STRS - NASDAQ

00:06 Good morning and welcome to the Stratus Properties year ended December 31st 2021 Financial and Operational Conference Call. Earlier this morning Stratus issued a press release announcing its year ended December 31st 2021 financial results. The press release is available on Stratus' website at stratusproperties.com. Following management's remarks, we will host a question-and-answer session. Please note, this call is being recorded and will be available for replay on Stratus’ website through April 14th, 2022. Anyone listening to the taped replay should note that all information presented is current as of today, March 31st, 2022, and should be considered valid only as of this date. 00:54 As a reminder, today's press release and certain comments that will be made on this call include forward-looking statements, and actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements. Please review the cautionary language included in Stratus’ press release issued today and the risk factors described in Stratus’ 2021 Form 10-K that could cause actual results to differ materially from those projected by Stratus. 01:24 In addition, management will discuss earnings before interest, taxes, depreciation and amortization, also referred to as EBITDA, and net asset value or NAV, and financial measures calculated by reference to NAV, including after-tax NAV and after-tax NAV per share, which are financial measures not recognized under US generally accepted accounting principles, also referred to as GAAP. As required by SEC rules, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in the supplemental schedule to Stratus' press release issued today. On March 25th, 2022 the Company published on its website under the Investors tab an update to its NAV. 02:11 I would now like to turn the conference call over to Mr. Beau Armstrong, Chairman, President and Chief Executive Officer of Stratus Properties. Please go ahead.

