INTERGROUP CORP

Current report

SAN FRANCISCO MARKET CONDITIONS

Current report

The Hotel’s operating results are significantly affected by economic, business travel, convention and tourism conditions in San Francisco. During fiscal 2026, the Hotel experienced improved business travel and convention demand, which contributed to higher occupancy, average daily rate and room revenue compared with fiscal 2025. San Francisco lodging demand remains subject to changes in local economic conditions, convention activity, business and leisure travel and public perceptions of the city. Because the Company’s Hotel operations are concentrated in a single property in San Francisco, changes in these conditions may have a significant effect on the Company’s future operating results. See Item 1A – Risk Factors.

Current report

The Company reported net income of $336,000 for fiscal 2026 compared with a net loss of $7.547 million for fiscal 2025. The improvement primarily reflected a $4.223 million increase in income from operations to $11.866 million, a $3.508 million gain on the sale of a multifamily property, a $2.289 million decrease in the net loss from marketable securities operations to $213,000 and an $890,000 decrease in mortgage interest expense to $12.666 million. These improvements were partially offset by higher income tax expense and the absence of the $1.416 million gain on extinguishment of debt recognized in fiscal 2025.

Current report

Portsmouth’s principal source of revenue is the Hotel, including room, food and beverage, parking and other operating revenue.

Current report

Hotel Operations segment income increased to $12.524 million in fiscal 2026 from $8.732 million in fiscal 2025. The improvement primarily reflected higher room revenue resulting from increased average daily rate, higher occupancy, improved business travel and convention demand, and the addition of 14 guestrooms to available inventory effective September 30, 2025. The increase was partially offset by higher Hotel operating expenses and by the absence of the $1.030 million management incentive fee waiver recognized as a reduction of Hotel operating expenses in fiscal 2025.

Current report

Hotel Operating Table

Current report

Hotel operating expenses increased by $5.642 million, to $43.273 million in fiscal 2026 from $37.631 million in fiscal 2025. The increase primarily reflected higher salaries, wages and employee-related costs, higher Hilton marketing and guest loyalty program fees, increased credit card processing costs, and higher travel agent and group commissions associated with increased business volume. Fiscal 2025 Hotel operating expenses also benefited from the $1.030 million Aimbridge incentive management fee waiver discussed above.

Current report

Total Hotel revenue increased approximately 20% to $55.797 million in fiscal 2026 from $46.363 million in fiscal 2025. Average daily rate increased $35, or approximately 16%, to $253 from $218; average occupancy increased three percentage points to 95% from 92%; and RevPAR increased $39, or approximately 20%, to $239 from $200. The increases reflected improved business travel and convention demand, the benefit of the completed guestrooms renovation, which included the addition of 14 guestrooms to available inventory during fiscal 2026.

Current report

Revenues from real estate operations increased to $18,154,000 in fiscal 2026 from $18,015,000 in fiscal 2025, primarily driven by stronger multifamily occupancy and rental rate trends across the portfolio. Real estate operating expenses decreased to $9,301,000 from $9,550,000 primarily due to lower insurance and real estate tax expense, partially offset by increases in other property operating expenses and utilities. As a result, Real Estate Operations segment income increased to $8.853 million in fiscal 2026 from $8.465 million in fiscal 2025.

Current report

The fiscal 2026 securities gain consisted of a realized gain of $167,000 and an unrealized gain of $786,000, compared with a realized loss of $329,000 and an unrealized loss of $1.018 million in fiscal 2025. After dividend and interest income and trading and margin interest expense, the Company recorded a net loss from marketable securities operations of $213,000 in fiscal 2026 compared with a net loss of $2.502 million in fiscal 2025.

Current report

During the years ended June 30, 2026 and 2025, the Company evaluated its other investments for impairment and recorded no impairment losses in either period.

