----

|                                                       |
|------------------------------------------------------------|
|                                                       |
| UNITED      STATES                                         |
| SECURITIES      AND EXCHANGE COMMISSION                    |
| Washington,      D.C. 20549                                |
|                                                       |
| FORM      10-Q                                             |
|                                                       |
| (Mark      One)                                            |
| [X]                                                        | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES      EXCHANGE ACT OF 1934                       |
| For      the quarterly period ended June 30, 2008          |
| or                                                         |
| [  ]                                             | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES      EXCHANGE ACT OF 1934                       |
| For      the transition period from                        |   | to |
| Commission      File Number: 0-19989                       |
|                                                       |
|                                                            |
|                                                       |
| Stratus      Properties Inc.                               |
| (Exact      name of registrant as specified in itscharter) |

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

----

| STRATUS      PROPERTIES INC.                                                              |   |
|-------------------------------------------------------------------------------------------|--------|
| TABLE OF CONTENTS                                                                         |   |
|                                                                                      |   |
|                                                                                      |   |
|                                                                                      | Page   |
| Part I.  Financial Information                                                  | 2      |
|                                                                                      |   |
| Item 1.  Financial Statements:                                                  |   |
|                                                                                      |   |
| Consolidated Balance Sheets (Unaudited)                                                   | 2      |
|                                                                                      |   |
| Consolidated Statements of Operations      (Unaudited)                                    | 3      |
|                                                                                      |   |
| Consolidated Statements of Cash Flows      (Unaudited)                                    | 4      |
|                                                                                      |   |
| Notes to Consolidated Financial Statements      (Unaudited)                               | 5      |
|                                                                                      |   |
| Report of Independent Registered Public Accounting      Firm                              | 11     |
|                                                                                      |   |
| Item 2.  Management’s Discussion and Analysis of      Financial Condition |   |
| and Results of Operations                                                                 | 12     |
|                                                                                      |   |
| Item 3.  Quantitative and Qualitative Disclosures      about Market Risk        | 21     |
|                                                                                      |   |
| Item 4.  Controls and      Procedures                                           | 21     |
|                                                                                      |   |
| Part II.  Other Information                                                     | 21     |
|                                                                                      |   |
| Item 2.  Unregistered Sales of Equity      Securities and Use of Proceeds       | 21     |
|                                                                                      |   |
| Item 6.  Exhibits                                                               | 22     |
|                                                                                      |   |
| Signature                                                                                 | 22     |
|                                                                                      |   |
| Exhibit Index                                                                             | E-1    |
|                                                                                      |   |

----

Table of Contents

Part I.  FINANCIAL INFORMATION

Item 1.  FinancialStatements.

CONSOLIDATED BALANCE SHEETS (Unaudited)

|                                                               | June      30, |    | December      31, |   |
|--------------------------------------------------------------------|---------------|---------|-------------------|--------|
|                                                               | 2008          |    | 2007              |   |
| ASSETS                                                             |          |    |              |   |   |   |
| Current      assets:                                               |          |    |              |   |   |   |
| Cash      and cash equivalents                                     | $             | 34,693  |              | $      | 40,873 |   |
| Restricted      cash                                               |          | 6       |              |   | 112 |   |
| Accounts      receivable                                           |          | 1,306   |              |   | 2,315 |   |
| Notes      receivable from property sales                          |          | 186     |              |   | 311 |   |
| Deposits,      prepaid expenses and other                          |          | 6,393   |              |   | 79 |   |
| Deferred      tax asset                                            |          | 557     |              |   | 1,401 |   |
| Total      current assets                                          |          | 43,141  |              |   | 45,091 |   |
| Real      estate, commercial leasing assets and facilities, net:   |          |    |              |   |   |   |
| Property      held for sale – developed or under development |          | 139,238 |              |   | 129,759 |   |
| Property      held for sale – undeveloped                    |          | 16,878  |              |   | 16,523 |   |
| Property      held for use, net                                    |          | 24,931  |              |   | 24,421 |   |
| Investment      in unconsolidated affiliate                        |          | 2,004   |              |   | 4,226 |   |
| Deferred      tax asset                                            |          | 7,054   |              |   | 5,534 |   |
| Other      assets                                                  |          | 5,736   |              |   | 2,803 |   |
| Total      assets                                                  | $             | 238,982 |              | $      | 228,357 |   |
|                                                               |          |    |              |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                    |          |    |              |   |   |   |
| Current      liabilities:                                          |          |    |              |   |   |   |
| Accounts      payable and accrued liabilities                      | $             | 5,858   |              | $      | 6,324 |   |
| Accrued      interest, property taxes and other                    |          | 5,709   |              |   | 5,623 |   |
| Current      portion of long-term debt                             |          | 271     |              |   | 242 |   |
| Total      current liabilities                                     |          | 11,838  |              |   | 12,189 |   |
| Long-term      debt                                                |          | 63,142  |              |   | 61,258 |   |
| Other      liabilities                                             |          | 1,859   |              |   | 2,510 |   |
| Total      liabilities                                             |          | 76,839  |              |   | 75,957 |   |
|                                                               |          |    |              |   |   |   |
| Minority      interest in consolidated subsidiary                  |          | 10,614  |              |   | - |   |
|                                                               |          |    |              |   |   |   |
| Stockholders’      equity:                                   |          |    |              |   |   |   |
| Preferred      stock                                               |          | -       |              |   | - |   |
| Common      stock                                                  |          | 82      |              |   | 81 |   |
| Capital      in excess of par value of common stock                |          | 197,234 |              |   | 195,898 |   |
| Accumulated      deficit                                           |          | (30,484 | )                 |   | (29,300 | ) |
| Common      stock held in treasury                                 |          | (15,303 | )                 |   | (14,279 | ) |
| Total      stockholders’ equity                              |          | 151,529 |              |   | 152,400 |   |
| Total      liabilities and stockholders’ equity              | $             | 238,982 |              | $      | 228,357 |   |
|                                                               |          |    |              |   |   |   |