02:20 Thank you all for joining our year ended December 31, 2021 financial and operational conference call today. Our Chief Financial Officer, Erin Pickens is also here with me today. 02:33 I would like to start by spending some time acknowledging the tremendous year we had, which was only made possible by our incredibly talented and hard working team here at Stratus. Then I will provide updates on the status of our current residential development project pipeline, as well as touch on a few of our new retail and commercial development activities, which we are excited about. Finally, I will pass the call to Erin to review our 2021 financial results before wrapping up with remarks about the encouraging markets we operate in and our successful full cycle development strategy. 03:11 To begin, our momentum is driven by our significant achievements last year, and I'm excited to share that 2021 produced record net earnings for Stratus’. Our total stockholders' equity increased 60% to $158.1 million at year-end 2021 from year-end 2020 and upon the completion of the pending sale of Block 21, we expect to record a pre-tax gain of approximately $120 million or $95 million after tax. The Block 21 transaction is also expected to be accretive to stockholders equity. 03:49 We had the most productive year in the history of our company in 2021, which included executing the sales of the Saint Mary and The Santal for a combined sales price of $212 million and a combined pre-tax gain of $106 million. Sourcing significant institutional equity capital with an attractive promote structure for Stratus to develop several new projects in our pipeline, including The Saint June, The Annie B, and The Saint George multi-family projects in Austin and continuing to lease up our retail projects, including our newest shadow-anchored H-E-B in the Houston Suburb of Magnolia, which is currently under construction. 04:35 Separately, we also successfully achieved our Board refreshment objectives to enhance the skills, experience and diversity of the Board through the appointments of three new directors over the past 18-months. Neville Rhone, Junior, in December 2020; Kate Henriksen in January 2021; and Laurie Dotter in August 2021. I am proud of our team’s success in entitling, designing, constructing, leasing and open lease selling the Saint Mary and The Santal, our teams continue to work toward the Block 21 sale to start off several new projects and continued progress on substantial new opportunities in our existing development pipeline. 05:23 In January 2021, we announced the sale of the St Mary, a 240-unit luxury garden style rental project in the Circle C Community in Austin for $60 million or $250,000 per unit. After closing costs and repayment of the project loan, the sales generated net proceeds of approximately $34 million of which Stratus received $21.9 million. Stratus recognized a gain on the sale of $22.9 million with $16.2 million net of non-controlling interests in 2021. 06:01 In December of 2021, we completed the sale of The Santal a 448-unit garden style multi-family luxury rental project located in Section N of Barton Creek for $152 million generating net proceeds of approximately $74 million and a pre-tax gain on the sale of $83 million after closing costs and repayment of the project loan. A portion of the proceeds from the sale of The Santal enabled us to pay down in full our revolving credit facility with Comerica Bank. 06:37 We are also continuing to work toward closing the sale of our Block 21 property to Ryman Hospitality Properties, Inc. for $260 million. The transaction is expected to close prior to June 1st, 2022 subject to the timely satisfaction or waiver of various closing conditions, including the consent of the loan servicers to Ryman’s assumption of the existing mortgage loan, the consent of the hotel operator an affiliate of Marriott to Ryman’s assumption of the hotel operating agreement, the absence of a material adverse effect and other customary closing conditions. 07:17 Our outstanding achievements in 2021 reflect our team's continued success in developing properties from within our significant land portfolio, as well as sourcing new development opportunities to generate value for our shareholders. I'm confident we have the development expertise, market knowledge, relationships and focus to continue to thrive in Austin and other select fast growing Texas markets where we operate. 07:45 With that I'm going to turn to provide updates on our residential projects. I want to start by first discussing our residential property portfolio. Our residential projects continue to thrive in 2021, positively impacted by home-centric trends resulting from the pandemic and increased attractiveness of Austin, which continue to drive demand higher than available supply. For The Annie B, The Saint George and The Saint June, we raised $46.3 million of third-party equity capital in 2021, contributing to the 90% increase in total equity to $208.6 million at year-end 2021 from year-end 2020, and demonstrating our ability to source outside equity capital with promoted economics for the Company, as we previously did with the St Mary and Kingwood Place projects in 2018. 08:42 I will now provide brief descriptions at each of these new projects. The Annie B is our proposed luxury high rise rental project in downtown Austin near the state capital expected to be a 400 foot tower with unobstructed 360-degree views of the capital downtown Austin, the University of Texas campus and West Austin. The project consists of approximately 420,000 square feet with 300 luxury multi-family units for lease and ground level retail and other unique amenities in the historic A.O. Watson House, which was part of The Annie B land assemblage and will be fully renovated as part of this project. We closed the purchases in September 2021 and expect to finalize development plans and financing over the next 12-months. 