Intergroup Corp: Form 10-K for the period ended Jun 30, 2026

GENERAL

The InterGroup Corporation (“InterGroup” or the “Company,” and together with its consolidated subsidiaries, “we,” “us,” or “our”) is a Delaware corporation whose common stock is listed on the Nasdaq Capital Market under the symbol “INTG.” The Company’s operations principally consist of the ownership and operation of a hotel, the ownership and management of multifamily and commercial real estate, and investments in marketable and other securities.

As of June 30, 2026, the Company owned approximately 75.9% of the outstanding common stock of Portsmouth Square, Inc. (“Portsmouth”), which is a consolidated subsidiary of the Company.

Through Portsmouth and its wholly owned subsidiaries, the Company owns and operates the Hilton San Francisco Financial District, a full-service hotel located at 750 Kearny Street in San Francisco, California (the “Hotel”). Effective September 30, 2025, the Hotel’s available room inventory increased from 544 to 558 rooms following the conversion of 14 former administrative office spaces into guestrooms. The Hotel generates revenues principally from guestrooms, food and beverage operations, parking and other ancillary operations and serves business, convention, group and leisure travelers.

The Hotel is owned through Portsmouth’s wholly owned subsidiaries, including Justice Operating Company, LLC (“Operating”), which owns the Hotel.

In addition to the operations of the Hotel, the Company also generates income from the ownership, management and, when appropriate, sale of real estate. Property includes fifteen apartment complexes, one commercial real estate property and three single-family houses. The properties are located throughout the United States but are concentrated in Texas and Los Angeles County, California. The Company also owns approximately two acres of unimproved land in Maui, Hawaii. As of June 30, 2026, all the Company’s operating real estate properties are managed in-house.

The Company evaluates real estate and other investment opportunities subject to guidelines established by the Board of Directors and its Executive Strategic Real Estate and Securities Investment Committee and the availability of appropriate financing.

The Company also invests from time to time in marketable securities and other investments. See Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Marketable Securities Investment Policies” below for additional information regarding the Company’s marketable securities and other investments.

HILTON FRANCHISE AGREEMENT

Operating is party to a franchise agreement with HLT Franchise Holding, LLC (“Hilton”) under which the Hotel operates as the Hilton San Francisco Financial District. The franchise agreement extends through January 31, 2030.

The franchise agreement requires the Hotel to comply with applicable Hilton brand standards and capital improvement requirements. Failure to comply with applicable requirements could result in penalties or termination of the franchise, as discussed in Item 1A – Risk Factors.

HOTEL MANAGEMENT AGREEMENT

Operating entered into a hotel management agreement (“HMA”) with Aimbridge Hospitality (“Aimbridge”) to manage the Hotel, along with its five-level parking garage, effective February 3, 2017. The HMA has an initial ten-year term ending in February 2027 and provides for up to five successive one-year renewal periods, subject to the terms of the agreement.

Under the HMA, Aimbridge receives a base management fee equal to 1.70% of total Hotel revenue and may earn an incentive fee based on Hotel operating performance, subject to the terms of the HMA. See Note 11 – Management Agreement to the Consolidated Financial Statements and Item 1A – Risk Factors.

CHINESE CULTURE FOUNDATION LEASE

The Hotel is subject to a long-term lease with the Chinese Culture Foundation of San Francisco (the “Foundation”) covering the third-floor Chinese Culture Center. The lease automatically extended for an additional 10-year term in October 2023 while the property continues to operate as a hotel. Under the lease, the Foundation has the right to reserve the event space for up to 75 days per calendar year, subject to specified conditions, and the Hotel may use reserved dates upon payment of a contractual fee.

SALE OF REAL ESTATE PROPERTY

In December 2025, the Company completed the sale of a 12-unit multifamily property located in Los Angeles County, California for a sales price of $4.85 million, resulting in a gain on sale of $3,508,000, which is included in gain on sale of real estate in the consolidated statements of operations. See Note 5 – Investment in Real Estate, Net and Note 18 – Disposition of Real Estate to the Consolidated Financial Statements.

MARKETABLE SECURITIES INVESTMENT POLICIES

In addition to its Hotel and real estate operations, the Company from time to time invests in marketable securities and other investment instruments.

The Company’s securities investments are made under the supervision of an Executive Strategic Real Estate and Securities Investment Committee of the Board of Directors (the “Committee”). The Committee has delegated authority to manage the portfolio to the Company’s Chairman and Chief Executive Officer subject to investment guidelines established by the Committee.

See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 6 – Investment in Marketable Securities to the Consolidated Financial Statements for additional information regarding the Company’s investment activities.