Current report

As of June 30, 2026, the Company’s marketable equity securities portfolio included investments in American Realty Investors, Inc. (NASDAQ: ARL) and Snowflake Inc. (NYSE: SNOW), which represented approximately 29.2% and 13.9%, respectively, of the fair value of the Company’s marketable equity securities portfolio. American Realty Investors, Inc. is included in the REITs and real estate companies industry group, while Snowflake Inc. is included in the technology industry group.

Current report

The Company’s principal sources of liquidity are cash on hand, cash flows generated from its real estate and Hotel operations, marketable securities and property-level financing. As of June 30, 2026, the Company had cash and cash equivalents of $6.356 million and restricted cash of $10.943 million, for total cash, cash equivalents and restricted cash of $17.299 million, compared with $15.195 million as of June 30, 2025. The Company also held marketable securities with a fair value of $4.394 million as of June 30, 2026, compared with $969,000 as of June 30, 2025. As of June 30, 2026, the Company had $427,000 due to a securities broker and $272,000 of obligations for securities sold, which are presented separately as liabilities in the consolidated balance sheet. Restricted cash primarily consists of amounts maintained in lender-controlled accounts and is not generally available for unrestricted corporate purposes.

Current report

Cash Flows

Current report

Net cash provided by operating activities was $3.450 million in fiscal 2026, compared with $5.893 million in fiscal 2025. The decrease primarily reflected the cash-flow effect of changes in marketable securities, which used $2.640 million of cash in fiscal 2026 compared with providing $5.467 million in fiscal 2025, partially offset by improved consolidated operating results. Net cash provided by investing activities was $1.762 million in fiscal 2026, compared with $3.917 million used in fiscal 2025. Fiscal 2026 investing activities included $4.472 million of proceeds from the sale of a 12-unit multifamily property and $456,000 of insurance proceeds, partially offset by $2.198 million of Hotel capital expenditures and $968,000 of real estate capital expenditures. . Net cash used in financing activities was $3.108 million in fiscal 2026, compared with $4.525 million provided in fiscal 2025. Fiscal 2026 financing cash flows principally reflected $1.201 million of mortgage payments, the $1.834 million repayment of the mortgage associated with the property sold during the year and $73,000 of common stock repurchases. Fiscal 2025 financing cash flows principally reflected the March 2025 Hotel refinancing.

Current report

The Company’s material cash requirements include operating expenses, corporate overhead, interest expense, lender-required reserves, capital expenditures and scheduled debt maturities. During fiscal 2026, Portsmouth incurred approximately $2.198 million of capital expenditures at the Hotel. The Company also incurred approximately $968,000 of capital expenditures related to its non-Hotel real estate properties. The Company expects to fund its ordinary-course requirements primarily through operating cash flows, cash on hand and existing financing arrangements.

Current report

Following the removal of the pedestrian bridge in August 2026, Portsmouth expects to incur capital expenditures for the design and construction of permanent improvements to the Hotel’s Kearny Street entrance. The City and its contractor are separately performing restoration work associated with the bridge demolition. Portsmouth has not yet established a reliable estimate of the cost of its permanent entrance improvements, which will depend on the final design, governmental and other approvals, permitting requirements and construction conditions.

Current report

Hotel Financing

Current report

Portsmouth’s $67.0 million senior mortgage loan and $36.3 million mezzanine loan mature on April 9, 2027 and provide for three one-year extension options, subject to specified conditions. As of June 30, 2026, Portsmouth was in compliance with all applicable covenants under the loan agreements. The first extension through April 9, 2028 requires, among other conditions, a Debt Service Coverage Ratio (“DSCR”) of at least 1.10:1.00, and no Debt Yield requirement applies to the first extension. Based on management’s application of the methodology set forth in the senior loan agreement, Portsmouth’s calculated DSCR was approximately 1.45:1.00 as of June 30, 2026. Management currently expects to satisfy the applicable conditions and exercise the first extension through April 9, 2028. If Portsmouth is unable to exercise an extension, it would be required to repay or refinance the loans at maturity.