09:38 The Saint George is a proposed wrap style multi-family rental project to be constructed on approximately 4 acres with about 317-units comprised of luxury Studio 1 and 2 bedroom units and an attached parking garage along the Burnet Road corridor in North Central Austin, which is near the new Austin FC Soccer Stadium. We closed the land purchase in December 2021, while we continue to plan the project negotiate a construction loan and obtain entitlements in permit approvals. We expect to begin construction by mid-2022 and achieve substantial completion by mid-2024. 10:21 In the third quarter of 2021, we began construction on the Saint June, a 182-unit luxury garden style multi-family rental project within the Amarra development in the Barton Creek community in Austin. The first units of The Saint June are expected to be completed in the third quarter of this year, with completion of the project expected in the first quarter of 2023. In 2021, we also continue to make progress on several important long-term development projects, including Holden Hills and Section N at Barton Creek with a particular focus on health and wellness, sustainability and energy conservation. Sustainable development continues to be a guiding principle for the Company. Holden Hill's is our final large residential development within the Barton Creek community consisting of 495 acres and design to feature 475 unique residences to be developed in multiple phases. 11:22 We anticipate securing the final permits to initiate construction in September of this year and to begin to close the sales of homesites in mid-2024 subject to obtaining financing. Using a conceptual approach similar to Holden Hills, we are evaluating a redesign of Section N and approximately 570 acre track with a significant multi-family component in the Southern portion of Barton Creek. At Lantana Place South of our Barton Creek development, we are planning to begin construction on the 306-unit multi-family component of this project in the third quarter of this year with an expected completion admin 2021. I will provide more detail on Lantana Place in a moment. 12:09 Cost increases for our residential projects in 2021 reflect increased construction activity in line with increased demand, as well as industry-wide impacts of material and labor supply constraints. We continue to monitor and strategically advance on certain projects in line with current trends in future expectations, such as incorporation of more residential users, while also actively managing and monitoring design and construction costs. 12:38 Our retail, commercial and mixed-use projects are also continuing to perform well and have benefited from increased activity in foot traffic throughout 2021. We are continuing to lease up our retail projects Kingwood Place, Lantana Place, West Killeen Market and Jones Crossing. All four projects are producing positive cash flow after debt service. The Kingwood Place project in the Greater Houston area includes approximately 152,000 square feet of retail lease space anchored by 103,000 square foot H-E-B Grocery Store, five pad sites of which four have been ground leased and one is available. 13:17 As of December 31, 2021 we assigned leases for approximately 85% of the completed retail space, including H-E-B. Kingwood Place also includes a 10 acre parcel currently planned for approximately 275 multi-family units. In September 2021, we entered into a contract to sell this land for $5.5 million and if consummated the sale is expected to close in mid-2022. Lantana Place is a partially developed mixed use real estate development project. As December of 31, 2021, we have signed leases for approximately 85% of the 99,379 square feet of retail space, including the anchor tenant Moviehouse & Eatery and a ground lease for an AC by Marriott Hotel. 14:07 As mentioned earlier, we expect to begin construction of the multifamily development in the third quarter. This site within that Lantana Place was recently rezoned from office use to multifamily use. As of December 31, 2021, we had executed leases for approximately 70% of the retail space at West Killeen Market, our H-E-B anchored retail shopping center in Killeen Texas. During 2021, we sold a pad site at West Killeen market for $750,000 and only one unsold pad site remains. 14:42 We are also continuing to lease up our Jones Crossing property. Jones Crossing is an H-E-B-anchored mixed-use project located in College Station, Texas. As of December 31, 2021 we had signed leases for approximately 95% of the completed retail space, including H-E-B. Also as of December 31, 2021 we had approximately 23 undeveloped acres with estimated development potential of approximately 104,750 square feet of commercial space in five vacant pad sites. 15:17 In 2021, we also announced new development plans obtained debt financing and commence construction on the first phase of development for Magnolia Place, a mixed-used development shadow-anchored by H-E-B in the Greater Houston area. The development is planned to consist of four retail buildings, five retail pad sites to be sold or leased, 194 single-family lots and approximately 500 multi-family units. We have signed three leases for 40% of the in-line retail space and are in discussions with additional potential tenants. The H-E-B is expected to open in the second quarter of 2022 and the first two retail buildings are expected to be available for occupancy in the third quarter of 2022. 16:04 Our design plans for New Caney and H-E-B anchored mixed-use project, including restaurants and retail services remain underway. We currently plan to commence construction no earlier than 2024. We expect the New Caney project will total approximately 145,000 square feet, five pad sites in a 10-acre multi-family parcel plan for approximately 275 multi-family units. Overall, we are pleased with the performance of our existing properties, I'm encouraged by the activity and our pipeline and our team's proven ability to create value through the development process. 16:39 Thank you. And I will now turn the call over to our CFO, Erin Pickens for a review of the 2021 financial results. Erin?

