INTERGROUP CORP

Current report

Economic conditions and reduced travel demand could materially adversely affect our business.

Current report

Demand for hotel accommodations depends on business and leisure travel, consumer confidence, corporate spending and general economic conditions. Economic downturns, inflation, higher interest rates, reduced discretionary spending, public health events, geopolitical conflicts or other disruptions could reduce occupancy, average daily room rates and food and beverage revenues. Increased competition during weaker economic periods may also place downward pressure on pricing and profitability.

Current report

Through our majority-owned subsidiary, Portsmouth Square, Inc. (“Portsmouth”), we own the Hilton San Francisco Financial District (the “Hotel”). The Hotel represents a significant component of our consolidated revenues and operating results. Because our Hotel operations are concentrated in a single property and a single geographic market, their financial performance is particularly sensitive to economic, business, travel, tourism and convention conditions in the San Francisco area. Any event that adversely affects the local economy, travel demand or Hotel operations could materially reduce Hotel revenues, cash flows and operating results and adversely affect our consolidated financial performance. Although our real estate portfolio and investment activities provide diversification, they do not eliminate the concentration risk associated with the Hotel’s reliance on a single geographic market.

Current report

We operate in a highly competitive lodging market.

Current report

The Hotel competes with numerous hotels and hospitality providers in the San Francisco market, many of which have greater financial, operational, marketing or brand resources than we do. Increased competition, changing customer preferences, or competitors’ investments in renovations, technology, loyalty programs or pricing strategies could reduce occupancy, room rates and operating margins.

Current report

The Hotel requires significant ongoing capital expenditures.

Current report

Hotels require substantial expenditures for renovations, maintenance, furniture, fixtures, equipment, technology and compliance with brand standards and governmental requirements. We may not generate sufficient cash flow to fund these expenditures and may need additional debt or equity financing. Delays, cost overruns, labor shortages, supply chain disruptions, inflation or an inability to obtain financing could adversely affect the Hotel’s competitiveness and our financial performance.

Current report

We have significant consolidated debt obligations, including the Hotel’s senior mortgage and mezzanine indebtedness and mortgage debt secured by our non-Hotel real estate properties. These obligations require substantial principal and interest payments and may subject the applicable borrowers and guarantors to financial and other covenants. Our indebtedness reduces financial flexibility, limits our ability to pursue strategic opportunities and increases our vulnerability to adverse economic conditions and rising interest rates. Our inability to comply with applicable covenants, refinance indebtedness or, with respect to the Hotel financing, satisfy extension conditions could materially adversely affect our liquidity, financial condition and results of operations.

Current report

The Hotel’s senior mortgage and amended mezzanine loans are generally non-recourse to the borrower subsidiaries, subject to specified recourse liabilities and “springing recourse” events. InterGroup and Portsmouth each provide limited guaranties of specified recourse obligations. The guaranteed obligations include customary non-recourse carve-outs and certain performance obligations, and the guaranties may become full-recourse for the outstanding debt upon the occurrence of specified springing recourse events. Certain guaranteed obligations also relate to post-removal repair and restoration obligations associated with the pedestrian bridge, and the senior guaranty includes certain carry-reserve funding and casualty-shortfall obligations. If any guaranteed obligation becomes payable, our liquidity and financial condition could be materially adversely affected.

Current report

Our real estate operations are subject to market, regulatory and operating risks that could adversely affect occupancy, rental income and property values..

Current report

Our multifamily and commercial real estate properties are subject to changes in local economic conditions, rental demand, competition, occupancy and rental rates, as well as landlord-tenant and rent regulation, property taxes, insurance costs, utilities, maintenance and capital requirements. Many property-level operating costs are fixed or do not decline proportionately if occupancy or rental income decreases. Adverse market or regulatory conditions, increased operating costs or declines in property values could reduce cash flows from our real estate operations and adversely affect our financial condition and results of operations.

Current report

Our investment portfolio is subject to market, concentration and liquidity risks.

Current report

We hold investments in marketable and nonmarketable securities. Market volatility, changes in interest rates, credit conditions, issuer-specific developments or reduced liquidity could adversely affect the value of these investments and our financial performance. Changes in the fair value of our marketable equity securities are recognized in earnings and may cause volatility in our reported results. As of June 30, 2026, two equity securities collectively represented approximately 43% of the fair value of our marketable equity securities portfolio, increasing our exposure to changes in the value of those investments. Nonmarketable investments may be difficult to value or sell and may require us to hold them for extended periods or realize losses if liquidity is required.

