# Intergroup Corp: Form 10-Q for the period ended Mar 31, 2022

- Company: [Intergroup Corp](/companies/intg.md) (CIK 69422)
- Form: 10-Q
- Filed: 2022-05-02
- Accepted by EDGAR: Apr 29, 2022, 18:12 ET
- Period: 2022-03-31
- Accession: 0001493152-22-011649
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/69422/000149315222011649/form10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/69422/000149315222011649/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $10.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2021-07-01 to 2022-03-31 | $31.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$121.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2021-07-01 to 2022-03-31 | $183.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | −$711.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2021-07-01 to 2022-03-31 | −$2.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$466.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2021-07-01 to 2022-03-31 | −$4.6m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.21 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2021-07-01 to 2022-03-31 | −$2.09 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2021-07-01 to 2022-03-31 | −$8.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2021-07-01 to 2022-03-31 | $1.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2021-07-01 to 2022-03-31 | $1.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-03-31 | $6.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2022-03-31 | $133.1m | us-gaap:Assets |
| Total liabilities | at 2022-03-31 | $212.3m | us-gaap:Liabilities |
| Long-term debt | at 2022-03-31 | $231.9m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2022-03-31 | −$58.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,088 characters.

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

The Company may from time to time make forward-looking statements and projections concerning future expectations. When used in this discussion, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “could,” “might” and similar expressions, are intended to identify forward-looking statements.

Such statements are subject to certain risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: national and worldwide economic conditions, including the impact of recessionary conditions on tourism, travel and the lodging industry; the impact of terrorism and war on the national and international economies, including tourism, securities markets, energy and fuel costs; natural disasters; general economic conditions and competition in the hotel industry in the San Francisco area; seasonality, labor relations and labor disruptions; actual and threatened pandemics such as swine flu or the outbreak of COVID-19 or similar outbreaks; partnership distributions; the ability to obtain financing at favorable interest rates and terms; securities markets, regulatory factors, litigation and other factors discussed below in this Report and in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. These risks and uncertainties could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

### NEGATIVE EFFECTS OF CIVIL AUTHORITY ACTIONS ON OUR BUSINESS

On February 25, 2020, the City of San Francisco issued the proclamation by the Mayor declaring the existence of a local emergency. The negative effects of the civil authority actions related to the novel strain of coronavirus (“COVID-19”) on our business have been significant. In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious virus, which has continued to spread, has adversely affected workforces, customers, economies and financial markets globally. It has also disrupted the normal operations of many businesses, including ours. To mitigate the harm from the pandemic, on March 16, 2020, the City and County of San Francisco, along with a group of five other Bay Area counties and the City of Berkeley, issued parallel health officer orders imposing shelter in place limitations across the Bay Area, requiring everyone to stay safe at home except for certain essential needs. Since February 2020, several unfavorable events and civil authority actions have unfolded causing demand for our hotel rooms to suffer including cancellations of all citywide conventions, reduction of flights in and out of the Bay Area and decline in both leisure and business travel.

In December 2020, due to the surge in COVID-19 cases and hospitalizations, the Health Officer of the City and County of San Francisco suspended or restricted certain activities. Health Order C19-07q (the “Order”) incorporates suspensions, reductions in capacity limits, and other restrictions contained in the Regional Stay At Home Order issued by the California Department of Public Health on December 3, 2020. Effective December 17, 2020, the Bay Area Region, including San Francisco, was required to comply with the State’s December 3, 2020 Regional Stay-at-Home Order. The Order strongly discouraged anyone in the County from travelling for leisure, recreation, business, or other purposes that could be postponed until after the surge. With limited exceptions, this Order imposed a mandatory quarantine on anyone traveling, moving, or returning to the County from anywhere outside the Bay Area. Effective January 20, 2021, Health Order C19- 07r revised and replaced the previous Order; it continued to temporarily prohibit certain businesses and activities from resuming but allowed certain other businesses, activities, travel, and governmental functions to occur subject to specified health and safety restrictions, limitations, and conditions to limit the transmission of COVID-19.

