----

|                                                       |
|------------------------------------------------------------|
|                                                       |
| 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 March 31, 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 Income    (Unaudited)                                    | 3      |
|                                                                                |   |
| Consolidated Statements of Cash Flows      (Unaudited)                              | 4      |
|                                                                                |   |
| Notes to Consolidated Financial Statements      (Unaudited)                         | 5      |
|                                                                                |   |
| Report of Independent Registered Public Accounting      Firm                        | 10     |
|                                                                                |   |
| Item 2.  Management's Discussion and Analysis of      Financial Condition |   |
| and Results of Operations                                                           | 11     |
|                                                                                |   |
| Item 3.  Quantitative and Qualitative Disclosures      about Market Risk  | 17     |
|                                                                                |   |
| Item 4.  Controls and    Procedures                                       | 18     |
|                                                                                |   |
| Part II.  Other Information                                               | 18     |
|                                                                                |   |
| Item 2.  Unregistered Sales of Equity      Securities and Use of Proceeds | 18     |
|                                                                                |   |
| Item 4.  Submission of Matters to a Vote of      Security Holders         | 18     |
|                                                                                |   |
| Item 6.  Exhibits                                                         | 18     |
|                                                                                |   |
| Signature                                                                           | 19     |
|                                                                                |   |
| Exhibit Index                                                                       | E-1    |
|                                                                                |   |

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Table of Contents
FINANCIAL

Item 1

CONSOLIDATED BALANCE SHEETS (Unaudited)

|                                                               | March      31, |    | December      31, |   |
|--------------------------------------------------------------------|----------------|---------|-------------------|--------|
|                                                               | 2008           |    | 2007              |   |
| ASSETS                                                             |           |    |              |   |   |   |
| Current      assets:                                               |           |    |              |   |   |   |
| Cash      and cash equivalents                                     | $              | 37,730  |              | $      | 40,873 |   |
| Restricted      cash                                               |           | 111     |              |   | 112 |   |
| Accounts      receivable                                           |           | 1,202   |              |   | 2,315 |   |
| Notes      receivable from property sales                          |           | 306     |              |   | 311 |   |
| Deposits,      prepaid expenses and other                          |           | 45      |              |   | 79 |   |
| Deferred      tax asset                                            |           | 1,279   |              |   | 1,401 |   |
| Total      current assets                                          |           | 40,673  |              |   | 45,091 |   |
| Real      estate, commercial leasing assets and facilities, net:   |           |    |              |   |   |   |
| Property      held for sale – developed or under development |           | 130,556 |              |   | 129,759 |   |
| Property      held for sale – undeveloped                    |           | 16,644  |              |   | 16,523 |   |
| Property      held for use, net                                    |           | 25,246  |              |   | 24,421 |   |
| Investment      in unconsolidated affiliate                        |           | 2,782   |              |   | 4,226 |   |
| Deferred      tax asset                                            |           | 5,653   |              |   | 5,534 |   |
| Other      assets                                                  |           | 2,920   |              |   | 2,803 |   |
| Total      assets                                                  | $              | 224,474 |              | $      | 228,357 |   |
|                                                               |           |    |              |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                    |           |    |              |   |   |   |
| Current      liabilities:                                          |           |    |              |   |   |   |
| Accounts      payable and accrued liabilities                      | $              | 5,825   |              | $      | 6,324 |   |
| Accrued      interest, property taxes and other                    |           | 2,598   |              |   | 5,623 |   |
| Current      portion of long-term debt                             |           | 267     |              |   | 242 |   |
| Total      current liabilities                                     |           | 8,690   |              |   | 12,189 |   |
| Long-term      debt                                                |           | 61,190  |              |   | 61,258 |   |
| Other      liabilities                                             |           | 2,296   |              |   | 2,510 |   |
| Total      liabilities                                             |           | 72,176  |              |   | 75,957 |   |
|                                                               |           |    |              |   |   |   |
| Stockholders’      equity:                                   |           |    |              |   |   |   |
| Preferred      stock                                               |           | -       |              |   | - |   |
| Common      stock                                                  |           | 82      |              |   | 81 |   |
| Capital      in excess of par value of common stock                |           | 196,554 |              |   | 195,898 |   |
| Accumulated      deficit                                           |           | (29,211 | )                 |   | (29,300 | ) |
| Common      stock held in treasury                                 |           | (15,127 | )                 |   | (14,279 | ) |
| Total      stockholders’ equity                              |           | 152,298 |              |   | 152,400 |   |
| Total      liabilities and stockholders’ equity              | $              | 224,474 |              | $      | 228,357 |   |
|                                                               |           |    |              |   |   |   |