Current report

We depend on third-parties to operate and franchise the Hotel

Current report

The Hotel is managed by Aimbridge Hospitality and operates under the Hilton brand pursuant to a franchise agreement. Our success depends in part upon the continued performance of these third parties and our ability to maintain these contractual relationships. Failure to satisfy franchise standards, termination or nonrenewal of the management or franchise agreement, or poor operational performance could materially adversely affect our operations and financial results.

Current report

The Hotel is subject to numerous federal, state and local laws and regulations governing hotel operations, employment practices, food and beverage service, accessibility, environmental matters, privacy, taxation and public health and safety. Changes in applicable laws or failure to comply with regulatory requirements could result in increased operating costs, fines, penalties, litigation or operational restrictions.

Current report

Our business is exposed to catastrophic events and insurance risks.

Current report

Natural disasters, including earthquakes, floods, severe weather and wildfires, terrorism, public health emergencies, cyber incidents affecting travel infrastructure and other catastrophic events could damage our properties, disrupt operations or reduce travel demand. Although we maintain insurance coverage on our properties, such coverage may not be available for all risks or may be subject to significant deductibles, exclusions or coverage limitations. Rising insurance costs or reduced availability of coverage could adversely affect our financial condition and results of operations.

Current report

Cybersecurity incidents could adversely affect our operations.

Current report

We rely on information technology systems, including systems operated by third parties, to conduct our business. Cybersecurity incidents, including ransomware attacks, unauthorized access or other disruptions, could impair operations, compromise confidential information, expose us to litigation or regulatory actions and harm our reputation. While we maintain cybersecurity risk management processes and did not experience any material cybersecurity incidents during fiscal 2026, future incidents could materially adversely affect our business. See Item 1C – Cybersecurity.

Current report

The market price of our common stock may fluctuate significantly due to changes in our operating performance, market conditions, interest rates, investor sentiment, trading volume, factors affecting our Hotel, real estate and investment activities, and sales or anticipated sales of large blocks of our common stock. These fluctuations may occur regardless of our operating performance and could adversely affect the value of an investment in our common stock.

Current report

Mr. Winfield’s controlling ownership may limit the influence of other shareholders.

Previous report

Adverse changes in the U.S. and global economies could adversely affect our financial performance.

Previous report

Due to a number of factors affecting consumers, the outlook for the lodging industry remains uncertain. These factors have, at times, resulted in fewer customers visiting San Francisco or in reduced customer spending as compared to prior periods, and may do so again. The current macroeconomic environment, including risks of a U.S. or global recession, has resulted in many businesses reducing or eliminating typical travel and group meetings as a conservative measure in times of financial uncertainty. Leisure travel and other leisure activities represent discretionary expenditures, and participation in such activities tends to decline during economic downturns, during which consumers generally have less disposable income. As a result, customer demand for the amenities and leisure activities that we offer may decline during such periods. Furthermore, during periods of economic contraction, revenues may decrease while some of our costs remain fixed or even increase, resulting in decreased earnings.

Previous report

Weakened global economic conditions may adversely affect our industry, business, and results of operations.

Previous report

Our overall performance depends in part on worldwide economic conditions, which could adversely affect the tourism industry. According to current economic news reports, the United States and other key international economies may enter into a recession or experience prolonged periods of slow growth, characterized by falling demand for a variety of goods and services, restricted credit, going concern threats to financial institutions, major multinational companies and medium and small businesses, poor liquidity, declining asset values, reduced corporate profitability, and volatility in credit, equity and foreign exchange markets. These conditions affect discretionary and leisure spending and could adversely affect our customers’ ability or willingness to travel to destinations for leisure and cut back on discretionary business travel, which could adversely affect our operating results. In addition, in a weakened economy, companies that have competing properties may reduce room rates and other prices which could also reduce our average revenues and harm our operating results.

Previous report

Through our majority-owned subsidiary, Portsmouth Square, Inc. (“Portsmouth”), we own a single hotel property in San Francisco, California (the Hilton San Francisco Financial District). While InterGroup is not a single-asset company—we also own and operate a diversified portfolio of multifamily and commercial real estate and hold investment securities—the Hotel represents a significant component of our consolidated revenues and cash flows. As a result, adverse conditions in the San Francisco Bay Area—including local economic trends, business-travel and convention activity, competitive dynamics, public safety or municipal issues, natural disasters (including earthquakes), climate-related impacts, and public health events—could materially reduce Hotel operating results and, in turn, negatively impact our consolidated results of operations, liquidity, and cash flows.