SEASONALITY

Historically, the Hotel’s operation has been seasonal under normal circumstances. The Hotel generally experiences lower demand during the holiday period from approximately Thanksgiving through early January. These seasonal patterns may cause fluctuations in the Hotel’s quarterly revenues.

COMPETITION

The Hotel operates in a highly competitive San Francisco lodging market and competes with full-service and other lodging properties for business, convention, group and leisure travelers. Competition is based on factors including location, brand affiliation, room rates, property condition, amenities, service levels and access to corporate, convention and leisure demand. The Hotel’s Financial District location, Hilton affiliation and recently renovated guestrooms and public areas are important competitive factors.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

The Hotel is subject to federal, state and local laws and regulations applicable to its operations, including laws and regulations relating to employment and labor, food and beverage service, accessibility, health and safety, privacy, taxation and environmental matters. The Company’s multifamily and commercial real estate operations are also subject to federal, state and local laws and regulations applicable to landlords and property owners, including landlord-tenant, rent regulation, zoning, building and safety, accessibility and environmental requirements. Changes in applicable laws or regulations could increase the Company’s operating or capital costs.

The Company’s operations are subject to various federal, state, and local environmental laws and regulations. Management is not aware of any pending environmental matters or remediation obligations that are expected to have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. Compliance with existing environmental laws has not had, and is not currently expected to have, a material effect on the Company’s capital expenditures, earnings or competitive position.

COMPETITION – RENTAL PROPERTIES

The multifamily rental market is highly competitive. The Company competes for residents primarily based on location, rental rates, property condition, amenities and services. Competition from other multifamily properties and alternative housing may adversely affect occupancy, rental rates and operating results.

EMPLOYEES

As of June 30, 2026, the Company had 214 employees, including 175 full-time employees. Of the total, 27 were employed in corporate and multifamily operations and 187 were employed in Hotel operations.

As of June 30, 2026, approximately 90% of the Hotel employees were represented by one of three labor unions and were covered by collective bargaining agreements (“CBAs”). Aimbridge, as agent for Justice Operating Company, LLC (“Operating”), administers the applicable CBAs, and Operating funds the related payroll, employee benefits and other labor costs.

The CBA covering employees represented by Local 2 (Hotel and Restaurant Employees) expires on August 13, 2028. The CBA covering employees represented by Local 856 (International Brotherhood of Teamsters) expires on December 31, 2028. The CBA covering employees represented by Local 39 (Stationary Engineers) expires in July 2030.

The terms of the CBAs affect the Hotel’s wages, employee benefits and other labor-related operating costs. See Item 1A – Risk Factors.

ADDITIONAL INFORMATION

The Company files required annual and quarterly reports on Forms 10-K and 10-Q, current reports on Form 8-K and other information with the Securities and Exchange Commission (“SEC” or the “Commission”). The SEC no longer operates a public reference room. The Commission also maintains an Internet site at https://www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.

Other information about the Company can be found on its website www.intgla.com (http://www.intgla.com). Reference in this document to that website address does not constitute incorporation by reference of the information contained on the website. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports available free of charge on our website as soon as reasonably practicable after such materials are filed with or furnished to the SEC.

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

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.

Exposure to the San Francisco market through our majority-owned subsidiary could adversely affect our consolidated results, cash flows and financial condition.

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.

We operate in a highly competitive lodging market.

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.

The Hotel requires significant ongoing capital expenditures.

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.

We have substantial debt, and we may incur additional indebtedness, which may negatively affect our business and financial results.

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.

Limited guaranties and “springing recourse” events under the Hotel financing could expose InterGroup or Portsmouth to liability.

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.

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

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.

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

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.

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

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.

Our Hotel operations are subject to extensive regulation.

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.

Our business is exposed to catastrophic events and insurance risks.

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.

Cybersecurity incidents could adversely affect our operations.

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.

The price of the Company’s common stock may fluctuate significantly, which could negatively affect holders of its common stock.

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.

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

The Company’s President, Chief Executive Officer and Chairman of the Board of Directors, John V. Winfield, beneficially owns a majority of the Company’s common stock. As a result, Mr. Winfield is able to control or significantly influence the election of the Company’s Board of Directors and other matters requiring shareholder approval. The interests of Mr. Winfield may differ from those of other shareholders, and this concentration of ownership may also delay or prevent a change in control that other shareholders might consider beneficial.