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Table of Contents
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

|                                                   | Three      Months Ended |   |
|--------------------------------------------------------|-------------------------|--------|
|                                                   | March      31,          |   |
|                                                   | 2008                    |   | 2007 |   |
| Revenues:                                              |                    |   |   |   |   |   |
| Real      estate                                       | $                       | 3,904  |   | $ | 4,426 |   |
| Rental      income                                     |                    | 951    |   |   | 670 |   |
| Commissions,      management fees and other            |                    | 212    |   |   | 221 |   |
| Total      revenues                                    |                    | 5,067  |   |   | 5,317 |   |
| Cost      of sales:                                    |                    |   |   |   |   |   |
| Real      estate, net                                  |                    | 3,218  |   |   | 1,593 |   |
| Rental                                                 |                    | 816    |   |   | 758 |   |
| Depreciation                                           |                    | 383    |   |   | 277 |   |
| Total      cost of sales                               |                    | 4,417  |   |   | 2,628 |   |
| General      and administrative expenses               |                    | 1,657  |   |   | 1,986 |   |
| Total      costs and expenses                          |                    | 6,074  |   |   | 4,614 |   |
| Operating      (loss) income                           |                    | (1,007 | ) |   | 703 |   |
| Interest      expense, net                             |                    | (330   | ) |   | (3 | ) |
| Interest      income                                   |                    | 949    |   |   | 504 |   |
| Equity      in unconsolidated affiliate’s income |                    | 556    |   |   | - |   |
| Income      from continuing operations                 |                    |   |   |   |   |   |
| before      income taxes                               |                    | 168    |   |   | 1,204 |   |
| Provision      for income taxes                        |                    | (79    | ) |   | (442 | ) |
| Income      from continuing operations                 |                    | 89     |   |   | 762 |   |
| Loss      from discontinued operations                 |                    | -      |   |   | (24 | ) |
| Net      income                                        | $                       | 89     |   | $ | 738 |   |
|                                                   |                    |   |   |   |   |   |
| Basic      net income per share of common stock:       |                    |   |   |   |   |   |
| Continuing      operations                             | $                       | 0.01   |   | $ | 0.10 |   |
| Discontinued      operations                           |                    | -      |   |   | - |   |
| Basic      net income per share of common stock        | $                       | 0.01   |   | $ | 0.10 |   |
|                                                   |                    |   |   |   |   |   |
| Diluted      net income per share of common stock:     |                    |   |   |   |   |   |
| Continuing      operations                             | $                       | 0.01   |   | $ | 0.10 |   |
| Discontinued      operations                           |                    | -      |   |   | - |   |
| Diluted      net income per share of common stock      | $                       | 0.01   |   | $ | 0.10 |   |
|                                                   |                    |   |   |   |   |   |
| Average      shares of common stock outstanding:       |                    |   |   |   |   |   |
| Basic                                                  |                    | 7,567  |   |   | 7,549 |   |
| Diluted                                                |                    | 7,651  |   |   | 7,670 |   |
|                                                   |                    |   |   |   |   |   |