Previous report

Prolonged weakness in the San Francisco market could also limit cash available at Portsmouth for debt service, required reserves, or capital expenditures, which may restrict upstream distributions to InterGroup and constrain our corporate capital allocation. Although our other real estate investments and securities provide diversification, they do not eliminate the concentration risk inherent in our Hotel segment’s reliance on a single urban market. See also “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 10 – Mortgage Notes Payable.

Previous report

We face intense local and increasingly national competition which could impact our operations and adversely affect our business and the results of operations.

Previous report

We operate in the highly competitive San Francisco hotel industry. The Hotel competes with other high-quality Northern California hotels and resorts. Many of these competitors seek to attract customers to their properties by providing food and beverage outlets, retail stores and other related amenities, in addition to recently renovated hotel accommodations. To the extent that we seek to enhance our revenue base by offering our own various amenities, we compete with the service offerings provided by these competitors.

Previous report

Many of the competing properties have themes and attractions which draw a significant number of visitors and directly compete with our operations. Some of these properties are operated by subsidiaries or divisions of large public companies that may have greater name recognition and financial and marketing resources than we do and market to the same target demographic group as we do. Various competitors are expanding and renovating their existing facilities. We believe that competition in the San Francisco hotel and resort industry is based on certain property-specific factors, including overall atmosphere, range of amenities, price, location, technology infrastructure, entertainment attractions, theme and size. Any market perception that we do not excel with respect to such property-specific factors could adversely affect our ability to compete effectively. If we fail to respond effectively to changes in market conditions, customer preferences, or competitor strategies – including pricing actions, loyalty programs, and digital marketing initiatives, we could lose market share, which could adversely affect our business, revenues, and results of operations.

Previous report

The San Francisco hotel and resort industry is capital intensive; financing our renovations and future capital improvements could reduce our cash flow and adversely affect our financial performance.

Previous report

The Hotel has an ongoing need for renovations and other capital improvements to remain competitive, including replacement, from time to time, of furniture, fixtures and equipment. We will also need to make capital expenditures to comply with applicable laws and regulations.

Previous report

Renovations and other capital improvements of hotels require significant capital expenditures. In addition, renovations and capital improvements of hotels usually generate little or no cash flow until the project’s completion. We may not be able to fund such projects solely from cash provided from our operating activities. Consequently, we will rely upon the availability of debt or equity capital and reserve funds to fund renovations and capital improvements and our ability to carry them out will be limited if we cannot obtain satisfactory debt or equity financing, which will depend on, among other things, market conditions. No assurances can be made that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on favorable terms. In addition, labor shortages, supply chain disruptions, inflationary pressures on materials and services, and increased regulatory requirements related to environmental sustainability or climate-resilient construction could further escalate costs or extend project timelines.

Previous report

Renovations and other capital improvements may give rise to the following additional risks, among others: construction cost overruns and delays; increased prices of materials due to tariffs; temporary closures of all or a portion of the Hotel to customers; disruption in service and room availability causing reduced demand, occupancy and rates; and possible environmental issues.

Previous report

As a result, renovations and any other future capital improvement projects may increase our expenses, reduce our cash flows and our revenues. If capital expenditures exceed our expectations, this excess would have an adverse effect on our available cash. Significant delays or cost overruns could also impact our ability to maintain competitive standards and customer satisfaction, potentially reducing revenues.

Previous report

We have substantial debt service obligations. Our substantial debt may negatively affect our business and operations in several ways, including: requiring us to use a substantial portion of our funds from operations to make required payments on principal and interest, which will reduce funds available for operations and capital expenditures, future business opportunities and other purposes; making us more vulnerable to economic and industry downturns and reducing our flexibility in responding to changing business and economic conditions; limiting our flexibility in planning for, or reacting to, changes in the business and the industry in which we operate; placing us at a competitive disadvantage compared to our competitors that have less debt; limiting our ability to borrow more money for operations, capital or to finance acquisitions in the future; and requiring us to dispose of assets, if needed, in order to make required payments of interest and principal. In addition, increases in interest rates, changes in credit market conditions, or a downgrade of our creditworthiness could increase our borrowing costs or limit our access to additional financing. If we are unable to refinance existing debt on acceptable terms or at all, we may need to reduce or delay capital expenditures, asset improvements, or strategic initiatives, which could negatively affect our competitive position and financial performance.

Previous report

The Hotel’s senior mortgage and amended mezzanine loans are generally non-recourse to the borrower subsidiaries, except for customary non-recourse carve-outs (e.g., fraud, willful misconduct, misapplication of funds, certain prohibited transfers, and environmental indemnities) and specified “springing recourse” events. Portsmouth and InterGroup have provided limited guaranties of these recourse obligations. While no such events have occurred as of June 30, 2025, the occurrence of a defined recourse event could increase our exposure and have a material adverse effect on liquidity or financial condition.