The Company maintains processes designed to assess, identify and manage material risks from cybersecurity threats. Because the Company’s Hotel and corporate operations depend substantially on information technology systems operated or supported by third parties, the Company’s cybersecurity risk management processes address risks arising from both its corporate technology environment and the third-party systems used in the operation and franchising of the Hotel.

Risk Management and Strategy

The Company’s technology environment generally consists of three principal areas. First, the Hotel utilizes systems and technology provided and maintained by Hilton in connection with reservations, booking, marketing and other franchise-related functions. Second, Aimbridge Hospitality (“Aimbridge”), as manager of the Hotel, provides and maintains systems used for Hotel-level accounting, operations and administrative support. Third, the Company’s corporate office relies on a third-party information technology and cybersecurity provider and third-party software platforms, including Yardi, for accounting and administrative functions. A substantial portion of the Company’s corporate operations and communications are conducted through internet-based systems and third-party technology platforms.

Because of the Company’s size, it does not maintain a dedicated internal cybersecurity department and instead relies on its third-party information technology and cybersecurity provider for technical cybersecurity expertise and services relating to its corporate technology environment.

The Company’s cybersecurity risk management processes include:

• use of third-party information technology and cybersecurity professionals to assist in monitoring, investigating, containing and remediating identified threats and vulnerabilities;
• monthly cybersecurity awareness and compliance training for Company staff;
• maintenance and periodic testing of cybersecurity incident-response procedures;
• consideration of cybersecurity risks associated with material third-party technology and service providers.

The Company uses its third-party information technology and cybersecurity provider and related cybersecurity tools and services to assist in monitoring its corporate technology environment, evaluating vulnerabilities and addressing identified cybersecurity risks. Hotel personnel also complete annual Payment Card Industry (“PCI”) compliance certification and training requirements through both Hilton and Aimbridge.

The Company’s cybersecurity risk management processes are integrated into its overall risk management processes.

Third-Party Service Providers

The Company depends substantially on third-party technology and service providers, including Hilton and Aimbridge for systems used in Hotel operations, its third-party information technology and cybersecurity provider for its corporate technology environment, and third-party software platforms, including Yardi, for certain accounting and administrative functions. The Company considers cybersecurity risks associated with material third-party technology and service providers as part of its cybersecurity risk management processes and relies in part on information received from such providers regarding cybersecurity risks and incidents. The Company does not directly control the cybersecurity systems, practices or infrastructure of Hilton, Aimbridge, Yardi or its other third-party service providers. Accordingly, a cybersecurity incident affecting one of these providers could adversely affect the Company even if the Company’s corporate systems were not directly compromised.

Management and Board Oversight

The Company’s management is responsible for overseeing the assessment and management of material risks from cybersecurity threats. Because the Company does not maintain a dedicated internal cybersecurity department, management relies on its third-party information technology and cybersecurity provider, as well as information received from material technology and service providers, to assist in identifying, assessing and responding to cybersecurity risks.

The Company’s Controller and Principal Financial Officer is responsible for coordinating the Company’s cybersecurity risk management activities with its third-party information technology and cybersecurity provider. The Controller and Principal Financial Officer receives information regarding identified cybersecurity risks, vulnerabilities and incidents and is responsible for escalating material cybersecurity matters to senior management and, when appropriate, the Board of Directors. The Controller and Principal Financial Officer is not a dedicated cybersecurity professional; the Company relies on its third-party information technology and cybersecurity provider for technical cybersecurity expertise and services.

Management monitors cybersecurity risks through communications with the Company’s third-party information technology and cybersecurity provider, assessments of identified risks and vulnerabilities, and information received from material third-party service providers.

The Board of Directors oversees risks from cybersecurity threats and receives periodic reports from management regarding cybersecurity risks, incidents and risk mitigation measures. Material cybersecurity incidents would be reported to the Board as appropriate. The Board reviews the Company’s cybersecurity risk management processes and incident-response planning periodically.

Effect of Cybersecurity Risks

Risks from cybersecurity threats, including risks associated with third-party systems used by the Company, have not materially affected the Company, including its business strategy, results of operations or financial condition, and the Company has not identified any such risks that are reasonably likely to materially affect the Company. The Company did not identify any cybersecurity incident during the fiscal year ended June 30, 2026 that materially affected the Company. The Company nevertheless remains subject to cybersecurity risks arising from its own technology environment and from systems maintained by Hilton, Aimbridge, Yardi and other third-party service providers. A material cybersecurity incident affecting any of these systems could disrupt Hotel or corporate operations, compromise confidential or proprietary information, result in legal or regulatory exposure, or otherwise materially adversely affect the Company’s business, results of operations or financial condition. See Item 1A – Risk Factors.