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|                                                                     | Three      Months Ended |   |
|--------------------------------------------------------------------------|-------------------------|--------|
|                                                                     | March      31,          |   |
|                                                                     | 2008                    |   | 2007 |   |
| Cash      flow from operating activities:                                |                    |   |   |   |   |   |
| Net      income                                                          | $                       | 89     |   | $ | 738 |   |
| Adjustments      to reconcile net income to net cash provided by         |                    |   |   |   |   |   |
| operating      activities:                                               |                    |   |   |   |   |   |
| Loss      from discontinued operations                                   |                    | -      |   |   | 24 |   |
| Depreciation                                                             |                    | 383    |   |   | 277 |   |
| Cost      of real estate sold                                            |                    | 2,741  |   |   | 2,610 |   |
| Deferred      income taxes                                               |                    | 3      |   |   | 93 |   |
| Stock-based      compensation                                            |                    | 242    |   |   | 527 |   |
| Equity      in unconsolidated affiliate’s income                   |                    | (556   | ) |   | - |   |
| Distribution      of unconsolidated affiliate’s income             |                    | 1,044  |   |   | - |   |
| Deposits                                                                 |                    | (1,012 | ) |   | (446 | ) |
| Other                                                                    |                    | (131   | ) |   | (24 | ) |
| (Increase)      decrease in working capital:                             |                    |   |   |   |   |   |
| Accounts      receivable, prepaid expenses and other                     |                    | 512    |   |   | (135 | ) |
| Accounts      payable, accrued liabilities and other                     |                    | (2,712 | ) |   | (2,228 | ) |
| Net      cash provided by continuing operations                          |                    | 603    |   |   | 1,436 |   |
| Net      cash used in discontinued operations                            |                    | -      |   |   | (169 | ) |
| Net      cash provided by operating activities                           |                    | 603    |   |   | 1,267 |   |
|                                                                     |                    |   |   |   |   |   |
| Cash      flow from investing activities:                                |                    |   |   |   |   |   |
| Purchases      and development of real estate properties                 |                    | (8,300 | ) |   | (9,176 | ) |
| Development      of commercial leasing properties and other expenditures |                    | (273   | ) |   | (93 | ) |
| Municipal      utility district reimbursements                           |                    | 3,753  |   |   | 2,000 |   |
| Return      of investment in unconsolidated affiliate                    |                    | 1,596  |   |   | - |   |
| Net      cash used in continuing operations                              |                    | (3,224 | ) |   | (7,269 | ) |
| Net      cash used in discontinued operations                            |                    | -      |   |   | (29 | ) |
| Net      cash used in investing activities                               |                    | (3,224 | ) |   | (7,298 | ) |
|                                                                     |                    |   |   |   |   |   |
| Cash      flow from financing activities:                                |                    |   |   |   |   |   |
| Borrowings      from revolving credit facility                           |                    | -      |   |   | 10,950 |   |
| Payments      on revolving credit facility                               |                    | -      |   |   | (5,625 | ) |
| Repayments      on project loans                                         |                    | (43    | ) |   | - |   |
| Net      payments for exercised stock options                            |                    | (291   | ) |   | (38 | ) |
| Excess      tax benefit from exercised stock options                     |                    | 64     |   |   | 323 |   |
| Purchases      of Stratus common shares                                  |                    | (252   | ) |   | (153 | ) |
| Net      cash (used in) provided by continuing operations                |                    | (522   | ) |   | 5,457 |   |
| Net      cash used in discontinued operations                            |                    | -      |   |   | (76 | ) |
| Net      cash (used in) provided by financing activities                 |                    | (522   | ) |   | 5,381 |   |
| Net      decrease in cash and cash equivalents                           |                    | (3,143 | ) |   | (650 | ) |
| Cash      and cash equivalents at beginning of year                      |                    | 40,873 |   |   | 1,839 |   |
| Cash      and cash equivalents at end of period                          |                    | 37,730 |   |   | 1,189 |   |
| Less      cash at discontinued operations                                |                    | -      |   |   | (276 | ) |
| Cash      and cash equivalents at end of period                          | $                       | 37,730 |   | $ | 913 |   |
|                                                                     |                    |   |   |   |   |   |

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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

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

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

|                                                | Three      Months Ended |   |
|-----------------------------------------------------|-------------------------|--------|
|                                                | March      31,          |   |
|                                                | 2008                    |   | 2007 |   |
| Income      from continuing operations              | $                       | 89     |   | $ | 762 |   |
| Loss      from discontinued operations              |                    | -      |   |   | (24 | ) |
| Net      income                                     | $                       | 89     |   | $ | 738 |   |
|                                                |                    |   |   |   |   |   |
| Weighted      average common shares outstanding     |                    | 7,567  |   |   | 7,549 |   |
| Add:  Dilutive      stock options         |                    | 70     |   |   | 103 |   |
| Restricted      stock                               |                    | 14     |   |   | 18 |   |
| Weighted      average common shares outstanding for |                    |   |   |   |   |   |
| purposes      of calculating diluted net income     |                    |   |   |   |   |   |
| per      share                                      |                    | 7,651  |   |   | 7,670 |   |
|                                                |                    |   |   |   |   |   |
| Diluted      net income per share of common stock:  |                    |   |   |   |   |   |
| Continuing      operations                          | $                       | 0.01   |   | $ | 0.10 |   |
| Discontinued      operations                        |                    | -      |   |   | - |   |
| Diluted      net income per share of common stock   | $                       | 0.01   |   | $ | 0.10 |   |
|                                                |                    |   |   |   |   |   |