On March 24, 2021, the City and County of San Francisco announced it moved into the orange tier which removed the suggested Shelter in Place for guests travelling to San Francisco. This was a very positive step for the hotel community. This tier opened activities in the city including expanded restaurant capacities, museums, and attractions. For the hotel it allowed for guests to gather in public spaces and for outlets and amenities to open at limited capacities including fitness centers. It did not change the very stringent cleaning and sanitation requirements set forth by the Health Officer of the City and County of San Francisco which proved to be a costly measure to maintain. Effective May 6, 2021, the City and County of San Francisco moved into the yellow tier guidelines. We continue to closely monitor the very fluid changes that the Center for Disease Control, San Francisco Department of Health and other authorities implement with regards to the COVID-19 pandemic.

On August 20, 2021, San Francisco announced vaccination requirements for indoor activities. This order requires restaurants, theaters, and entertainment venues where food or drink is served inside, as well as gyms, recreation facilities, yoga studios, dance studios and other fitness establishments, clubs involving elevated breathing to show proof of vaccination.

On January 11, 2022, a new Health Order has been issued. The primary change to the Order is to comply with changes the State made lowering the threshold for mega events to 500 attendees indoor and 5,000 attendees outdoor beginning January 15, 2022. On March 17, 2022, the State of California announced that beginning on April 1, 2022, it will no longer require that people attending Indoor Mega-Event (i.e., events with 1,000 or more attendees) provide proof of vaccination or negative testing to gain entry. Instead, the State strongly recommend that venues hosting Indoor Mega-Events continue to impose that requirement.

The San Francisco hospitality market has seen the two largest citywide events go virtual with DreamForce in September 2021 and JP Morgan Healthcare Conference in January 2022. RSA Conference originally scheduled for February 2022 was moved to June 2022 and Google Cloud Next was cancelled for 2022. As of the date of this report, the market is seeing slow and steady improvement month over month. Rates in the market grew roughly 20% from February 2022 to March 2022 as demand is steadily increasing, particularly midweek where it has been the softest. Demand generators are returning to the market with the largest being Game Developers Conference in March 2022. Although it was approximately half of the pre-COVID attendance, it lifted the market to the best RevPAR we have seen since March 2020. April 2022 continues the trend with midweek rates rising and another strong performance from the RIMS citywide. San Francisco has two more citywide conferences in May 2022 and the momentum continues into the summer. The cancellations and pushing back of these major events have stopped, providing cautious optimism about the market’s ability to recover in 2022 and beyond.

In response to the decrease in demand, we have since furloughed most managers at the Hotel except for members of the executive team and continue to limit hourly staff to a minimum. By the end of March 2020, we had temporarily closed all our food and beverage outlets, valet parking, concierge and bell services, fitness center, as well as the executive lounge facility. We continue to implement social distancing standards and cleaning processes designed by Aimbridge and Hilton to keep employees and guests safe. The full impact and duration of the COVID-19 outbreak continues to evolve as of the date of this Annual Report. The pandemic effectively eliminated our ability to generate any profits, due to the drastic decline in both leisure and business travel. As a result, management believes the ongoing length and severity of the economic downturn caused by the pandemic will have a material adverse impact on our future business, financial condition, liquidity and financial results. We are also assessing the potential impact on the impairment analysis of our long-lived assets and the realization of our deferred tax assets. As of the date of this report, the effects of the pandemic continue to affect our economy, business and leisure travel, and our needs to continue to curtail certain revenue generating activities at the Hotel. We expect that the effects will continue to have a material adverse effect on our business until the pandemic ends.

As a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020, additional avenues of relief may be available to workers and families through enhanced unemployment insurance provisions and to small businesses through programs administered by the Small Business Administration (“SBA”). The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. On April 9, 2020, Justice entered into a loan agreement (“SBA Loan - Justice”) with CIBC Bank USA under the CARES Act. Justice received proceeds of $4,719,000 from the SBA Loan - Justice. In accordance with the requirements of the CARES Act, Justice has used all proceeds from the SBA Loan for payroll costs and other qualified expenses. The SBA Loan - Justice was scheduled to mature on April 9, 2022 and had a 1.00% interest rate and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On April 27, 2020, InterGroup entered into a loan agreement (“SBA Loan - InterGroup”) with CIBC Bank USA under the CARES Act and received loan proceeds in the amount of $453,000. As of June 30, 2021, InterGroup used all the $453,000 loan proceeds in qualified payroll expenses. The SBA Loan – InterGroup was scheduled to mature on April 27, 2022 and had a 1.00% interest rate. Both the SBA Loan – Justice and SBA Loan – InterGroup (collectively the “SBA Loans”) were forgiven in full by the SBA as of June 30, 2021.

