10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2013

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to_________

Commission File Number 0-4057

PORTSMOUTH SQUARE, INC.

(Exact name of registrant as specified in its charter)

CALIFORNIA	94-1674111
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

10940 Wilshire Blvd., Suite 2150, Los Angeles, California 90024

(Address of principal executive offices)(Zip Code)

(310) 889-2500

(Registrant’s telephone number, including area code)

_________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                            x Yes¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):

¨ Yesx No

The number of shares outstanding of registrant’s Common Stock, as of February 3, 2014, was 734,183.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION	Page
Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets as of December 31, 2013 (Unaudited) and June 30, 2013.	3
	Condensed Consolidated Statements of Operations (Unaudited) for the Three Months ended December 31, 2013 and 2012.	4
	Condensed Consolidated Statements of Operations (Unaudited) for the Six Months ended December 31, 2013 and 2012.	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months ended December 31, 2013 and 2012.	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 4.	Controls and Procedures.	23
	PART II – OTHER INFORMATION
Item 6.	Exhibits.	24
Signatures		24

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PART 1

FINANCIAL INFORMATION

Item 1 – Condensed Consolidated Financial Statements

PORTSMOUTH SQUARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of	December 31, 2013
	(Unaudited)		June 30, 2013
ASSETS
Investment in hotel, net	$	33,219,000	$	34,048,000
Investment in real estate		973,000		973,000
Investment in marketable securities		3,360,000		3,324,000
Other investments, net		5,157,000		5,160,000
Cash and cash equivalents		2,426,000		668,000
Restricted cash - redemption		19,091,000		-
Restricted cash - mortgage impounds		852,000		-
Accounts receivable, net		1,580,000		1,957,000
Other assets, net		3,594,000		2,004,000
Deferred tax asset		5,454,000		3,193,000
Total assets	$	75,706,000	$	51,327,000
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities:
Accounts payable and other liabilities	$	13,884,000	$	9,176,000
Redemption payable		19,091,000		-
Due to securities broker		286,000		579,000
Obligations for securities sold		518,000		531,000
Other notes payable		731,000		1,595,000
Mortgage and subordinated notes payable		117,000,000		43,413,000
Total liabilities		151,510,000		55,294,000
Commitments and contingencies
Shareholders' deficit:
Common stock, no par value: Authorized shares - 750,000;     734,183 shares issued and outstanding		2,092,000		2,092,000
Additional paid-in-capital		-		916,000
Retained earnings (accumulated deficit)		(71,750,000)		574,000
Total Portsmouth shareholders' (deficit) equity		(69,658,000)		3,582,000
Noncontrolling interest		(6,146,000)		(7,549,000)
Total shareholders' deficit		(75,804,000)		(3,967,000)
Total liabilities and shareholders' deficit	$	75,706,000	$	51,327,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PORTSMOUTH SQUARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the three months ended December 31,	2013		2012
Revenue - Hotel	$	12,274,000	$	10,970,000
Costs and operating expenses
Hotel operating expenses		(9,493,000)		(9,398,000)
Hotel restructuring costs		(7,295,000)		-
Hotel occupancy tax - penalty fees		(1,084,000)		-
Hotel depreciation and amortization expense		(698,000)		(568,000)
General and administrative expense		(174,000)		(171,000)
Total costs and operating expenses		(18,744,000)		(10,137,000)
Income (loss) from operations		(6,470,000)		833,000
Other income (expense)
Interest expense - mortgage		(767,000)		(660,000)
Interest expense - occupancy tax		(328,000)		-
Loss on extinguishment of debt		(3,910,000)		-
Loss on disposal of assets		(1,092,000)		-
Net gain (loss) on marketable securities		114,000		(737,000)
Net unrealized loss on other investments		(3,000)		(27,000)
Dividend and interest income		167,000		171,000
Trading and margin interest expense		(57,000)		(55,000)
Other expense, net		(5,876,000)		(1,308,000)
Loss before income taxes		(12,346,000)		(475,000)
Income tax benefit		2,732,000		165,000
Net loss		(9,614,000)		(310,000)
Less: Net loss (income) attributable to the noncontrolling interest		955,000		(127,000)
Net loss attributable to Portsmouth	$	(8,659,000)	$	(437,000)
Basic and diluted net loss per share attributable to Portsmouth	$	(11.79)	$	(0.60)
Weighted average number of common shares outstanding - basic and diluted		734,183		734,183

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PORTSMOUTH SQUARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the six months ended December 31,	2013		2012
Revenue - Hotel	$	25,579,000	$	23,106,000
Costs and operating expenses
Hotel operating expenses		(19,025,000)		(18,562,000)
Hotel restructuring costs		(7,295,000)		-
Hotel occupancy tax - penalty fees		(1,084,000)		-
Hotel depreciation and amortization expense		(1,298,000)		(1,126,000)
General and administrative expense		(343,000)		(340,000)
Total costs and operating expenses		(29,045,000)		(20,028,000)
Income (loss) from operations		(3,466,000)		3,078,000
Other income (expense)
Interest expense - mortgage		(1,402,000)		(1,324,000)
Interest expense - occupancy tax		(328,000)		-
Loss on extinguishment of debt		(3,910,000)		-
Loss on disposal of assets		(1,092,000)		-
Net gain (loss) on marketable securities		207,000		(243,000)
Net unrealized loss on other investments		(3,000)		(112,000)
Dividend and interest income		171,000		178,000
Trading and margin interest expense		(123,000)		(109,000)
Other expense, net		(6,480,000)		(1,610,000)
Income (loss) before income taxes		(9,946,000)		1,468,000
Income tax benefit (expense)		2,261,000		(159,000)
Net (loss) income		(7,685,000)		1,309,000
Less: Net income attributable to the noncontrolling interest		(257,000)		(944,000)
Net (loss) income attributable to Portsmouth	$	(7,942,000)	$	365,000
Basic and diluted net (loss) income per share attributable to Portsmouth	$	(10.82)	$	0.50
Weighted average number of common shares outstanding - basic and diluted		734,183		734,183

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PORTSMOUTH SQUARE, INC.

CONDENDSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the six months ended December 31,	2013		2012
Cash flows from operating activities:
Net (loss) income	$	(7,685,000)	$	1,309,000
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net unrealized loss on marketable securities		(201,000)		267,000
Unrealized gain on other investments		3,000		112,000
Hotel loss on extinguishment of debt		3,910,000		-
Loss on disposal of assets		1,092,000		-
Depreciation and amortization		1,298,000		1,126,000
Changes in assets and liabilities:
Investment in marketable securities		165,000		(190,000)
Accounts receivable		377,000		(104,000)
Other assets		(1,626,000)		(495,000)
Accounts payable and other liabilities		4,708,000		223,000
Due to securities broker		(293,000)		403,000
Obligations for securities sold		(13,000)		(176,000)
Deferred tax asset		(2,261,000)		159,000
Net cash (used in) provided by operating activities		(526,000)		2,634,000
Cash flows from investing activities:
Payments for hotel furniture, equipment and building improvements		(1,525,000)		(1,341,000)
Net cash used in investing activities		(1,525,000)		(1,341,000)
Cash flows from financing activities:
Restricted cash - redemption and mortgage impounds		(19,943,000)		-
Redemption payments and dividends to noncontrolling interest		(45,061,000)		(781,000)
Net borrowings (payments) on mortgage and subordinated notes payable		69,677,000		(448,000)
Payments (borrowings) on other notes payable		(864,000)		25,000
Net cash provided by (used in) financing activities		3,809,000		(1,204,000)
Net increase in cash and cash equivalents		1,758,000		89,000
Cash and cash equivalents at the beginning of the period		668,000		1,032,000
Cash and cash equivalents at the end of the period	$	2,426,000	$	1,121,000
Supplemental information:
Interest paid	$	1,438,000	$	1,343,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PORTSMOUTH SQUARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated financial statements included herein have been prepared by Portsmouth Square, Inc. (“Portsmouth” or the “Company”), without audit, according to the rules and regulations of the Securities and Exchange Commission.Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures that are made are adequate to make the information presented not misleading.Further, the condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which included only normal recurring adjustments) necessary for a fair statement of the financial position, cash flows and results of operations as of and for the periods indicated. It is suggested that these financial statements be read in conjunction with the audited financial statements of Portsmouth and the notes therein included in the Company's Annual Report on Form 10-K for the year ended June 30, 2013.The June 30, 2013 Condensed Consolidated Balance Sheet was derived from the Company’s Form 10-K for the year ended June 30, 2013.

The results of operations for the three and six months ended December 31, 2013 are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2014.

For the three and six months ended December 31, 2013 and 2012, the Company had no components of comprehensive income other than net income itself.

OWNERSHIP AND PROPERTIES

As of December 31, 2013, Santa Fe Financial Corporation (“Santa Fe”), a public company, owns approximately 68.8% of the outstanding common shares of Portsmouth Square, Inc. (“Portsmouth” or the “Company”). Santa Fe is an 80.5%-owned subsidiary of The InterGroup Corporation (“InterGroup”), a public company. InterGroup also directly owns approximately 12.9% of the common stock of Portsmouth.

Portsmouth’s primary business is conducted through its general and limited partnership interest in Justice Investors, a California limited partnership (“Justice” or the “Partnership”). Portsmouth has a 93% limited partnership interest in Justice and is the sole general partner.The financial statements of Justice are consolidated with those of the Company.

Justice owns a 543-room hotel property located at 750 Kearny Street, San Francisco California, known as the Hilton San Francisco Financial District (the Hotel) and related facilities including a five level underground parking garage. The Hotel is operated by the partnership as a full service Hilton brand hotel pursuant to a Franchise License Agreement with Hilton Hotels Corporation. Justice also has a Management Agreement with Prism Hospitality L.P. (Prism) to perform the day-to-day management functions of the Hotel. The parking garage that is part of the Hotel property is managed by Ace Parking pursuant to a contract with the Partnership.

Portsmouth also receives management fees as a general partner of Justice for its services in overseeing and managing the Partnership’s assets. Those fees are eliminated in consolidation.

Basic income (loss) per share is calculated based upon the weighted average number of common shares outstanding during each period.During the three and six months December 31, 2013 and 2012, the Company did not have any potentially dilutive securities outstanding.

JUSTICE PARTNERSHIP REDEMPTION AND RESTRUCTURING

On December 18, 2013, Justice Investors, a California limited partnership (“Justice” or the “Partnership”), completed its Offer to Redeem any and all limited partnership interests not held by Portsmouth Square, Inc. (the “Company”), and the Loan Agreements, as defined in below.In addition, the requisite approval of amendments to its Amended and Restated Agreement of Limited Partnership became effective upon the completion of the Offer to Redeem and the consummation of the Loan Agreements.Such amendments are described in below.As a result, the Company is now the sole General Partner of Justice and controls 93% of Justice.

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Justice has accepted tenders, for cash, of approximately 29.173% of the limited partnership interests outstanding prior to the Offer to Redeem, and payments to the holders of such interests, in the amount of $1,385,000 for each 1% tendered, are in the process of being distributed.In addition, Justice has accepted the election of holders of approximately 17.146% of the limited partnership interests outstanding prior to the Offer to Redeem to participate in the alternate redemption structure, which allows them to redeem their limited partnership interests at some time within the next 12 months for certain property or cash or a combination of property and cash.The current and deferred payments to holders or limited partnership interests are classified as restricted cash and, together with the expenses discussed below, totals $19,091,000 and is classified on the balance sheet as redemption payable.The Company, which prior to the Offer to Redeem owned 50% of the then outstanding limited partnership interests, now owns approximately 93% of the limited partnership interests of Justice.

Justice incurred approximately $7,295,000 in hotel restructuring costs relating to the Offer to Redeem and related financing transactions, including a one-time management fee of $1,550,000, approximately $745,000 in legal, accounting and other professional expenses, and a Documentary Transfer Tax fee of approximately $5 million paid to the City of San Francisco.  The Documentary Transfer Tax fee was assessed as a condition to recording the transfer of Justice Investors' principal asset to a subsidiary to consummate the redemption.  While Justice believes the assessment of the Documentary Transfer tax was inappropriate, the tax was paid, under protest, on advice of Justice’s counsel to allow for the consummation of the redemption.  Justice intends to challenge the calculation of the tax.  No prediction can be made as to whether the tax will be upheld, or whether any portion of the tax will be refunded.Justice allocated a portion of the Documentary Transfer Tax to certain former limited partners of Justice Investors as a cost of the transaction. Certain of these limited partners have objected to the allocation, and Justice and the limited partners are pursuing non-binding mediation in an attempt to resolve the dispute.  No prediction can be given as to the outcome of the dispute.

Justice utilized the book value method to record the redemption of the limited partners.Under book value (bonus) method the remaining partners continue the existing partnership, recording no changes to the book values of the partnership's assets and liabilities. As a result, any revaluation of the existing partnership's assets or liabilities that might be undertaken is solely to determine the settlement price to the outgoing partner. The partner's withdrawal from the partnership is recorded by adjusting the remaining partners' capital accounts with the amount of the bonus, which is allocated according to their income-sharing ratio. The amount of adjustment is equal to the difference between the settlement price paid to the withdrawing partner and the book value of his share of total partnership capital at the time he withdraws.Justice Partner’s capital was reduced by approximately $64.1 million for the redemption.

In connection with the Offer to Redeem, Justice retired existing debt and replaced it with lower-yielding loans, the proceeds of which were used to fund the Offer to Redeem and to provide for additional working capital for the Hotel.  Justice incurred a loss on the extinguishment of debt of $3,910,000 which included a yield maintenance (prepayment penalty) expense of $3,808,000 and a write-off of capitalized loan costs on the refinanced debt of approximately $102,000.

The City of San Francisco’s Tax Collector’s office has claimed that Justice owes the City of San Francisco $2.1 million based on the Tax Collector’s interpretation of the San Francisco Business and Tax Regulations Code relating to Transient Occupancy Tax and Tourist Improvement District Assessment. This amount exceeds Justice’s estimate of the taxes owed, and Justice has disputed the claim and is seeking to discharge all penalties and interest charges imposed by the Tax Collector.  No prediction can be given at this time as to the outcome of this dispute. 