----

Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

|                                                          | Three      Months Ended |   | Six      Months Ended |   |
|---------------------------------------------------------------|-------------------------|--------|-----------------------|--------|
|                                                          | June      30,           |   | June      30,         |   |
|                                                          | 2008                    |   | 2007                  |   | 2008 |   | 2007 |   |
| Revenues:                                                     |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Real      estate                                              | $                       | 2,399  |                  | $      | 5,317 |   | $ | 6,303 |   | $ | 9,743 |   |
| Rental      income                                            |                    | 1,169  |                  |   | 711 |   |   | 2,120 |   |   | 1,381 |   |
| Commissions,      management fees and other                   |                    | 655    |                  |   | 760 |   |   | 867 |   |   | 981 |   |
| Total      revenues                                           |                    | 4,223  |                  |   | 6,788 |   |   | 9,290 |   |   | 12,105 |   |
| Cost      of sales:                                           |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Real      estate, net                                         |                    | 2,652  |                  |   | 3,406 |   |   | 5,870 |   |   | 4,989 |   |
| Rental                                                        |                    | 923    |                  |   | 763 |   |   | 1,739 |   |   | 1,531 |   |
| Depreciation                                                  |                    | 394    |                  |   | 206 |   |   | 777 |   |   | 483 |   |
| Total      cost of sales                                      |                    | 3,969  |                  |   | 4,375 |   |   | 8,386 |   |   | 7,003 |   |
| General      and administrative expenses                      |                    | 1,897  |                  |   | 1,828 |   |   | 3,554 |   |   | 3,814 |   |
| Total      costs and expenses                                 |                    | 5,866  |                  |   | 6,203 |   |   | 11,940 |   |   | 10,817 |   |
| Operating      (loss) income                                  |                    | (1,643 | )                     |   | 585 |   |   | (2,650 | ) |   | 1,288 |   |
| Interest      expense, net                                    |                    | (329   | )                     |   | (10 | ) |   | (659 | ) |   | (13 | ) |
| Interest      income                                          |                    | 154    |                  |   | 31 |   |   | 1,103 |   |   | 535 |   |
| Equity      in unconsolidated affiliate’s income        |                    | 222    |                  |   | - |   |   | 778 |   |   | - |   |
| (Loss)      income from continuing operations                 |                    |   |                  |   |   |   |   |   |   |   |   |   |
| before      income taxes and minority interest                |                    | (1,596 | )                     |   | 606 |   |   | (1,428 | ) |   | 1,810 |   |
| Benefit      from (provision for) income taxes                |                    | 364    |                  |   | (189 | ) |   | 285 |   |   | (631 | ) |
| Minority      interest in net loss of consolidated subsidiary |                    | 64     |                  |   | - |   |   | 64 |   |   | - |   |
| (Loss)      income from continuing operations                 |                    | (1,168 | )                     |   | 417 |   |   | (1,079 | ) |   | 1,179 |   |
| Loss      from discontinued operations                        |                    | (105   | )                     |   | (176 | ) |   | (105 | ) |   | (200 | ) |
| Net      (loss) income                                        | $                       | (1,273 | )                     | $      | 241 |   | $ | (1,184 | ) | $ | 979 |   |
|                                                          |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Basic      net (loss) income per share of common stock:       |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Continuing      operations                                    | $                       | (0.16  | )                     | $      | 0.05 |   | $ | (0.15 | ) | $ | 0.16 |   |
| Discontinued      operations                                  |                    | (0.01  | )                     |   | (0.02 | ) |   | (0.01 | ) |   | (0.03 | ) |
| Basic      net (loss) income per share of common stock        | $                       | (0.17  | )                     | $      | 0.03 |   | $ | (0.16 | ) | $ | 0.13 |   |
|                                                          |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Diluted      net (loss) income per share of common stock:     |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Continuing      operations                                    | $                       | (0.16  | )                     | $      | 0.05 |   | $ | (0.15 | ) | $ | 0.15 |   |
| Discontinued      operations                                  |                    | (0.01  | )                     |   | (0.02 | ) |   | (0.01 | ) |   | (0.02 | ) |
| Diluted      net (loss) income per share of common stock      | $                       | (0.17  | )                     | $      | 0.03 |   | $ | (0.16 | ) | $ | 0.13 |   |
|                                                          |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Weighted      average shares of common stock outstanding:     |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Basic                                                         |                    | 7,631  |                  |   | 7,568 |   |   | 7,599 |   |   | 7,559 |   |
| Diluted                                                       |                    | 7,631  |                  |   | 7,690 |   |   | 7,599 |   |   | 7,680 |   |
|                                                          |                    |   |                  |   |   |   |   |   |   |   |   |   |

----

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|                                                                     | Six      Months Ended |    |
|--------------------------------------------------------------------------|-----------------------|---------|
|                                                                     | June      30,         |    |
|                                                                     | 2008                  |    | 2007 |   |
| Cash      flow from operating activities:                                |                  |    |   |   |   |   |
| Net      (loss) income                                                   | $                     | (1,184  | ) | $ | 979 |   |
| Adjustments      to reconcile net (loss) income to net cash (used in)    |                  |    |   |   |   |   |
| provided      by operating activities:                                   |                  |    |   |   |   |   |
| Loss      from discontinued operations                                   |                  | 105     |   |   | 200 |   |
| Depreciation                                                             |                  | 777     |   |   | 483 |   |
| Minority      interest in net loss of consolidated subsidiary            |                  | (64     | ) |   | - |   |
| Cost      of real estate sold                                            |                  | 4,634   |   |   | 5,358 |   |
| Deferred      income taxes                                               |                  | (676    | ) |   | (157 | ) |
| Stock-based      compensation                                            |                  | 483     |   |   | 759 |   |
| Equity      in unconsolidated affiliate’s income                   |                  | (778    | ) |   | - |   |
| Distribution      of unconsolidated affiliate’s income             |                  | 1,266   |   |   | - |   |
| Deposits                                                                 |                  | (1,148  | ) |   | (2,922 | ) |
| Other                                                                    |                  | (361    | ) |   | (10 | ) |
| (Increase)      decrease in working capital:                             |                  |    |   |   |   |   |
| Accounts      receivable, prepaid expenses and other                     |                  | (5,764  | ) |   | (276 | ) |
| Accounts      payable, accrued liabilities and other                     |                  | 335     |   |   | 1,314 |   |
| Net      cash (used in) provided by continuing operations                |                  | (2,375  | ) |   | 5,728 |   |
| Net      cash used in discontinued operations                            |                  | -       |   |   | (93 | ) |
| Net      cash (used in) provided by operating activities                 |                  | (2,375  | ) |   | 5,635 |   |
|                                                                     |                  |    |   |   |   |   |
| Cash      flow from investing activities:                                |                  |    |   |   |   |   |
| Purchases      and development of real estate properties                 |                  | (19,065 | ) |   | (17,143 | ) |
| Development      of commercial leasing properties and other expenditures |                  | (352    | ) |   | (216 | ) |
| Municipal      utility district reimbursements                           |                  | 3,753   |   |   | 2,557 |   |
| Return      of investment in unconsolidated affiliate                    |                  | 2,374   |   |   | - |   |
| Net      cash used in continuing operations                              |                  | (13,290 | ) |   | (14,802 | ) |
| Net      cash used in discontinued operations                            |                  | -       |   |   | (118 | ) |
| Net      cash used in investing activities                               |                  | (13,290 | ) |   | (14,920 | ) |
|                                                                     |                  |    |   |   |   |   |
| Cash      flow from financing activities:                                |                  |    |   |   |   |   |
| Borrowings      from revolving credit facility                           |                  | -       |   |   | 15,450 |   |
| Payments      on revolving credit facility                               |                  | -       |   |   | (18,450 | ) |
| Borrowings      from construction loan                                   |                  | 2,022   |   |   | - |   |
| Repayments      on Lantana promissory note                               |                  | (109    | ) |   | - |   |
| Borrowings      from unsecured term loans                                |                  | -       |   |   | 15,000 |   |
| Minority      interest contributions                                     |                  | 10,678  |   |   | - |   |
| Net      payments for exercised stock options                            |                  | (114    | ) |   | (35 | ) |
| Excess      tax benefit from exercised stock options                     |                  | 281     |   |   | 655 |   |
| Purchases      of Stratus common shares                                  |                  | (428    | ) |   | (153 | ) |
| Financing      costs                                                     |                  | (2,845  | ) |   | (284 | )  |
| Net      cash provided by continuing operations                          |                  | 9,485   |   |   | 12,183 |   |
| Net      cash used in discontinued operations                            |                  | -       |   |   | (154 | ) |
| Net      cash provided by financing activities                           |                  | 9,485   |   |   | 12,029 |   |
| Net      (decrease) increase in cash and cash equivalents                |                  | (6,180  | ) |   | 2,744 |   |
| Cash      and cash equivalents at beginning of year                      |                  | 40,873  |   |   | 1,839 |   |
| Cash      and cash equivalents at end of period                          |                  | 34,693  |   |   | 4,583 |   |
| Less      cash at discontinued operations                                |                  | -       |   |   | (496 | ) |
| Cash      and cash equivalents at end of period                          | $                     | 34,693  |   | $ | 4,087 |   |
|                                                                     |                  |    |   |   |   |   |