SAN FRANCISCO HOTEL PROPERTY

The Hotel is owned by Portsmouth through its wholly owned subsidiary, Justice Operating Company, LLC (“Operating”). The Hotel is located at 750 Kearny Street in the Financial District of San Francisco, California, one block from the Transamerica Pyramid. The Embarcadero Center is within walking distance and North Beach is two blocks away, and the Hotel is included in the Company’s Hotel Operations reportable segment.

The Hotel is a 31-story (including parking garage), steel and concrete, A-frame building, built in 1970. The Hotel has 558 guest rooms and suites, situated on 22 floors. During fiscal 2026, 14 former administrative office spaces were converted to guestrooms, which were added to the Hotel’s room inventory effective September 30, 2025.

The Hotel has a restaurant, lounge and private dining room totaling approximately 3,700 square feet, two kitchens servicing restaurant and banquet operations, a fitness center and a rooftop swimming pool that is not currently in operation. The third floor houses the Chinese Culture Center (the “CCC”), its administrative office, and a grand ballroom. The Hotel has approximately 22,000 square feet of meeting space, including the grand ballroom, and a five-level underground parking garage.

The pedestrian bridge formerly spanning Kearny Street between the Hotel and Portsmouth Square Park was removed on August 9, 2026. In connection with the removal, the Hotel was closed from July 31, 2026 through August 9, 2026 and resumed guest operations on August 10, 2026. See Note 19 – Subsequent Events to the Consolidated Financial Statements for additional information regarding the bridge removal and related post-removal repair work.

The Hotel is subject to a mortgage securing the Company’s $67.0 million senior mortgage loan. See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 10 – Mortgage and Mezzanine Loans to the Consolidated Financial Statements for additional information regarding the Company’s financing arrangements.

RENTAL PROPERTIES

As of June 30, 2026, the Company’s investment in real estate consisted of 19 operating properties located throughout the United States, with a concentration in Texas and Los Angeles County, California, consisting of fifteen apartment complexes, three single-family houses held as strategic investments and one commercial real estate property. In addition, the Company owns approximately two acres of unimproved land in Maui, Hawaii. As of June 30, 2026, all the Company’s operating real estate properties are managed in-house.

Description of Properties

The Company’s non-Hotel real estate holdings as of June 30, 2026 are summarized below:

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MORTGAGES

Certain of the Company’s real estate properties are subject to mortgage indebtedness. The Company’s consolidated mortgage indebtedness includes financing secured by the Hotel and mortgages secured by its non-Hotel real estate properties. See Note 10 – Mortgage and Mezzanine Loans to the Consolidated Financial Statements for additional information.

ECONOMIC AND PHYSICAL OCCUPANCY RATES

The Company leases units in its residential rental properties on a short-term basis, with no lease extending beyond one year. The economic occupancy (gross potential less rent below market, vacancy loss, bad debt, discounts and concessions divided by gross potential rent) and the physical occupancy (gross potential rent less vacancy loss divided by gross potential rent) for each of the Company’s operating properties for fiscal year ended June 30, 2026 are provided below.

Certain of the Company’s Los Angeles properties contain a relatively small number of rental units, including properties with as few as two or four units. As a result, a vacancy in a single unit at these smaller properties can have a disproportionately large effect on the reported occupancy percentage compared with larger apartment communities. In addition, during fiscal 2026, the Company wrote off certain tenant receivables dating from the COVID-19 period that management determined were uncollectible. Because bad debt is included in the calculation of economic occupancy, these write-offs reduced the reported economic occupancy percentages of certain properties without a corresponding reduction in physical occupancy. Accordingly, the economic occupancy percentages for certain properties during fiscal 2026 are not necessarily indicative of their physical occupancy or current operating performance.

The Company’s Los Angeles County residential properties are subject to state and local rent stabilization and tenant-protection laws that may limit the Company’s ability to increase rents and otherwise affect the operation of its properties. During the fiscal year ended June 30, 2026, the allowable annual rent increase for rental units subject to the City of Los Angeles Rent Stabilization Ordinance (“RSO”) was 3%. Effective February 2, 2026, the City eliminated the additional rent increase previously permitted when a landlord provided gas or electricity. The allowable annual RSO rent increase remains 3% for the period July 1, 2026 through June 30, 2027.