| 3.   | INVESTMENT      IN UNCONSOLIDATED AFFILIATE |
|----------------|---------------------------------------------|

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| Total      revenues | $      | 1,557  |   |
|---------------------|--------|--------|--------|
| Net      income     | $      | 1,112  |   |
|                |   |   |   |

| 4.   | 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. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $21.5      million of borrowings outstanding under the Lantana Promissory Note, which      matures in January 2018. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| 5.   | RESTRICTED      CASH, INTEREST COST AND STOCK-BASEDCOMPENSATION |
|----------------|-----------------------------------------------------------------|

|                                                          | Three      Months Ended |   |
|---------------------------------------------------------------|-------------------------|--------|
|                                                          | March      31,          |   |
|                                                          | 2008                    |   | 2007 |   |
| Stock      options awarded to employees (including directors) | $                       | 95     |   |   | 117 |   |
| Restricted      stock units                                   |                    | 193    |   |   | 508 |   |
| Less      capitalized amounts                                 |                    | (46    | ) |   | (98 | ) |
| Impact      on income from continuing operations              |                    |   |   |   |   |   |
| before      income taxes                                      | $                       | 242    |   |   | 527 |   |
|                                                          |                    |   |   |   |   |   |

| 6.   | DISCONTINUED      OPERATIONS |
|----------------|------------------------------|

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| Rental      income                       | $      | 889    |   |
|------------------------------------------|--------|--------|--------|
| Rental      property costs               |   | (344   | )      |
| Depreciation                             |   | (262   | )      |
| General      and administrative expenses |   | (15    | )      |
| Interest      expensea                   |   | (330   | )      |
| Interest      income                     |   | 25     |   |
| Loss      before income taxes            |   | (37    | )      |
| Benefit      from income taxes           |   | 13     |   |
| Loss      from discontinued operations   | $      | (24    | )      |
|                                     |   |   |   |

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

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

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|                                       | Real      Estate Operationsa |    | Commercial      Leasing |   | Other  |   | Total  |   |
|--------------------------------------------|------------------------------|---------|-------------------------|--------|--------|--------|--------|--------|
|                                       | (In      Thousands)          |    |
| Three Months Ended      March 31, 2008     |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Revenues                                   | $                            | 4,116   |                    | $      | 951    |   | $      | -      |   | $ | 5,067 |   |
| Cost      of sales, excluding depreciation |                         | (3,218  | )                       |   | (816   | )      |   | -      |   |   | (4,034 | ) |
| Depreciation                               |                         | (46     | )                       |   | (337   | )      |   | -      |   |   | (383 | ) |
| General      and administrative expenses   |                         | (1,425  | )                       |   | (232   | )      |   | -      |   |   | (1,657 | ) |
| Operating      loss                        | $                            | (573    | )                       | $      | (434   | )      | $      | -      |   | $ | (1,007 | ) |
| Provision      for income taxes            | $                            | (79     | )                       | $      | -      |   | $      | -      |   | $ | (79 | ) |
| Capital      expenditures                  | $                            | 8,300   |                    | $      | 273    |   | $      | -      |   | $ | 8,573 |   |
| Total      assets                          | $                            | 182,376 |                    | $      | 34,978 |   | $      | 7,120  | b | $ | 224,474 |   |
|                                       |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Three Months Ended      March 31, 2007     |                         |    |                    |   |   |   |   |   |   |   |   |   |
| Revenues                                   | $                            | 4,647   |                    | $      | 670    |   | $      | -      |   | $ | 5,317 |   |
| Cost      of sales, excluding depreciation |                         | (1,593  | )                       |   | (758   | )      |   | -      |   |   | (2,351 | ) |
| Depreciation                               |                         | (32     | )                       |   | (245   | )      |   | -      |   |   | (277 | ) |
| General      and administrative expense    |                         | (1,721  | )                       |   | (265   | )      |   | -      |   |   | (1,986 | ) |
| Operating      income (loss)               | $                            | 1,301   |                    | $      | (598   | )      | $      | -      |   | $ | 703 |   |
| Loss      from discontinued operations     | $                            | -       |                    | $      | (24    | )      | $      | -      |   | $ | (24 | ) |
| Provision      for income taxes            | $                            | (442    | )                       | $      | -      |   | $      | -      |   | $ | (442 | ) |
| Capital      expenditures                  | $                            | 9,176   |                    | $      | 122    |   | $      | -      |   | $ | 9,298 |   |
| Total      assets                          | $                            | 142,836 |                    | $      | 56,224 | c      | $      | 8,557  | b | $ | 207,617 |   |
|                                       |                         |    |                    |   |   |   |   |   |   |   |   |   |