----

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

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

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

|                                                      | Three      Months Ended |   | Six      Months Ended |   |
|-----------------------------------------------------------|-------------------------|--------|-----------------------|--------|
|                                                      | June      30,           |   | June      30,         |   |
|                                                      | 2008                    |   | 2007                  |   | 2008 |   | 2007 |   |
| (Loss)      income from continuing operations             | $                       | (1,168 | )                     | $      | 417 |   | $ | (1,079 | ) | $ | 1,179 |   |
| Loss      from discontinued operations                    |                    | (105   | )a                    |   | (176 | ) |   | (105 | )a |   | (200 | ) |
| Net      (loss) income                                    | $                       | (1,273 | )                     | $      | 241 |   | $ | (1,184 | ) | $ | 979 |   |
|                                                      |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Weighted      average common shares outstanding           |                    | 7,631  |                  |   | 7,568 |   |   | 7,599 |   |   | 7,559 |   |
| Add:  Dilutive      stock options               |                    | -      |                  |   | 97 |   |   | - |   |   | 100 |   |
| Restricted      stock                                     |                    | -      |                  |   | 25 |   |   | - |   |   | 21 |   |
| Weighted      average common shares outstanding for       |                    |   |                  |   |   |   |   |   |   |   |   |   |
| purposes      of calculating diluted net (loss) income    |                    |   |                  |   |   |   |   |   |   |   |   |   |
| per      share                                            |                    | 7,631  |                  |   | 7,690 |   |   | 7,599 |   |   | 7,680 |   |
|                                                      |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Diluted      net (loss) income per share of common stock: |                    |   |                  |   |   |   |   |   |   |   |   |   |
| Continuing      operations                                | $                       | (0.16  | )                     | $      | 0.05 |   | $ | (0.15 | ) | $ | 0.15 |   |
| Discontinued      operations                              |                    | (0.01  | )a                    |   | (0.02 | ) |   | (0.01 | )a |   | (0.02 | ) |
| Diluted      net (loss) income per share of common stock  | $                       | (0.17  | )                     | $      | 0.03 |   | $ | (0.16 | ) | $ | 0.13 |   |
|                                                      |                    |   |                  |   |   |   |   |   |   |   |   |   |

| a.   | Relates      to the revised amount of Texas Margin Tax accrued on Escarpment Village      income earned during 2007 (see Note7). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------|

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

----

Table of Contents

----

Table of Contents
| 4.   | INVESTMENT      IN UNCONSOLIDATED AFFILIATE |
|----------------|---------------------------------------------|

|                |   | Three      Months Ended |   | Six      Months Ended |
|---------------------|--------|-------------------------|--------|-----------------------|
|                |   | June      30, 2008      |   | June      30, 2008    |
|                |   |                    |   |                  |
| Total      revenues | $      | 1,701                   | $      | 3,258                 |
| Net      income     | $      | 443                     | $      | 1,555                 |

| 5.   | DEBT      OUTSTANDING |
|----------------|-----------------------|

| ·   | $40.0      million of borrowings outstanding under seven unsecured term loans,      including two $5.0 million loans, two $8.0 million loans, a $7.0 million      loan and two $3.5 million loans, all of which will mature in December      2011. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $21.4      million of borrowings outstanding under the Lantana Promissory Note, which      matures in January 2018. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | $2.0      million of borrowings outstanding under the W Austin Hotel &      Residences project construction loan, which matures in September      2011. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | INTEREST      COST AND STOCK-BASED COMPENSATION |
|----------------|-------------------------------------------------|

----

Table of Contents
|                                                          | Three      Months Ended |   | Six      Months Ended |   |
|---------------------------------------------------------------|-------------------------|--------|-----------------------|--------|
|                                                          | June      30,           |   | June      30,         |   |
|                                                          | 2008                    |   | 2007                  |   | 2008 |   | 2007 |   |
| Stock      options awarded to employees (including directors) | $                       | 94     |                  | $      | 118 |   | $ | 189 |   | $ | 235 |   |
| Restricted      stock units                                   |                    | 193    |                  |   | 157 |   |   | 386 |   |   | 665 |   |
| Less      capitalized amounts                                 |                    | (46    | )                     |   | (43 | ) |   | (92 | ) |   | (141 | ) |
| Impact      on (loss) income from continuing operations       |                    |   |                  |   |   |   |   |   |   |   |   |   |
| before      income taxes                                      | $                       | 241    |                  | $      | 232 |   | $ | 483 |   | $ | 759 |   |

| 7.   | DISCONTINUED      OPERATIONS |
|----------------|------------------------------|

|                                     | Three      Months Ended |   | Six      Months Ended |   |
|------------------------------------------|-------------------------|--------|-----------------------|--------|
|                                     | June      30, 2007      |   | June      30, 2007    |   |
| Rental      income                       | $                       | 867    |                  | $      | 1,756 |   |
| Rental      property costs               |                    | (552   | )                     |   | (896 | ) |
| Depreciation                             |                    | (264   | )                     |   | (526 | ) |
| General      and administrative expenses |                    | (18    | )                     |   | (33 | ) |
| Interest      expensea                   |                    | (329   | )                     |   | (659 | ) |
| Interest      income                     |                    | 25     |                  |   | 50 |   |
| Loss      before income taxes            |                    | (271   | )                     |   | (308 | ) |
| Benefit      from income taxes           |                    | 95     |                  |   | 108 |   |
| Loss      from discontinued operations   | $                       | (176   | )                     | $      | (200 | ) |
|                                     |                    |   |                  |   |   |   |

| a.   | Relates      to interest expense from the Escarpment Village loan from TIAA and does      not include any additional allocations of  interest. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | BUSINESS      SEGMENTS |
|----------------|------------------------|