In December 2013, Justice determined to substantially demolish the Hotel’s ground-level Spa (with the exception of the ceilings and certain mechanical systems) to build out additional meeting rooms, a technology lounge and re-locate Hotel offices. Justice believes this will result in a greater guest experience and increases in operating revenues. Justice recorded a loss of approximately $738,000 as a disposal of assets on the closure of the Hotel’s Spa on the lobby level.

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Justice Loan Agreements

On December 18, 2013:(i) Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); and (ii) Justice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”).Justice is the sole member of Mezzanine, and Mezzanine is the sole member of Operating.

The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan.The proceeds of the Loan Agreements were used to fund the redemption of limited partnership interests described above and the pay-off of the prior mortgage.

The Mortgage Loan is secured by the Partnership’s principal asset, the Hilton San Francisco-Financial District (the “Property”). The Mortgage Loan initially bears an interest rate of 5.28% per annum and matures in January 2024.The term of the loan is 10 years with interest only due in the first three years and principle and interest on the remaining seven years of the loan.The Mortgage Loan also requires payments for impounds related to property tax, insurance and capital improvement reserves.As additional security for the Mortgage Loan, there is a limited guaranty (“Mortgage Guaranty”) executed by the Company in favor of Mortgage Lender.

The Mezzanine Loan is a secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan.The Mezzanine Loan initially bears interest at 9.75% per annum and matures in January, 2024.Interest only is payable monthly.As additional security for the Mezzanine Loan, there is a limited guaranty executed by the Company in favor of Mezzanine Lender (the “Mezzanine Guaranty” and, together with the Mortgage Guaranty, the “Guaranties”).

The Guaranties are limited to what are commonly referred to as “bad boy” acts, including:(i) fraud or intentional misrepresentations; (ii) gross negligence or willful misconduct; (iii) misapplication or misappropriation of rents, security deposits, insurance or condemnation proceeds; and (iv) failure to pay taxes or insurance.The Guaranties will be full recourse guaranties under identified circumstances, including failure to maintain “single purpose” status, transfer of the Property in violation of the applicable loan documents and the Property becoming subject to a bankruptcy proceeding.Pursuant to the Guaranties, the Company is required to maintain a certain minimum net worth and liquidity.As of December 31, 2013, the Company is in compliance with both requirements.

Each of the Loan Agreements contains customary representations and warranties, events of default, reporting requirements, affirmative covenants and negative covenants, which impose restrictions on, among other things, organizational changes of the respective borrower, operations of the Property, agreements with affiliates and third parties.Each of the Loan Agreements also provides for mandatory prepayments under certain circumstances (including casualty or condemnation events) and voluntary prepayments, subject to satisfaction of prescribed conditions set forth in the Loan Agreements.

Limited Partnership Agreement Amendments

In conjunction with the Offer to Redeem, the Partnership solicited and obtained consents from holders of the requisite limited partnership interests to amendments to the Justice Amended and Restated Agreement of Limited Partnership, which became effective upon the completion of the Offer to Redeem and the consummation of the Loan Agreements.The amendments included the following changes to the Justice Amended and Restated Agreement of Limited Partnership:

· Providing for a single general partner;

⋅ Providing for Class B limited partnership interests, which, if issued, would represent interests in the Partnership; and

· Permitting the General Partner to admit additional limited partners, subject to certain restrictions.

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NOTE 2 – INVESTMENT IN HOTEL, NET

Investment in hotel consisted of the following as of:

			Accumulated		Net Book
December 31, 2013	Cost		Depreciation		Value
Land	$	1,124,000	$	-	$	1,124,000
Furniture and equipment		22,162,000		(21,296,000)		866,000
Building and improvements		50,710,000		(19,481,000)		31,229,000
	$	73,996,000	$	(40,777,000)	$	33,219,000

			Accumulated		Net Book
June 30, 2013	Cost		Depreciation		Value
Land	$	1,124,000	$	-	$	1,124,000
Furniture and equipment		22,270,000		(19,312,000)		2,958,000
Building and improvements		50,473,000		(20,507,000)		29,966,000
	$	73,867,000	$	(39,819,000)	$	34,048,000

NOTE 3 - INVESTMENT IN MARKETABLE SECURITIES

The Company’s investment in marketable securities consists primarily of corporate equities. The Company has also invested in corporate bonds and income producing securities, which may include interests in real estate based companies and REITs, where financial benefit could insure to its shareholders through income and/or capital gain.

At December 31, 2013 and June 30, 2013, all of the Company’s marketable securities are classified as trading securities.The change in the unrealized gains and losses on these investments are included in earnings.Trading securities are summarized as follows:

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			Gross		Gross		Net		Fair
Investment	Cost		Unrealized Gain		Unrealized Loss		Unrealized Gain		Value
As of December 31, 2013
Corporate
Equities	$	2,850,000	$	1,178,000	$	(668,000)	$	510,000	$	3,360,000
As of June 30, 2013
Corporate
Equities	$	3,104,000	$	992,000	$	(772,000)	$	220,000	$	3,324,000

As of December 31, 2013 and June 30, 2013, the Company had $621,000 and $637,000, respectively, of unrealized losses related to securities held for over one year.

Net gain (loss) on marketable securities on the statement of operations is comprised of realized and unrealized gains (losses).Below is the composition of the two components for the three and six months December 31, 2013 and 2012, respectively.

For the three months ended December 31,	2013		2012
Realized gain on marketable securities	$	78,000	$	1,000
Unrealized gain (loss) on marketable securities		36,000		(738,000)
Net gain (loss) on marketable securities	$	114,000	$	(737,000)

For the six months ended December 31,	2013		2012
Realized gain on marketable securities	$	6,000	$	24,000
Unrealized gain (loss) on marketable securities		201,000		(267,000)
Net gain (loss) on marketable securities	$	207,000	$	(243,000)

NOTE 4 – OTHER INVESTMENTS, NET

The Company may also invest, with the approval of the Securities Investment Committee and other Company guidelines, in private investment equity funds and other unlisted securities, such as convertible notes through private placements. Those investments in non-marketable securities are carried at cost on the Company’s balance sheet as part of other investments, net of other than temporary impairment losses.

Other investments, net consist of the following:

Type	December 31, 2013		June 30, 2013
Preferred stock - Comstock, at cost	$	4,410,000	$	4,410,000
Private equity hedge fund, at cost		646,000		646,000
Corporate debt and equity instruments, at cost		101,000		101,000
Warrants - at fair value		-		3,000
	$	5,157,000	$	5,160,000

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NOTE 5 - FAIR VALUE MEASUREMENTS

The carrying values of the Company’s financial instruments not required to be carried at fair value on a recurring basis approximate fair value due to their short maturities (i.e., accounts receivable, other assets, accounts payable and other liabilities, due to securities broker and obligations for securities sold) or the nature and terms of the obligation (i.e., other notes payable and mortgage notes payable).

The assets measured at fair value on a recurring basis are as follows:

As of December 31, 2013
Assets:	Level 1		Level 2		Level 3		Total
Investment in marketable securities:
Basic materials	$	1,974,000	$	-	$	-	$	1,974,000
Financial services		516,000		-		-		516,000
Technology		372,000		-		-		372,000
REITs and real estate companies		162,000		-		-		162,000
Other		336,000		-		-		336,000
	$	3,360,000	$	-	$	-	$	3,360,000

As of June 30, 2013
Assets:	Level 1		Level 2		Level 3		Total
Cash equivalents - money market	$	3,000	$	-	$	-	$	3,000
Other investments - warrants		-		-		3,000		3,000
Investment in marketable securities:
Basic materials		1,513,000		-		-		1,513,000
Technology		622,000		-		-		622,000
Financial services		526,000		-		-		526,000
REITs and real estate companies		255,000		-		-		255,000
Other		408,000		-		-		408,000
		3,324,000		-		-		3,324,000
	$	3,327,000	$	-	$	3,000	$	3,330,000

The fair values of investments in marketable securities are determined by the most recently traded price of each security at the balance sheet date. The fair value of the warrants was determined based upon a Black-Scholes option valuation model.

Financial assets that are measured at fair value on a non-recurring basis and are not included in the tables above include “Other investments, net (non-marketable securities),” that were initially measured at cost and have been written down to fair value as a result of impairment or adjusted to record the fair value of new instruments received (i.e., preferred shares) in exchange for old instruments (i.e., debt instruments). The following table shows the fair value hierarchy for these assets measured at fair value on a non-recurring basis as follows:

									Net loss for the six months
Assets	Level 1		Level 2		Level 3		December 31, 2013		ended December 31, 2013
Other non-marketable investments	$	-	$	-	$	5,157,000	$	5,157,000	$	-

									Net loss for the six months
Assets	Level 1		Level 2		Level 3		June 30, 2013		ended December 31, 2012
Other non-marketable investments	$	-	$	-	$	5,157,000	$	5,157,000	$	-

Other investments in non-marketable securities are carried at cost net of any impairment loss.  The Company has no significant influence or control over the entities that issue these investments and holds less than 20% ownership in each of the investments. These investments are reviewed on a periodic basis for other-than-temporary impairment. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

- 12 -

 

NOTE 6 - SEGMENT INFORMATION

The Company operates in two reportable segments, the operation of the hotel (“Hotel Operations”) and the investment of its cash in marketable securities and other investments (“Investment Transactions”). These two operating segments, as presented in the consolidated financial statements, reflect how management internally reviews each segment’s performance.Management also makes operational and strategic decisions based on this same information.

Information below represents reporting segments for the three and six months December 31, 2013 and 2012, respectively.Operating income from Hotel operations consists of the operation of the hotel and operation of the garage.Operating income for investment transactions consist of net investment income and dividend and interest income.

As of and for the three months	Hotel		Investment
ended December 31, 2013	Operations		Transactions		Other		Total
Revenues	$	12,274,000	$	-	$	-	$	12,274,000
Segment operating expenses		(17,872,000)		-		(174,000)		(18,046,000)
Segment loss		(5,598,000)		-		(174,000)		(5,772,000)
Interest expense - mortgage		(767,000)		-		-		(767,000)
Interest expense - occupancy tax		(328,000)		-		-		(328,000)
Loss on extinguishment of debt		(3,910,000)		-		-		(3,910,000)
Loss on disposal of assets		(1,092,000)		-		-		(1,092,000)
Depreciation and amortization expense		(698,000)		-		-		(698,000)
Income from investments		-		221,000		-		221,000
Income tax benefit		-		-		2,732,000		2,732,000
Net income (loss)	$	(12,393,000)	$	221,000	$	2,558,000	$	(9,614,000)
Total assets	$	33,219,000	$	8,517,000	$	33,970,000	$	75,706,000
As of and for the three months	Hotel		Investment
ended December 31, 2012	Operations		Transactions		Other		Total
Revenues	$	10,970,000	$	-	$	-	$	10,970,000
Segment operating expenses		(9,398,000)		-		(171,000)		(9,569,000)
Segment income (loss)		1,572,000		-		(171,000)		1,401,000
Interest expense - mortgage		(660,000)		-		-		(660,000)
Depreciation and amortization expense		(568,000)		-		-		(568,000)
Loss from investments		-		(648,000)		-		(648,000)
Income tax benefit		-		-		165,000		165,000
Net income (loss)	$	344,000	$	(648,000)	$	(6,000)	$	(310,000)
Total assets	$	33,073,000	$	7,805,000	$	9,746,000	$	50,624,000

- 13 -

As of and for the six months	Hotel		Investment
ended December 31, 2013	Operations		Transactions		Other		Total
Revenues	$	25,579,000	$	-	$	-	$	25,579,000
Segment operating expenses		(27,404,000)		-		(343,000)		(27,747,000)
Segment loss		(1,825,000)		-		(343,000)		(2,168,000)
Interest expense - mortgage		(1,402,000)		-		-		(1,402,000)
Interest expense - occupancy tax		(328,000)		-		-		(328,000)
Loss on extinguishment of debt		(3,910,000)		-		-		(3,910,000)
Loss on disposal of assets		(1,092,000)		-		-		(1,092,000)
Depreciation and amortization expense		(1,298,000)		-		-		(1,298,000)
Income from investments		-		252,000		-		252,000
Income tax benefit		-		-		2,261,000		2,261,000
Net income (loss)	$	(9,855,000)	$	252,000	$	1,918,000	$	(7,685,000)
Total assets	$	33,219,000	$	8,517,000	$	33,970,000	$	75,706,000
As of and for the six months	Hotel		Investment
ended December 31, 2012	Operations		Transactions		Other		Total
Revenues	$	23,106,000	$	-	$	-	$	23,106,000
Segment operating expenses		(18,562,000)		-		(340,000)		(18,902,000)
Segment income (loss)		4,544,000		-		(340,000)		4,204,000
Interest expense		(1,324,000)		-		-		(1,324,000)
Depreciation and amortization expense		(1,126,000)		-		-		(1,126,000)
Loss from investments		-		(286,000)		-		(286,000)
Income tax expense		-		-		(159,000)		(159,000)
Net income (loss)	$	2,094,000	$	(286,000)	$	(499,000)	$	1,309,000
Total assets	$	33,073,000	$	7,805,000	$	9,746,000	$	50,624,000

NOTE 7 - RELATED PARTY TRANSACTIONS

Certain shared costs and expenses, primarily administrative expenses, rent and insurance are allocated among the Company, the Company’s parent, Santa Fe and InterGroup, the parent of Santa Fe, based on management's estimate of the pro rata utilization of resources.For the three months ended December 31, 2013 and 2012, these expenses were approximately $18,000 for each respective period.For the six months ended December 31, 2013 and 2012, these expenses were approximately $36,000 for each respective period.

During the three months ended December 31, 2013 and 2012, the Company received management fees from Justice Investors totaling $108,000 and $89,000, respectively.During the six months ended December 31, 2013 and 2012, the Company received management fees from Justice Investors totaling $220,000 and $201,000, respectively.These amounts were eliminated in consolidation.

In connection with the redemption of limited partnership interests of Justice Investors, Limited Partnership described in Note 1 above, Justice Operating Company, LLC agreed to pay a total of $1,550,000 in fees to certain officers and directors of the Company for services rendered in connection with the redemption of partnership interests, refinancing of Justice’s properties and reorganization of Justice Investors.This agreement was superseded by a letter dated December 11, 2013 from Justice Investors, Limited Partnership, in which Justice Investors Limited Partnership assumed the payment obligations of Justice Operating Company, LLC.The first payment under this agreement was made concurrently with the closing of the loan agreements described in Note 1 above, with the remaining payments due upon Justice Investor’s having adequate available cash as described in the letter.