16:48 Thank you, Beau. Today, we reported our year ended December 31st, 2021 financial results in our press release issued this morning. Stratus’ consolidated revenues totaled $28.2 million for 2021, compared with $44.3 million for 2020, primarily reflecting the decrease in revenue from our Real Estate Operations Segment as our available inventory of developed lots decreased. 17:17 Net income attributable to common stockholders totaled $57.4 million or $6.90 per diluted share for 2021, compared to a net loss of $22.8 million or $2.78 per diluted share for 2020. Net income for 2021 versus net loss for 2020 is primarily the result of gains recognized on the sales of The Santal and The Saint Mary, totaling $106 million combined on a pre-tax basis. 17:49 EBITDA totaled $90.7 million for 2021, which was a significant increase over $1.1 million for 2020 also primarily attributable to the gains recognized on the sales of The Santal and the Saint Mary. Historically, we have reported four operating segments: Real Estate Operations; Leasing Operations, Hotel and Entertainment. Moving forward, due to the pending sale of Block 21, our continuing operations include our Real Estate Operations and Leasing Operation Segment, while our discontinued operations include Hotel, Entertainment, as well as the Leasing Operations associated with Block 21. 18:29 Revenue from our Real Estate Operations segment in 2021, totaled $8.5 million, compared with $22.6 million in 2020. The segment’s operating loss totaled $3.3 million in 2021, compared with operating income of $3.7 million in 2020. This decrease in revenue and the operating loss, primarily reflect the decrease in the number of lots sold during 2021 as our available inventory decreased. 18:58 Revenue from our Real Estate Operations accounted for 30% of our total revenue in 2021 and 51% in 2020. The operating loss also includes impairment charges of $700,000 for two Amarra Villas homes under construction and under contract; $625,000 for the multi-family attractive land at Kingwood Place for which a sale is pending; and $500,000 for an office building in Austin that Stratus is renovating, in may occupy as its headquarters upon closing of the sale of Block 21. 19:33 As of December 31st, 2021 Stratus had only two unsold developed Amarra Drive Phase 3 lots. Also in 2021 Stratus sold its last condominium at the W Austin residences at Block 21. Revenue from our Leasing Operations Segment in 2021, totaled $19.8 million, compared to $21.8 million in 2020. The decrease primarily reflects the sale of the Saint Mary, partially offset by increased revenue at Lantana Place, notably revenue from our Leasing Operations Segment accounted for 70% of our total revenue for 2021 versus 49% for 2020. 20:16 The segment's operating income was $111.4 million in 2021, compared to operating income of $3.1 million in 2020, this significant increase reflects the gains recognized on the sales of The Santal and Saint May, which as I mentioned earlier totaled $106 million combined pre-tax. Despite the COVID-19 pandemic Stratus has retained substantially all pre-pandemic retail tenants and added new tenants and all of our tenants are currently paying rent for their leases, as well as monthly payments pursuant to previously disclosed base rent deferral arrangements. 20:53 Moving now to results for our discontinued operations. Stratus’ Hotel revenues increased to $18.3 million in 2021, up from $9.9 million in 2020, which is primarily a result of higher room occupancy and food and beverage sales as the impacts of the COVID-19 pandemic continue to lessen throughout 2021. Revenue per available room or RevPAR was $155 in 2021, compared with $61 in 2020. Entertainment revenues increased to $12.9 million in 2021, compared to $5.2 million in 2020, primarily reflecting the increase in the number of events hosted at ACL Live and 310 ACL Live. Seating capacity remains limited at Stratus’ entertainment venues until opening up to full capacity in August 2021. 21:49 After closing costs and Ryman’s assumption of the outstanding Block 21 loans, the sale of Block 21 is expected to generate net pre-tax proceeds of approximately $115 million and after-tax proceeds of approximately $90 million before prorations and including $6.9 million to be escrow for 12-months after closing. We expect to record a pre-tax gain of approximately $120 million from the closing of the sale or $95 million after tax. 22:20 Our general and administrative expenses included in corporate eliminations and other increased to $24.5 million in 2021, compared to $13.6 million in 2020, primarily reflecting a $7.4 million increase in employee incentive compensation costs associated with the profit participation incentive plan, primarily for The Santal and Lantana Place project and $2.7 million increase in consulting, legal and public relations costs for Stratus’ successful proxy contest. 22:55 Turning to capital management at December 31st 2021 consolidated debt totaled $106.6 million and consolidated cash totaled $24.2 million, this is compared with consolidated debt of $137.7 million and consolidated cash of $9.3 million at December 31st 2020. Consolidated debt amounts at both dates excluded Block 21 loan of approximately $138 million and at December 31st 2020 also excluded The Santal loan of approximately $75 million and The Saint Mary construction loan of approximately $25 million as a result of these properties being classified as held for sale in those dates. 23:40 After using a portion of the proceeds from the sale of The Santal to repay the balance under our $60 million Comerica Bank credit facility as of December 31st 2021, we had $59.7 million available under the credit facility with letters of credit totaling $347,000 committed against the credit facility. Purchases and development of real estate properties, included in operating cash flows, and capital expenditures included in investing cash flows, totaled $72.3 million for 2021, primarily related to the purchases of the land for The Saint George and The Annie B, the development of the Saint June other Barton Creek properties, including Amarra Villas and the Magnolia Place and Lantana Place project. 24:25 This compares with the $20 million for 2020, primarily related to the development of Kingwood Place, Lantana Place and Barton Creek properties and the purchase of an office building in Austin. We project that Stratus will be able to meet its debt service and other cash obligations for at least the next 12-months. Our $60 million revolving credit facility with Comerica Bank matures on September 27th 2022. We’re in discussions with the lender to remove Holden Hills from the collateral pool for the facility, financed the Holden Hills project under a separate loan agreement and enter into a revised revolving credit facility with a lower borrowing limit secured by the remaining collateral under the facility. If these discussions are not concluded timely, we expect to be able to extend or refinance the facility prior to the maturity date. No assurances can be given to the results anticipated by our projections will occur. 25:20 Finally, before I pass the call back to Beau, I would like to discuss Stratus’ updated NAV. The presentation of our calculations can be found on Stratus’ website. Stratus’ total stockholders' equity was $158.1 million at December 31st 2021, compared with $98.9 million at December 31st 2020. Stratus’ after-tax NAV, increased to $408.9 million or $48.80 per share as of December 31st 2021. This compares with $337.3 million or $40.65 per share as of December 31st 2020. The increase in the after-tax NAV was primarily driven by the increase in the gross value of Block 21, which as of December 31st 2020 was determined using an appraisal obtained during the COVID-19 pandemic and is currently determined using the contract price with Ryman. 26:20 Thank you. I will now turn the call back to Beau for his closing remarks.