Current report

Cash Management

Current report

Hotel cash receipts remain subject to a lender-controlled cash-management arrangement and are applied to approved operating expenses, debt service and required reserves. The arrangement restricts the availability of Hotel cash for other corporate purposes. Release from the cash-management arrangement is subject to conditions specified in the senior loan documents and lender determination. The cash-management arrangement remained in effect as of June 30, 2026; its continued operation does not constitute a default or noncompliance with Portsmouth’s loan covenants.

Current report

Intercompany Credit Facility

Current report

Portsmouth also has a $40.0 million revolving credit facility with InterGroup, of which $38.108 million was outstanding as of June 30, 2026. In August 2026, the facility’s maturity was extended from July 31, 2027 to July 31, 2029. The related balances and transactions are eliminated in consolidation. Accordingly, the facility provides liquidity to Portsmouth within the consolidated group but does not constitute an external source of liquidity to the Company on a consolidated basis.

Current report

Liquidity Outlook

Current report

Management believes the Company’s existing liquidity sources and financing arrangements are sufficient to meet its obligations for at least 12 months following issuance of the consolidated financial statements. The Company’s liquidity remains subject to Hotel and real estate operating performance, interest rates, capital requirements, debt-extension conditions and the availability of refinancing. See Item 1A, “Risk Factors,” and Notes 2, 10 and 16 to the Consolidated Financial Statements.

Current report

Inflation may affect the Company’s operating results through increases in labor and employee benefit costs, utilities, food and beverage costs, insurance, repairs and maintenance, supplies, real estate taxes and other Hotel and real estate operating expenses. Because Hotel room rates are generally established for relatively short periods, room rates can be adjusted in response to changes in market conditions and operating costs; however, the Company’s ability to increase room rates is subject to demand, competition and other market conditions.

Current report

The Company’s residential rental properties generally have leases of one year or less, which may provide opportunities to adjust rental rates as leases expire or renew. However, the Company’s ability to increase rents at certain properties is limited by applicable state and local rent stabilization and tenant-protection laws. Continued inflationary pressure could increase the Company’s operating and capital costs and, to the extent those increases cannot be offset by higher room rates, rental rates, occupancy or other revenue growth, could adversely affect operating margins and cash flows.

Current report

CRITICAL ACCOUNTING ESTIMATES

Current report

The preparation of the Company’s consolidated financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. Critical accounting estimates involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the Company’s financial condition or results of operations. Management believes the estimates discussed below involve the most significant judgments and estimation uncertainty affecting the consolidated financial statements.

Current report

We assess the realizability of our deferred tax assets quarterly and recognize a valuation allowance when, based on all available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. This assessment requires significant judgment, including consideration of recent operating results and cumulative pre-tax income or losses, expected future taxable income, the timing of reversals of temporary differences and other available evidence. Objective evidence, including recent cumulative pre-tax results, is generally given greater weight than subjective forecasts of future taxable income. Changes in operating results, objectively verifiable evidence of sustained future profitability, the timing of reversals of temporary differences, changes in tax laws or other relevant evidence could cause management to change its assessment in future periods, which could have a material effect on income tax expense or benefit.

Current report

IMPAIRMENT OF HOTEL ASSETS

Current report

We review our Hotel property and equipment for impairment whenever events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable. When such indicators are present, we evaluate recoverability by comparing the carrying amount of the applicable asset or asset group to the estimated undiscounted future cash flows expected to result from its use and eventual disposition. If the carrying amount is not recoverable, an impairment loss is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset or asset group.

Current report

We use significant judgment to determine whether indicators of impairment exist and consider the Hotel’s operating performance and prospects, hospitality industry and San Francisco market conditions, the Hotel’s location, and property-specific information available at the time of the assessment. When an impairment indicator exists, significant judgment is also required in developing the assumptions and estimates used in the recoverability analysis and, if necessary, in estimating fair value. These assumptions may include, as applicable, projected occupancy, average daily room rates, Hotel revenues and operating expenses, capital expenditures, market conditions and other factors affecting expected future cash flows. Fair value may be estimated using discounted cash flow, replacement cost or market comparison analyses, as appropriate.