Previous report

Our business model involves high fixed costs, including property taxes and insurance costs, which we may be unable to adjust in a timely manner in response to a reduction in our revenues.

Previous report

The costs associated with owning and operating the Hotel are significant. Some of these costs (such as property taxes and insurance costs) are fixed, meaning that such costs may not be altered in a timely manner in response to changes in demand for services. Failure to adjust our expenses may adversely affect our business and results of operations. Our real property taxes may increase as property tax rates change and as the values of properties are assessed and reassessed by tax authorities. Our real estate taxes do not depend on our revenues, and generally we could not reduce them other than by disposing of our real estate assets.

Previous report

Insurance premiums have increased significantly in recent years, and continued escalation may result in our inability to obtain adequate insurance at acceptable premium rates. A continuation of this trend would appreciably increase the operating expenses of the Hotel. If we do not obtain adequate insurance, to the extent that any of the events not covered by an insurance policy materialize, our financial condition may be materially adversely affected. Further, factors such as climate change, extreme weather events, and increased litigation risk have contributed to rising insurance premiums and reduced coverage availability in certain markets, including California. Limited insurance options or higher costs could pressure our operating margins and cash flows.

Previous report

In the future, our property may be subject to increases in real estate and other tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses, which could reduce our cash flow and adversely affect our financial performance. If our revenues decline and we are unable to reduce our expenses in a timely manner, our business and results of operations could be adversely affected.

Previous report

Risk of declining market values in marketable securities.

Previous report

The Company invests from time to time in marketable securities. As a result, the Company is exposed to market volatility in connection with these investments. The Company’s financial position and financial performance could be adversely affected by worsening market conditions or sluggish performance of such investments. Factors such as interest rate fluctuations, geopolitical events, changes in credit ratings, and overall capital market volatility could also lead to unrealized or realized losses in our investment portfolio. In addition, a prolonged decline in market values could reduce our liquidity or our ability to meet certain financial covenants, and changes in fair value of equity securities are recognized in earnings, which can increase the volatility of our reported results.

Previous report

Illiquidity risk in nonmarketable securities.

Previous report

Nonmarketable securities are, by definition, instruments that are not readily salable in the capital markets, and when sold are usually at a substantial discount. Thus, the holder is limited to return on investment from any income producing feature of the instrument, as any sale of such an instrument would be subject to a substantial discount. Thus, a holder may need to hold such instruments for a longer period of time and may be unable to liquidate the investment without incurring a substantial loss if cash is needed on short notice. This lack of liquidity could adversely affect our ability to respond to changing market conditions or to reallocate capital to other strategic opportunities.

Previous report

Litigation and legal proceedings could expose us to significant liabilities and thus negatively affect our financial results.

Previous report

We are a party, from time to time, to various litigation claims and legal proceedings, government and regulatory inquiries and/or proceedings, including, but not limited to, intellectual property, premises liability and breach of contract claims. Material legal proceedings are described more fully in Note 17, Commitments and Contingencies, to our consolidated financial statements, included in Item 8 of this Annual Report on Form 10-K.

Previous report

Litigation is inherently unpredictable and defending these proceedings can result in significant ongoing expenditures and the diversion of our management’s time and attention from the operation of our business, which could have a negative effect on our business operations. Our failure to successfully defend or settle any litigation or legal proceedings could result in liabilities that, to the extent not covered by our insurance, could have a material adverse effect on our financial condition, revenue and profitability. In addition, regulatory investigations or enforcement actions could result in fines, penalties, or other sanctions, some of which may not be covered by insurance. Any adverse publicity resulting from litigation or regulatory matters could also harm our brand reputation and customer relationships, further impacting revenues.

Previous report

The threat of terrorism could adversely affect the number of customer visits to the Hotel.

Previous report

The threat of terrorism has caused, and may in the future cause, a significant decrease in customer visits to San Francisco due to disruptions in commercial and leisure travel patterns and concerns about travel safety. We cannot predict the extent to which disruptions in air or other forms of travel as a result of any further terrorist act, outbreak of hostilities or escalation of war would adversely affect our financial condition, results of operations or cash flows. The possibility of future attacks may hamper business and leisure travel patterns and, accordingly, the performance of our business and our operations. Moreover, other security-related risks – including cybersecurity threats impacting travel infrastructure, domestic or international civil unrest, and geopolitical tensions – could have similar adverse effects on travel demand and hotel occupancy levels.

Previous report

We depend in part, on third-party management companies for the future success of our business and the loss of one or more of their key personnel could have an adverse effect on our ability to manage our business and operate successfully and competitively or could be negatively perceived in the capital markets.