On February 3, 2021, Justice entered into a second loan agreement (“Second SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of $2,000,000 from the Second SBA Loan. As of June 30, 2021, Justice used all proceeds from the Second SBA Loan primarily for payroll costs. The Second SBA Loan was scheduled to mature on February 3, 2026, had a 1.00% interest rate, and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On November 19, 2021, the Second SBA Loan was forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the condensed consolidated statement of operations for the nine months ended March 31, 2022.

### RESULTS OF OPERATIONS

As of March 31, 2022, the Company owns approximately 75% of the common shares of Portsmouth Square, Inc. Historically, the Company’s principal source of revenue is derived from the investment of its subsidiary, Portsmouth, in the Justice Investors Limited Partnership (“Justice” or the “Partnership”) inclusive of hotel room revenue, food and beverage revenue, garage revenue, and revenue from other operating departments. Justice owned the Hotel and related facilities, including a five-level underground parking garage up to its dissolution on December 23, 2021 when Portsmouth replaced Justice as the owner of the Hotel. The financial statements of Justice had been consolidated with those of the Company. However, the impact of the COVID-19 pandemic is highly uncertain and management expects that the ongoing length and severity of the economic downturn will have a material adverse impact on our business, financial condition, liquidity and financial results.

The Hotel is a full-service Hilton brand hotel pursuant to a Franchise License Agreement (the “License Agreement”) with Hilton. The Partnership entered into the License Agreement on December 10, 2004. The term of the License Agreement was for an initial period of 15 years commencing on the opening date, with an option to extend the License Agreement for another five years, subject to certain conditions. On June 26, 2015, Operating and Hilton entered into an amended franchise agreement which extended the License Agreement through 2030, modified the monthly royalty rate, extended geographic protection to Operating and also provided the Partnership certain key money cash incentives to be earned through 2030. The key money cash incentives were received on July 1, 2015.

Aimbridge Hospitality (“Aimbridge”) manages the Hotel under certain Hotel management agreement (“HMA”) with Operating. The term of the management agreement is for an initial period of ten years commencing on the February 3, 2017 date and automatically renews for successive one (1) year periods, to not exceed five years in the aggregate, subject to certain conditions. Under the terms on the HMA, base management fee payable to Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel revenue.

In addition to the operations of the Hotel, the Company also generates income from the ownership, management and, when appropriate, sale of real estate. Properties include sixteen apartment complexes, one commercial real estate property, and three single-family houses as strategic investments. The properties are located throughout the United States, but are concentrated in Texas and Southern California. The Company also has an investment in unimproved real property. All of the Company’s residential and commercial rental operating properties are managed in-house.

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 from time to time and will consider other investments if such investments offer growth or profit potential.

### Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The Company had a net loss of $873,000 for the three months ended March 31, 2022 compared to a net income of $1,399,000 for the three months ended March 31, 2021. The change is primarily attributable to $906,000 gain on marketable securities in the three months ended March 31, 2022 as compared to $5,638,000 gain on marketable securities for the three months ended March 31, 2021.

### Hotel Operations

The Company had net loss from Hotel operations of $2,112,000 for the three months ended March 31, 2022 compared to net loss of $3,259,000 for the three months ended March 31, 2021. The change is primarily attributable to the increase in Hotel revenue.

The following table sets forth a more detailed presentation of Hotel operations for the three months ended March 31, 2022 and 2021.

| For the three months ended March 31, Hotel revenues: | 2022 | 2021 |
| --- | ---: | ---: |
| Hotel rooms | $5,505,000 | $2,368,000 |
| Food and beverage | 372,000 | 17,000 |
| Garage | 677,000 | 479,000 |
| Other operating departments | 78,000 | 38,000 |
| Total hotel revenues | 6,632,000 | 2,902,000 |
| Operating expenses excluding depreciation and amortization | (6,544,000) | (3,990,000) |
| Operating loss before interest, depreciation and amortization | 88,000 | (1,088,000) |
| Interest expense - mortgage | (1,624,000) | (1,642,000) |
| Depreciation and amortization expense | (576,000) | (529,000) |
| Net loss from Hotel operations | $(2,112,000) | $(3,259,000) |

