The InterGroup(INTG) - 2025 Q4 - Annual Report

Ownership and Structure - As of June 30, 2025, InterGroup owns approximately 75.9% of the outstanding common shares of Portsmouth[23] - The concentrated ownership by the CEO, holding 70.1% of shares, limits other shareholders' influence on corporate affairs[97] - The Company owns approximately 75.9% of the common shares of Portsmouth Square, Inc., which operates the Hilton San Francisco Financial District[174] Financial Performance - For the fiscal year ended June 30, 2025, the Company reported a net loss of $7,547,000, an improvement from a net loss of $12,556,000 for the previous year[178] - Income from operations increased to $7,643,000 in fiscal 2025, up from $1,454,000 in fiscal 2024[178] - Hotel revenues for the year ended June 30, 2025, totaled $46,363,000, compared to $41,886,000 in fiscal 2024, reflecting an increase in hotel room revenues[181] - The Company experienced a loss of $4,166,000 from hotel operations in fiscal 2025, reduced from a loss of $7,154,000 in fiscal 2024[179] - The Company's revenues increased by 10% year over year, with an average daily rate increase of $1, average occupancy up by 10%, and RevPAR rising by $23 for the twelve months ended June 30, 2025, compared to the previous year[185] - Real estate operations revenues rose to $18,015,000 in fiscal 2025 from $16,254,000 in fiscal 2024, driven by higher occupancy and increased rental rates[186] Debt and Financing - The Company has substantial debt obligations, which may limit operational flexibility and increase vulnerability to economic downturns[74] - The Company secured a modified Mezzanine Loan Agreement for $36,300,000 at a fixed rate of 7.25% per annum, with matching maturity and extension terms to the senior loan[117] - The Company had an outstanding balance of $38,108,000 on its related-party revolving credit facility as of June 30, 2025, with no principal repayments made[202] - The related-party revolving credit facility with InterGroup was amended to increase capacity to $40 million and reduce the interest rate to 9%[218] - Portsmouth's refinancing on March 28, 2025, improved its maturity profile and liquidity, remaining current on required debt service[218] Operational Performance - The Hotel's operation has been seasonal, generally maintaining high occupancy and room rates throughout the year except for the holiday season[46] - The Hotel achieved a RevPAR of $214.66, significantly higher than the CompSet's RevPAR of $172.84, marking a 23% increase since the renovation completed in June 2024, while the CompSet experienced an 8.3% decline[49] - The average occupancy percentage for the year ended June 30, 2025, was 92%, compared to 82% for the year ended June 30, 2024[184] - The Hotel has completed a full guest room renovation over the last two years, expecting to drive rate and grow RevPar[47] - The Hotel received a Quality Assurance inspection score of 96.7%, the highest in at least a decade, earning an "Outstanding" ranking from Hilton[48] Risks and Challenges - The Company faces significant operating risks, including competition, inflationary pressures, and potential economic downturns that could adversely affect performance[57] - The Hotel's reliance on the San Francisco market exposes it to risks from local economic trends and public health events, which could materially impact consolidated results[66] - Future changes in environmental laws or undiscovered contamination could result in significant costs or liabilities for the Company[55] - Cybersecurity risks could disrupt operations and adversely affect the company's financial condition and reputation[94] - Ongoing litigation and legal proceedings could expose the company to significant liabilities, negatively impacting financial results[81] Expenses and Costs - Total operating expenses increased by $1,492,000 due to higher union salaries, marketing fees, credit card fees, and commissions[182] - The Company recorded a reduction in Hotel operating expenses of $1,030,134 for the year ended June 30, 2025, due to waived incentive fees[33] - Insurance premiums have significantly increased, impacting operating expenses and potentially affecting financial condition if adequate coverage is not obtained[77] - Future increases in real estate taxes, utility costs, and operating expenses could adversely affect cash flow and financial performance[78] - The company faces high fixed costs, including property taxes and insurance, which may not be adjusted timely in response to revenue reductions[76] Liquidity and Cash Management - As of June 30, 2025, the Company had total cash, cash equivalents, and restricted cash of $15,195,000, up from $8,694,000 as of June 30, 2024[194] - The company expects existing liquidity sources to meet parent-level cash requirements for at least the next 12 months[211] - Management believes current liquidity sources will support near-term working capital needs despite potential pressures on hotel performance indicators[212] - The company has taken proactive steps to stabilize its liquidity profile amid uncertainties in interest rates and operating costs[212] - Cash management agreements restrict upstream distributions from the Hotel until certain conditions are met[209] Strategic Initiatives - The Company initiated a plan to dispose of a non-core 12-unit multifamily property in Los Angeles, which is expected to provide additional liquidity[197] - The company continues to evaluate strategic alternatives in response to challenges in the San Francisco hospitality sector[215] - The Company plans to fund obligations primarily from real estate operating cash flows and property-level refinancings[213] Market and Investment - The Company may derive income from investments in income-producing instruments, corporate debt, and equity securities[39] - The investment portfolio as of June 30, 2025, was concentrated, with one investment (American Realty Investors, Inc.) accounting for approximately 99% of the total equity value[191] - The Company reported a net loss on marketable securities of $1,347,000 for the year ended June 30, 2025, compared to a net loss of $485,000 in the prior year[187] - The Company may utilize margin for its marketable securities purchases, with margin balances of $0 for both June 30, 2025 and 2024[43] - Nonmarketable securities may require longer holding periods and could result in substantial losses if cash is needed on short notice[80] Regulatory and Compliance - The hotel industry is heavily regulated, and failure to comply with regulations could adversely affect operations and financial performance[88] - The Company regained compliance with Nasdaq Listing Rule 5550(b)(2) by demonstrating a market value of listed securities above $35 million for 11 consecutive business days[164] - The Company's financial statements do not reflect market values of real estate, potentially leading to discrepancies in reported asset values[98]