LIQUIDITY

12 Months Ended

Jun. 30, 2023

Liquidity

LIQUIDITY

NOTE 2 – LIQUIDITY

Historically, our cash flows have been primarily generated from our Hotel and real estate operations. However, the dealings by federal, state, and local civil authorities have a material detrimental impact on our liquidity. For the fiscal year ended June 30, 2023, our net cash flow used by operations was $107,000. We have taken several steps to preserve capital and increase liquidity at our 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 to recover, the Company will continue to evaluate what services the Company brings back. During the fiscal year ended June 30, 2023, the Company continued to make capital improvements to the hotel in the amount of $5,866,000 and anticipates continuing its guest room upgrade program during the fiscal year 2024.

The Company had cash and cash equivalents of $5,960,000 and $14,367,000 as of June 30, 2023 and 2022, respectively. The Company had restricted cash of $6,914,000 and $8,982,000 as of June 30, 2023 and 2022, respectively. The Company had marketable securities, net of margin due to securities brokers, of $15,328,000 and $10,110,000 as of June 30, 2023 and 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. On July 7, 2021, the maturity date was extended to July 31, 2022. 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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, net of loan amortization costs of zero, respectively. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to InterGroup. All funds advanced to the Hotel have been eliminated in consolidated financial statements at June 30, 2023 and 2022.

On May 31, 2023, the Company refinanced its St. Louis, Missouri $4,823,000 mortgage with a two-year $5,360,000 mortgage with a floating monthly rate of the 30-day SOFR (capped at 5.5%) plus SOFR margin of 3.10%, interest-only payments are due for the first 12 months and $5,500 principal paydowns commencing in June 2024. During the fiscal year ending June 30, 2022, we refinanced six of our properties’ existing mortgages and obtained a mortgage note payable on one of our California properties, generating net proceeds totaling $16,683,000. We are currently evaluating other refinancing opportunities and we could refinance additional multifamily properties should the need arise, or should management consider the interest rate environment favorable.

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

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

Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities and capital improvements of the Hotel and our real estate properties. We will continue to finance our business activities primarily with existing cash, including from the activities described above, and cash generated from our operations. 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 June 30, 2023, the Company’s material financial obligations which also includes interest payments.

			Year		Year		Year		Year		Year
	Total		2024		2025		2026		2027		2028		Thereafter
Mortgage and subordinated notes payable	$	192,870,000	$	108,420,000	$	9,318,000	$	1,168,000	$	3,299,000	$	1,771,000	$	68,894,000
Related party notes payable		2,956,000		567,000		567,000		567,000		463,000		317,000		475,000
Interest		25,577,000		3,849,000		2,898,000		2,390,000		2,284,000		2,286,000		11,870,000
Total	$	221,403,000	$	112,836,000	$	12,783,000	$	4,125,000	$	6,046,000	$	4,374,000	$	81,239,000