For the three months ended March 31, 2022, the Hotel had operating income of $88,000 before interest expense, depreciation, and amortization on total operating revenues of $6,632,000 compared to operating loss of $1,088,000 before interest expense, depreciation, and amortization on total operating revenues of $2,902,000 for the three months ended March 31, 2021. For the three months ended March 31, 2022, room revenues increased by $3,137,000, food and beverage revenue increased by $355,000, and garage revenue increased by $198,000, compared to the three months ended March 31, 2021. The year over year increase in all the revenue sources are the result of the recovery from the business interruption attributable to a variety of responses by federal, state, and local civil authority to the COVID-19 outbreak since March 2020. Total operating expenses increased by $2,554,000 due to increase in salaries and wages, union health insurance, repairs and maintenance, credit card fees, management fees, and franchise fees.

The following table sets forth the average daily room rate, average occupancy percentage and revenue per occupied room (“RevPAR”, calculated by multiplying the hotel’s average daily room rate by its occupancy percentage) of the Hotel for the three months ended March 31, 2022 and 2021.

| Three Months Ended March 31, | Average Daily Rate | Average Occupancy % | RevPAR |
| --- | ---: | ---: | ---: |
| **2022** | $149 | 74% | $110 |
| **2021** | $103 | 47% | $48 |

The Hotel’s revenues increased by 128% this quarter as compared to the previous comparable quarter. Average daily rate increased by $46, average occupancy increased by 27%, and RevPAR increased by $62 for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

### Real Estate Operations

Net income from real estate operations for the three months ended March 31, 2022 decreased by $2,000 to $383,000 compared to $385,000 for the three months ended March 31, 2021 due to increase in mortgage interest expense. Revenue from real estate operations increased by $361,000 year over year due to increase in market rent and reduction in bad debt. All the Company’s properties are managed in-house. 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.

### Investment Transactions

The Company had a net gain on marketable securities of $906,000 for the three months ended March 31, 2022 compared to a net gain on marketable securities of $5,638,000 for the three months ended March 31, 2021. For the three months ended March 31, 2022, the Company had a net realized gain of $127,000 and a net unrealized gain of $779,000. For the three months ended March 31, 2021, the Company had a net realized gain of $267,000 and a net unrealized gain of $5,371,000. Gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company’s results of operations. However, the amount of gain or loss on marketable securities for any given period may have no predictive value and variations in amount from period to period may have no analytical value. For a more detailed description of the composition of the Company’s marketable securities see the Marketable Securities section below.

### Nine months ended March 31, 2022 compared to nine months ended March 31, 2021

The Company had net loss of $6,022,000 for the nine months ended March 31, 2022 compared to net income of $5,155,000 for the nine months ended March 31, 2021. The change is primarily attributable to the $12,043,000 gain from sale of real estate in August 2020 and $3,613,000 loss on marketable securities in the nine months ended March 31, 2022.

### Hotel Operations

The Company had net loss from Hotel operations of $4,179,000 for the nine months ended March 31, 2022 compared to net loss of $11,420,000 for the nine months ended March 31, 2021. The change is primarily attributable to the increase in Hotel revenue.

The following table sets forth a more detailed presentation of Hotel operations for the nine months ended March 31, 2022 and 2021.

| For the nine months ended March 31, Hotel revenues: | 2022 | 2021 |
| --- | ---: | ---: |
| Hotel rooms | $16,285,000 | $7,842,000 |
| Food and beverage | 934,000 | 130,000 |
| Garage | 2,352,000 | 1,373,000 |
| Other operating departments | 214,000 | 91,000 |
| Total hotel revenues | 19,785,000 | 9,436,000 |
| Operating expenses excluding depreciation and amortization | (19,356,000) | (14,156,000) |
| Operating income (loss) before interest, depreciation and amortization | 429,000 | (4,720,000) |
| Gain on extinguishment of debt | 2,000,000 | - |
| Interest expense - mortgage | (4,939,000) | (5,010,000) |
| Depreciation and amortization expense | (1,669,000) | (1,690,000) |
| Net loss from Hotel operations | $(4,179,000) | $(11,420,000) |

