Liquidity

9 Months Ended

Mar. 31, 2023

Liquidity

Liquidity

Note 2. Liquidity

Historically, the Company’s cash flows have been primarily generated from our Hotel and real estate operations. However, the responses by federal, state, and local civil authorities to the COVID-19 pandemic continue to have a material detrimental impact on the Company’s liquidity. For the nine months ended March 31, 2023, the Company’s net cash flows used in operations was $2,427,000. The Company has cautiously re-established certain services at our Hotel but have continued to take steps to preserve capital and increase liquidity at the Hotel, including implementing strict cost management measures to eliminate non-essential expenses, renegotiating certain reoccurring expenses, and temporarily closing certain hotel services and outlets. As the hospitality and travel environment continues its recovery, Portsmouth will continue to evaluate what services it brings back. During the nine months ended March 31, 2023, Portsmouth continued to make capital improvements to the hotel in the amount of $4,131,000 and anticipates continuing its guest room upgrade program during the remainder of fiscal year 2023. During the nine months ended March 31, 2023, the Company made capital improvements in the amount of $1,940,000 to its multi-family and commercial real estate.

The Company had cash, and cash equivalents, of $6,670,000 and $14,367,000 as of March 31, 2023 and June 30, 2022, respectively. The Company had marketable securities, net of margin due to securities brokers, of $16,134,000 and $10,110,000 as of March 31, 2023 and June 30, 2022, respectively. These marketable securities are short-term investments and liquid in nature.

On December 16, 2020, Justice and InterGroup entered into a loan modification agreement which increased Justice’s borrowing from InterGroup as needed up to $10,000,000 and extended the maturity date of the loan to July 31, 2021. As of the date of this report, the maturity date was extended to July 31, 2023. On September 7, 2021, the Board of InterGroup passed a resolution to provide funding to Portsmouth for the working capital of the Hotel up to $16,000,000 if necessary. Upon the dissolution of Justice in December 2021, Portsmouth assumed Justice’s note payable to InterGroup in the amount of $11,350,000. On December 31, 2021, Portsmouth and InterGroup entered into a loan modification agreement which memorialized the increase to $16,000,000 and the substitution of Portsmouth for Justice. During the fiscal year ending June 30, 2022, InterGroup advanced $7,550,000 to the Hotel, bringing the total amount due to InterGroup to $14,200,000 as of June 30, 2022 and March 31, 2023. Currently, the Company does not anticipate any need for additional funding from InterGroup. As of March 31, 2023, the Company has not made any pay-downs to its note payable to InterGroup. The Company could amend its by-laws and increase the number of authorized shares to issue additional shares to raise capital in the public markets if needed. The loan to InterGroup is eliminated in consolidation of the Company’s condensed consolidated financial statements.

During the fiscal year ended June 30, 2022, the Company refinanced five of our properties’ existing mortgages and obtained a mortgage note payable on one of our California properties, generating net proceeds totaling $16,683,000. The Company will continue to evaluate other refinancing opportunities and could refinance additional multifamily properties should the need arise, or should management consider the interest rate environment favorable. In July 2022, the Company renewed its uncollateralized revolving line of credit from CIBC Bank USA (“CIBC”) at a reduced amount of $2,000,000 from $5,000,000. The entire $2,000,000 is available to draw down as of March 31, 2023.

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s known short-term liquidity requirements primarily consist of funds necessary to pay for operating and other expenditures, including management and franchise fees, corporate expenses, payroll and related costs, taxes, interest and principal payments on our outstanding indebtedness, and repairs and maintenance at all our properties. The Company has been and will continue its efforts to secure a new loan to replace its current first mortgage and mezzanine debt which matures on January 1, 2024. Management anticipates the successful completion of the hotel’s debt refinancing.

The Company’s long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities and capital improvements of the Hotel and our real estate properties. We will continue to finance our business activities primarily with existing cash, including from the activities described above, and cash generated from our operations. After considering our approach to liquidity and accessing our available sources of cash, we believe that our cash position, after giving effect to the transactions discussed above, will be adequate to meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and related benefits, taxes and compliance costs and other commitments, for at least twelve months from the date of issuance of these financial statements, even if the economic recovery takes longer than anticipated. The objectives of our cash management policy are to maintain existing leverage levels and the availability of liquidity, while minimizing operational costs. However, there can be no guarantee that management will be successful with its plan.

The following table provides a summary as of March 31, 2023, the Company’s material financial obligations which also includes interest payments.

	Total		3 Months 2023		Year 2024		Year 2025		Year 2026		Year 2027		Thereafter
Mortgage notes payable	$	193,087,000	$	5,578,000	$	108,417,000	$	3,966,000	$	1,171,000	$	3,301,000	$	70,654,000
Related party notes payable		3,096,000		142,000		567,000		567,000		567,000		463,000		790,000
Interest		29,043,000		2,176,000		5,640,000		2,501,000		2,381,000		2,274,000		14,071,000
Total	$	225,226,000	$	7,896,000	$	114,624,000	$	7,034,000	$	4,119,000	$	6,038,000	$	85,515,000