Current report

As of June 30, 2026, the carrying amount of the Company’s Investment in Hotel, net was approximately $38.0 million. Changes in economic or operating conditions or in the assumptions and estimates used in our analysis could result in impairments charge in future periods. Because these estimates are based on assumptions about future operating performance and market conditions, actual results could differ materially from those assumptions. There were no indicators of impairment of the Hotel assets, and no impairment losses were recorded for the years ended June 30, 2026 and 2025.

Previous report

MARKET CONDITIONS IN SAN FRANCISCO

Previous report

We continue to monitor the San Francisco lodging market, including changes in business travel, convention activity, tourism, public safety initiatives, and broader economic conditions. Demand trends are influenced by the region’s technology sector, convention and group calendars, and overall macroeconomic conditions. Management evaluates these trends and related uncertainties when planning pricing, sales and marketing, and capital allocation strategies. See “Risk Factors” for a discussion of factors that could adversely affect demand for our Hotel.

Previous report

REAL ESTATE

Previous report

Real estate carried at historical cost; book values may understate economic value. Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires real estate to be carried at historical cost less accumulated depreciation and, where applicable, impairment. We do not record increases in the fair value of our properties to reflect market conditions or replacement cost. As a result, the carrying values of certain long-held assets may be significantly lower than their estimated market values. Management believes the intrinsic value of the Company—driven in part by the long holding periods of many properties and relatively modest mortgage balances on those assets—is not fully reflected in the historical cost basis presented on our balance sheet. These views are qualitative in nature; we have not obtained portfolio-wide third-party appraisals and do not undertake to do so. Actual realizable values are subject to market conditions, property-specific factors, transaction costs and taxes, and may differ materially from management’s views.

Previous report

The Company acquires its investments in real estate and other investments utilizing cash, securities, or debt, subject to approval or guidelines of the Board of Directors. The Company also invests in income-producing instruments, equity and debt securities and will consider other investments if such investments offer growth or profit potential.

Previous report

For the fiscal year ended June 30, 2025, the Company reported a net loss of $7,547,000, compared to a net loss of $12,556,000 for the year ended June 30, 2024. Income from operations was $7,643,000 in fiscal 2025, an increase from $1,454,000 for the year ended June 30, 2024. Losses from marketable securities transactions totaled $2,502,000 for the year ended June 30, 2025, compared to losses of $1,633,000 for the year ended June 30, 2024. Interest expense increased to $13,556,000 for the year ended June 30, 2025, from $12,007,000 for the year ended June 30, 2024, an increase of $1,549,000, primarily due to higher interest costs associated with the Company’s Hotel operations.

Previous report

The Company had a loss of $4,166,000 from Hotel operations for the year ended June 30, 2025 compared to a loss of $7,154,000 for the year ended June 30, 2024. The decrease in pre-tax loss for fiscal 2025 compared to fiscal 2024, was primarily attributable to increased hotel room revenues and to the refinancing-related waiver of default interest and forbearance fees from the mezzanine lender. In connection with the March 2025 refinancing, the mezzanine lender waived certain previously accrued default interest and forbearance amounts; the Company recognized a $1.416 million gain on extinguishment of debt in fiscal 2025 in accordance with ASC 405-20.

Previous report

The following tables set forth a more detailed presentation of Hotel operations for the years ended June 30, 2025 and 2024.

Previous report

Total operating expenses increased by $1,492,000 due to increases in union salaries and wages, Hilton marketing and guest loyalty fees, credit card fees, and travel agent and group commissions.

Previous report

The Hotel’s revenues increased by 10% year over year. Average daily rate increased by $1, average occupancy increased 10%, and RevPAR increased by $23 for the twelve months ended June 30, 2025 compared to the twelve months ended June 30, 2024.

Previous report

Revenues from real estate operations increased to $18,015,000 in fiscal 2025 and $16,254,000 in fiscal 2024, primarily as the result of higher occupancy and increased rental rates. Real estate operating expenses decreased to $9,550,000 from $9,836,000 primarily due to a decrease in vacancy at our Missouri property, which rebranding and is undergoing renovation. Management continues to review and analyze the Company’s real estate operations to improve occupancy and rental rates and to reduce expenses and improve efficiencies.