Previous report

The Hotel is managed by Aimbridge. Their ability to manage the Hotel and to operate successfully and competitively is dependent, in part, upon the efforts and continued service of their managers. The departure of key personnel of current or future management companies could have an adverse effect on our business and our ability to operate successfully and competitively, and it could be difficult to find replacements for these key personnel, as competition for such personnel is intense. In addition, the termination or non-renewal of our management agreement, changes in the terms of such agreement, or the failure of our management company to meet performance expectations could materially impact our operations. Lack of a robust succession plan for management personnel could also heighten our operations risk in the event of unexpected departures.

Previous report

Seasonality and other related factors such as weather can be expected to cause quarterly fluctuations in revenue at the Hotel.

Previous report

The hotel and resort industry is seasonal in nature. This seasonality can tend to cause quarterly fluctuations in revenues at the Hotel. Our quarterly earnings may also be adversely affected by other related factors outside our control, including weather conditions and poor economic conditions. Changes in climate patterns, including more frequent or severe weather events, could alter historical seasonal demand trends or disrupt travel plans. As a result, we may have to enter into short-term borrowings in certain quarters in order to offset these quarterly fluctuations in our revenues. If weather-related or climate-related events become more frequent or severe, the impact on occupancy and average daily rates could be greater than historical experience suggests.

Previous report

The hotel industry is heavily regulated and failure to comply with extensive regulatory requirements may result in an adverse effect on our business.

Previous report

Violations of laws could result in, among other things, disciplinary action. If we fail to comply with regulatory requirements, this may result in an adverse effect on our business. In addition, heightened regulatory scrutiny or enforcement actions could divert management’s attention and resources, impacting our financial performance.

Previous report

Uninsured and underinsured losses could adversely affect our financial condition and results of operations.

Previous report

There are certain types of losses, generally of a catastrophic nature, such as earthquakes and floods or terrorist acts, which may be uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. We will use our discretion in determining amounts, coverage limits, deductibility provisions of insurance and the appropriateness of self-insuring, with a view to maintaining appropriate insurance coverage on our investments at a reasonable cost and on suitable terms. Uninsured and underinsured losses could harm our financial condition and results of operations. We could incur liabilities resulting from loss or injury to the Hotel or to persons at the Hotel. Claims, whether or not they have merit, could harm the reputation of the Hotel or cause us to incur expenses to the extent of insurance deductibles or losses in excess of policy limitations, which could harm our results of operations. Moreover, recent trends in the insurance market have resulted in reduced coverage availability and higher premiums for catastrophic risks, particularly in California. Climate change, extreme weather events, and geopolitical instability could further pressure insurance capacity and costs.

Previous report

In the event of a catastrophic loss, our insurance coverage may not be sufficient to cover the full current market value or replacement cost of our lost investment. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in the Hotel, as well as the anticipated future revenue from the property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the Hotel. In the event of a significant loss, our deductible may be high, and we may be required to pay for all such repairs and, therefore, it could materially adversely affect our financial condition. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate the Hotel after it has been damaged or destroyed. Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed property.

Previous report

It has generally become more difficult and expensive to obtain property and casualty insurance, including coverage for terrorism. When our current insurance policies expire, we may encounter difficulty in obtaining or renewing property or casualty insurance on our property at the same levels of coverage and under similar terms. Such insurance may be more limited and for some catastrophic risks (for example, earthquake, flood and terrorism) may not be generally available at current levels. Even if we can renew our policies or to obtain new policies at levels and with limitations consistent with our current policies, we cannot be sure that we will be able to obtain such insurance at premium rates that are commercially reasonable. If we were unable to obtain adequate insurance on the Hotel for certain risks, it could cause us to be in default under specific covenants on certain of our indebtedness or other contractual commitments that require us to maintain adequate insurance on the Hotel to protect against the risk of loss. If this were to occur, or if we were unable to obtain adequate insurance and the Hotel experienced damage which would otherwise have been covered by insurance, it could materially adversely affect our financial condition and the operations of the Hotel.

Previous report

In addition, insurance coverage for the Hotel and for casualty losses does not customarily cover damages that are characterized as punitive or similar damages. As a result, any claims or legal proceedings, or settlement of any such claims or legal proceedings that result in damages that are characterized as punitive or similar damages may not be covered by our insurance. If these types of damages are substantial, our financial resources may be adversely affected. We may also face gaps in coverage for newly emerging risks, such as pandemic-related business interruptions or cybersecurity-related losses, if insurers restrict or exclude such coverage in future policies.