LIQUIDITY

9 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LIQUIDITY

NOTE 2 - LIQUIDITY

Historically, our cash flows have been primarily generated from our Hotel and real estate operations. However, the current state of affairs of the City of San Francisco, its political challenges as well as the way its local government’s policies with regard to safety, drugs abuse, homelessness, crime, etc., have caused the City of San Francisco to be one of the slowest cities in the country to fully recover from the COVID-19 pandemic. Additionally, since San Francisco is a top-heavy tech company city, the “remote work” initiatives have caused a slowdown in business travel and in person meetings. Prior to the COVID-19 pandemic, our Hotel enjoyed most of its revenues from business travel, conventions, self-contained groups, etc., and post pandemic, most revenues are generated from leisure travel which is generally at a lower guest room rate. For the nine months ended March 31, 2024, our net cash flow provided for operations was $1,782,000. We have cautiously re-established certain services at our Hotel but have continued to take 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 slowly recover in San Francisco, Portsmouth will continue to evaluate what services it brings back. During the nine months ended March 31, 2024, Portsmouth continued to make capital improvements to the hotel in the amount of $2,649,000 and anticipates continuing its guest room upgrade program during the remaining of fiscal year 2024. During the nine months ended March 31, 2024 the Company made capital improvements in the amount of $1,944,000 to its multi-family and commercial real estate.

The Company had cash and cash equivalents of $7,763,000 and $5,960,000 as of March 31, 2024 and June 30, 2023, respectively. The Company had restricted cash of $4,225,000 and $6,914,000 as of March 31, 2024 and June 30, 2023, respectively. The Company had marketable securities, net of margin due to securities brokers, of $11,717,000 and $15,328,000 as of March 31, 2024 and June 30, 2023, respectively. These marketable securities are short-term investments and liquid in nature.

On April 27, 2020, InterGroup entered into a loan agreement (“SBA Loan - InterGroup”) with CIBC Bank USA under the CARES Act and received loan proceeds in the amount of $453,000. As of March 31, 2021, InterGroup had used all of the $453,000 loan proceeds in qualified payroll expenses. The SBA Loan – InterGroup was scheduled to mature on April 27, 2022 and had a 1.00% interest rate. The SBA Loans are subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. If the SBA approves the forgiveness amount, all payments of principal and interest are deferred until the date the forgiveness amount is remitted by the SBA to CIBC. If the SBA does not forgive any amount of the loan, payments would start within 30 days. All unforgiven portion of the principal and accrued interest will be due at maturity. In March of 2021 the SBA had forgiven the full $453,000 of the SBA Loan. In February 2024 InterGroup repaid the loan after an eligibility investigation took place concluding the type of business was ineligible for the loan. The repayment of the SBA loan has been recorded as a loss on extinguishment of debt in the condensed consolidated statements of operations for the nine months ended March 31, 2024.

On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, with interest only payable each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. The loan was extended to July 31, 2023. On December 16, 2020, the Partnership and InterGroup entered into a loan modification agreement which increased the Partnership’s borrowing from InterGroup as needed up to $10,000,000. Upon the dissolution of the Partnership in December 2021, Portsmouth assumed the Partnership’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. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. As of June 30, 2023 the balance of the loan was $15,700,000 net of loan amortization costs of zero. Portsmouth agreed to a 0.5% loan modification fee for the increased borrowing of $10,000,000 payable to InterGroup. In March 2024, Portsmouth and InterGroup entered in a loan modification agreement which increased Portsmouth’s borrowing amount to $30,000,000. During the nine months ended March 31, 2024, Portsmouth borrowed an additional $4,400,000 to fund its hotel operations. As of March 31, 2024 the balance of the loan was $20,100,000 and Portsmouth has not made any paid-downs to its note payable to InterGroup. All material intercompany accounts and transactions have been eliminated in consolidation.

In December 2023, 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 interest rate at 7.60%. The loan matures in November 2031.

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.

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 increase 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, 2024, the Company’s material financial obligations

which also includes interest payments.

			3 Months		Year		Year		Year		Year
	Total		2024		2025		2026		2027		2028		Thereafter
Mortgage and subordinated notes payable	$	195,370,000	$	300,000	$	115,363,000	$	1,162,000	$	3,296,000	$	1,770,000	$	73,479,000
Other notes payable		2,529,000		142,000		567,000		567,000		463,000		317,000		473,000
Interest		27,119,000		2,698,000		3,259,000		2,752,000		2,645,000		2,648,000		13,117,000
Total	$	225,018,000	$	3,140,000	$	119,189,000	$	4,481,000	$	6,404,000	$	4,735,000	$	87,069,000