----

Table of Contents

|                                       | Real      Estate Operationsa |    | Commercial      Leasing |   | Other  |   | Total  |   |
|--------------------------------------------|------------------------------|---------|-------------------------|--------|--------|--------|--------|--------|
|                                       | (In      Thousands)          |    |
| Three Months Ended      June 30, 2008      |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Revenues                                   | $                            | 3,054   |                    | $      | 1,169  |   | $      | -      |   | $ | 4,223 |   |
| Cost      of sales, excluding depreciation |                         | (2,652  | )                       |   | (923   | )      |   | -      |   |   | (3,575 | ) |
| Depreciation                               |                         | (48     | )                       |   | (346   | )      |   | -      |   |   | (394 | ) |
| General      and administrative expenses   |                         | (1,631  | )                       |   | (266   | )      |   | -      |   |   | (1,897 | ) |
| Operating      loss                        | $                            | (1,277  | )                       | $      | (366   | )      | $      | -      |   | $ | (1,643 | ) |
| Loss      from discontinued operations     | $                            | -       |                    | $      | (105   | )b     | $      | -      |   | $ | (105 | )b |
| Benefit      from income taxes             | $                            | 364     |                    | $      | -      |   | $      | -      |   | $ | 364 |   |
| Capital      expenditures                  | $                            | 10,765  |                    | $      | 79     |   | $      | -      |   | $ | 10,844 |   |
| Total      assets                          | $                            | 197,199 |                    | $      | 33,740 |   | $      | 8,043  | c | $ | 238,982 |   |
|                                       |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Three Months Ended      June 30, 2007      |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Revenues                                   | $                            | 6,077   |                    | $      | 711    |   | $      | -      |   | $ | 6,788 |   |
| Cost      of sales, excluding depreciation |                         | (3,406  | )                       |   | (763   | )      |   | -      |   |   | (4,169 | ) |
| Depreciation                               |                         | (38     | )                       |   | (168   | )      |   | -      |   |   | (206 | ) |
| General      and administrative expenses   |                         | (1,587  | )                       |   | (241   | )      |   | -      |   |   | (1,828 | ) |
| Operating      income (loss)               | $                            | 1,046   |                    | $      | (461   | )      | $      | -      |   | $ | 585 |   |
| Loss      from discontinued operations     | $                            | -       |                    | $      | (176   | )      | $      | -      |   | $ | (176 | ) |
| Provision      for income taxes            | $                            | (189    | )                       | $      | -      |   | $      | -      |   | $ | (189 | ) |
| Capital      expenditures                  | $                            | 7,967   |                    | $      | 212    |   | $      | -      |   | $ | 8,179 |   |
| Total      assets                          | $                            | 145,473 |                    | $      | 61,768 | d      | $      | 8,795  | c | $ | 216,036 |   |
|                                       |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Six Months Ended June      30, 2008        |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Revenues                                   | $                            | 7,170   |                    | $      | 2,120  |   | $      | -      |   | $ | 9,290 |   |
| Cost      of sales, excluding depreciation |                         | (5,870  | )                       |   | (1,739 | )      |   | -      |   |   | (7,609 | ) |
| Depreciation                               |                         | (94     | )                       |   | (683   | )      |   | -      |   |   | (777 | ) |
| General      and administrative expenses   |                         | (3,056  | )                       |   | (498   | )      |   | -      |   |   | (3,554 | ) |
| Operating      loss                        | $                            | (1,850  | )                       | $      | (800   | )      | $      | -      |   | $ | (2,650 | ) |
| Loss      from discontinued operations     | $                            | -       |                    | $      | (105   | )b     | $      | -      |   | $ | (105 | )b |
| Benefit      from income taxes             | $                            | 285     |                    | $      | -      |   | $      | -      |   | $ | 285 |   |
| Capital      expenditures                  | $                            | 19,065  |                    | $      | 352    |   | $      | -      |   | $ | 19,417 |   |
|                                       |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Six Months Ended June      30, 2007        |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Revenues                                   | $                            | 10,724  |                    | $      | 1,381  |   | $      | -      |   | $ | 12,105 |   |
| Cost      of sales, excluding depreciation |                         | (4,989  | )                       |   | (1,531 | )      |   | -      |   |   | (6,520 | ) |
| Depreciation                               |                         | (70     | )                       |   | (413   | )      |   | -      |   |   | (483 | ) |
| General      and administrative expenses   |                         | (3,308  | )                       |   | (506   | )      |   | -      |   |   | (3,814 | ) |
| Operating      income (loss)               | $                            | 2,357   |                    | $      | (1,069 | )      | $      | -      |   | $ | 1,288 |   |
| Loss      from discontinued operations     | $                            | -       |                    | $      | (200   | )      | $      | -      |   | $ | (200 | ) |
| Provision      for income taxes            | $                            | (631    | )                       | $      | -      |   | $      | -      |   | $ | (631 | ) |
| Capital      expenditures                  | $                            | 17,143  |                    | $      | 334    |   | $      | -      |   | $ | 17,477 |   |
|                                       |                         |    |                    |   |   |   |   |   |   |   |   |   |

----

Table of Contents

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

| b.   | Relates      to the revised amount of Texas Margin Tax accrued on Escarpment Village      income earned during 2007 (see note7). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------|

| c.   | Primarily      includes deferred tax assets. |
|----------------|----------------------------------------------|

| d.   | Includes      assets from the discontinued operations of Escarpment Village, which      Stratus sold on October 12, 2007, totaling $34.9 million, net of      accumulated depreciation of $1.3 million, at June 30,  2007. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.   | NEW      ACCOUNTING STANDARDS |
|----------------|-------------------------------|

----

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

----

Table of Contents

Item 2.  Management’s Discussion andAnalysis of Financial Condition and Results ofOperations.

|                  |      |   | Acreage                             |   |        |
|-----------------------|-----------|--------|-------------------------------------|--------|-------------|
|                  |      |   | Developed      or Under Development |   | Undeveloped |   |   |
|                  | Developed |   | Single                              |   | Multi-      |   |   |   |   |   | Single |   |   |   |   |   | Total |
|                  | Lots      |   | Family                              |   | family      |   | Commercial |   | Total |   | Family |   | Commercial |   | Total |   | Acreage |
| Austin                |      |   |                                |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Barton      Creek     | 23        |   | 642                                 |   | 249         |   | 376 |   | 1,267 |   | 391 |   | 20 |   | 411 |   | 1,678 |
| Lantana               | -         |   | -                                   |   | -           |   | 223 |   | 223 |   | - |   | - |   | - |   | 223 |
| Circle      C         | 163       | a      | 148                                 | a      | -           |   | 12 |   | 160 |   | - |   | 375 |   | 375 |   | 535 |
| W      Austin Hotel   |      |   |                                |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| &      Residences | -         |   | -                                   |   | -           |   | 2 | b | 2 |   | - |   | - |   | - |   | 2 |
| San      Antonio      |      |   |                                |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Camino      Real      | -         |   | -                                   |   | -           |   | - |   | - |   | - |   | 2 |   | 2 |   | 2 |
| Total                 | 186       |   | 790                                 |   | 249         |   | 613 |   | 1,652 |   | 391 |   | 397 |   | 788 |   | 2,440 |
|                  |      |   |                                |   |        |   |   |   |   |   |   |   |   |   |   |   |   |

| a.   | Relates      to Meridian, an 800-lot residentialdevelopment. |
|----------------|--------------------------------------------------------------|