For fully covered units subject to the Los Angeles County Rent Stabilization and Tenant Protections Ordinance in unincorporated Los Angeles County, the general maximum annual increase was 1.930% for the period July 1, 2025 through June 30, 2026 and is 1.919% for the period July 1, 2026 through June 30, 2027, with different limits applicable to certain qualifying small-property landlords and luxury units. Residential units not subject to more restrictive local rent regulation may also be subject to California’s Tenant Protection Act and other applicable state and local tenant-protection laws. These laws and regulations may affect rental rates, occupancy, collections, operating costs and the Company’s ability to manage its residential properties.

The Company is not a party to any material pending legal proceedings required to be disclosed under Item 103 of Regulation S-K. See Note 17 – Commitments and Contingencies and Note 19 – Subsequent Events to the Consolidated Financial Statements for information regarding Portsmouth’s matters and arrangements with the City and County of San Francisco relating to the pedestrian bridge formerly connecting the Hotel to Portsmouth Square Park.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes, and Item 1A - “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K.

SAN FRANCISCO MARKET CONDITIONS

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.

RESULTS OF OPERATIONS

As of June 30, 2026, the Company owned approximately 75.9% of the common shares of Portsmouth Square, Inc. The Company’s principal operating revenues are generated by the Hotel and its multifamily and commercial real estate properties. The Company also generates income and losses from its investment activities.

Portsmouth’s primary asset is a hotel property located at 750 Kearny Street, San Francisco, California 94108, known as the “Hilton San Francisco Financial District” (the “Hotel” or the “Property”) and related facilities, including a five-level underground parking garage. Effective September 30, 2025, the Hotel’s available room inventory increased from 544 to 558 rooms following the conversion of 14 former administrative office spaces into guestrooms. The financial statements of Portsmouth are consolidated with those of the Company.

In addition to the operations of the Hotel, the Company also generates income from the ownership and management of its real estate. Properties include fifteen 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 in Hawaii.

Fiscal Year Ended June 30, 2026, Compared to Fiscal Year Ended June 30, 2025

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.

Hotel Operations

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

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.

Hotel Operating Table

The following table sets forth the monthly average occupancy percentage of the Hotel for the fiscal years ended June 30, 2026 and 2025.

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.

The following table sets forth the average daily room rate, average occupancy percentage and room revenue per available room (“RevPAR”) of the Hotel for the years ended June 30, 2026 and 2025.

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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.

Real Estate Operations

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.

Investment Transactions

The Company had a net gain on marketable securities of $953,000 for the year ended June 30, 2026 compared with a net loss on marketable securities of $1,347,000 for the year ended June 30, 2025.

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.

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 is not necessarily predictive, and variations from period to period may have limited analytical value. For a more detailed description of the composition of the Company’s marketable securities, see the Marketable Securities section below.

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.

MARKETABLE SECURITIES AND OTHER INVESTMENTS

As of June 30, 2026 and 2025, the Company had investments in marketable equity securities of $4,394,000 and $969,000, respectively. The following table shows the composition of the Company’s marketable securities portfolio by selected industry groups:

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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.

As of June 30, 2025, American Realty Investors, Inc. represented approximately 99% of the fair value of the Company’s marketable equity securities portfolio.

The following table summarizes the results of the Company’s marketable securities activities for the respective years.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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.

Cash Flows

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.

Material Cash Requirements

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.

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.

Hotel Financing

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.

Cash Management

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.

Intercompany Credit Facility

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.

Liquidity Outlook

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.

IMPACT OF INFLATION

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.

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.

CRITICAL ACCOUNTING ESTIMATES

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.

DEFERRED INCOME TAXES – VALUATION ALLOWANCE

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.

IMPAIRMENT OF HOTEL ASSETS

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.

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.

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.

As a smaller reporting company, the Company is not required to provide the information required by this Item pursuant to Item 305(e) of Regulation S-K.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of June 30, 2026, management, with the participation of our Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.

REMEDIATION OF PREVIOUSLY REPORTED MATERIAL WEAKNESS

During fiscal 2026, management implemented enhanced controls over the accounting for stock-based compensation, including the adoption of an equity management tool. These controls operated for a sufficient period and were tested for operating effectiveness. Based on the results of this testing, management concluded that the previously reported material weakness related to the interpretation and accounting for stock-based compensation was remediated as of June 30, 2026.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2026, using the criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of June 30, 2026.

As a non-accelerated filer, the Company is not required to include, and this Annual Report does not contain, an attestation report of our independent registered public accounting firm regarding internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the quarter ended June 30, 2026, management completed the remediation of the previously identified material weakness related to the interpretation and accounting for stock-based compensation. The remediation included enhanced controls over stock-based compensation and the use of an equity management tool to support the calculation, tracking and accounting for stock-based compensation, as described above.

Other than this remediation there were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.