For the nine months ended March 31, 2022, the Hotel had operating income of $429,000 before interest expense, depreciation, and amortization on total operating revenues of $19,785,000 compared to operating loss of $4,720,000 before interest expense, depreciation, and amortization on total operating revenues of $9,436,000 for the nine months ended March 31, 2021. For the nine months ended March 31, 2022, room revenues increased by $8,443,000, food and beverage revenue increased by $804,000, and garage revenue increased by $979,000, compared to the nine months ended March 31, 2021. The year over year increase in all the revenue sources are the result of the recovery from the business interruption attributable to a variety of responses by federal, state, and local civil authority to the COVID-19 outbreak since March 2020. Total operating expenses increased by $5,200,000 due to increase in salaries and wages, frequent stay program costs, union health insurance, repairs and maintenance, credit card fees, management fees, travel agent commission, and franchise fees.

The following table sets forth the average daily room rate, average occupancy percentage and RevPAR of the Hotel for the nine months ended March 31, 2022 and 2021.

| Nine Months Ended March 31, | Average Daily Rate | Average Occupancy % | RevPAR |
| --- | ---: | ---: | ---: |
| **2022** | $143 | 76% | $108 |
| **2021** | $106 | 49% | $52 |

The Hotel’s revenues increased by 109% for the nine months ended March 31, 2022 as compared to the nine months ended March 31, 2021. Average daily rate increased by $37, average occupancy increased by 27%, and RevPAR increased by $56 for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021.

### Real Estate Operations

Net income from real estate operations for the nine months ended March 31, 2022 decreased by $11,798,000 compared to the nine months ended March 31, 2021 due to the $12,043,000 gain from sale of real estate in August 2020. Revenue from real estate operations increased by $1,305,000 year over year due to reduction in vacancy and bad debt. All the Company’s properties are managed in-house. 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.

### Investment Transactions

The Company had a net loss on marketable securities of $3,613,000 for the nine months ended March 31, 2022 compared to a net gain on marketable securities of $8,937,000 for the nine months ended March 31, 2021. For the nine months ended March 31, 2022, the Company had a net realized loss of $874,000 and a net unrealized loss of $2,739,000. For the nine months ended March 31, 2022, Company had a net realized loss of $2,581,000 from its investment in Comstock. For the nine months ended March 31, 2021, the Company had a net realized loss of $667,000 and a net unrealized gain of $9,604,000. Gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company’s results of operations. However, the amount of gain or loss on marketable securities for any given period may have no predictive value and variations in amount from period to period may have no analytical value. For a more detailed description of the composition of the Company’s marketable securities see the Marketable Securities section below.

### MARKETABLE SECURITIES

The following table shows the composition of the Company’s marketable securities portfolio as of March 31, 2022 and June 30, 2021 by selected industry groups.

| As of March 31, 2022 Industry Group | Fair Value | % of Total Investment Securities |
| --- | ---: | ---: |
| Financial services | $9,874,000 | 38.7% |
| Communication services | 5,166,000 | 20.2% |
| REITs and real estate companies | 4,510,000 | 17.7% |
| Energy | 1,974,000 | 7.7% |
| Industrials | 1,180,000 | 4.6% |
| Technology | 1,155,000 | 4.5% |
| Basic material | 842,000 | 3.3% |
| Consumer cyclical | 438,000 | 1.7% |
| Healthcare | 202,000 | 0.8% |
| Utilities | 200,000 | 0.8% |
|  | $25,541,000 | 100.0% |

| As of June 30, 2021 Industry Group | Fair Value | % of Total Investment Securities |
| --- | ---: | ---: |
| REITs and real estate companies | $11,624,000 | 32.5% |
| Energy | 6,374,000 | 17.8% |
| Communication services | 4,872,000 | 13.6% |
| Financial services | 3,873,000 | 10.8% |
| Industrials | 3,746,000 | 10.5% |
| Basic material | 1,797,000 | 5.0% |
| Consumer cyclical | 1,702,000 | 4.8% |
| Healthcare | 981,000 | 2.7% |
| Technology | 442,000 | 1.2% |
| Other | 381,000 | 1.1% |
|  | $35,792,000 | 100.0% |

As of March 31, 2022, the Company’s investment portfolio is diversified with 63 different equity positions. The Company held two equity securities that are more than 10% of the equity value of the portfolio. The largest security position represents 29% of the portfolio and consists of the common stock of Berkshire Hathaway Inc. (NYSE: BRKA) which is included in the financial services industry group. The second largest security position represents 20% of the portfolio and consists of the preferred stock of Paramount Global (NASDAQ: PARAP) which is included in the communication services industry group.