Previous report

For the year ended June 30, 2025, the Company had a net realized loss of $329,000 and a net unrealized loss of $1,018,000. For the year ended June 30, 2024, the Company had a net realized gain of $1,251,000 and a net unrealized loss of $1,736,000.

Previous report

During the years ended June 30, 2025 and 2024, the Company performed an impairment analysis of its other investments and determined that its investments had other than temporary impairment and recorded impairment losses of $0 and $5,000, respectively.

Previous report

The Company and its subsidiary Portsmouth compute and file income tax returns and prepare separate income tax provisions for financial reporting. Portsmouth does not record an income tax benefit from its pre-tax losses due to its continued operating losses in each of the past three consecutive taxable years.

Previous report

As of June 30, 2024, the Company’s investment portfolio was diversified with 24 different equity positions. The Company holds two equity securities that comprised more than 10% of the equity value of the portfolio. The two largest security positions represent 28% and 22% of the portfolio and consist of the common stock of American Realty Investors, Inc. (NASDAQ: ARL) and Alphabet Inc. (NASDAQ: GOOG), which are included in the REITs and real estate companies and Communication Services, respectively

Previous report

As of June 30, 2025, the Company had total cash, cash equivalents, and restricted cash $15,195,000 (including $53,000 classified as held for sale) compared to $8,694,000 as of June 30, 2024. The Company also held marketable securities, net of margin balances, of $969,000, compared to $7,266,000 at June 30, 2024. These marketable securities are short-term and considered readily convertible to cash.

Previous report

InterGroup’s liquidity is driven primarily by: (i) cash generated by its multifamily and commercial real estate portfolio; (ii) cash and cash equivalents held at the parent; (iii) proceeds from refinancings at InterGroup-owned properties; and (iv) limited amounts of marketable securities. Key expected uses of cash at the parent include corporate G&A, parent-level income taxes, debt service on InterGroup property-level mortgages, and capital expenditures for its multifamily and other real estate assets.

Previous report

Parent cash sources and uses for the next twelve months include:

Previous report

InterGroup also provides liquidity to Portsmouth through an unsecured related-party revolving credit facility (see “Related Party Credit Facility – InterGroup”). The availability of this facility depends on InterGroup’s own cash, cash flows from operations, and financing capacity. If InterGroup’s liquidity were to be constrained, Portsmouth’s ability to draw on the facility could be limited. InterGroup’s Board (or Audit Committee) oversees related-party transactions in accordance with the Company’s policies and applicable SEC rules.

Previous report

In February 2025, the Company initiated a plan to dispose of a non-core 12-unit multifamily property in Los Angeles and commenced active marketing in April 2025. The property was classified as held for sale at June 30, 2025. If completed, the sale would provide additional liquidity; the Company currently expects to use any net proceeds for general corporate purposes, which may include debt reduction, reinvestment in the real estate portfolio, and working capital. There is no assurance as to the timing, terms, or completion of the transaction. In the ordinary course of portfolio management, we may selectively dispose of non-core assets or recycle capital where we believe market pricing is attractive. Any such activity will depend on prevailing market conditions, property-level performance, tax consequences, and our capital allocation priorities. We can provide no assurance as to the timing, pricing, or completion of any disposition.

Previous report

Nasdaq Listing Compliance. As discussed under Item 1A and Item 5, in July 2025 the Nasdaq Hearings Panel granted the Company an extension through September 30, 2025 to regain compliance with Nasdaq Listing Rule 5550(b)(2) (minimum MVLS). On September 17, 2025, the Company received confirmation from Nasdaq that the Company has regained compliance with Listing Rule 5550(b)(2). Nasdaq’s notice stated that, as of September 15, 2025, the Company had demonstrated 11 consecutive business days with a market value of listed securities above $35 million, thereby satisfying the requirement. As a result, the Panel granted the Company’s request for continued listing, and the matter is now closed.