Four of the Portsmouth directors serve as directors of Intergroup. Three of those directors also serve as directors of Santa Fe.The three Santa Fe directors also serve as directors of InterGroup.

John V. Winfield serves as Chief Executive Officer and Chairman of the Company, Santa Fe, and InterGroup.Depending on certain market conditions and various risk factors, the Chief Executive Officer, his family, Santa Fe and InterGroup may, at times, invest in the same companies in which the Company invests.The Company encourages such investments because it places personal resources of the Chief Executive Officer and his family members, and the resources of Santa Fe and InterGroup, at risk in connection with investment decisions made on behalf of the Company.

- 14 -

 

Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

              OPERATIONS

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

The Company may from time to time make forward-looking statements and projections concerning future expectations.When used in this discussion, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “could,” “might” and similar expressions, are intended to identify forward-looking statements.These statements are subject to certain risks and uncertainties, such as national and worldwide economic conditions, including the impact of recessionary conditions on tourism, travel and the lodging industry, the impact of terrorism and war on the national and international economies, including tourism and securities markets, energy and fuel costs, natural disasters, general economic conditions and competition in the hotel industry in the San Francisco area, seasonality, labor relations and labor disruptions, actual and threatened pandemics such as swine flu, partnership distributions, the ability to obtain financing at favorable interest rates and terms, securities markets, regulatory factors, litigation and other factors discussed below in this Report and in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013, that could cause actual results to differ materially from those projected.Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof.The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

The Company's principal business is conducted through its general and limited partnership interest in the Justice Investors limited partnership (“Justice” or the “Partnership”).Justice owns a 543 room hotel property located at 750 Kearny Street, San Francisco, California 94108, known as the “Hilton San Francisco Financial District” (the “Hotel”) and related facilities, including a five-level underground parking garage. The financial statements of Justice have been consolidated with those of the Company.

The Hotel is operated by the Partnership as a full service Hilton brand hotel pursuant to a Franchise License Agreement with Hilton Hotels Corporation. The term of the Agreement is for a period of 15 years commencing on January 12, 2006, with an option to extend the license term for another five years, subject to certain conditions. Justice also has a Management Agreement with Prism Hospitality L.P. (“Prism”) to perform the day-to-day management functions of the Hotel.

The parking garage that is part of the Hotel property is managed by Ace Parking pursuant to a contract with the Partnership.Portsmouth also receives management fees as a general partner of Justice for its services in overseeing and managing the Partnership’s assets. Those fees are eliminated in consolidation.

On December 18, 2013, Justice Investors completed its Offer to Redeem any and all limited partnership interests not held by Portsmouth Square, Inc.As a result, the Company is now the sole General Partner of Justice.

Justice has accepted tenders, for cash, of approximately 29.173% of the limited partnership interests outstanding prior to the Offer to Redeem, and payments to the holders of such interests, in the amount of $1,385,000 for each 1% tendered, are in the process of being distributed.In addition, Justice has accepted the election of holders of approximately 17.146% of the limited partnership interests outstanding prior to the Offer to Redeem to participate in the alternate redemption structure, which allows them to redeem their limited partnership interests at some time within the next 12 months for certain property or cash or a combination of property and cash.This amount totals $19,091,000 and is classified on the balance sheet as redemption payable.The related restricted cash is included on the balance sheet as part of the restricted cash balance totaling $19,091,000.The Company, which prior to the Offer to Redeem owned 50% of the then outstanding limited partnership interests, now owns approximately 93% of the limited partnership interests of Justice.

- 15 -

On December 18, 2013,Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); andJustice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”).Justice is the sole member of Mezzanine, and Mezzanine is the sole member of Operating.The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan.A portion of the proceeds of the Loan Agreements was used to fund the redemption of limited partnership interests described in above.Please see Footnote 1 of the consolidated financial statements for further information on the loans.

Three Months Ended December 31, 2013 Compared to Three Months Ended December 31, 2012

The Company had a net loss of $9,614,000 for the three months ended December 31, 2013 compared to net loss of $310,000 for the three months ended December 31, 2012.The significant change in the net loss is primarily attributable the costs related to the restructuring and redemption of the limited partners of Justice Investors and the related refinancing of the mortgage note on the Hotel.This is partially offset by the continued improvement of Hotel operations prior to the non-recurring expenses.

The Company had a net loss from hotel operations of $12,393,000 for the three months ended December 31, 2013, compared to net income of $344,000 for the three months ended December 31, 2012. The change in the net (loss) income is primarily attributable the costs related to the restructuring and the redemption of the limited partners of Justice and the related refinancing of the mortgage note on the Hotel.This is partially offset by the increase revenues at the Hotel resulting from higher average room rates.

The following table sets forth a more detailed presentation of Hotel operations for the three months ended December 31, 2013 and 2012.

For the three months ended December 31,	2013		2012
Hotel revenues:
Hotel rooms	$	9,761,000	$	8,441,000
Food and beverage		1,568,000		1,608,000
Garage		744,000		691,000
Other operating departments		201,000		230,000
Total hotel revenues		12,274,000		10,970,000
Operating expenses, excluding non-recurring charges, depreciation and amortization		(9,493,000)		(9,398,000)
Operating income before non-recurring charges, interest and depreciation and     amortization		2,781,000		1,572,000
Hotel restructuring costs		(7,295,000)		-
Hotel occupancy tax - penalty fees		(1,084,000)		-
Income (loss) before loss on extinguishment of debt, loss on disposal of assets ,      interest, depreciation and amortization		(5,598,000)		1,572,000
Loss on extinguishment of debt		(3,910,000)		-
Loss on disposal of assets		(1,092,000)		-
Interest expense - mortgage		(767,000)		(660,000)
Interest expense - occupancy tax		(328,000)		-
Depreciation and amortization expense		(698,000)		(568,000)
Net (loss) income from Hotel operations	$	(12,393,000)	$	344,000

For the three months ended December 31, 2013, the Hotel generated operating income of $2,781,000 before non-recurring charges and interest and depreciation and amortization on total operating revenues of $12,274,000 compared to operating income of $1,572,000 before non-recurring charges and interest and depreciation and amortization on total operating revenues of $10,970,000 for the three months ended December 31, 2012.Room revenues increased by $1,320,000 for the three months ended December 31, 2013 compared to the three months ended December 31, 2012 primarily as the result of higher room rates.Food and beverage revenues decreased by $40,000 and garage revenues increased by $53,000 for the same period.

Operating expenses remained relatively consistent with the prior comparable period.

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 three months ended December 31, 2013 and 2012.

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Three Months Ended December 31,	Average Daily Rate		Average Occupancy %		RevPar
2013	$	218	90	%	$	195
2012	$	195	87	%	$	169

Room revenues remained strong as the San Francisco market continued to have good demand for higher rated business. The Hotel’s average daily rate increased by $23 for the three months ended December 31, 2013 compared to the three months ended December 31, 2012, while occupancy percentages increase to 90% from 87%.As a result, the Hotel was able to achieve a RevPar number that was $26 higher than the comparative three month period.

Justice incurred approximately $7,295,000 in hotel restructuring costs relating to the Offer to Redeem and related financing transactions, including a one-time management fee of $1,550,000, approximately $745,000 in legal, accounting and other professional expenses, and a Documentary Transfer Tax fee of approximately $5 million paid to the City of San Francisco.  The Documentary Transfer Tax fee was assessed as a condition to recording the transfer of Justice Investors' principal asset to a subsidiary to consummate the redemption.  While Justice believes the assessment of the Documentary Transfer tax was inappropriate, the tax was paid, under protest, on advice of Justice’s counsel to allow for the consummation of the redemption.  Justice intends to challenge the calculation of the tax.  No prediction can be made as to whether the tax will be upheld, or whether any portion of the tax will be refunded.Justice allocated a portion of the Documentary Transfer Tax to certain former limited partners of Justice Investors as a cost of the transaction. Certain of these limited partners have objected to the allocation, and Justice and the limited partners are pursuing non-binding mediation in an attempt to resolve the dispute.  No prediction can be given as to the outcome of the dispute.

The City of San Francisco’s Tax Collector’s office has claimed that Justice owes the City of San Francisco $2.1 million based on the Tax Collector’s interpretation of the San Francisco Business and Tax Regulations Code relating to Transient Occupancy Tax and Tourist Improvement District Assessment. This amount exceeds Justice’s estimate of the taxes owed, and Justice has disputed the claim and is seeking to discharge all penalties and interest charges imposed by the Tax Collector.  No prediction can be given at this time as to the outcome of this dispute. 

In connection with the Offer to Redeem, Justice retired existing debt and replaced it with lower-yielding loans, the proceeds of which were used to fund the Offer to Redeem and to provide for additional working capital for the Hotel.  Justice incurred a loss on the extinguishment of debt of $3,910,000 which included a yield maintenance (prepayment penalty) expense of $3,808,000 and a write-off of capitalized loan costs on the refinanced debt of approximately $102,000.

In December 2013, Justice determined to substantially demolish the Hotel’s ground-level Spa (with the exception of the ceilings and certain mechanical systems) to build out additional meeting rooms, a technology lounge and re-locate Hotel offices. Justice believes this will result in a greater guest experience and increases in operating revenues. Justice recorded a loss of approximately $738,000 as a disposal of assets on the closure of the Hotel’s Spa on the lobby level.

Our highest priority is guest satisfaction. We believe that enhancing the guest experience differentiates the Hotel from our competition by building the most sustainable guest loyalty. During fiscal 2013, we completed a significant, “green” project that retrofits all of our guest room windows with new “double-pane” inserts that result in greater energy savings and better sound attenuation for our guests. We have also upgraded our common areas of the Hotel and improved our restaurant facilities, food and beverage services and now provide advanced technological amenities throughout our lobby. Our guest responses to these improvements have been very positive. The Hotel also remains a leader in implementing Hilton’s Huanying (“Welcome”) program that features a tailored experience for Chinese travelers. We continue taking steps that further develop our ties with the local Chinese community and the city of San Francisco, representing good corporate citizenship and promoting important, new business opportunities.

   

Moving forward, we will continue to focus on cultivating more international business, especially from China, and capturing a greater percentage of the higher rated business, leisure and group travel. We will also continue in our efforts to upgrade our guest rooms and facilities and explore new and innovative ways to differentiate the Hotel from its competition, as well as focusing on returning our food and beverage operations to profitability. During the last twelve months, we have seen steady improvement in business and leisure travel. If that trend in the San Francisco market and the hotel industry continues, it should translate into an increase in room revenues and profitability. However, like all hotels, it will remain subject to the uncertain domestic and global economic environment and other risk factors beyond our control, such as the effect of natural disasters.

- 17 -

The Company had a net gain on marketable securities of $114,000 for the three months ended December 31, 2013 compared to a net loss on marketable securities of $737,000 for the three months ended December 31, 2012. For the three months ended December 31, 2013, the Company had a net realized gain of $78,000 and a net unrealized gain of $36,000.For the three months ended December 31, 2012, the Company had a net realized gain of $1,000 and a net unrealized loss of $738,000.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 may have no predictive value and variations in amount from period to period may have no analytical value. For a more detailed description of the composition of the Company’s marketable securities see the Marketable Securities section below.

The Company consolidates Justice (Hotel) for financial reporting purposes and is not taxed on its non-controlling interest in the Hotel.  The income tax benefit during the three months ended December 31, 2013 and 2012 represents the income tax effect on the Company’s pretax income which includes its share in net income of the Hotel.

Six Months Ended December 31, 2013 Compared to Six Months Ended December 31, 2012

The Company had a net loss of $7,685,000 for the six months ended December 31, 2013 compared to net income of $1,309,000 for the six months ended December 31, 2012.The significant change in the net (loss) income is primarily attributable the costs related to the restructuring and redemption of the limited partners of Justice Investors and the related refinancing of the mortgage note on the Hotel.This is partially offset by the continued improvement of Hotel operations prior to the non-recurring expenses.

The Company had a net loss from hotel operations of $9,855,000 for the six months ended December 31, 2013, compared to net income of $2,094,000 for the six months ended December 31, 2012. The change in the net (loss) income is primarily attributable the costs related to the restructuring and the redemption of the limited partners of Justice and the related refinancing of the mortgage note on the Hotel.This is partially offset by the increase revenues at the Hotel resulting from higher average room rates partially offset by the related increase in operating expenses.

The following table sets forth a more detailed presentation of Hotel operations for the six months ended December 31, 2013 and 2012.

- 18 -

For the six months ended December 31,	2013		2012
Hotel revenues:
Hotel rooms	$	20,815,000	$	18,213,000
Food and beverage		2,896,000		3,019,000
Garage		1,499,000		1,419,000
Other operating departments		369,000		455,000
Total hotel revenues		25,579,000		23,106,000
Operating expenses, excluding non-recurring charges, depreciation and amortization		(19,025,000)		(18,562,000)
Operating income before non-recurring charges, interest and depreciation and     amortization		6,554,000		4,544,000
Hotel restructuring costs		(7,295,000)		-
Hotel occupancy tax - penalty fees		(1,084,000)		-
Income (loss) before loss on extinguishment of debt, loss on disposal of assets ,      interest, depreciation and amortization		(1,825,000)		4,544,000
Loss on extinguishment of debt		(3,910,000)		-
Loss on disposal of assets		(1,092,000)		-
Interest expense - mortgage		(1,402,000)		(1,324,000)
Interest expense - occupancy tax		(328,000)		-
Depreciation and amortization expense		(1,298,000)		(1,126,000)
Net (loss) income from Hotel operations	$	(9,855,000)	$	2,094,000

For the six months ended December 31, 2013, the Hotel generated operating income of $6,554,000 before non-recurring charges and interest and depreciation and amortization on total operating revenues of $25,579,000 compared to operating income of $4,544,000 before non-recurring charges and interest and depreciation and amortization on total operating revenues of $23,106,000 for the six months ended December 31, 2012.Room revenues increased by $2,602,000 for the six months ended December 31, 2013 compared to the six months ended December 31, 2012 primarily as the result of higher room rates.Food and beverage revenues decreased by $123,000 and garage revenues increased by $80,000 for the same period.