26:24 Thank you, Erin. I'm extremely proud of our team for all that we've accomplished this year. 2021 has been the most productive year in our history and Stratus’ momentum is strong. With our historic sales this past year in the pending sale of Block 21, we are continuing to explore a range of capital allocation priorities for the uses of proceeds, which may include a combination of further deleveraging; returning cash to shareholders; and reinvesting in our project pipeline. 26:57 We expect to provide additional information after the Block 21 transaction is concluded and the Stratus’ Board and Management have had the opportunity to assess market conditions and the capital desired for use in Stratus’ development pipeline. In the meantime after careful consideration, the Board has concluded that Stratus converting to a REIT is not the best path forward for Stratus and its shareholders. Among the factors, the Board considered in reaching its conclusion or Stratus’ continued success in generating attractive returns by developing and selling its properties. 27:31 Stratus’ large undeveloped land holdings, which provide ongoing and future opportunities for development in sale and the promising nature of other projects in Stratus’ development pipeline. Our successful performance and drive are informed by our ability to understand favorable market conditions and trends, we are committed and equipped to continue to source new opportunities for Stratus moving forward. 27:56 Austin continues to be a thriving city and the Metroplex has always been core to our pipeline. The demand for housing remains strong here in other select markets we operate in. We have many exciting opportunities in our development portfolio. Our strategy is flexible and allows us to pursue opportunities that make sense, whether we decided to hold a property for lease or pursue a sale or refinance, we have a talented team committed to continuously evaluating the best value creation opportunities for each of our properties. 28:29 Thank you all for joining. At this time, I would like to ask the operator to open the line for questions.