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

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

| c.   | Includes      assets from the discontinued operations of Escarpment Village, which      Stratus sold on October 12, 2007, totaling $34.7 million, net of      accumulated depreciation of $1.0 million, at March 31,    2007. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | JOINT      VENTURE WITH CANYON-JOHNSON URBAN FUND II, L.P. AND LOAN      AGREEMENT |
|----------------|------------------------------------------------------------------------------------|

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

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REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

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Item 2

|              |      |   | Acreage                             |   |        |
|-------------------|-----------|--------|-------------------------------------|--------|-------------|
|              |      |   | Developed      or Under Development |   | Undeveloped |   |   |
|              | Developed |   | Single                              |   | Multi-      |   |   |   |   |   | Single |   |   |   |   |   | Total |
|              | Lots      |   | Family                              |   | family      |   | Commercial |   | Total |   | Family |   | Commercial |   | Total |   | Acreage |
| Austin            |      |   |                                |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Barton      Creek | 24        |   | 642                                 |   | 249         |   | 376 |   | 1,267 |   | 391 |   | 20 |   | 411 |   | 1,678 |
| Lantana           | -         |   | -                                   |   | -           |   | 223 |   | 223 |   | - |   | - |   | - |   | 223 |
| Circle      C     | 67        | a      | 181                                 | a      | -           |   | 37 |   | 218 |   | - |   | 350 |   | 350 |   | 568 |
| Block      21     | -         |   | -                                   |   | -           |   | 2 | b | 2 |   | - |   | - |   | - |   | 2 |
| San      Antonio  |      |   |                                |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Camino      Real  | -         |   | -                                   |   | -           |   | - |   | - |   | - |   | 2 |   | 2 |   | 2 |
| Total             | 91        |   | 823                                 |   | 249         |   | 638 |   | 1,710 |   | 391 |   | 372 |   | 763 |   | 2,473 |
|              |      |   |                                |   |        |   |   |   |   |   |   |   |   |   |   |   |   |

| 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. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------|

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|                                   | First      Quarter |   |
|----------------------------------------|--------------------|--------|
|                                   | 2008               |   | 2007 |   |
| Revenues:                              |               |   |   |   |   |   |
| Real      estate operations            | $                  | 4,116  |   | $ | 4,647 |   |
| Commercial      leasing                |               | 951    |   |   | 670 |   |
| Total      revenues                    | $                  | 5,067  |   | $ | 5,317 |   |
|                                   |               |   |   |   |   |   |
| Operating      (loss) income           | $                  | (1,007 | ) | $ | 703 |   |
|                                   |               |   |   |   |   |   |
| Provision      for income taxes        | $                  | (79    | ) | $ | (442 | ) |
|                                   |               |   |   |   |   |   |
| Income      from continuing operations | $                  | 89     |   | $ | 762 |   |
| Loss      from discontinued operations |               | -      |   |   | (24 | ) |
| Net      income                        | $                  | 89     |   | $ | 738 |   |
|                                   |               |   |   |   |   |   |