Major factors for the increase in operating expenses were an increase in contractual union wages and benefits in all operating departments and higher commissions paid for certain group and city-wide convention business in the current period. Franchise and management fees, which are based on a percentage of revenues, also increased as well as costs for certain promotions for Hilton Honors members during the current period.Franchise and management fees, which are based on a percentage of revenues, also increased as well as costs for certain promotions for Hilton Honors members during the current period.

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 six months ended December 31, 2013 and 2012.

Six Months Ended December 31,	Average Daily Rate		Average Occupancy %		RevPar
2013	$	227	92	%	$	208
2012	$	202	88	%	$	168

Room revenues remained strong as the San Francisco market continued to have good demand for higher rated business. The Hotel’s average daily rate increased by $25 for the six months ended December 31, 2013 compared to the six months ended December 31, 2012, while occupancy percentages increase to 92% from 88%.As a result, the Hotel was able to achieve a RevPar number that was $40 higher than the comparative six month period.

- 19 -

Justice incurred approximately $7,295,000 in hotel restructuring costs relating to the Offer to Redeem and related financing transactions, including a one-time management fee of $1,550,000, approximately $745,000 in legal, accounting and other professional expenses, and a Documentary Transfer Tax fee of approximately $5 million paid to the City of San Francisco.  The Documentary Transfer Tax fee was assessed as a condition to recording the transfer of Justice Investors' principal asset to a subsidiary to consummate the redemption.  While Justice believes the assessment of the Documentary Transfer tax was inappropriate, the tax was paid, under protest, on advice of Justice’s counsel to allow for the consummation of the redemption.  Justice intends to challenge the calculation of the tax.  No prediction can be made as to whether the tax will be upheld, or whether any portion of the tax will be refunded.Justice allocated a portion of the Documentary Transfer Tax to certain former limited partners of Justice Investors as a cost of the transaction. Certain of these limited partners have objected to the allocation, and Justice and the limited partners are pursuing non-binding mediation in an attempt to resolve the dispute.  No prediction can be given as to the outcome of the dispute.

The City of San Francisco’s Tax Collector’s office has claimed that Justice owes the City of San Francisco $2.1 million based on the Tax Collector’s interpretation of the San Francisco Business and Tax Regulations Code relating to Transient Occupancy Tax and Tourist Improvement District Assessment. This amount exceeds Justice’s estimate of the taxes owed, and Justice has disputed the claim and is seeking to discharge all penalties and interest charges imposed by the Tax Collector.  No prediction can be given at this time as to the outcome of this dispute.

In connection with the Offer to Redeem, Justice retired existing debt and replaced it with lower-yielding loans, the proceeds of which were used to fund the Offer to Redeem and to provide for additional working capital for the Hotel.  Justice incurred a loss on the extinguishment of debt of $3,910,000 which included a yield maintenance (prepayment penalty) expense of $3,808,000 and a write-off of capitalized loan costs on the refinanced debt of approximately $102,000.

In December 2013, Justice determined to substantially demolish the Hotel’s ground-level Spa (with the exception of the ceilings and certain mechanical systems) to build out additional meeting rooms, a technology lounge and re-locate Hotel offices. Justice believes this will result in a greater guest experience and increases in operating revenues. Justice recorded a loss of approximately $738,000 as a disposal of assets on the closure of the Hotel’s Spa on the lobby level.

   

Our highest priority is guest satisfaction. We believe that enhancing the guest experience differentiates the Hotel from our competition by building the most sustainable guest loyalty. During fiscal 2013, we completed a significant, “green” project that retrofits all of our guest room windows with new “double-pane” inserts that result in greater energy savings and better sound attenuation for our guests. We have also upgraded our common areas of the Hotel and improved our restaurant facilities, food and beverage services and now provide advanced technological amenities throughout our lobby. Our guest responses to these improvements have been very positive. The Hotel also remains a leader in implementing Hilton’s Huanying (“Welcome”) program that features a tailored experience for Chinese travelers. We continue taking steps that further develop our ties with the local Chinese community and the city of San Francisco, representing good corporate citizenship and promoting important, new business opportunities.

Moving forward, we will continue to focus on cultivating more international business, especially from China, and capturing a greater percentage of the higher rated business, leisure and group travel. We will also continue in our efforts to upgrade our guest rooms and facilities and explore new and innovative ways to differentiate the Hotel from its competition, as well as focusing on returning our food and beverage operations to profitability. During the last twelve months, we have seen steady improvement in business and leisure travel. If that trend in the San Francisco market and the hotel industry continues, it should translate into an increase in room revenues and profitability. However, like all hotels, it will remain subject to the uncertain domestic and global economic environment and other risk factors beyond our control, such as the effect of natural disasters.

The Company had a net gain on marketable securities of $207,000 for the six months ended December 31, 2013 compared to a net loss marketable securities of $243,000 for the six months ended December 31, 2012. For the six months ended December 31, 2013, the Company had a net realized gain of $6,000 and a net unrealized gain of $201,000.For the six months ended December 31, 2012, the Company had a net realized gain of $24,000 and a net unrealized loss of $267,000.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 may have no predictive value and variations in amount from period to period may have no analytical value. For a more detailed description of the composition of the Company’s marketable securities see the Marketable Securities section below.

The Company consolidates Justice (Hotel) for financial reporting purposes and is not taxed on its non-controlling interest in the Hotel.  The income tax benefit (expense) during the six months ended December 31, 2013 and 2012 represents the income tax effect on the Company’s pretax income which include its share in net income of the Hotel.The tax benefit during the six months ended December 31, 2013 primarily resulted from the loss from Justice.

- 20 -

MARKETABLE SECURITIES

As of December 31, 2013 and June 30, 2013, the Company had investments in marketable equity securities of $3,360,000 and $3,324,000, respectively.The following table shows the composition of the Company’s marketable securities portfolio by selected industry groups as:

As of December 31, 2013			% of Total
			Investment
Industry Group		Fair Value	Securities
Basic materials	$	1,974,000	58.8	%
Financial services		516,000	11.1	%
Technology		372,000	15.4	%
REITs and real estate companies		162,000	4.7	%
Other		336,000	10.0	%
	$	3,360,000	100.0	%

As of June 30, 2013			% of Total
			Investment
Industry Group	Fair Value		Securities
Basic materials	$	1,513,000	45.5	%
Technology		622,000	18.7	%
Financial services		526,000	15.8	%
REITs and real estate companies		255,000	7.7	%
Other		408,000	12.3	%
	$	3,324,000	100.0	%

The Company’s investment portfolio is diversified with 36 different equity positions.The Company holds three equity securities that are comprised of more than 10% of the equity value of the portfolio.The largest security represents 49% of the portfolio and consists of the common stock of Comstock Mining, Inc. (“Comstock” - NYSE MKT: LODE) which is included in the basic materials industry group. The amount of the Company’s investment in any particular issuer may increase or decrease, and additions or deletions to its securities portfolio may occur, at any time.While it is the internal policy of the Company to limit its initial investment in any single equity to less than 10% of its total portfolio value, that investment could eventually exceed 10% as a result of equity appreciation or reduction of other positions.A significant percentage of the portfolio consists of common stock in Comstock that was obtained through dividend payments by Comstock on its 7.5% Series A-1 Convertible Preferred Stock.Marketable securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date.

FINANCIAL CONDITION AND LIQUIDITY

The Company’s cash flows are primarily generated from its Hotel operations, and general partner management fees and limited partnership distributions from Justice Investors (“the Partnership”). The Company also receives cash generated from the investment of its cash and marketable securities and other investments.

On December 18, 2013, Justice Investors completed its Offer to Redeem any and all limited partnership interests not held by Portsmouth Square, Inc.As a result, the Company is now the sole General Partner of Justice.

- 21 -

Justice has accepted tenders, for cash, of approximately 29.173% of the limited partnership interests outstanding prior to the Offer to Redeem, and payments to the holders of such interests, in the amount of $1,385,000 for each 1% tendered, are in the process of being distributed.In addition, Justice has accepted the election of holders of approximately 17.146% of the limited partnership interests outstanding prior to the Offer to Redeem to participate in the alternate redemption structure, which allows them to redeem their limited partnership interests at some time within the next 12 months for certain property or cash or a combination of property and cash.This amount totals $19,091,000 and is classified on the balance sheet as redemption payable.The related restricted cash is included on the balance sheet as part of the restricted cash balance totaling $19,091,000.The Company, which prior to the Offer to Redeem owned 50% of the then outstanding limited partnership interests, now owns approximately 93% of the limited partnership interests of Justice.

To fund redemption of limited partnership interests and to repay the prior mortgage,Justice obtained a $97,000,000 mortgage loan and a $20,000,000 mezzanine loan.

The mortgage loan are secured by the Partnership’s principal asset, the Hilton San Francisco-Financial District. The mortgage loan initially bears an interest rate of 5.28% per annum and matures in January 2024.As additional security for the mortgage loan, there is a limited guaranty executed by the Company in favor of mortgage lender.

The mezzanine loan is a secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan.The mezzanine loan initially bears interest at 9.75% per annum and matures in January 2024.As additional security for the mezzanine loan, there is a limited guaranty executed by the Company in favor of mezzanine lender.

The new Justice Compensation Agreement that became effective on December 1, 2008, when Portsmouth assumed the role of managing general partner of Justice, has provided additional cash flows to the Company. Under the new Compensation Agreement, Portsmouth is now entitled to 80% of the minimum base fee to be paid to the general partners of $285,000, while under the prior agreement, Portsmouth was entitled to receive only 20% of the minimum base fee. The general partner fees paid to Portsmouth for the six months ended December 31, 2013 and 2012 was $220,000 and $201,000, respectively.

Despite an uncertain economy, the Hotel has continued to generate positive cash flows. While the debt service requirements related the new loans,may create some additional risk for the Company and its ability to generate cash flows in the future, management believes that cash flows from the operations of the Hotel and the garage will continue to be sufficient to meet all of the Partnership’s current and future obligations and financial requirements. Management also believes that there is sufficient equity in the Hotel assets to support future borrowings, if necessary, to fund any new capital improvements and other requirements.

The Company has invested in short-term, income-producing instruments and in equity and debt securities when deemed appropriate.The Company's marketable securities are classified as trading with unrealized gains and losses recorded through the consolidated statements of operations.

Management believes that its cash, marketable securities, and the cash flows generated from those assets and from partnership distributions and management fees, will be adequate to meet the Company’s current and future obligations.

MATERIAL CONTRACTUAL OBLIGATIONS

The following table provides a summary as of December 31, 2013, the Company’s material financial obligations which also including interest payments.

- 22 -

			6 Months		Year		Year		Year		Year
	Total		2014		2015		2016		2017		2018		Thereafter
Mortgage and subordinated notes payable	$	117,000,000	$	-	$	-	$	-	$	584,000	$	1,462,000	$	114,954,000
Redemption payable	$	19,091,000	$	9,546,000	$	9,545,000	$	-	$	-	$	-	$	-
Other notes payable	$	731,000		297,000		291,000		45,000		51,000		47,000		-
Interest	$	159,208,000		3,675,000		7,331,000		7,316,000		7,207,000		6,993,000		126,686,000
Total	$	296,030,000	$	13,518,000	$	17,167,000	$	7,361,000	$	7,842,000	$	8,502,000	$	241,640,000

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no material off balance sheet arrangements.

IMPACT OF INFLATION

Hotel room rates are typically impacted by supply and demand factors, not inflation, since rental of a hotel room is usually for a limited number of nights.Room rates can be, and usually are, adjusted to account for inflationary cost increases.Since Prism has the power and ability under the terms of its management agreement to adjust hotel room rates on an ongoing basis, there should be minimal impact on partnership revenues due to inflation. Partnership revenues are also subject to interest rate risks, which may be influenced by inflation.For the two most recent fiscal years, the impact of inflation on the Company's income is not viewed by management as material.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Critical accounting policies are those that are most significant to the portrayal of our financial position and results of operations and require judgments by management in order to make estimates about the effect of matters that are inherently uncertain. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to the consolidation of our subsidiaries, to our revenues, allowances for bad debts, accruals, asset impairments, other investments, income taxes and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.There have been no material changes to the Company’s critical accounting policies during the six months December 31, 2013.Please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2013 for a summary of the critical accounting policies.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q.Based upon such evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in the Company’s internal control over financial reporting during the last quarterly period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 23 -

PART II.

OTHER INFORMATION

Item 6.Exhibits.