28:36 We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Fred Burtner with Private Investor. Please go ahead.

29:18 Good morning Beau and Erin. I had two questions, first on Block 21, is there a particular issue that's holding up the closing of the sale?

29:31 Good morning, Fred. Not really, there’s -- it’s more of a process. This is a -- the underlying financing is of CMBS loan, which I know, you know, how those work. Those are all chopped up into little pieces and part of the -- and in our loan agreement, we have the right to have this loan assumed under certain conditions and it's -- there’s no -- it is clear to us that Ryman is a great borrower and owner and operator. So there's been no question about Ryman, it's really a matter of just a process. There are a lot of hands on the wheel, so to speak. So we have made it through, I think, the critical process of the special servicer and have -- they have signed off on it. So now we're just kind of grinding through the balance of the process. So I would -- it's not anything that is -- there's nothing wrong with the property, there's nothing wrong with the -- with Ryman, it's really just a matter of a kind of a terrible process if you know, if I had to blame one thing.

30:37 Okay, thank you. And my other question is why did the company waste -- this is about The Santal, why does the Company waste time and money trying to sell The Santal in 2019, when you did so much better by waiting for 2021?

30:53 Well, I think what we did, Fred is when we marketed the property in 2019, we ran a comprehensive process, we hired a local broker and the project had wide distribution and we had a number of really I thought, very strong offers that would have been very profitable. But when we analyzed that we thought that perhaps would just be, be a better for us to refinance it, so we refinanced it and pulled out most of our investment, and at that point just continue to operate the property. And then what happened is we – COVID happened, we had -- we were able to kind of push rents a little bit, Austin really began to attract even more capital, which is hard to imagine, just given the base we were operating office. So we took it back out and obviously we had a much better price, I think the highest price we had was about -- was literally $101 million, so it went from $101 million to $152 million in the span of whatever it was 18-months or so. 32:08 So I think we made the right decision by refinancing and holding it. The rent roll moved a little bit, I don't know that it moved enough to where to justify that kind of price move. I think we just got the benefit of Austin and the – adjusting the amount of capital that has come into this town. So -- I guess we got lucky on that one. And yes, I'll say that the buyer is very happy with the project, so I think our philosophy is around here, we'd like to leave a little meat on the bone for the next buyer and so we know that they are happy with the asset and so I think it's been good for everybody.

32:53 Thank you. I appreciate it.

32:57 The next question is from Chris Mooney with Wedbush Securities. Please go ahead.

33:03 Good morning, Beau and Erin. And really, congratulations on a very busy and very successful 2021. I have several questions, but first is in the NAV calculation here and there is a $5 million potential set aside on the Block 21 transaction. Can you speak to that a bit? And then I was kind of surprised at the amount of $12 billion, something that's being set aside for some period of time. Can you give us a little more color on both of those, related to Block 21?

33:42 I'll handle the $5 million, so the $5 million is -- there are a couple of retail spaces within the Block that we have some tenants that are moving around, and so we basically have set aside $5 million just depending on what happens with these tenants. So I can't tell you whether I think that we'll be able to -- we'll keep that money or not. We just kind of dealt with it in that fashion. I think we're taking the conservative approach that we actually don't get that $5 million, but it's something that's going to take several months to work itself out. As to the $12 million that number seems high to me, I do know that we have $6 million.

34:25 $6.9 million.

34:26 Yes, $6.9 million, Chris that its customary, we know this is a single its -- there's really no recourse back to Stratus and so I think it's customary that in transactions like this that will set aside some cash for 12-months to basically backstop some of our reps and warranties. So that's why that story, and I think we feel comfortable that money will ultimately flow to Stratus, but it is -- it's kind of a customary set aside, if you will for a transaction of this size.

34:58 Okay, a couple of more quick ones, is there any update on activity either in Lakeway or Circle C?