|                                        | First      Quarter |   |
|---------------------------------------------|--------------------|--------|
|                                        | 2008               |   | 2007 |   |
| Revenues:                                   |               |   |   |   |   |   |
| Developed      property sales               | $                  | 3,904  |   | $ | 3,343 |   |
| Undeveloped      property sales             |               | -      |   |   | 1,083 |   |
| Commissions,      management fees and other |               | 212    |   |   | 221 |   |
| Total      revenues                         |               | 4,116  |   |   | 4,647 |   |
|                                        |               |   |   |   |   |   |
| Cost      of sales, including depreciation  |               | (3,264 | ) |   | (1,625 | ) |
| General      and administrative expenses    |               | (1,425 | ) |   | (1,721 | ) |
|                                        |               |   |   |   |   |   |
| Operating      (loss) income                | $                  | (573   | ) | $ | 1,301 |   |
|                                        |               |   |   |   |   |   |

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|                         | First      Quarter |   |
|------------------------------|--------------------|--------|
|                         | 2008               |   | 2007 |   |
|                         | Lots               |   | Revenues |   | Lots |   | Revenues |   |
| Residential      Properties: |               |   |   |   |   |   |   |   |
| Barton      Creek            |               |   |   |   |   |   |   |   |
| Wimberly      Lane Phase II  |               |   |   |   |   |   |   |   |
| Standard      Homebuilder    | 1                  |   | $   265 | a | 3 |   | $   523 |   |
|                         |               |   |   |   |   |   |   |   |
| Circle      C                |               |   |   |   |   |   |   |   |
| Meridian                     | 33                 |   | 2,229 |   | 28 |   | 1,816 |   |
|                         |               |   |   |   |   |   |   |   |
| Deerfield                    | 21                 |   | 1,410 |   | 15 |   | 1,004 |   |
| Total      Residential       | 55                 |   | $3,904 |   | 46 |   | $3,343 |   |
|                         |               |   |   |   |   |   |   |   |

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

|                                     | First      Quarter |   |
|------------------------------------------|--------------------|--------|
|                                     | 2008               |   | 2007 |   |
| Rental      income                       | $                  | 951    |   | $ | 670 |   |
| Rental      property costs               |               | (816   | ) |   | (758 | ) |
| Depreciation                             |               | (337   | ) |   | (245 | ) |
| General      and administrative expenses |               | (232   | ) |   | (265 | ) |
| Operating      loss                      | $                  | (434   | ) | $ | (598 | ) |
|                                     |               |   |   |   |   |   |

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| ·   | $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. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $21.5      million of borrowings outstanding under the Lantana Promissory Note, which      matures in January 2018. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

Item 3.  Quantitative and QualitativeDisclosures about Market Risk.

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Table of Contents

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 |
| January      1 to 31, 2008  |   | 26,589         | b      | $32.69           | b      | 6,498                         |   | 417,863                     |
| February      1 to 29, 2008 |   | 2,077          |   | 31.06            |   | 2,077                         |   | 415,786                     |
| March      1 to 31, 2008    |   | 10,829         | c      | 29.00            | c      | -                             |   | 415,786                     |
| Total                       |   | 39,495         |   | $31.59           |   | 8,575                         |   |                        |
|                        |   |           |   |             |   |                          |   |                        |

| 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 March 31, 2008, $4.2 million remained under the      Comerica agreement for purchases of common  stock. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      20,091 shares ($33.94 per share) tendered to Stratus to      cover the cost of option exercises under the applicable stock incentive      plans (Plans). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Represents      shares tendered to Stratus to cover the cost of      option exercises under thePlans. |
|----------------|---------------------------------------------------------------------------------------------------------------------------|

Item 4.  
Submission ofMatters to a Vote of Security Holders

|                          | Votes      Cast For |   | Authority      Withheld |
|-------------------------------|---------------------|--------|-------------------------|
| 1.      Election of Director: |                |   |                    |
| Michael      D. Madden        | 4,333,345           |   | 2,811,003               |

|                    |   |      |   |    |   |        |   |
|-------------------------|--------|-----------|--------|---------|--------|-------------|--------|
|                    |   | For       |   | Against |   | Abstentions |   |
| 2.      Ratification of |   |      |   |    |   |        |   |
| PricewaterhouseCoopers  |   |      |   |    |   |        |   |
| LLP      as independent |   |      |   |    |   |        |   |
| auditor                 |   | 5,566,949 |   | 170,236 |   | 1,407,163   |   |
|                    |   |      |   |    |   |        |   |