31.1Certification of Principal Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

31.2Certification of Principal Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

32.1Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		PORTSMOUTH SQUARE, INC.
		(Registrant)
Date: February 14, 2014	by	/s/ John V. Winfield
		John V. Winfield, President,
		Chairman of the Board and
		Chief Executive Officer
Date: February 14, 2014	by	/s/ Geoffrey M. Palermo
		Assistant Secretary
Date: February 14, 2014	by	/s/ David T. Nguyen
		David T. Nguyen, Treasurer
		and Controller

- 24 -

 

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, John V. Winfield, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Portsmouth Square, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2014

/s/ John V. Winfield

John V. Winfield

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, David T. Nguyen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Portsmouth Square, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 14, 2014

/s/ David T. Nguyen

David T. Nguyen

Treasurer and Controller

(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Portsmouth Square, Inc. (the "Company") on Form 10-Q for the quarterly period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John V. Winfield, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

· The Report fully complies with the requirements of Section 13(a) or 5(d) of the Securities Exchange Act of 1934; and

· The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John V. Winfield

John V. Winfield

President and Chief Executive Officer

(Principal Executive Officer)

Date: February 14, 2014

A signed original of this written statement required by Section 906 has been provided to Portsmouth Square, Inc. and will be retained by Portsmouth Square, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Portsmouth Square, Inc. (the "Company") on Form 10-Q for the quarterly period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David T. Nguyen, Treasurer and Controller of the Company, serving as its Principal Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

· The Report fully complies with the requirements of Section 13(a) or 5(d) of the Securities Exchange Act of 1934; and

· The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David T. Nguyen

David T. Nguyen

Treasurer and Controller

(Principal Financial Officer)

Date: February 14, 2014

A signed original of this written statement required by Section 906 has been provided to Portsmouth Square, Inc. and will be retained by Portsmouth Square, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

FAIR VALUE MEASUREMENTS (Details) (USD $)	Dec. 31, 2013	Jun. 30, 2013
Assets:
Investment in marketable securities	$ 3,360,000	$ 3,324,000
Fair Value, Measurements, Recurring [Member]
Assets:
Cash equivalents - money market		3,000
Other investments - warrants		3,000
Investment in marketable securities	3,360,000	3,324,000
Assets, Fair Value Disclosure		3,330,000
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Cash equivalents - money market		3,000
Other investments - warrants		0
Investment in marketable securities	3,360,000	3,324,000
Assets, Fair Value Disclosure		3,327,000
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Cash equivalents - money market		0
Other investments - warrants		0
Investment in marketable securities	0	0
Assets, Fair Value Disclosure		0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Cash equivalents - money market		0
Other investments - warrants		3,000
Investment in marketable securities	0	0
Assets, Fair Value Disclosure		3,000
Fair Value, Measurements, Recurring [Member] | Basic Materials [Member]
Assets:
Investment in marketable securities	1,974,000	1,513,000
Fair Value, Measurements, Recurring [Member] | Basic Materials [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Investment in marketable securities	1,974,000	1,513,000
Fair Value, Measurements, Recurring [Member] | Basic Materials [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Basic Materials [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Technology [Member]
Assets:
Investment in marketable securities	372,000	622,000
Fair Value, Measurements, Recurring [Member] | Technology [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Investment in marketable securities	372,000	622,000
Fair Value, Measurements, Recurring [Member] | Technology [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Technology [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Financial Services [Member]
Assets:
Investment in marketable securities	516,000	526,000
Fair Value, Measurements, Recurring [Member] | Financial Services [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Investment in marketable securities	516,000	526,000
Fair Value, Measurements, Recurring [Member] | Financial Services [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Financial Services [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | REIT'S and Real Estate Companies [Member]
Assets:
Investment in marketable securities	162,000	255,000
Fair Value, Measurements, Recurring [Member] | REIT'S and Real Estate Companies [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Investment in marketable securities	162,000	255,000
Fair Value, Measurements, Recurring [Member] | REIT'S and Real Estate Companies [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | REIT'S and Real Estate Companies [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Other1 [Member]
Assets:
Investment in marketable securities	336,000	408,000
Fair Value, Measurements, Recurring [Member] | Other1 [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Investment in marketable securities	336,000	408,000
Fair Value, Measurements, Recurring [Member] | Other1 [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Investment in marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Other1 [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Investment in marketable securities	$ 0	$ 0

XML

OTHER INVESTMENTS, NET

6 Months Ended

Dec. 31, 2013

Other Investment [Abstract]

Other Investments Disclosure [Text Block]

NOTE 4 – OTHER INVESTMENTS, NET

The Company may also invest, with the approval of the Securities Investment Committee and other Company guidelines, in private investment equity funds and other unlisted securities, such as convertible notes through private placements. Those investments in non-marketable securities are carried at cost on the Company’s balance sheet as part of other investments, net of other than temporary impairment losses.

Other investments, net consist of the following:

Type	December 31, 2013		June 30, 2013
Preferred stock - Comstock, at cost	$	4,410,000	$	4,410,000
Private equity hedge fund, at cost		646,000		646,000
Corporate debt and equity instruments, at cost		101,000		101,000
Warrants - at fair value		-		3,000
	$	5,157,000	$	5,160,000

XML

RELATED PARTY TRANSACTIONS (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Related Party Transaction [Line Items]
Costs and Expenses, Related Party	$ 18,000	$ 18,000	$ 36,000	$ 36,000
Justice [Member]
Related Party Transaction [Line Items]
Management Fees Revenue	108,000	89,000	220,000	201,000
Payments to Acquire Limited Partnership Interests			$ 1,550,000

XML

SEGMENT INFORMATION (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013
Segment Reporting Information [Line Items]
Revenues	$ 12,274,000	$ 10,970,000	$ 25,579,000	$ 23,106,000
Segment operating expenses	(18,046,000)	(9,569,000)	(27,747,000)	(18,902,000)
Segment income (loss)	(5,772,000)	1,401,000	(2,168,000)	4,204,000
Interest expense - mortgage	(767,000)	(660,000)	(1,402,000)	(1,324,000)
Interest expense - occupancy tax	(328,000)	0	(328,000)	0
Loss on extinguishment of debt	(3,910,000)	0	(3,910,000)	0
Loss on disposal of assets	(1,092,000)	0	(1,092,000)	0
Depreciation and amortization expense	(698,000)	(568,000)	(1,298,000)	(1,126,000)
Income from investments	221,000	(648,000)	252,000	(286,000)
Income tax benefit	2,732,000	165,000	2,261,000	(159,000)
Net income (loss)	(9,614,000)	(310,000)	(7,685,000)	1,309,000
Total assets	75,706,000	50,624,000	75,706,000	50,624,000	51,327,000
Hotel [Member]
Segment Reporting Information [Line Items]
Revenues	12,274,000	10,970,000	25,579,000	23,106,000
Segment operating expenses	(17,872,000)	(9,398,000)	(27,404,000)	(18,562,000)
Segment income (loss)	(5,598,000)	1,572,000	(1,825,000)	4,544,000
Interest expense - mortgage	(767,000)	(660,000)	(1,402,000)	(1,324,000)
Interest expense - occupancy tax	(328,000)		(328,000)
Loss on extinguishment of debt	(3,910,000)		(3,910,000)
Loss on disposal of assets	(1,092,000)		(1,092,000)
Depreciation and amortization expense	(698,000)	(568,000)	(1,298,000)	(1,126,000)
Income from investments	0	0	0	0
Income tax benefit	0	0	0	0
Net income (loss)	(12,393,000)	344,000	(9,855,000)	2,094,000
Total assets	33,219,000	33,073,000	33,219,000	33,073,000
Investment Transactions [Member]
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Segment operating expenses	0	0	0	0
Segment income (loss)	0	0	0	0
Interest expense - mortgage	0	0	0	0
Interest expense - occupancy tax	0		0
Loss on extinguishment of debt	0		0
Loss on disposal of assets	0		0
Depreciation and amortization expense	0	0	0	0
Income from investments	221,000	(648,000)	252,000	(286,000)
Income tax benefit	0	0	0	0
Net income (loss)	221,000	(648,000)	252,000	(286,000)
Total assets	8,517,000	7,805,000	8,517,000	7,805,000
Other Property [Member]
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Segment operating expenses	(174,000)	(171,000)	(343,000)	(340,000)
Segment income (loss)	(174,000)	(171,000)	(343,000)	(340,000)
Interest expense - mortgage	0	0	0	0
Interest expense - occupancy tax	0		0
Loss on extinguishment of debt	0		0
Loss on disposal of assets	0		0
Depreciation and amortization expense	0	0	0	0
Income from investments	0	0	0	0
Income tax benefit	2,732,000	165,000	2,261,000	(159,000)
Net income (loss)	2,558,000	(6,000)	1,918,000	(499,000)
Total assets	$ 33,970,000	$ 9,746,000	$ 33,970,000	$ 9,746,000

XML

INVESTMENT IN MARKETABLE SECURITIES

6 Months Ended

Dec. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 3 - INVESTMENT IN MARKETABLE SECURITIES

The Company’s investment in marketable securities consists primarily of corporate equities. The Company has also invested in corporate bonds and income producing securities, which may include interests in real estate based companies and REITs, where financial benefit could insure to its shareholders through income and/or capital gain.

At December 31, 2013 and June 30, 2013, all of the Company’s marketable securities are classified as trading securities. The change in the unrealized gains and losses on these investments are included in earnings. Trading securities are summarized as follows:

			Gross		Gross		Net		Fair
Investment	Cost		Unrealized Gain		Unrealized Loss		Unrealized Gain		Value
As of December 31, 2013
Corporate
Equities	$	2,850,000	$	1,178,000	$	(668,000)	$	510,000	$	3,360,000
As of June 30, 2013
Corporate
Equities	$	3,104,000	$	992,000	$	(772,000)	$	220,000	$	3,324,000

As of December 31, 2013 and June 30, 2013, the Company had $621,000 and $637,000, respectively, of unrealized losses related to securities held for over one year.

Net gain (loss) on marketable securities on the statement of operations is comprised of realized and unrealized gains (losses). Below is the composition of the two components for the three and six months December 31, 2013 and 2012, respectively.

For the three months ended December 31,	2013		2012
Realized gain on marketable securities	$	78,000	$	1,000
Unrealized gain (loss) on marketable securities		36,000		(738,000)
Net gain (loss) on marketable securities	$	114,000	$	(737,000)

For the six months ended December 31,	2013		2012
Realized gain on marketable securities	$	6,000	$	24,000
Unrealized gain (loss) on marketable securities		201,000		(267,000)
Net gain (loss) on marketable securities	$	207,000	$	(243,000)

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2013	Jun. 30, 2013
ASSETS
Investment in hotel, net	$ 33,219,000	$ 34,048,000
Investment in real estate	973,000	973,000
Investment in marketable securities	3,360,000	3,324,000
Other investments, net	5,157,000	5,160,000
Cash and cash equivalents	2,426,000	668,000
Restricted cash - redemption	19,091,000	0
Restricted cash - mortgage impounds	852,000	0
Accounts receivable, net	1,580,000	1,957,000
Other assets, net	3,594,000	2,004,000
Deferred tax asset	5,454,000	3,193,000
Total assets	75,706,000	51,327,000
Liabilities:
Accounts payable and other liabilities	13,884,000	9,176,000
Redemption payable	19,091,000	0
Due to securities broker	286,000	579,000
Obligations for securities sold	518,000	531,000
Other notes payable	731,000	1,595,000
Mortgage and subordinated notes payable	117,000,000	43,413,000
Total liabilities	151,510,000	55,294,000
Commitments and contingencies
Shareholders' deficit:
Common stock, no par value: Authorized shares - 750,000; 734,183 shares issued and outstanding	2,092,000	2,092,000
Additional paid-in-capital	0	916,000
Retained earnings (accumulated deficit)	(71,750,000)	574,000
Total Portsmouth shareholders' (deficit) equity	(69,658,000)	3,582,000
Noncontrolling interest	(6,146,000)	(7,549,000)
Total shareholders' deficit	(75,804,000)	(3,967,000)
Total liabilities and shareholders' deficit	$ 75,706,000	$ 51,327,000

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated financial statements included herein have been prepared by Portsmouth Square, Inc. (“Portsmouth” or the “Company”), without audit, according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures that are made are adequate to make the information presented not misleading. Further, the condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which included only normal recurring adjustments) necessary for a fair statement of the financial position, cash flows and results of operations as of and for the periods indicated. It is suggested that these financial statements be read in conjunction with the audited financial statements of Portsmouth and the notes therein included in the Company's Annual Report on Form 10-K for the year ended June 30, 2013. The June 30, 2013 Condensed Consolidated Balance Sheet was derived from the Company’s Form 10-K for the year ended June 30, 2013.

The results of operations for the three and six months ended December 31, 2013 are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2014.

For the three and six months ended December 31, 2013 and 2012, the Company had no components of comprehensive income other than net income itself.

OWNERSHIP AND PROPERTIES

As of December 31, 2013, Santa Fe Financial Corporation (“Santa Fe”), a public company, owns approximately 68.8% of the outstanding common shares of Portsmouth Square, Inc. (“Portsmouth” or the “Company”). Santa Fe is an 80.5%-owned subsidiary of The InterGroup Corporation (“InterGroup”), a public company. InterGroup also directly owns approximately 12.9% of the common stock of Portsmouth.

Portsmouth’s primary business is conducted through its general and limited partnership interest in Justice Investors, a California limited partnership (“Justice” or the “Partnership”). Portsmouth has a 93% limited partnership interest in Justice and is the sole general partner. The financial statements of Justice are consolidated with those of the Company.

Justice owns a 543-room hotel property located at 750 Kearny Street, San Francisco California, known as the Hilton San Francisco Financial District (the Hotel) and related facilities including a five level underground parking garage. The Hotel is operated by the partnership as a full service Hilton brand hotel pursuant to a Franchise License Agreement with Hilton Hotels Corporation. Justice also has a Management Agreement with Prism Hospitality L.P. (Prism) to perform the day-to-day management functions of the Hotel. The parking garage that is part of the Hotel property is managed by Ace Parking pursuant to a contract with the Partnership.

Portsmouth also receives management fees as a general partner of Justice for its services in overseeing and managing the Partnership’s assets. Those fees are eliminated in consolidation.

Basic income (loss) per share is calculated based upon the weighted average number of common shares outstanding during each period. During the three and six months December 31, 2013 and 2012, the Company did not have any potentially dilutive securities outstanding.

JUSTICE PARTNERSHIP REDEMPTION AND RESTRUCTURING

On December 18, 2013, Justice Investors, a California limited partnership (“Justice” or the “Partnership”), completed its Offer to Redeem any and all limited partnership interests not held by Portsmouth Square, Inc. (the “Company”), and the Loan Agreements, as defined in below. In addition, the requisite approval of amendments to its Amended and Restated Agreement of Limited Partnership became effective upon the completion of the Offer to Redeem and the consummation of the Loan Agreements. Such amendments are described in below. As a result, the Company is now the sole General Partner of Justice and controls 93% of Justice.

Justice has accepted tenders, for cash, of approximately 29.173% of the limited partnership interests outstanding prior to the Offer to Redeem, and payments to the holders of such interests, in the amount of $1,385,000 for each 1% tendered, are in the process of being distributed. In addition, Justice has accepted the election of holders of approximately 17.146% of the limited partnership interests outstanding prior to the Offer to Redeem to participate in the alternate redemption structure, which allows them to redeem their limited partnership interests at some time within the next 12 months for certain property or cash or a combination of property and cash. The current and deferred payments to holders or limited partnership interests are classified as restricted cash and, together with the expenses discussed below, totals $19,091,000 and is classified on the balance sheet as redemption payable. The Company, which prior to the Offer to Redeem owned 50% of the then outstanding limited partnership interests, now owns approximately 93% of the limited partnership interests of Justice.

