controls which could adversely affect the registrant's
           ability to record, process, summarize and report financial data
           and have identified for the registrant's auditors any material
           weaknesses in internal controls; and
      b)   any fraud, whether or not material, that involves management
           or other employees who have a significant role in the
           registrant's internal controls; and

6.   The registrant's other certifying officers and I have
     indicated in this quarterly report whether or not there were
     significant changes in internal controls or in other factors
     that could significantly affect internal controls subsequent
     to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies
     and material weaknesses.

Date:  November 14, 2002
                             /s/ William H.Armstrong III
                            ----------------------------
                                 William H. Armstrong III
                           Chairman of the Board, President
                              and Chief Executive Officer

<PAGE>                         19


I, John E. Baker, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of
Stratus Properties Inc.;

2.   Based on my knowledge, this quarterly report does not
     contain any untrue statement of a material fact or omit to
     state a material fact necessary to make the statements made,
     in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered
     by this quarterly report;

3.   Based on my knowledge, the financial statements, and other
     financial information included in this quarterly report,
     fairly present in all material respects the financial
     condition, results of operations and cash flows of the
     registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are
     responsible for establishing and maintaining disclosure
     controls and procedures (as defined in Exchange Act Rules
     13a-14 and 15d-14) for the registrant and we have:

      a)  designed such disclosure controls and procedures to ensure
          that material information relating to the registrant, including
          its consolidated subsidiaries, is made known to us by others
          within those entities, particularly during the period in which
          this quarterly report is being prepared;
      b)  evaluated the effectiveness of the registrant's disclosure
          controls and procedures as of a date within 90 days prior to the
          filing date of this quarterly report (the "Evaluation Date"); and
      c)  presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on
          our evaluation as of the Evaluation Date;



5.   The registrant's other certifying officers and I have
     disclosed, based on our most recent evaluation, to the
     registrant's auditors and the audit committee of
     registrant's board of directors (or persons performing the
     equivalent function):

       a) all significant deficiencies in the design or operation of
          internal controls which could adversely affect the registrant's
          ability to record, process, summarize and report financial data
          and have identified for the registrant's auditors any material
          weaknesses in internal controls; and
      b)  any fraud, whether or not material, that involves management
          or other employees who have a significant role in the
          registrant's internal controls; and

6.   The registrant's other certifying officers and I have
     indicated in this quarterly report whether or not there were
     significant changes in internal controls or in other factors
     that could significantly affect internal controls subsequent
     to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies
     and material weaknesses.

Date:  November 14, 2002
                                  /s/ John E. Baker
                                 ----------------------
                                      John E. Baker
                                  Senior Vice President
                               and Chief Financial Officer


                    STRATUS PROPERTIES INC.
                         EXHIBIT INDEX
 Exhibit
 Number

  3.1 Amended and Restated Certificate of Incorporation of Stratus.
      Incorporated by reference to Exhibit 3.1 to Stratus' 1998 Form
      10-K.

  3.2 Certificate of Amendment to the Amended and Restated
      Certificate of Incorporation of Stratus.  Incorporated by
      reference to Exhibit 3.2 to Stratus' 2001 Form 10-K.

  3.3 By-laws of Stratus, as amended as of February 11, 1999.
      Incorporated by Reference to Exhibit 3.2 to Stratus' 1998 Form
      10-K.

  4.1 The loan agreement by and between Comerica Bank-Texas and
      Stratus Properties Inc., Stratus Properties Operating Co.,
      L.P., Circle C Land Corp. and Austin 290 Properties Inc. dated
      December 21, 1999.  Incorporated by reference to Exhibit 4.4 to
      Stratus 1999 Form 10-K.

  4.2 Rights Agreement, dated as of May 16, 2002, between Stratus and
      Mellon Investor Services LLP, as Rights Agent, which includes
      the Certificates of Designation of Series C Participating
      Preferred Stock; the Forms of Rights Certificate Assignment,
      and Election to Purchase; and the Summary of Rights to Purchase
      Preferred Shares.  Incorporated by reference to Exhibit 4.1 to
      Stratus Registration Statement on Form 8-A dated May 22, 2002.

 10.1 Development and Management Agreement dated and effective as of
      June 1, 1991 by and between Longhorn Development Company and
      Precept Properties, Inc. (the "Precept Properties Agreement").
      Incorporated by reference to Exhibit 10.8 to Stratus' 1992 Form
      10-K.

 10.2 Assignment dated June 11, 1992 of the Precept Properties
      Agreement by and among FTX (successor by merger to FMI Credit
      Corporation, as successor by merger to Longhorn Development
      Company), the Partnership and Precept Properties, Inc.
      Incorporated by reference to Exhibit 10.9 to Stratus' 1992 Form
      10-K.

 10.3 Construction Loan Agreement dated April 9, 1999 by and between
      Stratus 7000 West Joint Venture and Comerica Bank-Texas.
      Incorporated by Reference to Exhibit 10.13 to Stratus' 2001
      Form 10-K.