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

----

Table of Contents
|                              | As      of June 30, 2008 |
|-----------------------------------|--------------------------|
|                              | Developed                |   | Under      Development |   | Potential      Development      a |   | Total |
|                              |                     |   |   |   |   |   |   |
| Barton      Creek:                |                     |   |   |   |   |   |   |
| Verano      Drive                 | -                        |   | 71 |   | - |   | 71 |
| Calera      Drive                 | 8                        |   | - |   | - |   | 8 |
| Calera      Court Courtyard Homes | 5                        |   | - |   | - |   | 5 |
| Mirador      Estate               | 2                        |   | - |   | - |   | 2 |
| Wimberly      Lane Phase II       | 1                        |   | - |   | - |   | 1 |
| Amarra      Drive                 | 7                        |   | 35 |   | 89 |   | 131 |
| Amarra      Townhomes             | -                        |   | - |   | 97 |   | 97 |
| Section      N Multi-family       | -                        |   | - |   | 1,860 |   | 1,860 |
| Other      Barton Creek Sections  | -                        |   | - |   | 154 |   | 154 |
|                              |                     |   |   |   |   |   |   |
| Circle      C:                    |                     |   |   |   |   |   |   |
| Meridian                          | 163                      |   | 57 |   | - |   | 220 |
| Total      Residential Lots       | 186                      |   | 163 |   | 2,200 |   | 2,549 |
|                              |                     |   |   |   |   |   |   |

| a.   | Our      development of the properties identified under the heading “Potential      Development” is dependent upon the approval of our development plans and      permits by governmental agencies, including the City of Austin. Those      governmental agencies may either not approve one or more development plans      and permit applications related to such properties or require us to modify      our development plans. Accordingly, our development strategy with respect      to those properties may change in thefuture. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents
|                               | As      of June 30, 2008 |
|------------------------------------|--------------------------|
|                               | Developed                |   | Under      Development |   | Potential      Development      a |   |  Total |
|                               |                     |   |   |   |   |   |   |
| Barton      Creek:                 |                     |   |   |   |   |   |   |
| Barton      Creek Village Phase I  | 22,000                   |   | - |   | - |   | 22,000 |
| Barton      Creek Village Phase II | -                        |   | - |   | 18,000 |   | 18,000 |
| Entry      Corner                  | -                        |   | - |   | 5,000 |   | 5,000 |
| Amarra      Retail/Office          | -                        |   | - |   | 90,000 |   | 90,000 |
| Section      N                     | -                        |   | - |   | 1,500,000 |   | 1,500,000 |
|                               |                     |   |   |   |   |   |   |
| Circle      C:                     |                     |   |   |   |   |   |   |
| Chase      Ground Lease            | 4,000                    |   | - |   | - |   | 4,000 |
| Tract      106                     | -                        |   | 22,000 |   | - |   | 22,000 |
| Tract      110                     | -                        |   | - |   | 760,000 |   | 760,000 |
| Tract      107                     | -                        |   | - |   | 110,000 |   | 110,000 |
| Tract      101                     | -                        |   | - |   | 90,000 |   | 90,000 |
| Tract      102                     | -                        |   | - |   | 25,000 |   | 25,000 |
| Tract      114                     | -                        |   | - |   | 5,000 |   | 5,000 |
|                               |                     |   |   |   |   |   |   |
| Lantana:                           |                     |   |   |   |   |   |   |
| 7500      Rialto                   | 150,000                  |   | - |   | - |   | 150,000 |
| Advanced      Micro Devices        |                     |   |   |   |   |   |   |
| Option      Tracts                 | -                        |   | - |   | 760,000 |   | 760,000 |
| Tract      GR1                     | -                        |   | - |   | 325,000 |   | 325,000 |
| Tract      G07                     | -                        |   | - |   | 210,000 |   | 210,000 |
| Tract      CS5                     | -                        |   | - |   | 175,000 |   | 175,000 |
| Tract      CS1-CS3                 | -                        |   | - |   | 150,000 |   | 150,000 |
| Tract      LR1                     | -                        |   | - |   | 75,000 |   | 75,000 |
| Tract      L04                     | -                        |   | - |   | 70,000 |   | 70,000 |
|                               |                     |   |   |   |   |   |   |
| Austin      290 Tract              | -                        |   | - |   | 20,000 |   | 20,000 |
| Total      Square Feet             | 176,000                  |   | 22,000 |   | 4,388,000 |   | 4,586,000 |
|                               |                     |   |   |   |   |   |   |

| a.   | Our      development of the properties identified under the heading “Potential      Development” is dependent upon the approval of our development plans and      permits by governmental agencies, including the City of Austin. Those      governmental agencies may either not approve one or more development plans      and permit applications related to such properties or require us to modify      our development plans. Accordingly, our development strategy with respect      to those properties may change in thefuture. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

|                                           | Second      Quarter |   | Six      Months |   |
|------------------------------------------------|---------------------|--------|-----------------|--------|
|                                           | 2008                |   | 2007            |   | 2008 |   | 2007 |   |
| Revenues:                                      |                |   |            |   |   |   |   |   |   |   |   |   |
| Real      estate operations                    | $                   | 3,054  |            | $      | 6,077 |   | $ | 7,170 |   | $ | 10,724 |   |
| Commercial      leasing                        |                | 1,169  |            |   | 711 |   |   | 2,120 |   |   | 1,381 |   |
| Total      revenues                            | $                   | 4,223  |            | $      | 6,788 |   | $ | 9,290 |   | $ | 12,105 |   |
|                                           |                |   |            |   |   |   |   |   |   |   |   |   |
| Operating      (loss) income                   | $                   | (1,643 | )               | $      | 585 |   | $ | (2,650 | ) | $ | 1,288 |   |
|                                           |                |   |            |   |   |   |   |   |   |   |   |   |
| Benefit      from (provision for) income taxes | $                   | 364    |            | $      | (189 | ) | $ | 285 |   | $ | (631 | ) |
|                                           |                |   |            |   |   |   |   |   |   |   |   |   |
| (Loss)      income from continuing operations  | $                   | (1,168 | )               | $      | 417 |   | $ | (1,079 | ) | $ | 1,179 |   |
| Loss      from discontinued operations         |                | (105   | )a              |   | (176 | ) |   | (105 | )a |   | (200 | ) |
| Net      (loss) income                         | $                   | (1,273 | )               | $      | 241 |   | $ | (1,184 | ) | $ | 979 |   |
|                                           |                |   |            |   |   |   |   |   |   |   |   |   |

| a.   | Relates      to the revised amount of Texas Margin Tax accrued on Escarpment Village      income earned during 2007 (see note7). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------|