Justice incurred approximately $7,295,000 in hotel restructuring costs relating to the Offer to Redeem and related financing transactions, including a one-time management fee of $1,550,000, approximately $745,000 in legal, accounting and other professional expenses, and a Documentary Transfer Tax fee of approximately $5 million paid to the City of San Francisco.  The Documentary Transfer Tax fee was assessed as a condition to recording the transfer of Justice Investors' principal asset to a subsidiary to consummate the redemption.  While Justice believes the assessment of the Documentary Transfer tax was inappropriate, the tax was paid, under protest, on advice of Justice’s counsel to allow for the consummation of the redemption.  Justice intends to challenge the calculation of the tax.  No prediction can be made as to whether the tax will be upheld, or whether any portion of the tax will be refunded. Justice allocated a portion of the Documentary Transfer Tax to certain former limited partners of Justice Investors as a cost of the transaction. Certain of these limited partners have objected to the allocation, and Justice and the limited partners are pursuing non-binding mediation in an attempt to resolve the dispute.  No prediction can be given as to the outcome of the dispute.

Justice utilized the book value method to record the redemption of the limited partners. Under book value (bonus) method the remaining partners continue the existing partnership, recording no changes to the book values of the partnership's assets and liabilities. As a result, any revaluation of the existing partnership's assets or liabilities that might be undertaken is solely to determine the settlement price to the outgoing partner. The partner's withdrawal from the partnership is recorded by adjusting the remaining partners' capital accounts with the amount of the bonus, which is allocated according to their income-sharing ratio. The amount of adjustment is equal to the difference between the settlement price paid to the withdrawing partner and the book value of his share of total partnership capital at the time he withdraws. Justice Partner’s capital was reduced by approximately $64.1 million for the redemption.

In connection with the Offer to Redeem, Justice retired existing debt and replaced it with lower-yielding loans, the proceeds of which were used to fund the Offer to Redeem and to provide for additional working capital for the Hotel.  Justice incurred a loss on the extinguishment of debt of $3,910,000 which included a yield maintenance (prepayment penalty) expense of $3,808,000 and a write-off of capitalized loan costs on the refinanced debt of approximately $102,000.

The City of San Francisco’s Tax Collector’s office has claimed that Justice owes the City of San Francisco $2.1 million based on the Tax Collector’s interpretation of the San Francisco Business and Tax Regulations Code relating to Transient Occupancy Tax and Tourist Improvement District Assessment. This amount exceeds Justice’s estimate of the taxes owed, and Justice has disputed the claim and is seeking to discharge all penalties and interest charges imposed by the Tax Collector.  No prediction can be given at this time as to the outcome of this dispute. 

In December 2013, Justice determined to substantially demolish the Hotel’s ground-level Spa (with the exception of the ceilings and certain mechanical systems) to build out additional meeting rooms, a technology lounge and re-locate Hotel offices. Justice believes this will result in a greater guest experience and increases in operating revenues. Justice recorded a loss of approximately $738,000 as a disposal of assets on the closure of the Hotel’s Spa on the lobby level.

Justice Loan Agreements

On December 18, 2013: (i) Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); and (ii) Justice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”). Justice is the sole member of Mezzanine, and Mezzanine is the sole member of Operating.

The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan. The proceeds of the Loan Agreements were used to fund the redemption of limited partnership interests described above and the pay-off of the prior mortgage.

The Mortgage Loan is secured by the Partnership’s principal asset, the Hilton San Francisco-Financial District (the “Property”). The Mortgage Loan initially bears an interest rate of 5.28% per annum and matures in January 2024. The term of the loan is 10 years with interest only due in the first three years and principle and interest on the remaining seven years of the loan. The Mortgage Loan also requires payments for impounds related to property tax, insurance and capital improvement reserves. As additional security for the Mortgage Loan, there is a limited guaranty (“Mortgage Guaranty”) executed by the Company in favor of Mortgage Lender.

The Mezzanine Loan is a secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The Mezzanine Loan initially bears interest at 9.75% per annum and matures in January, 2024. Interest only is payable monthly. As additional security for the Mezzanine Loan, there is a limited guaranty executed by the Company in favor of Mezzanine Lender (the “Mezzanine Guaranty” and, together with the Mortgage Guaranty, the “Guaranties”).

The Guaranties are limited to what are commonly referred to as “bad boy” acts, including: (i) fraud or intentional misrepresentations; (ii) gross negligence or willful misconduct; (iii) misapplication or misappropriation of rents, security deposits, insurance or condemnation proceeds; and (iv) failure to pay taxes or insurance. The Guaranties will be full recourse guaranties under identified circumstances, including failure to maintain “single purpose” status, transfer of the Property in violation of the applicable loan documents and the Property becoming subject to a bankruptcy proceeding. Pursuant to the Guaranties, the Company is required to maintain a certain minimum net worth and liquidity. As of December 31, 2013, the Company is in compliance with both requirements.

Each of the Loan Agreements contains customary representations and warranties, events of default, reporting requirements, affirmative covenants and negative covenants, which impose restrictions on, among other things, organizational changes of the respective borrower, operations of the Property, agreements with affiliates and third parties. Each of the Loan Agreements also provides for mandatory prepayments under certain circumstances (including casualty or condemnation events) and voluntary prepayments, subject to satisfaction of prescribed conditions set forth in the Loan Agreements.

Limited Partnership Agreement Amendments

In conjunction with the Offer to Redeem, the Partnership solicited and obtained consents from holders of the requisite limited partnership interests to amendments to the Justice Amended and Restated Agreement of Limited Partnership, which became effective upon the completion of the Offer to Redeem and the consummation of the Loan Agreements. The amendments included the following changes to the Justice Amended and Restated Agreement of Limited Partnership:

· Providing for a single general partner;

· Providing for Class B limited partnership interests, which, if issued, would represent interests in the Partnership; and

· Permitting the General Partner to admit additional limited partners, subject to certain restrictions.

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INVESTMENT IN MARKETABLE SECURITIES (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Schedule of Trading Securities and Other Trading Assets [Line Items]
Realized gain on marketable securities	$ 78,000	$ 1,000	$ 6,000	$ 24,000
Unrealized gain (loss) on marketable securities	36,000	(738,000)	201,000	(267,000)
Net gain (loss) on marketable securities	$ 114,000	$ (737,000)	$ 207,000	$ (243,000)

XML

OTHER INVESTMENTS, NET (Details) (USD $)	Dec. 31, 2013	Jun. 30, 2013
Other Investments [Line Items]
Other investments, net	$ 5,157,000	$ 5,160,000
Preferred Stock - Comstock, At Cost [Member]
Other Investments [Line Items]
Other investments, net	4,410,000	4,410,000
Private Equity Hedge Fund At Cost [Member]
Other Investments [Line Items]
Other investments, net	646,000	646,000
Corporate Debt and Equity Instruments At Cost [Member]
Other Investments [Line Items]
Other investments, net	101,000	101,000
Warrants - at fair value [Member]
Other Investments [Line Items]
Other investments, net	$ 0	$ 3,000

XML

INVESTMENT IN HOTEL, NET

6 Months Ended

Dec. 31, 2013

Real Estate [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

NOTE 2 – INVESTMENT IN HOTEL, NET

Investment in hotel consisted of the following as of:

			Accumulated		Net Book
December 31, 2013	Cost		Depreciation		Value
Land	$	1,124,000	$	-	$	1,124,000
Furniture and equipment		22,162,000		(21,296,000)		866,000
Building and improvements		50,710,000		(19,481,000)		31,229,000
	$	73,996,000	$	(40,777,000)	$	33,219,000

			Accumulated		Net Book
June 30, 2013	Cost		Depreciation		Value
Land	$	1,124,000	$	-	$	1,124,000
Furniture and equipment		22,270,000		(19,312,000)		2,958,000
Building and improvements		50,473,000		(20,507,000)		29,966,000
	$	73,867,000	$	(39,819,000)	$	34,048,000

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CONDENSED CONSOLIDATED BALANCE SHEETS [PARENTHETICAL]	Dec. 31, 2013	Jun. 30, 2013
Common stock, shares authorized	750,000	750,000
Common stock, shares issued	734,183	734,183
Common stock , shares outstanding	734,183	734,183

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

The assets measured at fair value on a recurring basis are as follows:

As of December 31, 2013
Assets:	Level 1		Level 2		Level 3		Total
Investment in marketable securities:
Basic materials	$	1,974,000	$	-	$	-	$	1,974,000
Financial services		516,000		-		-		516,000
Technology		372,000		-		-		372,000
REITs and real estate companies		162,000		-		-		162,000
Other		336,000		-		-		336,000
	$	3,360,000	$	-	$	-	$	3,360,000

As of June 30, 2013
Assets:	Level 1		Level 2		Level 3		Total
Cash equivalents - money market	$	3,000	$	-	$	-	$	3,000
Other investments - warrants		-		-		3,000		3,000
Investment in marketable securities:
Basic materials		1,513,000		-		-		1,513,000
Technology		622,000		-		-		622,000
Financial services		526,000		-		-		526,000
REITs and real estate companies		255,000		-		-		255,000
Other		408,000		-		-		408,000
		3,324,000		-		-		3,324,000
	$	3,327,000	$	-	$	3,000	$	3,330,000

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Table Text Block]

The following table shows the fair value hierarchy for these assets measured at fair value on a non-recurring basis as follows:

									Net loss for the six months
Assets	Level 1		Level 2		Level 3		December 31, 2013		ended December 31, 2013
Other non-marketable investments	$	-	$	-	$	5,157,000	$	5,157,000	$	-

									Net loss for the six months
Assets	Level 1		Level 2		Level 3		June 30, 2013		ended December 31, 2012
Other non-marketable investments	$	-	$	-	$	5,157,000	$	5,157,000	$	-

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Document And Entity Information	6 Months Ended
	Dec. 31, 2013	Feb. 03, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	PRSI
Entity Common Stock, Shares Outstanding		734,183
Entity Registrant Name	PORTSMOUTH SQUARE INC
Entity Central Index Key	0000079661
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company

XML

SEGMENT INFORMATION (Tables)

6 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Information below represents reporting segments for the three and six months December 31, 2013 and 2012, respectively. Operating income from Hotel operations consists of the operation of the hotel and operation of the garage. Operating income for investment transactions consist of net investment income and dividend and interest income.

As of and for the three months	Hotel		Investment
ended December 31, 2013	Operations		Transactions		Other		Total
Revenues	$	12,274,000	$	-	$	-	$	12,274,000
Segment operating expenses		(17,872,000)		-		(174,000)		(18,046,000)
Segment loss		(5,598,000)		-		(174,000)		(5,772,000)
Interest expense - mortgage		(767,000)		-		-		(767,000)
Interest expense - occupancy tax		(328,000)		-		-		(328,000)
Loss on extinguishment of debt		(3,910,000)		-		-		(3,910,000)
Loss on disposal of assets		(1,092,000)		-		-		(1,092,000)
Depreciation and amortization expense		(698,000)		-		-		(698,000)
Income from investments		-		221,000		-		221,000
Income tax benefit		-		-		2,732,000		2,732,000
Net income (loss)	$	(12,393,000)	$	221,000	$	2,558,000	$	(9,614,000)
Total assets	$	33,219,000	$	8,517,000	$	33,970,000	$	75,706,000
As of and for the three months	Hotel		Investment
ended December 31, 2012	Operations		Transactions		Other		Total
Revenues	$	10,970,000	$	-	$	-	$	10,970,000
Segment operating expenses		(9,398,000)		-		(171,000)		(9,569,000)
Segment income (loss)		1,572,000		-		(171,000)		1,401,000
Interest expense - mortgage		(660,000)		-		-		(660,000)
Depreciation and amortization expense		(568,000)		-		-		(568,000)
Loss from investments		-		(648,000)		-		(648,000)
Income tax benefit		-		-		165,000		165,000
Net income (loss)	$	344,000	$	(648,000)	$	(6,000)	$	(310,000)
Total assets	$	33,073,000	$	7,805,000	$	9,746,000	$	50,624,000

 

As of and for the six months	Hotel		Investment
ended December 31, 2013	Operations		Transactions		Other		Total
Revenues	$	25,579,000	$	-	$	-	$	25,579,000
Segment operating expenses		(27,404,000)		-		(343,000)		(27,747,000)
Segment loss		(1,825,000)		-		(343,000)		(2,168,000)
Interest expense - mortgage		(1,402,000)		-		-		(1,402,000)
Interest expense - occupancy tax		(328,000)		-		-		(328,000)
Loss on extinguishment of debt		(3,910,000)		-		-		(3,910,000)
Loss on disposal of assets		(1,092,000)		-		-		(1,092,000)
Depreciation and amortization expense		(1,298,000)		-		-		(1,298,000)
Income from investments		-		252,000		-		252,000
Income tax benefit		-		-		2,261,000		2,261,000
Net income (loss)	$	(9,855,000)	$	252,000	$	1,918,000	$	(7,685,000)
Total assets	$	33,219,000	$	8,517,000	$	33,970,000	$	75,706,000
As of and for the six months	Hotel		Investment
ended December 31, 2012	Operations		Transactions		Other		Total
Revenues	$	23,106,000	$	-	$	-	$	23,106,000
Segment operating expenses		(18,562,000)		-		(340,000)		(18,902,000)
Segment income (loss)		4,544,000		-		(340,000)		4,204,000
Interest expense		(1,324,000)		-		-		(1,324,000)
Depreciation and amortization expense		(1,126,000)		-		-		(1,126,000)
Loss from investments		-		(286,000)		-		(286,000)
Income tax expense		-		-		(159,000)		(159,000)
Net income (loss)	$	2,094,000	$	(286,000)	$	(499,000)	$	1,309,000
Total assets	$	33,073,000	$	7,805,000	$	9,746,000	$	50,624,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Revenue - Hotel	$ 12,274,000	$ 10,970,000	$ 25,579,000	$ 23,106,000
Costs and operating expenses
Hotel operating expenses	(9,493,000)	(9,398,000)	(19,025,000)	(18,562,000)
Hotel restructuring costs	(7,295,000)	0	(7,295,000)	0
Hotel occupancy tax - penalty fees	(1,084,000)	0	(1,084,000)	0
Hotel depreciation and amortization expense	(698,000)	(568,000)	(1,298,000)	(1,126,000)
General and administrative expense	(174,000)	(171,000)	(343,000)	(340,000)
Total costs and operating expenses	(18,744,000)	(10,137,000)	(29,045,000)	(20,028,000)
Income (loss) from operations	(6,470,000)	833,000	(3,466,000)	3,078,000
Other income (expense)
Interest expense - mortgage	(767,000)	(660,000)	(1,402,000)	(1,324,000)
Interest expense - occupancy tax	(328,000)	0	(328,000)	0
Loss on extinguishment of debt	(3,910,000)	0	(3,910,000)	0
Loss on disposal of assets	(1,092,000)	0	(1,092,000)	0
Net gain (loss) on marketable securities	114,000	(737,000)	207,000	(243,000)
Net unrealized loss on other investments	(3,000)	(27,000)	(3,000)	(112,000)
Dividend and interest income	167,000	171,000	171,000	178,000
Trading and margin interest expense	(57,000)	(55,000)	(123,000)	(109,000)
Other expense, net	(5,876,000)	(1,308,000)	(6,480,000)	(1,610,000)
Income (loss) before income taxes	(12,346,000)	(475,000)	(9,946,000)	1,468,000
Income tax benefit (expense)	2,732,000	165,000	2,261,000	(159,000)
Net (loss) income	(9,614,000)	(310,000)	(7,685,000)	1,309,000
Less: Net loss (income) attributable to the noncontrolling interest	955,000	(127,000)	(257,000)	(944,000)
Net (loss) income attributable to Portsmouth	$ (8,659,000)	$ (437,000)	$ (7,942,000)	$ 365,000
Basic and diluted net (loss) income per share attributable to Portsmouth (in dollars per share)	$ (11.79)	$ (0.60)	$ (10.82)	$ 0.50
Weighted average number of common shares outstanding - basic and diluted (in shares)	734,183	734,183	734,183	734,183