 10.4 Modification Agreement dated August 16, 1999, by and between
      Comerica Bank-Texas, as lender, Stratus 7000 West Joint
      Venture, as borrower and Stratus Properties Inc., as guarantor.
      Incorporated by Reference to Exhibit 10.14 to Stratus' 2001
      Form 10-K.

 10.5 Construction Loan Agreement dated February 24, 2000 by and
      between Stratus 7000 West Joint Venture and Comerica Bank-
      Texas.  Incorporated by Reference to Exhibit 10.15 to Stratus'
      2001 Form 10-K.

 10.6 Second Amendment to Construction Loan Agreement dated December
      31, 1999 by and between Stratus 7000 West Joint Venture, as
      borrower, Stratus Properties Operating Co., L.P. and Stratus
      Properties Inc., as Guarantors, and Comerica Bank-Texas.
      Incorporated by Reference to Exhibit 10.16 to Stratus' 2001
      Form 10-K.

 10.7 Second Modification Agreement dated February 24, 2000 by and
      between Comerica Bank-Texas, as lender, and Stratus 7000 West
      Joint Venture, as borrower, and Stratus Properties Inc., as
      guarantor.  Incorporated by Reference to Exhibit 10.17 to
      Stratus' 2001 Form 10-K.

 10.8 Third Modification Agreement dated August 23, 2001 by and
      between Comerica Bank-Texas, as lender, Stratus 7000 West Joint
      Venture, as Borrower and Stratus Properties Inc., as guarantor.
      Incorporated by Reference to Exhibit 10.18 to Stratus' 2001
      Form 10-K.

 10.9 Guaranty Agreement dated December 31, 1999 by and between

<PAGE>                           E-1

      Stratus Properties Inc. and Comerica Bank-Texas.  Incorporated
      by reference to Stratus' Quarterly Report on Form 10-Q  for the
      Quarter ended March 31, 2000.

10.10 Guaranty Agreement dated February 24, 2000 by and between
      Stratus Properties Inc. and Comerica Bank-Texas. Incorporated
      by reference to Stratus' Quarterly Report on Form 10-Q  for the
      Quarter ended March 31, 2000.

10.11 Development Management Agreement by and between Commercial
      Lakeway Limited Partnership, as owner, and Stratus Properties
      Inc., as development manager, dated January 26, 2001.
      Incorporated by reference to Exhibit 10.18 to the Stratus 2001
      First Quarter 10-Q.

10.12 Amended Loan Agreement dated December 27, 2000 by and between
      Stratus Properties Inc. and Comerica-Bank Texas.  Incorporated
      by reference to Exhibit 10.19 to the Stratus 2000 Form 10-K.

10.13 Second Amendment to Loan Agreement dated December 18, 2001 by
      and among Stratus Properties Inc., Stratus Properties Operating
      Co., L.P., Circle C Land Corp. and Austin 290 Properties Inc.
      collectively as borrower and Comerica Bank-Texas, as lender.
      Incorporated by Reference to Exhibit 10.23 to Stratus' 2001
      Form 10-K.

10.14 Loan Agreement dated December 28, 2000 by and between Stratus
      Properties Inc. and Holliday Fenoliglio Fowler, L.P.,
      subsequently assigned to an affiliate of First American Asset
      Management.  Incorporated by reference to Exhibit 10.20 to the
      Stratus 2000 Form 10-K.

10.15 Loan Agreement dated June 14, 2001, by and between Stratus
      Properties Inc. and Holliday Fenoliglio Fowler, L.P.,
      subsequently assigned to an affiliate of First American Asset
      Management.  Incorporated by reference to Exhibit 10.22 to
      Stratus' Quarterly Report on Form 10-Q for the quarter ended
      September 30, 2001.

10.16 Construction Loan Agreement dated June 11, 2001 between 7500
      Rialto Boulevard, L.P. and Comerica Bank-Texas.  Incorporated
      by Reference to Exhibit 10.26 to Stratus' 2001 Form 10-K.

10.17 Guaranty Agreement dated June 11, 2001 by Stratus Properties
      Inc. in favor of Comerica Bank-Texas.  Incorporated by
      Reference to Exhibit 10.27 to Stratus' 2001 Form 10-K.

10.18 Development Agreement dated August 15, 2002 between Circle C
      Land Corp. and City of Austin.

10.19 Stratus' Performance Incentive Awards Program, as amended
      effective February 11, 1999. Incorporated by reference to
      Exhibit 10.18 to Stratus' 1998 Form 10-K.

10.20 Stratus Stock Option Plan, as amended.  Incorporated by
      reference to Exhibit 10.9 to Stratus' 1997 Form 10-K.

10.21 Stratus 1996 Stock Option Plan for Non-Employee Directors, as
      amended.  Incorporated by reference to Exhibit 10.10 to
      Stratus' 1997 Form 10-K.

10.22 Stratus Properties Inc. 1998 Stock Option Plan as amended
      effective February 11, 1999. Incorporated by reference to
      Exhibit 10.21 to Stratus' 1998 Form 10-K.

15.1  Letter dated November 14, 2002, from PricewaterhouseCoopers LLP
      regarding the unaudited financial statements.


<PAGE>                       E-2