INTG 10-K & 10-Q changes, risk factors and insider trading

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk of declining market values in marketable securities.

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

Illiquidity risk in nonmarketable securities.

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

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

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

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

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

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

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

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

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

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

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

The hotel industry is subject to extensive regulation and the Hotel must maintain its licenses and pay taxes and fees to continue operations. Our property is subject to numerous laws, including those relating to the preparation and sale of food and beverages, including alcohol. We are also subject to laws governing our relationship with our employees in such areas as minimum wage and maximum working hours, overtime, working conditions, hiring and firing employees and work permits. Also, our ability to remodel, refurbish or add to our property may be dependent upon our obtaining necessary building permits from local authorities. The failure to obtain any of these permits could adversely affect our ability to increase revenues and net income through capital improvements of our property. In addition, we are subject to the numerous rules and regulations relating to state and federal taxation. Compliance with these rules and regulations requires significant management attention. Furthermore, compliance costs associated with such laws, regulations and licenses are significant. Any change in the laws, regulations or licenses applicable to our business or a violation of any current or future laws or regulations applicable to our business could require us to make substantial expenditures or could otherwise negatively affect the hotel’s operations. We are also subject to environmental, health, safety, accessibility, and privacy regulations, as well as increasing expectations for environmental, social, and governance (ESG) disclosures and performance. Failure to comply with any of these requirements, or changes in regulatory standards, could result in fines, penalties, litigation, or restrictions on our operations.

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

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

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

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

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

Cybersecurity risks could disrupt our operations and adversely affect our business, even though no material incidents have occurred.

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

REAL ESTATE

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

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

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

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

For the year ended June 30, 2025, the Hotel had operating income of $8,732,000 before interest, depreciation, and amortization on total operating revenues of $46,363,000. The following table sets forth the monthly average occupancy percentage of the Hotel for the fiscal years ended June 30, 2025 and 2024.

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

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

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

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

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

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

Parent Company (InterGroup) — Liquidity and Capital Resources

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

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

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

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

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

Related Party Credit Facility – InterGroup

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

Key modifications include:

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

Intergroup Real Estate – Recent Financing Activity

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

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

Liquidity Requirements and Material Cash Requirements

The following table sets forth a more detailed presentation of Hotel operations for the three months ended December 31, 2025 and 2024:

For the three months ended December 31, 2025, total Hotel revenues were $12,661,000, compared to $9,965,000 for the three months ended December 31, 2024, an increase of $2,696,000, or 27%, primarily due to higher room revenue. Operating expenses (excluding depreciation and amortization) were $10,427,000 for the three months ended December 31, 2025, compared to $9,055,000 for the three months ended December 31, 2024, an increase of $1,372,000, or 15%. As a result, operating income before interest expense and depreciation and amortization increased to $2,234,000 from $910,000. Mortgage interest expense decreased to $2,385,000 from $2,845,000, and depreciation and amortization expense increased to $940,000 from $903,000. Net loss from Hotel operations decreased to $1,091,000 from $2,838,000.

During the three months ended December 31, 2025, the Company recorded a $3,508,000 gain on the sale of a non-core multifamily property in Los Angeles County, which is included in gain on sale of real estate (see Note 15).

The following table sets forth a more detailed presentation of Hotel operations for the six months ended December 31, 2025 and 2024:

For the six months ended December 31, 2025, the Hotel had operating income of $4,171,000 before interest expense and depreciation and amortization expense on total operating revenues of $25,079,000 compared to operating income of $3,938,000 before interest expense and depreciation and amortization expense on total operating revenues of $21,785,000 for the six months ended December 31, 2024. Hotel revenues increased $3,294,000, driven primarily by higher room revenue. Operating expenses (excluding depreciation and amortization expenses) increased $3,061,000 due to the absence of a management incentive fee waiver in the prior-year period (approximately $1.030 million), partially offset by cost-control efforts and other operating variances. Mortgage interest expense decreased by $791,000 primarily reflecting changes in debt terms following the March 2025 refinancing. Depreciation and amortization expense was relatively consistent period over period.

As shown in the operating metrics table above, ADR and occupancy increased year-over-year, resulting in higher RevPAR for the six months ended December 31, 2025.

The Company had a net gain on marketable securities of $97,000 for the six months ended December 31, 2025 compared to a net loss of $469,000 for the six months ended December 31, 2024. For the six months ended December 31, 2025, the Company recorded a net realized gain of $20,000 and a net unrealized gain of $77,000. Dividend and interest income was $4,000 for the six months ended December 31, 2025 compared to $121,000 for the six months ended December 31, 2024. Trading and management expenses were $600,000 for the six months ended December 31, 2025 compared to $613,000 for the six months ended December 31, 2024. The Company did not incur margin interest expense during the six months ended December 31, 2025, compared to $48,000 during the six months ended December 31, 2024. As a result, net loss from investment transactions was $499,000 for the six months ended December 31, 2025 compared to $1,009,000 for the six months ended December 31, 2024. For the six months ended December 31, 2024, the Company had a net realized loss of $255,000 and a net unrealized loss of $214,000. See Note 6 – Investment in Marketable Securities.

The following tables present the composition of the Company’s marketable securities portfolio at period-end and the related net gains and losses on marketable securities, dividends and interest income, margin interest (if any), and trading and management expenses for the periods presented.

In December 2025, the Company sold a non-core 12-unit multifamily property in Los Angeles County that had been classified as held for sale at June 30, 2025. Net proceeds from the sale of approximately $2.6 million were used for general corporate purposes, including working capital.

See Note 11 – Other Notes Payable, Note 12 – Related Party Transactions and Note 13 - Mortgage Notes Payable and Mezzanine Financing for additional information.