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RELATED PARTY TRANSACTIONS

6 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 7 - RELATED PARTY TRANSACTIONS

Certain shared costs and expenses, primarily administrative expenses, rent and insurance are allocated among the Company, the Company’s parent, Santa Fe and InterGroup, the parent of Santa Fe, based on management's estimate of the pro rata utilization of resources. For the three months ended December 31, 2013 and 2012, these expenses were approximately $18,000 for each respective period. For the six months ended December 31, 2013 and 2012, these expenses were approximately $36,000 for each respective period.

During the three months ended December 31, 2013 and 2012, the Company received management fees from Justice Investors totaling $108,000 and $89,000, respectively. During the six months ended December 31, 2013 and 2012, the Company received management fees from Justice Investors totaling $220,000 and $201,000, respectively. These amounts were eliminated in consolidation.

In connection with the redemption of limited partnership interests of Justice Investors, Limited Partnership described in Note 1 above, Justice Operating Company, LLC agreed to pay a total of $1,550,000 in fees to certain officers and directors of the Company for services rendered in connection with the redemption of partnership interests, refinancing of Justice’s properties and reorganization of Justice Investors. This agreement was superseded by a letter dated December 11, 2013 from Justice Investors, Limited Partnership, in which Justice Investors Limited Partnership assumed the payment obligations of Justice Operating Company, LLC. The first payment under this agreement was made concurrently with the closing of the loan agreements described in Note 1 above, with the remaining payments due upon Justice Investor’s having adequate available cash as described in the letter.

Four of the Portsmouth directors serve as directors of Intergroup. Three of those directors also serve as directors of Santa Fe. The three Santa Fe directors also serve as directors of InterGroup.

John V. Winfield serves as Chief Executive Officer and Chairman of the Company, Santa Fe, and InterGroup. Depending on certain market conditions and various risk factors, the Chief Executive Officer, his family, Santa Fe and InterGroup may, at times, invest in the same companies in which the Company invests. The Company encourages such investments because it places personal resources of the Chief Executive Officer and his family members, and the resources of Santa Fe and InterGroup, at risk in connection with investment decisions made on behalf of the Company.

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SEGMENT INFORMATION

6 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

NOTE 6 - SEGMENT INFORMATION

The Company operates in two reportable segments, the operation of the hotel (“Hotel Operations”) and the investment of its cash in marketable securities and other investments (“Investment Transactions”). These two operating segments, as presented in the consolidated financial statements, reflect how management internally reviews each segment’s performance. Management also makes operational and strategic decisions based on this same information.

Information below represents reporting segments for the three and six months December 31, 2013 and 2012, respectively. Operating income from Hotel operations consists of the operation of the hotel and operation of the garage. Operating income for investment transactions consist of net investment income and dividend and interest income.

As of and for the three months	Hotel		Investment
ended December 31, 2013	Operations		Transactions		Other		Total
Revenues	$	12,274,000	$	-	$	-	$	12,274,000
Segment operating expenses		(17,872,000)		-		(174,000)		(18,046,000)
Segment loss		(5,598,000)		-		(174,000)		(5,772,000)
Interest expense - mortgage		(767,000)		-		-		(767,000)
Interest expense - occupancy tax		(328,000)		-		-		(328,000)
Loss on extinguishment of debt		(3,910,000)		-		-		(3,910,000)
Loss on disposal of assets		(1,092,000)		-		-		(1,092,000)
Depreciation and amortization expense		(698,000)		-		-		(698,000)
Income from investments		-		221,000		-		221,000
Income tax benefit		-		-		2,732,000		2,732,000
Net income (loss)	$	(12,393,000)	$	221,000	$	2,558,000	$	(9,614,000)
Total assets	$	33,219,000	$	8,517,000	$	33,970,000	$	75,706,000
As of and for the three months	Hotel		Investment
ended December 31, 2012	Operations		Transactions		Other		Total
Revenues	$	10,970,000	$	-	$	-	$	10,970,000
Segment operating expenses		(9,398,000)		-		(171,000)		(9,569,000)
Segment income (loss)		1,572,000		-		(171,000)		1,401,000
Interest expense - mortgage		(660,000)		-		-		(660,000)
Depreciation and amortization expense		(568,000)		-		-		(568,000)
Loss from investments		-		(648,000)		-		(648,000)
Income tax benefit		-		-		165,000		165,000
Net income (loss)	$	344,000	$	(648,000)	$	(6,000)	$	(310,000)
Total assets	$	33,073,000	$	7,805,000	$	9,746,000	$	50,624,000

 

As of and for the six months	Hotel		Investment
ended December 31, 2013	Operations		Transactions		Other		Total
Revenues	$	25,579,000	$	-	$	-	$	25,579,000
Segment operating expenses		(27,404,000)		-		(343,000)		(27,747,000)
Segment loss		(1,825,000)		-		(343,000)		(2,168,000)
Interest expense - mortgage		(1,402,000)		-		-		(1,402,000)
Interest expense - occupancy tax		(328,000)		-		-		(328,000)
Loss on extinguishment of debt		(3,910,000)		-		-		(3,910,000)
Loss on disposal of assets		(1,092,000)		-		-		(1,092,000)
Depreciation and amortization expense		(1,298,000)		-		-		(1,298,000)
Income from investments		-		252,000		-		252,000
Income tax benefit		-		-		2,261,000		2,261,000
Net income (loss)	$	(9,855,000)	$	252,000	$	1,918,000	$	(7,685,000)
Total assets	$	33,219,000	$	8,517,000	$	33,970,000	$	75,706,000
As of and for the six months	Hotel		Investment
ended December 31, 2012	Operations		Transactions		Other		Total
Revenues	$	23,106,000	$	-	$	-	$	23,106,000
Segment operating expenses		(18,562,000)		-		(340,000)		(18,902,000)
Segment income (loss)		4,544,000		-		(340,000)		4,204,000
Interest expense		(1,324,000)		-		-		(1,324,000)
Depreciation and amortization expense		(1,126,000)		-		-		(1,126,000)
Loss from investments		-		(286,000)		-		(286,000)
Income tax expense		-		-		(159,000)		(159,000)
Net income (loss)	$	2,094,000	$	(286,000)	$	(499,000)	$	1,309,000
Total assets	$	33,073,000	$	7,805,000	$	9,746,000	$	50,624,000

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INVESTMENT IN MARKETABLE SECURITIES (Details Textual) (USD $)	6 Months Ended	12 Months Ended
	Dec. 31, 2013	Jun. 30, 2013
Schedule of Trading Securities and Other Trading Assets [Line Items]
Trading Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	$ 621,000	$ 637,000

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013
Basis Of Presentation And Significant Accounting Policies [Line Items]
Percentage Of Limited Partnership Interests Redeemed	29.173%		29.173%
Payments For Redemption of Each One Percent Limited Partnership Interest	$ 1,385,000		$ 1,385,000
Alternate Redemption Structure, Approximate Percentage Of Limited Partnership Interest Holders Allowed	17.146%		17.146%
Redemption Payable	19,091,000		19,091,000		0
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest			93.00%
Restructuring Costs, Total	7,295,000	0	7,295,000	0
Management Fee Expense			1,550,000
Professional Fees			745,000
Documentary Transfer Tax Fee	5,000,000		5,000,000
Hotel loss on extinguishment of debt	3,910,000	0	3,910,000	0
Prepayment Penalty Expenses			3,808,000
Write off of Deferred Debt Issuance Cost			102,000
Gain (Loss) on Disposition of Assets for Financial Service Operations			738,000
Mezzanine Loan [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Proceeds from Loan Originations			20,000,000
Short-term Debt, Percentage Bearing Fixed Interest Rate	9.75%		9.75%
Conventional Mortgage Loan [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Proceeds from Loan Originations			97,000,000
Short-term Debt, Percentage Bearing Fixed Interest Rate	5.28%		5.28%
Debt Instrument, Maturity Date, Description			The term of the loan is 10 years with interest only due in the first three years and principle and interest on the remaining seven years of the loan.
Inter Group Corporation [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	68.80%		68.80%
Portsmouth [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Business Acquisition, Percentage of Voting Interests Acquired	12.90%		12.90%
Justice Investors [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest			93.00%
Reduction In Capital Due To Redemption	64,100,000		64,100,000
Justice Investors [Member] | Prior To Redeemption [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest			50.00%
Hotel [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Hotel loss on extinguishment of debt	3,910,000		3,910,000
City of San Francisco [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Deferred Tax Liabilities, Net	$ 2,100,000		$ 2,100,000

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INVESTMENT IN MARKETABLE SECURITIES (Tables)

6 Months Ended

Dec. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Marketable Securities [Table Text Block]

The change in the unrealized gains and losses on these investments are included in earnings. Trading securities are summarized as follows:

			Gross		Gross		Net		Fair
Investment	Cost		Unrealized Gain		Unrealized Loss		Unrealized Gain		Value
As of December 31, 2013
Corporate
Equities	$	2,850,000	$	1,178,000	$	(668,000)	$	510,000	$	3,360,000
As of June 30, 2013
Corporate
Equities	$	3,104,000	$	992,000	$	(772,000)	$	220,000	$	3,324,000

Gain (Loss) on Investments [Table Text Block]

Below is the composition of the two components for the three and six months December 31, 2013 and 2012, respectively.

For the three months ended December 31,	2013		2012
Realized gain on marketable securities	$	78,000	$	1,000
Unrealized gain (loss) on marketable securities		36,000		(738,000)
Net gain (loss) on marketable securities	$	114,000	$	(737,000)

For the six months ended December 31,	2013		2012
Realized gain on marketable securities	$	6,000	$	24,000
Unrealized gain (loss) on marketable securities		201,000		(267,000)
Net gain (loss) on marketable securities	$	207,000	$	(243,000)

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Justice ownership and properties [Policy Text Block]

OWNERSHIP AND PROPERTIES

As of December 31, 2013, Santa Fe Financial Corporation (“Santa Fe”), a public company, owns approximately 68.8% of the outstanding common shares of Portsmouth Square, Inc. (“Portsmouth” or the “Company”). Santa Fe is an 80.5%-owned subsidiary of The InterGroup Corporation (“InterGroup”), a public company. InterGroup also directly owns approximately 12.9% of the common stock of Portsmouth.

Portsmouth’s primary business is conducted through its general and limited partnership interest in Justice Investors, a California limited partnership (“Justice” or the “Partnership”). Portsmouth has a 93% limited partnership interest in Justice and is the sole general partner. The financial statements of Justice are consolidated with those of the Company.

Justice owns a 543-room hotel property located at 750 Kearny Street, San Francisco California, known as the Hilton San Francisco Financial District (the Hotel) and related facilities including a five level underground parking garage. The Hotel is operated by the partnership as a full service Hilton brand hotel pursuant to a Franchise License Agreement with Hilton Hotels Corporation. Justice also has a Management Agreement with Prism Hospitality L.P. (Prism) to perform the day-to-day management functions of the Hotel. The parking garage that is part of the Hotel property is managed by Ace Parking pursuant to a contract with the Partnership.

Portsmouth also receives management fees as a general partner of Justice for its services in overseeing and managing the Partnership’s assets. Those fees are eliminated in consolidation.

Basic income (loss) per share is calculated based upon the weighted average number of common shares outstanding during each period. During the three and six months December 31, 2013 and 2012, the Company did not have any potentially dilutive securities outstanding.

Justice partnership redemption [Policy Text Block]

JUSTICE PARTNERSHIP REDEMPTION AND RESTRUCTURING

On December 18, 2013, Justice Investors, a California limited partnership (“Justice” or the “Partnership”), completed its Offer to Redeem any and all limited partnership interests not held by Portsmouth Square, Inc. (the “Company”), and the Loan Agreements, as defined in below. In addition, the requisite approval of amendments to its Amended and Restated Agreement of Limited Partnership became effective upon the completion of the Offer to Redeem and the consummation of the Loan Agreements. Such amendments are described in below. As a result, the Company is now the sole General Partner of Justice and controls 93% of Justice.

Justice has accepted tenders, for cash, of approximately 29.173% of the limited partnership interests outstanding prior to the Offer to Redeem, and payments to the holders of such interests, in the amount of $1,385,000 for each 1% tendered, are in the process of being distributed. In addition, Justice has accepted the election of holders of approximately 17.146% of the limited partnership interests outstanding prior to the Offer to Redeem to participate in the alternate redemption structure, which allows them to redeem their limited partnership interests at some time within the next 12 months for certain property or cash or a combination of property and cash. The current and deferred payments to holders or limited partnership interests are classified as restricted cash and, together with the expenses discussed below, totals $19,091,000 and is classified on the balance sheet as redemption payable. The Company, which prior to the Offer to Redeem owned 50% of the then outstanding limited partnership interests, now owns approximately 93% of the limited partnership interests of Justice.