|                                        | Second      Quarter |   | Six      Months |   |
|---------------------------------------------|---------------------|--------|-----------------|--------|
|                                        | 2008                |   | 2007            |   | 2008 |   | 2007 |   |
| Revenues:                                   |                |   |            |   |   |   |   |   |   |   |   |   |
| Developed      property sales               | $                   | 2,358  |            | $      | 5,317 |   | $ | 6,262 |   | $ | 8,660 |   |
| Undeveloped      property sales             |                | 41     |            |   | - |   |   | 41 |   |   | 1,083 |   |
| Commissions,      management fees and other |                | 655    |            |   | 760 |   |   | 867 |   |   | 981 |   |
| Total      revenues                         |                | 3,054  |            |   | 6,077 |   |   | 7,170 |   |   | 10,724 |   |
|                                        |                |   |            |   |   |   |   |   |   |   |   |   |
| Cost      of sales, including depreciation  |                | (2,700 | )               |   | (3,444 | ) |   | (5,964 | ) |   | (5,059 | ) |
| General      and administrative expenses    |                | (1,631 | )               |   | (1,587 | ) |   | (3,056 | ) |   | (3,308 | ) |
|                                        |                |   |            |   |   |   |   |   |   |   |   |   |
| Operating      (loss) income                | $                   | (1,277 | )               | $      | 1,046 |   | $ | (1,850 | ) | $ | 2,357 |   |
|                                        |                |   |            |   |   |   |   |   |   |   |   |   |

----

Table of Contents

|                              | Second      Quarter |   |
|-----------------------------------|---------------------|--------|
|                              | 2008                |   | 2007 |   |
|                              | Lots                |   | Revenues |   | Lots |   | Revenues |   |
| Residential      Properties:      |                |   |   |   |   |   |   |   |
| Barton      Creek                 |                |   |   |   |   |   |   |   |
| Calera      Court Courtyard Homes | 1                   |   |  $            635 |   | - |   | $                  - |   |
| Calera      Drive                 | -                   |   | - |   | 2 |   |            809 |   |
| Mirador      Estate               | -                   |   | - |   | 2 |   | 1,559 |   |
| Wimberly      Lane Phase II       |                |   |   |   |   |   |   |   |
| Standard      Homebuilder         | -                   |   | - |   | 3 |   | 522 |   |
|                              |                |   |   |   |   |   |   |   |
| Circle      C                     |                |   |   |   |   |   |   |   |
| Meridian                          | 22                  |   | 1,723 |   | 20 |   | 1,423 |   |
|                              |                |   |   |   |   |   |   |   |
| Deerfield                         | -                   |   | - |   | 15 |   | 1,004 |   |
| Total      Residential            | 23                  |   | $         2,358 |   | 42 |   | $          5,317 |   |
|                              |                |   |   |   |   |   |   |   |

|                              | Six      Months |   |
|-----------------------------------|-----------------|--------|
|                              | 2008            |   | 2007 |   |
|                              | Lots            |   | Revenues |   | Lots |   | Revenues |   |
| Residential      Properties:      |            |   |   |   |   |   |   |   |
| Barton      Creek                 |            |   |   |   |   |   |   |   |
| Calera      Court Courtyard Homes | 1               |   | $             635 |   | - |   | $                 - |   |
| Calera      Drive                 | -               |   | - |   | 2 |   |            809 |   |
| Mirador      Estate               | -               |   | - |   | 2 |   | 1,559 |   |
| Wimberly      Lane Phase II       |            |   |   |   |   |   |   |   |
| Standard      Homebuilder         | 1               |   | 265 | a | 6 |   | 1,045 |   |
|                              |            |   |   |   |   |   |   |   |
| Circle      C                     |            |   |   |   |   |   |   |   |
| Meridian                          | 55              |   | 3,952 |   | 48 |   | 3,239 |   |
|                              |            |   |   |   |   |   |   |   |
| Deerfield                         | 21              |   | 1,410 |   | 30 |   | 2,008 |   |
| Total      Residential            | 78              |   | $          6,262 |   | 88 |   | $         8,660 |   |
|                              |            |   |   |   |   |   |   |   |

| a.   | Includes      $0.1 million for homebuilder contract termination  fee. |
|----------------|-----------------------------------------------------------------------|

----

Table of Contents
|                                     | Second      Quarter |   | Six      Months |   |
|------------------------------------------|---------------------|--------|-----------------|--------|
|                                     | 2008                |   | 2007            |   | 2008 |   | 2007 |   |
| Rental      income                       | $                   | 1,169  |            | $      | 711 |   | $ | 2,120 |   | $ | 1,381 |   |
| Rental      property costs               |                | (923   | )               |   | (763 | ) |   | (1,739 | ) |   | (1,531 | ) |
| Depreciation                             |                | (346   | )               |   | (168 | ) |   | (683 | ) |   | (413 | ) |
| General      and administrative expenses |                | (266   | )               |   | (241 | ) |   | (498 | ) |   | (506 | ) |
| Operating      loss                      | $                   | (366   | )               | $      | (461 | ) | $ | (800 | ) | $ | (1,069 | ) |
|                                     |                |   |            |   |   |   |   |   |   |   |   |   |

----

Table of Contents

----

Table of Contents

| ·   | $40.0      million of borrowings outstanding under seven unsecured term loans,      including two $5.0 million loans, two $8.0 million loans, a $7.0 million      loan and two $3.5 million loans, all of which will mature in December      2011. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $21.4      million of borrowings outstanding under the Lantana Promissory Note, which      matures in January 2018. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | $2.0      million of borrowings outstanding under the W Austin Hotel &      Residences project construction loan, which matures in September      2011. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents
Item 3.  Quantitative and QualitativeDisclosures about Market Risk.

Item 4.  Controls andProcedures.

PART II. – OTHER INFORMATION

Item 2.  Unregistered Sales of EquitySecurities and Use of Proceeds.

|                     |   | (a)      Total |   |                                                                     |   | (c)      Total Number of      |   | (d)      Maximum Number     |
|--------------------------|--------|----------------|--------|--------------------------------------------------------------------------|--------|-------------------------------|--------|-----------------------------|
|                     |   | Number         |   | (b)      Average                                                         |   | Shares      Purchased as Part |   | of      Shares That May     |
|                     |   | of      Shares |   | Price      Paid                                                          |   | of      Publicly Announced    |   | Yet      Be Purchased Under |
| Period                   |   | Purchased      |   | Per      Share                                                           |   | Plans      or Programsa       |   | the      Plans or Programsa |
| April      1 to 30, 2008 |   | 13,260         | b      | $         27.24             | b      | 3,354                         |   | 412,432                     |
| May      1 to 31, 2008   |   | 1,656          |   | 25.56                                                                    |   | 1,656                         |   | 410,776                     |
| June      1 to 30, 2008  |   | 1,800          |   | 23.74                                                                    |   | 1,800                         |   | 408,976                     |
| Total                    |   | 16,716         |   |   $         26.70 |   | 6,810                         |   |                        |
|                     |   |           |   |                                                                     |   |                          |   |                        |

| a.   | In      February 2001, our Board of Directors approved an open market share      purchase program for up to 0.7 million shares of our common stock. The      program does not have an expiration date. Our loan agreement with Comerica      provides a limit of $6.5 million for common stock purchases after      September 30, 2005. At June 30, 2008, $4.0 million remained under the      Comerica agreement for purchases of common  stock. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      9,906 shares ($27.28 per share) tendered to Stratus to cover the cost of      option exercises under the applicable stock incentive    plans. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

Item 6.  Exhibits.