Item 6.  
Exhibits

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SIGNATURE

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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 February 11, 1999.                                                                                                                                                                                                                                                                                                   |           | 10-Q                           | 000-19989     | 05/17/2004      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 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    | 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      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.2    | 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      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.3    | 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      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.4    | 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      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.5    | 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      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.6    | Construction      Loan Agreement dated June 11, 2001, between 7500 Rialto Boulevard, L.P.      and Comerica Bank-Texas.                                                                                                                                                                                                                                        |           | 10-K                           | 000-19989     | 03/22/2002      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |
| 10.7    | 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      |
|    |                                                                                                                                                                                                                                                                                                                                                           |           |                           |          |            |

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|    |               | Filed          |                           |          |            |   |
|---------|--------------------|----------------|--------------------------------|---------------|-----------------|--------|
| Exhibit |               | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title | Form      10-Q | Form                           | File      No. | Date      Filed |

|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|------------|
| 10.8   | 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  |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.9   | Guaranty      Agreement dated June 11, 2001, by Stratus Properties Inc. in favor of      Comerica Bank-Texas.                                                                                                                                                                                      |   | 10-K   | 000-19989 | 03/22/2002 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.10  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.11  | Development      Agreement dated August 15, 2002, between Circle C Land Corp. and City of      Austin.                                                                                                                                                                                             |   | 10-Q   | 000-19989 | 11/14/2002 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.12  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.13  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.14  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.15  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.16  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.17  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.18  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.19  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.20  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |
| 10.21  | 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 |
|   |                                                                                                                                                                                                                                                                                               |   |   |      |       |

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|    |               | 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 June 1, 2007, subsequently assigned to American Select      Portfolio Inc., an affiliate of First American Asset      Management.               |   | 10-Q   | 000-19989 | 08/09/2007 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.23  | 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 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.24  | 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 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.25  | 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 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.26  | 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 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.27* | Stratus’      Performance Incentive Awards Program, as amended, effective February 11,      1999.                                                                                                                                                 |   | 10-Q   | 000-19989 | 05/17/2004 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.28* | Stratus      Properties Inc. Stock Option Plan, as amended andrestated.                                                                                                                                                                                 |   | 10-Q   | 000-19989 | 05/10/2007 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.29* | Stratus      Properties Inc. 1996 Stock Option Plan for Non-Employee Directors, as      amended and restated.                                                                                                                                           |   | 10-Q   | 000-19989 | 05/10/2007 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.30* | Stratus      Properties Inc. 1998 Stock Option Plan, as amended and      restated.                                                                                                                                                                      |   | 10-Q   | 000-19989 | 05/10/2007 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.31* | Form      of Notice of Grant of Nonqualified Stock Options under the 1998 Stock      Option Plan.                                                                                                                                                       |   | 10-Q   | 000-19989 | 8/12/2005  |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.32* | Form      of Restricted Stock Unit Agreement under the 1998 Stock Option      Plan.                                                                                                                                                                     |   | 10-Q   | 000-19989 | 05/10/2007 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.33* | Stratus      Properties Inc. 2002 Stock Incentive 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 2002 Stock      Incentive Plan.                                                                                                                                                    |   | 10-Q   | 000-19989 | 08/12/2005 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.35* | Form      of Restricted Stock Unit Agreement under the 2002 Stock Incentive      Plan.                                                                                                                                                                  |   | 10-Q   | 000-19989 | 05/10/2007 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.36* | Stratus      Director Compensation.                                                                                                                                                                                                                     |   | 10-K   | 000-19989 | 03/16/2006 |
|   |                                                                                                                                                                                                                                                    |   |   |      |       |
| 10.37* | 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 |

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|    |               | Filed          |                           |          |            |   |
|---------|--------------------|----------------|--------------------------------|---------------|-----------------|--------|
| Exhibit |               | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title | Form      10-Q | Form                           | File      No. | Date      Filed |

|   |                                                                                                                       |   |   |      |       |
|--------|----------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|------------|
| 10.38* | 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      |   |      |       |
|   |                                                                                                                       |   |   |      |       |

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