As of June 30, 2021, the Company’s investment portfolio is diversified with 83 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 12% and 11% of the portfolio and consists of the common stock of DigitalBridge Group, Inc. (NASDAQ: DBRG) and Viacom CBS, Inc. (NASDAQ: VIACP), which are included in the REITs and real estate companies and communication services industry group, respectively.

The following table shows the net (loss) gain on the Company’s marketable securities and the associated margin interest and trading expenses for the respective periods:

| For the three months ended March 31, | 2022 | 2021 |
| --- | ---: | ---: |
| Net gain on marketable securities | $906,000 | $768,000 |
| Net gain on marketable securities - Comstock | - | 4,870,000 |
| Impairment loss on other investments | - | (30,000) |
| Dividend and interest income | 158,000 | 158,000 |
| Margin interest expense | (212,000) | (238,000) |
| Trading and management expenses | (127,000) | (124,000) |
| Net gain from investment transactions | $725,000 | $5,404,000 |

| For the nine months ended March 31, | 2022 | 2021 |
| --- | ---: | ---: |
| Net (loss) gain on marketable securities | $(1,032,000) | $8,886,000 |
| Net (loss) gain on marketable securities - Comstock | (2,581,000) | 51,000 |
| Impairment loss on other investments | (41,000) | (119,000) |
| Dividend and interest income | 807,000 | 363,000 |
| Margin interest expense | (638,000) | (519,000) |
| Trading and management expenses | (415,000) | (399,000) |
| Net (loss) gain from investment transactions | $(3,900,000) | $8,263,000 |

### FINANCIAL CONDITION AND LIQUIDITY

The Company had cash and cash equivalents of $6,548,000 and $6,808,000 as of March 31, 2022 and June 30, 2021, respectively. The Company had marketable securities, net of margin due to securities brokers, of $21,564,000 and $21,456,000 as of March 31, 2022 and June 30, 2021, respectively. These marketable securities are short-term investments and liquid in nature.

On December 16, 2020, Justice and InterGroup entered into a loan modification agreement which increased Justice’s borrowing from InterGroup as needed up to $10,000,000. Upon the dissolution of Justice in December 2021, Portsmouth assumed Justice’s note payable to InterGroup in the amount of $11,350,000. On December 2021, Portsmouth and InterGroup entered into a loan modification agreement which increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. During the nine months ending March 31, 2022, InterGroup advanced $7,550,000 to the Hotel, bringing the total amount due to InterGroup to $14,200,000 at March 31, 2022.

In June 2020, we refinanced one of our California properties and generated net proceeds of $1,144,000. During the fiscal year ended June 30, 2021, we completed refinancing on six of our California properties and generated net proceeds of $6,762,000. During the nine months ending March 31, 2022, we refinanced five of our properties’ existing mortgages and obtained a mortgage note payable on one of our California properties, generating net proceeds totaling $16,099,000 as a result. We are currently evaluating other refinancing opportunities and we could refinance additional multifamily properties should the need arise, or should management consider the interest rate environment favorable. The Company has an uncollateralized $5,000,000 revolving line of credit from CIBC Bank USA (“CIBC”) and the entire $5,000,000 is available to be drawn down as of March 31, 2022 should additional liquidity be necessary.

On April 9, 2020, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). Justice received proceeds of $4,719,000 from the SBA Loan. In accordance with the requirements of the CARES Act, Justice used the proceeds from the SBA Loan for payroll costs and other qualified expenses. The SBA Loan was scheduled to mature on April 9, 2022 with a 1.00% interest rate and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On June 10, 2021, the SBA Loan was forgiven in full.