SIGNATURE

----

Table of Contents
EXHIBIT INDEX

|    |                                                                                                                                                                                                                                                                                                                                                           | Filed          |                           |          |            |   |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------|---------------|-----------------|--------|
| Exhibit |                                                                                                                                                                                                                                                                                                                                                           | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title                                                                                                                                                                                                                                                                                                                                             | Form      10-Q | Form                           | File      No. | Date      Filed |
| 3.1     | Amended      and Restated Certificate of Incorporation of Stratus.                                                                                                                                                                                                                                                                                             |           | 10-Q                           | 000-19989     | 05/17/2004      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 3.2     | Certificate      of Amendment to the Amended and Restated Certificate of Incorporation of      Stratus, dated May 14, 1998.                                                                                                                                                                                                                                    |           | 10-Q                           | 000-19989     | 05/17/2004      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 3.3     | Certificate      of Amendment to the Amended and Restated Certificate of Incorporation of      Stratus, dated May 25, 2001.                                                                                                                                                                                                                                    |           | 10-K                           | 000-19989     | 03/22/2002      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 3.4     | By-laws      of Stratus, as amended as of November 6, 2007.                                                                                                                                                                                                                                                                                                    | X              |                           |          |            |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 4.1     | 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. |           | 8-A                            | 000-19989     | 05/23/2002      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 4.2     | Amendment      No. 1 to Rights Agreement between Stratus Properties Inc. and Mellon      Investor Services LLC, as Rights Agent, dated as of November 7,      2003.                                                                                                                                                                                            |           | 8-K                            | 000-19989     | 11/14/2003      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.1    | Third      Modification and Extension Agreement by and between Stratus Properties      Inc., Stratus Properties Operating Co., L.P., Circle C Land, L.P., Austin      290 Properties, Inc., Calera Court, L.P., Oly Stratus Barton Creek I Joint      Venture and Comerica Bank effective May 30, 2008.                                                        |           | 8-K                            | 000-19989     | 07/17/2008      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.2    | Second      Modification and Extension Agreement by and between Stratus Properties      Inc., Stratus Properties Operating Co., L.P., Circle C Land, L.P., Austin      290 Properties, Inc., Calera Court, L.P., and Comerica Bank effective May      30, 2007.                                                                                                |           | 8-K                            | 000-19989     | 02/08/2008      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.3    | Loan      Agreement by and between Stratus Properties Inc., Stratus Properties      Operating Co., L.P., Circle C Land, L.P., Austin 290 Properties, Inc.,      Calera Court, L.P., and Comerica Bank dated as of September 30,      2005.                                                                                                                     |           | 8-K                            | 000-19989     | 10/05/2005      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.4    | Construction      Loan Agreement dated May 2, 2008, by and between CJUF II Stratus Block 21      LLC and Corus Bank, N.A.                                                                                                                                                                                                                                      | X              |                           |          |            |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.5    | Promissory      Note dated May 2, 2008, by and between CJUF II Stratus Block 21 LLC and      Corus Bank, N.A.                                                                                                                                                                                                                                                  | X              |                           |          |            |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.6    | Revolving      Promissory Note by and between Stratus Properties Inc., Stratus Properties      Operating Co., L.P., Circle C Land, L.P., Austin 290 Properties, Inc.,      Calera Court, L.P., and Comerica Bank dated as of September 30,      2005.                                                                                                          |           | 8-K                            | 000-19989     | 10/05/2005      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.7    | Loan      Agreement dated December 28, 2000, by and between Stratus Properties Inc.      and Holliday Fenoglio Fowler, L.P., subsequently assigned to an affiliate      of First American Asset Management.                                                                                                                                                    |           | 10-K                           | 000-19989     | 03/28/2001      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |

----

Table of Contents

|    |                                                                                                                                                                                                                                                                                               | Filed          |                           |          |            |   |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------|---------------|-----------------|--------|
| Exhibit |                                                                                                                                                                                                                                                                                               | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title                                                                                                                                                                                                                                                                                 | Form      10-Q | Form                           | File      No. | Date      Filed |
| 10.8    | Loan      Agreement dated June 14, 2001, by and between Stratus Properties Inc. and      Holliday Fenoglio Fowler, L.P., subsequently assigned to an affiliate of      First American Asset Management.                                                                                            |           | 10-Q                           | 000-19989     | 11/13/2001      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.9    | Construction      Loan Agreement dated June 11, 2001, between 7500 Rialto Boulevard, L.P.      and Comerica Bank-Texas.                                                                                                                                                                            |           | 10-K                           | 000-19989     | 03/22/2002      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.10   | Modification      Agreement dated January 31, 2003, by and between Lantana Office Properties      I, L.P., formerly 7500 Rialto Boulevard, L.P., and Comerica      Bank-Texas.                                                                                                                     |           | 10-Q                           | 000-19989     | 05/15/2003      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.11   | Second      Modification Agreement dated as of December 29, 2003, to be effective as      of January 31, 2004, by and between Lantana Office Properties I, L.P., a      Texas limited partnership (formerly known as 7500 Rialto Boulevard, L.P.),      as borrower, and Comerica Bank, as lender. |           | 10-K                           | 000-19989     | 3/30/2004       |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.12   | Guaranty      Agreement dated June 11, 2001, by Stratus Properties Inc. in favor of      Comerica Bank-Texas.                                                                                                                                                                                      |           | 10-K                           | 000-19989     | 03/22/2002      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.13   | Loan      Agreement dated September 22, 2003, by and between Calera Court, L.P., as      borrower, and Comerica Bank, as lender.                                                                                                                                                                   |           | 10-Q                           | 000-19989     | 11/14/2003      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.14   | Development      Agreement dated August 15, 2002, between Circle C Land Corp. and City of      Austin.                                                                                                                                                                                             |           | 10-Q                           | 000-19989     | 11/14/2002      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.15   | First      Modification Agreement dated March 27, 2006, by and between Stratus 7000      West Joint Venture, as Old Borrower, and CarrAmerica Lantana, LP, as New      Borrower, and Teachers Insurance and Annuity Association of America, as      Lender.                                        |           | 8-K                            | 000-19989     | 03/29/2006      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.16   | Agreement      of Sale and Purchase dated November 23, 2005, by and between Stratus      Properties Operating Co., L.P., as Seller, and Advanced Micro Devices,      Inc., as Purchaser.                                                                                                           |           | 10-Q                           | 000-19989     | 05/10/2006      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.17   | First      Amendment to Agreement of Sale and Purchase dated April 26, 2006, by and      between Stratus Properties Operating Co., L.P., as Seller, and Advanced      Micro Devices, Inc., as Purchaser.                                                                                           |           | 10-Q                           | 000-19989     | 05/10/2006      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.18   | Deed      of Trust, Assignment of Leases and Rents, Security Agreement and Fixture      Filing dated as of June 30, 2006, by and among Escarpment Village, L.P.      and Teachers Insurance and Annuity Association of America.                                                                    |           | 10-Q                           | 000-19989     | 08/09/2006      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.19   | Promissory      Note dated as of June 30, 2006, by and between Escarpment Village, L.P.      and Teachers Insurance and Annuity Association of America.                                                                                                                                            |           | 10-Q                           | 000-19989     | 08/09/2006      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.20   | Amended      and Restated Loan Agreement between Stratus Properties Inc. and American      Strategic Income Portfolio Inc.-II dated as of December 12,      2006.                                                                                                                                  |           | 10-K                           | 000-19989     | 03/16/2007      |
|    |                                                                                                                                                                                                                                                                                               |           |                           |          |            |
| 10.21   | Amended      and Restated Loan Agreement between Stratus Properties Inc. and American      Select Portfolio Inc. dated as of December 12, 2006.                                                                                                                                                    |           | 10-K                           | 000-19989     | 03/16/2007      |