Previous report

Related Party Credit Facility – InterGroup

Previous report

Portsmouth maintains an unsecured related-party revolving credit facility with its parent company, InterGroup, for contingency liquidity purposes; however, as of the date of this report Hotel operations have been self-funded and no incremental draws have been required to support operating needs. The facility, originally entered into in 2014 and subsequently modified, has undergone several amendments since inception.

Previous report

Key modifications include:

Previous report

The facility now bears 9% annual interest, is interest-only, and may be prepaid at any time without penalty. During the fiscal year ended June 30, 2025, Portsmouth borrowed an additional $11,615,000 to fund Hotel refinancing and Hotel operations. As of June 30, 2025, the outstanding balance was $38,108,000, and Portsmouth had not made any principal repayments. This facility remains a critical source of liquidity and flexibility for Portsmouth. See also Note 9 – Other Financing Transactions. All material intercompany accounts and transactions have been eliminated in consolidation.

Previous report

Intergroup Real Estate – Recent Financing Activity

Previous report

During the fiscal year ending June 30, 2025, the Company refinanced the mortgage on its 157-unit apartment located in Florence, Kentucky in the amount of $9,800,000. The term of the loan is approximately 10 years with an interest rate of 5.40%. The loan matures in January 2035. In May 2025 we amended the loan on our St. Louis, Missouri property, establishing a maturity of June 5, 2028. In May 2025 the Company made a principal reduction payment of $344,000.

Previous report

During the fiscal year ending June 30, 2024, the Company obtained a second mortgage on its 358-unit apartment located in Las Colinas, Texas in the amount of $4,573,000. The term of the loan is approximately 7 years with an interest rate of 7.60%.

Previous report

Liquidity Requirements and Material Cash Requirements

Previous report

Our material cash requirements arise from (i) debt service and maturities on property-level mortgages within InterGroup’s real estate portfolio, (ii) recurring capital expenditures across our multifamily and commercial properties, (iii) corporate general and administrative costs and income taxes, and (iv) on a consolidated basis, debt service and required reserve deposits related to the Hilton San Francisco Financial District (the “Hotel”). See Note 2 – Liquidity, Note 10 – Mortgage Notes Payable, and Note 17 – Commitments and Contingencies.

Previous report

Parent-level (InterGroup) liquidity and cash requirements

Previous report

InterGroup’s liquidity is primarily supported by cash flows generated from its owned real estate portfolio (not Hotel operations), supplemented by cash on hand and, where appropriate, property-level financing. Historically, Portsmouth has paid only limited dividends to all of its shareholders, and none in the last 12 years; accordingly, we do not rely on Portsmouth or the Hotel for parent liquidity.

Previous report

Near-term parent cash requirements include:

Previous report

Longer-term parent cash requirements include:

Previous report

As of June 30, 2025, we had cash and cash equivalents of $5.1 million and marketable securities, net of margin balances, of $1.0 million (see Note 2 and Note 6). We also expect cash generated from real estate operations to continue to be our principal source of parent liquidity. We may from time to time consider asset sales, refinancings, or equity issuance (subject to Board and, if required, stockholder approval) as part of broader capital planning. See Note 9 for additional financing information.

Previous report

Consolidated (including Portsmouth) liquidity and cash requirements

Previous report

On a consolidated basis, our material cash requirements also include those of Portsmouth and the Hotel:

Previous report

Given these restrictions and the Hotel’s current cash management framework, we do not budget for parent-level liquidity from Hotel cash flows.

Previous report

Contractual obligations and maturities

Previous report

A summary of our contractual obligations, including principal and interest by year, is presented in “Material Contractual Obligations” within this Item 7 and in Note 10 – Mortgage Notes Payable. We have no material off-balance sheet arrangements. See “Off-Balance Sheet Arrangements”.

Previous report — wording carried elsewhere

Parent Company (InterGroup) — Liquidity and Capital Resources