35:08 Well. Lakeway, we retained approximately 25 acres of single-family land, that's the land use designation in our part agreement with the city of Lakeway. We have been in discussions with the city to -- in order to expedite the construction of a road through our property, which would be a bit of a, kind of, a relief valve, low Lakeway this goes from 620 to low [indiscernible] and it would provide better access to the H-E-B, which is a huge traffic generator and then 620 is about to undergo a pretty significant construction project. So the city is trying to figure out a way to incentivize us to build that road sooner, than we would like. So we had suggested to them and if they could see their way to allowing us to build a multi-family project there we would expedite the road construction. So we are -- we've been through a bit of a public process. We are -- I would say within a couple of weeks of making a formal application of the city, but I'll tell you they are not big fans of multi-family housing out there. So I don't know, it will be successful. I mean, we think the single-family works, it’s just doesn't work right now given some of the cost of this road is very expensive. There is a very expensive bridge that needs to be built. So we think that -- it's good real estate, it's just needs a little more time to season, but the multi-family would allow us -- would give us some better economics that we can justify moving forward with the road sooner. So I guess the short answer is -- or the long answer rather it's just to kind of stay tuned we're starting to kind of get into the process here over the next couple of weeks. 37:01 And then Circle C --

37:03 Yes.

37:04 You know, Circle C, we really have -- we just have a couple of properties that we've got a big office site along MoPac -- South MoPac and in the last 24-months there have been some significant traffic improvements that have helped the site. So we have actively been marketing that as an office campus. But we're also considering rezoning that or attempting to rezone that for more mixed use, we'd like to add a housing component to that if possible. Again multi-family, you know, I grew up in an apartment project, so that doesn't really bother me. But a lot of people just have an adverse reaction to apartments, even if it's kind of Class A nice stuff. So I -- again it's hard to hard to know whether we’ll be successful, but I think in Austin housing is probably our -- the city’s biggest priority right now, we just have this huge gap between the supply and demand of housing and I see that continuing for some time. 38:09 So I think that there are perhaps some sympathetic years at the City to help accommodate additional housing stock. So we'll know which again it's a process and it's purely discretionary by the City of Austin, but we feel that we'll put forth a thoughtful plan and we’ll take into account the needs, desires wishes of the neighborhood, but that -- it's going to take us a little bit of time. But again a long answer to your question, great real estate, we think that it would benefit from some -- an additional land use other than just straight office, so we're going to take a shot at it.

38:47 Okay great. And then on the three retail centers that are up and running and I guess Jones Crossing 95% leased. As these -- I assume these are stabilized in the past you have an interest in monetizing similar things? Is there any thought that you may do look at that again?

39:11 Yes, we are -- our typical process for this is we will ask a couple of the leading investment sales brokers to evaluate the projects and give us what we call the brokers opinion of value and then a marketing strategy. So we have done that, we have not selected, we have not made a selection yet of which company we're going to use. But we have pretty good data on the market, what's available, what’s sold, so I think we've got our -- a very clear picture of where we want to go. We do have some ongoing construction in lease-up and that really doesn't affect value, but it is something we'd like to get to a good passing-off point, if you will, between us and the ultimate purchaser. 40:04 So yes we are -- our strategy continues to be to build stabilize and sell. And I would think the Board again, I don't want to get ahead of the Board they have not made a decision on this yet. But my feeling is that we will present this to the Board, and again it's consistent with our strategy, we just want to make sure that we have fully stabilized as we maximize the value. But I would think that something that we will entertain certainly this year. And I think it's possible either to get to close this year or early next year depending on when we get in the market, because they are stabilized or stable or quickly stabilizing, they're all H-E-B affiliated which H-E-B of courses is very attractive from an institutional standpoint. So we think we're going to be in pretty good shape there. 40:58 And again, and lastly they all really performed very well during COVID and that's been something that we know institutional buyers have focused on is how did things performed during COVID and to the extent that they performed well. I think that bodes well going forward.

41:14 Sounds like it's going to be a busy ‘22 as well. Congratulations.

41:18 Yes, sure. We're counting on it. Thank you.