----

Table ofContents

|    |                                                                                                                                                                                                                                                    | Filed          |                           |          |            |   |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------|---------------|-----------------|--------|
| Exhibit |                                                                                                                                                                                                                                                    | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title                                                                                                                                                                                                                                      | Form      10-Q | Form                           | File      No. | Date      Filed |
| 10.22   | Loan      Agreement between Stratus Properties Inc. and Holliday Fenoglio Fowler,      L.P. dated as of December 12, 2006.                                                                                                                              |           | 10-K                           | 000-19989     | 03/16/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.23   | Loan      Agreement between Stratus Properties Inc. and Holliday Fenoglio Fowler,      L.P. dated as of December 12, 2006.                                                                                                                              |           | 10-K                           | 000-19989     | 03/16/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.24   | Letter      Agreement between Stratus Properties Inc. and Canyon-Johnson Urban Fund      II, L.P., dated as of May 4, 2007.                                                                                                                             |           | 10-Q                           | 000-19989     | 08/09/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.25   | Loan      Agreement between Stratus Properties Inc. and Holliday Fenoglio Fowler,      L.P. dated as of June 1, 2007, subsequently assigned to American Select      Portfolio Inc., an affiliate of First American Asset      Management.               |           | 10-Q                           | 000-19989     | 08/09/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.26   | Loan      Agreement between Stratus Properties Inc. and Holliday Fenoglio Fowler,      L.P. dated as of June 1, 2007, subsequently assigned to American Strategic      Income Portfolio Inc., an affiliate of First American Asset      Management.     |           | 10-Q                           | 000-19989     | 08/09/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.27   | Loan      Agreement between Stratus Properties Inc. and Holliday Fenoglio Fowler,      L.P. dated as of June 1, 2007, subsequently assigned to American Strategic      Income Portfolio Inc.-III, an affiliate of First American Asset      Management. |           | 10-Q                           | 000-19989     | 08/09/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.28   | Purchase      and Sale Agreement dated as of July 9, 2007, between      Escarpment Village, L.P. as Seller and Christopher Investment      Company, Inc. as Purchaser.                                                                             |           | 8-K                            | 000-19989     | 10/18/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.29   | Promissory      Note dated as of December 14, 2007, between Lantana Office Properties I,      L.P., as borrower, and The Lincoln National Life Insurance Company, as      lender.                                                                       |           | 8-K                            | 000-19989     | 12/14/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.30*  | Stratus’      Performance Incentive Awards Program, as amended, effective February 11,      1999.                                                                                                                                                 |           | 10-Q                           | 000-19989     | 05/17/2004      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.31*  | Stratus      Properties Inc. Stock Option Plan, as amended andrestated.                                                                                                                                                                                 |           | 10-Q                           | 000-19989     | 05/10/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.32*  | Stratus      Properties Inc. 1996 Stock Option Plan for Non-Employee Directors, as      amended and restated.                                                                                                                                           |           | 10-Q                           | 000-19989     | 05/10/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.33*  | Stratus      Properties Inc. 1998 Stock Option Plan, as amended and      restated.                                                                                                                                                                      |           | 10-Q                           | 000-19989     | 05/10/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.34*  | Form      of Notice of Grant of Nonqualified Stock Options under the 1998 Stock      Option Plan.                                                                                                                                                       |           | 10-Q                           | 000-19989     | 8/12/2005       |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.35*  | Form      of Restricted Stock Unit Agreement under the 1998 Stock Option      Plan.                                                                                                                                                                     |           | 10-Q                           | 000-19989     | 05/10/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.36*  | Stratus      Properties Inc. 2002 Stock Incentive Plan, as amended and      restated.                                                                                                                                                                   |           | 10-Q                           | 000-19989     | 05/10/2007      |
|    |                                                                                                                                                                                                                                                    |           |                           |          |            |
| 10.37*  | Form      of Notice of Grant of Nonqualified Stock Options under the 2002 Stock      Incentive Plan.                                                                                                                                                    |           | 10-Q                           | 000-19989     | 08/12/2005      |

----

Table ofContents

|    |                                                                                                                                  | Filed          |                           |          |            |   |
|---------|---------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------|---------------|-----------------|--------|
| Exhibit |                                                                                                                                  | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title                                                                                                                    | Form      10-Q | Form                           | File      No. | Date      Filed |
| 10.38*  | Form      of Restricted Stock Unit Agreement under the 2002 Stock Incentive      Plan.                                                |           | 10-Q                           | 000-19989     | 05/10/2007      |
|    |                                                                                                                                  |           |                           |          |            |
| 10.39*  | Stratus      Director Compensation.                                                                                                   |           | 10-K                           | 000-19989     | 03/16/2006      |
|    |                                                                                                                                  |           |                           |          |            |
| 10.40*  | Change      of Control Agreement between Stratus Properties Inc. and William H.      Armstrong III, effective as of January 26, 2007. |           | 8-K                            | 000-19989     | 01/30/2007      |
|    |                                                                                                                                  |           |                           |          |            |
| 10.41*  | Change      of Control Agreement between Stratus Properties Inc. and John E. Baker,      effective as of January 26, 2007.            |           | 10-K                           | 000-19989     | 01/30/2007      |
|    |                                                                                                                                  |           |                           |          |            |
| 15.1    | Letter      from PricewaterhouseCoopers LLP regarding the unaudited interim financial      statements.                                | X              |                           |          |            |
|    |                                                                                                                                  |           |                           |          |            |
| 31.1    | Certification      of Principal Executive Officer pursuant to Rule      13a-14(a)/15d-14(a).                                          | X              |                           |          |            |
|    |                                                                                                                                  |           |                           |          |            |
| 31.2    | Certification      of Principal Financial Officer pursuant to Rule      13a-14(a)/15d-14(a).                                          | X              |                           |          |            |
|    |                                                                                                                                  |           |                           |          |            |
| 32.1    | Certification      of Principal Executive Officer pursuant to 18 U.S.C. Section      1350.                                            | X              |                           |          |            |
|    |                                                                                                                                  |           |                           |          |            |
| 32.2    | Certification      of Principal Financial Officer pursuant to 18 U.S.C. Section      1350.                                            | X              |                           |          |            |
|    |                                                                                                                                  |           |                           |          |            |

----