Justice incurred approximately $7,295,000 in hotel restructuring costs relating to the Offer to Redeem and related financing transactions, including a one-time management fee of $1,550,000, approximately $745,000 in legal, accounting and other professional expenses, and a Documentary Transfer Tax fee of approximately $5 million paid to the City of San Francisco.  The Documentary Transfer Tax fee was assessed as a condition to recording the transfer of Justice Investors' principal asset to a subsidiary to consummate the redemption.  While Justice believes the assessment of the Documentary Transfer tax was inappropriate, the tax was paid, under protest, on advice of Justice’s counsel to allow for the consummation of the redemption.  Justice intends to challenge the calculation of the tax.  No prediction can be made as to whether the tax will be upheld, or whether any portion of the tax will be refunded. Justice allocated a portion of the Documentary Transfer Tax to certain former limited partners of Justice Investors as a cost of the transaction. Certain of these limited partners have objected to the allocation, and Justice and the limited partners are pursuing non-binding mediation in an attempt to resolve the dispute.  No prediction can be given as to the outcome of the dispute.

Justice utilized the book value method to record the redemption of the limited partners. Under book value (bonus) method the remaining partners continue the existing partnership, recording no changes to the book values of the partnership's assets and liabilities. As a result, any revaluation of the existing partnership's assets or liabilities that might be undertaken is solely to determine the settlement price to the outgoing partner. The partner's withdrawal from the partnership is recorded by adjusting the remaining partners' capital accounts with the amount of the bonus, which is allocated according to their income-sharing ratio. The amount of adjustment is equal to the difference between the settlement price paid to the withdrawing partner and the book value of his share of total partnership capital at the time he withdraws. Justice Partner’s capital was reduced by approximately $64.1 million for the redemption.

In connection with the Offer to Redeem, Justice retired existing debt and replaced it with lower-yielding loans, the proceeds of which were used to fund the Offer to Redeem and to provide for additional working capital for the Hotel.  Justice incurred a loss on the extinguishment of debt of $3,910,000 which included a yield maintenance (prepayment penalty) expense of $3,808,000 and a write-off of capitalized loan costs on the refinanced debt of approximately $102,000.

The City of San Francisco’s Tax Collector’s office has claimed that Justice owes the City of San Francisco $2.1 million based on the Tax Collector’s interpretation of the San Francisco Business and Tax Regulations Code relating to Transient Occupancy Tax and Tourist Improvement District Assessment. This amount exceeds Justice’s estimate of the taxes owed, and Justice has disputed the claim and is seeking to discharge all penalties and interest charges imposed by the Tax Collector.  No prediction can be given at this time as to the outcome of this dispute. 

In December 2013, Justice determined to substantially demolish the Hotel’s ground-level Spa (with the exception of the ceilings and certain mechanical systems) to build out additional meeting rooms, a technology lounge and re-locate Hotel offices. Justice believes this will result in a greater guest experience and increases in operating revenues. Justice recorded a loss of approximately $738,000 as a disposal of assets on the closure of the Hotel’s Spa on the lobby level.

Justice Loan Agreements [Policy Text Block]

Justice Loan Agreements

On December 18, 2013: (i) Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); and (ii) Justice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”). Justice is the sole member of Mezzanine, and Mezzanine is the sole member of Operating.

The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan. The proceeds of the Loan Agreements were used to fund the redemption of limited partnership interests described above and the pay-off of the prior mortgage.

The Mortgage Loan is secured by the Partnership’s principal asset, the Hilton San Francisco-Financial District (the “Property”). The Mortgage Loan initially bears an interest rate of 5.28% per annum and matures in January 2024. The term of the loan is 10 years with interest only due in the first three years and principle and interest on the remaining seven years of the loan. The Mortgage Loan also requires payments for impounds related to property tax, insurance and capital improvement reserves. As additional security for the Mortgage Loan, there is a limited guaranty (“Mortgage Guaranty”) executed by the Company in favor of Mortgage Lender.

The Mezzanine Loan is a secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The Mezzanine Loan initially bears interest at 9.75% per annum and matures in January, 2024. Interest only is payable monthly. As additional security for the Mezzanine Loan, there is a limited guaranty executed by the Company in favor of Mezzanine Lender (the “Mezzanine Guaranty” and, together with the Mortgage Guaranty, the “Guaranties”).

The Guaranties are limited to what are commonly referred to as “bad boy” acts, including: (i) fraud or intentional misrepresentations; (ii) gross negligence or willful misconduct; (iii) misapplication or misappropriation of rents, security deposits, insurance or condemnation proceeds; and (iv) failure to pay taxes or insurance. The Guaranties will be full recourse guaranties under identified circumstances, including failure to maintain “single purpose” status, transfer of the Property in violation of the applicable loan documents and the Property becoming subject to a bankruptcy proceeding. Pursuant to the Guaranties, the Company is required to maintain a certain minimum net worth and liquidity. As of December 31, 2013, the Company is in compliance with both requirements.

Each of the Loan Agreements contains customary representations and warranties, events of default, reporting requirements, affirmative covenants and negative covenants, which impose restrictions on, among other things, organizational changes of the respective borrower, operations of the Property, agreements with affiliates and third parties. Each of the Loan Agreements also provides for mandatory prepayments under certain circumstances (including casualty or condemnation events) and voluntary prepayments, subject to satisfaction of prescribed conditions set forth in the Loan Agreements.

Limited Partnership Agreement Amendments [Policy Text Block]

Limited Partnership Agreement Amendments

In conjunction with the Offer to Redeem, the Partnership solicited and obtained consents from holders of the requisite limited partnership interests to amendments to the Justice Amended and Restated Agreement of Limited Partnership, which became effective upon the completion of the Offer to Redeem and the consummation of the Loan Agreements. The amendments included the following changes to the Justice Amended and Restated Agreement of Limited Partnership:

· Providing for a single general partner;

· Providing for Class B limited partnership interests, which, if issued, would represent interests in the Partnership; and

· Permitting the General Partner to admit additional limited partners, subject to certain restrictions.

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INVESTMENT IN HOTEL, NET (Tables)

6 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Property, Plant and Equipment [Table Text Block]

Investment in hotel consisted of the following as of:

			Accumulated		Net Book
December 31, 2013	Cost		Depreciation		Value
Land	$	1,124,000	$	-	$	1,124,000
Furniture and equipment		22,162,000		(21,296,000)		866,000
Building and improvements		50,710,000		(19,481,000)		31,229,000
	$	73,996,000	$	(40,777,000)	$	33,219,000

			Accumulated		Net Book
June 30, 2013	Cost		Depreciation		Value
Land	$	1,124,000	$	-	$	1,124,000
Furniture and equipment		22,270,000		(19,312,000)		2,958,000
Building and improvements		50,473,000		(20,507,000)		29,966,000
	$	73,867,000	$	(39,819,000)	$	34,048,000

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OTHER INVESTMENTS, NET (Tables)

6 Months Ended

Dec. 31, 2013

Other Investment [Abstract]

Other Investments [Table Text Block]

Other investments, net consist of the following:

Type	December 31, 2013		June 30, 2013
Preferred stock - Comstock, at cost	$	4,410,000	$	4,410,000
Private equity hedge fund, at cost		646,000		646,000
Corporate debt and equity instruments, at cost		101,000		101,000
Warrants - at fair value		-		3,000
	$	5,157,000	$	5,160,000

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INVESTMENT IN MARKETABLE SECURITIES (Details) (USD $)	3 Months Ended		6 Months Ended			6 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013	Dec. 31, 2013 Equity Securities [Member]	Jun. 30, 2013 Equity Securities [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Cost						$ 2,850,000	$ 3,104,000
Gross Unrealized Gain						1,178,000	992,000
Gross Unrealized Loss						(668,000)	(772,000)
Net Unrealized Gain	36,000	(738,000)	201,000	(267,000)		510,000	220,000
Fair Value	$ 3,360,000		$ 3,360,000		$ 3,324,000	$ 3,360,000	$ 3,324,000

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FAIR VALUE MEASUREMENTS (Details 1) (USD $)	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other non-marketable investments	$ 5,157,000		$ 5,157,000
Net loss for the year	0	0
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other non-marketable investments	0		0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other non-marketable investments	0		0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other non-marketable investments	$ 5,157,000		$ 5,157,000

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CONDENDSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities:
Net (loss) income	$ (7,685,000)	$ 1,309,000
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net unrealized loss on marketable securities	(201,000)	267,000
Unrealized gain on other investments	3,000	112,000
Hotel loss on extinguishment of debt	3,910,000	0
Loss on disposal of assets	1,092,000	0
Depreciation and amortization	1,298,000	1,126,000
Changes in assets and liabilities:
Investment in marketable securities	165,000	(190,000)
Accounts receivable	377,000	(104,000)
Other assets	(1,626,000)	(495,000)
Accounts payable and other liabilities	4,708,000	223,000
Due to securities broker	(293,000)	403,000
Obligations for securities sold	(13,000)	(176,000)
Deferred tax asset	(2,261,000)	159,000
Net cash (used in) provided by operating activities	(526,000)	2,634,000
Cash flows from investing activities:
Payments for hotel furniture, equipment and building improvements	(1,525,000)	(1,341,000)
Net cash used in investing activities	(1,525,000)	(1,341,000)
Cash flows from financing activities:
Restricted cash - redemption and mortgage impounds	(19,943,000)	0
Redemption payments and dividends to noncontrolling interest	(45,061,000)	(781,000)
Net borrowings (payments) on mortgage and subordinated notes payable	69,677,000	(448,000)
Payments (borrowings) on other notes payable	(864,000)	25,000
Net cash provided by (used in) financing activities	3,809,000	(1,204,000)
Net increase in cash and cash equivalents	1,758,000	89,000
Cash and cash equivalents at the beginning of the period	668,000	1,032,000
Cash and cash equivalents at the end of the period	2,426,000	1,121,000
Supplemental information:
Interest paid	$ 1,438,000	$ 1,343,000

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FAIR VALUE MEASUREMENTS

6 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 5 - FAIR VALUE MEASUREMENTS

The carrying values of the Company’s financial instruments not required to be carried at fair value on a recurring basis approximate fair value due to their short maturities (i.e., accounts receivable, other assets, accounts payable and other liabilities, due to securities broker and obligations for securities sold) or the nature and terms of the obligation (i.e., other notes payable and mortgage notes payable).

The assets measured at fair value on a recurring basis are as follows:

As of December 31, 2013
Assets:	Level 1		Level 2		Level 3		Total
Investment in marketable securities:
Basic materials	$	1,974,000	$	-	$	-	$	1,974,000
Financial services		516,000		-		-		516,000
Technology		372,000		-		-		372,000
REITs and real estate companies		162,000		-		-		162,000
Other		336,000		-		-		336,000
	$	3,360,000	$	-	$	-	$	3,360,000

As of June 30, 2013
Assets:	Level 1		Level 2		Level 3		Total
Cash equivalents - money market	$	3,000	$	-	$	-	$	3,000
Other investments - warrants		-		-		3,000		3,000
Investment in marketable securities:
Basic materials		1,513,000		-		-		1,513,000
Technology		622,000		-		-		622,000
Financial services		526,000		-		-		526,000
REITs and real estate companies		255,000		-		-		255,000
Other		408,000		-		-		408,000
		3,324,000		-		-		3,324,000
	$	3,327,000	$	-	$	3,000	$	3,330,000

The fair values of investments in marketable securities are determined by the most recently traded price of each security at the balance sheet date. The fair value of the warrants was determined based upon a Black-Scholes option valuation model.

Financial assets that are measured at fair value on a non-recurring basis and are not included in the tables above include “Other investments, net (non-marketable securities),” that were initially measured at cost and have been written down to fair value as a result of impairment or adjusted to record the fair value of new instruments received (i.e., preferred shares) in exchange for old instruments (i.e., debt instruments). The following table shows the fair value hierarchy for these assets measured at fair value on a non-recurring basis as follows:

									Net loss for the six months
Assets	Level 1		Level 2		Level 3		December 31, 2013		ended December 31, 2013
Other non-marketable investments	$	-	$	-	$	5,157,000	$	5,157,000	$	-

									Net loss for the six months
Assets	Level 1		Level 2		Level 3		June 30, 2013		ended December 31, 2012
Other non-marketable investments	$	-	$	-	$	5,157,000	$	5,157,000	$	-

Other investments in non-marketable securities are carried at cost net of any impairment loss.  The Company has no significant influence or control over the entities that issue these investments and holds less than 20% ownership in each of the investments.  These investments are reviewed on a periodic basis for other-than-temporary impairment. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

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FAIR VALUE MEASUREMENTS (Details Textual)	6 Months Ended
	Dec. 31, 2013
Fair Value Measurements [Line Items]
Cost Method Investments, Additional Information	Other investments in non-marketable securities are carried at cost net of any impairment loss. The Company has no significant influence or control over the entities that issue these investments and holds less than 20% ownership in each of the investments.

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INVESTMENT IN HOTEL, NET (Details) (USD $)	Dec. 31, 2013	Jun. 30, 2013
Property, Plant and Equipment [Line Items]
Net Book Value	$ 33,219,000	$ 34,048,000
Hotel [Member]
Property, Plant and Equipment [Line Items]
Cost	73,996,000	73,867,000
Accumulated Depreciation	(40,777,000)	(39,819,000)
Net Book Value	33,219,000	34,048,000
Land [Member] | Hotel [Member]
Property, Plant and Equipment [Line Items]
Cost	1,124,000	1,124,000
Accumulated Depreciation	0	0
Net Book Value	1,124,000	1,124,000
Furniture and Fixtures [Member] | Hotel [Member]
Property, Plant and Equipment [Line Items]
Cost	22,162,000	22,270,000
Accumulated Depreciation	(21,296,000)	(19,312,000)
Net Book Value	866,000	2,958,000
Building Improvements [Member] | Hotel [Member]
Property, Plant and Equipment [Line Items]
Cost	50,710,000	50,473,000
Accumulated Depreciation	(19,481,000)	(20,507,000)
Net Book Value	$ 31,229,000	$ 29,966,000