On April 27, 2020, InterGroup entered into a loan agreement (“SBA Loan - InterGroup”) with CIBC Bank USA under the CARES Act and received loan proceeds in the amount of $453,000. InterGroup used all of the $453,000 loan proceeds in qualified payroll expenses. The SBA Loan – InterGroup was scheduled to mature on April 27, 2022 and had a 1.00% interest rate. On March 17, 2021, SBA Loan – InterGroup was forgiven in full.

On February 3, 2021, Justice entered into a second loan agreement (“Second SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of $2,000,000 from the Second SBA Loan. As of June 30, 2021, Justice used all proceeds from the Second SBA Loan primarily for payroll costs. The Second SBA Loan was scheduled to mature on February 3, 2026, had a 1.00% interest rate, and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On November 19, 2021, the Second SBA Loan was forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the condensed consolidated statement of operations for the nine months ended March 31, 2022.

Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating and other expenditures, including management and franchise fees, corporate expenses, payroll and related costs, taxes, interest and principal payments on our outstanding indebtedness, and repairs and maintenance of the Hotel.

Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities and capital improvements of the Hotel and our real estate properties. We will continue to finance our business activities primarily with existing cash, including from the activities described above, and cash generated from our operations. After considering our approach to liquidity and accessing our available sources of cash, we believe that our cash position, after giving effect to the transactions discussed above, will be adequate to meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and related benefits, taxes and compliance costs and other commitments, for at least twelve months from the date of issuance of these financial statements, even if current levels of low occupancy were to persist. The objectives of our cash management policy are to maintain existing leverage levels and the availability of liquidity, while minimizing operational costs. We believe that our cash on hand, along with other potential aforementioned sources of liquidity that management may be able to obtain, will be sufficient to fund our working capital needs, as well as our capital lease and debt obligations for at least the next twelve months and beyond. However, there can be no guarantee that management will be successful with its plan.

### OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

### MATERIAL CONTRACTUAL OBLIGATIONS

The following table provides a summary as of March 31, 2022, the Company’s material financial obligations which also includes interest payments.

|  | Total | 3 Months 2022 | Year 2023 | Year 2024 | Year 2025 | Year 2026 | Thereafter |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Mortgage and subordinated notes payable | $195,528,000 | $841,000 | $12,960,000 | $108,321,000 | $3,866,000 | $1,066,000 | $68,474,000 |
| Related party notes payable | 3,662,000 | 142,000 | 567,000 | 567,000 | 567,000 | 567,000 | 1,252,000 |
| Interest | 32,710,000 | 2,678,000 | 8,723,000 | 5,376,000 | 2,241,000 | 2,126,000 | 11,566,000 |
| Total | $231,900,000 | $3,661,000 | $22,250,000 | $114,264,000 | $6,674,000 | $3,759,000 | $81,292,000 |

### IMPACT OF INFLATION

Hotel room rates are typically impacted by supply and demand factors, not inflation, since rental of a hotel room is usually for a limited number of nights. Room rates can be, and usually are, adjusted to account for inflationary cost increases. Since Aimbridge has the power and ability to adjust hotel room rates on an ongoing basis, there should be minimal impact on partnership revenues due to inflation. Partnership revenues are also subject to interest rate risks, which may be influenced by inflation. For the two most recent fiscal years, the impact of inflation on the Company’s income is not viewed by management as material.

The Company’s residential rental properties provide income from short-term operating leases and no lease extends beyond one year. Rental increases are expected to offset anticipated increased property operating expenses.

### CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Critical accounting policies are those that are most significant to the presentation of our financial position and results of operations and require judgments by management in order to make estimates about the effect of matters that are inherently uncertain. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to the consolidation of our subsidiaries, to our revenues, allowances for bad debts, accruals, asset impairments, other investments, income taxes and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions. There have been no material changes to the Company’s critical accounting policies during the nine months ended March 31, 2022. Please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for a summary of the critical accounting policies.

## Market risk

As filed, 128 characters.

We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.

## Controls and procedures

As filed, 1,265 characters.

### EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

### CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in the Company’s internal control over financial reporting during the last quarterly period

covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

### PART II.

### OTHER INFORMATION

Filed May 2, 2022.
Source: SEC EDGAR, the filing index for accession 0001493152-22-011649. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.