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 September 30, 2016

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 0-6877

SANTA FE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

NEVADA	95-2452529
(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):

¨ Yes   x No

The number of shares outstanding of registrant’s Common Stock, as of October 21, 2016 was 1,241,810.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION	Page
Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and June 30, 2016.	3
	Condensed Consolidated Statements of Operations (Unaudited) for the Three months ended September 30, 2016 and 2015.	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three months ended September 30, 2016 and 2015.	5
Item 1.	Legal Proceedings	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 4.	Controls and Procedures.	16
	PART II – OTHER INFORMATION
Item 6.	Exhibits.	17
Signatures		17

PART I

FINANCIAL INFORMATION

Item 1 - Condensed Consolidated Financial Statements

SANTA FE FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of	September 30, 2016			June 30, 2016
	(Unaudited)
ASSETS
Investment in Hotel, net	$	40,560,000		$	41,018,000
Investment in real estate, net		5,091,000			5,051,000
Investment in marketable securities		7,740,000			6,358,000
Other investments, net		611,000			621,000
Cash and cash equivalents		1,404,000			3,397,000
Restricted cash - mortgage impounds		1,754,000			966,000
Accounts receivable - Hotel, net		3,012,000			3,218,000
Other assets, net		1,779,000			2,145,000
Deferred tax assets		10,383,000			11,088,000
Total assets	$	72,334,000		$	73,862,000
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities:
Accounts payable and other liabilities	$	15,903,000		$	18,966,000
Due to securities broker		1,120,000			586,000
Obligations for securities sold		478,000			57,000
Related party and other notes payable		10,726,000			11,246,000
Mortgage notes payable - real estate		3,327,000			3,343,000
Mortgage notes payable - Hotel, net		116,188,000			116,160,000
Total liabilities		147,742,000			150,358,000
Commitments and contingencies
Shareholders' deficit:
Common stock - par value $.10 per share;
Authorized - 2,000,000;
Issued 1,339,638 and outstanding 1,241,810		134,000			134,000
Additional paid-in capital		8,808,000			8,808,000
Accumulated deficit		(57,070,000	)		(57,756,000	)
Treasury stock, at cost, 97,828 shares		(951,000	)		(951,000	)
Total Santa Fe shareholders' deficit		(49,079,000	)		(49,765,000	)
Noncontrolling interest		(26,329,000	)		(26,731,000	)
Total shareholders' deficit		(75,408,000	)		(76,496,000	)
Total liabilities and shareholders' deficit	$	72,334,000		$	73,862,000

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

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SANTA FE FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the three months ended September 30,	2016			2015
Revenues:
Hotel	$	14,605,000		$	15,138,000
Real estate		90,000			123,000
Total revenues		14,695,000			15,261,000
Costs and operating expenses:
Hotel operating expenses		(10,256,000	)		(11,193,000	)
Real estate operating expenses		(48,000	)		(64,000	)
Depreciation and amortization expense		(712,000	)		(756,000	)
General and administrative expense		(245,000	)		(298,000	)
Total costs and operating expenses		(11,261,000	)		(12,311,000	)
Income from operations		3,434,000			2,950,000
Other income (expense):
Interest expense - mortgage		(2,011,000	)		(1,965,000	)
Net loss on disposal of assets		-			(30,000	)
Net gain on marketable securities		425,000			178,000
Net unrealized loss on other investments		-			(37,000	)
Impairment loss on other investments		(10,000	)		-
Dividend and interest income		18,000			2,000
Trading and margin interest expense		(63,000	)		(59,000	)
Other expense, net		(1,641,000	)		(1,911,000	)
Income before income taxes		1,793,000			1,039,000
Income tax expense		(705,000	)		(443,000	)
Net income		1,088,000			596,000
Less:  Net income attributable to the noncontrolling interest		(402,000	)		(265,000	)
Net income attributable to Santa Fe	$	686,000		$	331,000
Basic and diluted net income per share attributable to Santa Fe	$	0.55		$	0.27
Weighted average number of common shares outstanding - basic and diluted		1,241,810			1,241,810

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

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SANTA FE FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the three months ended September 30,	2016			2015
Cash flows from operating activities:
Net income	$	1,088,000		$	596,000
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Net unrealized gain on marketable securities		(305,000	)		(201,000	)
Unrealized loss on other investments		-			37,000
Impairment loss on other investments		10,000			-
Loss on disposal of assets		-			30,000
Depreciation and amortization		712,000			756,000
Changes in assets and liabilities:
Investment in marketable securities		(1,077,000	)		218,000
Accounts receivable		206,000			4,562,000
Other assets		436,000			250,000
Accounts payable and other liabilities		(3,063,000	)		(2,134,000	)
Due to securities broker		534,000			-
Obligations for securities sold		421,000			-
Deferred tax asset		705,000			443,000
Net cash (used in) provided by operating activities		(333,000	)		4,557,000
Cash flows from investing activities:
Payments for hotel and real estate investments		(336,000	)		(1,351,000	)
Net cash used in investing activities		(336,000	)		(1,351,000	)
Cash flows from financing activities:
Restricted cash - payments to mortgage impounds, net		(788,000	)		(264,000	)
Net payments of related party and other notes payable		(536,000	)		(140,000	)
Net cash used in financing activities		(1,324,000	)		(404,000	)
Net (decrease) increase in cash and cash equivalents:		(1,993,000	)		2,802,000
Cash and cash equivalents at the beginning of the period		3,397,000			1,146,000
Cash and cash equivalents at the end of the period	$	1,404,000		$	3,948,000
Supplemental information:
Interest paid	$	2,038,000		$	1,976,000
Non-cash transaction:
Conversion of other investments to marketable securities	$	-		$	6,659,000

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

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SANTA FE FINANCIAL CORPORATION

NOTES TO 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 Santa Fe Financial Corporation (“Santa Fe” 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 Santa Fe and the notes therein included in the Company's Annual Report on Form 10-K for the year ended June 30, 2016. The June 30, 2016 Condensed Consolidated Balance Sheet was derived from the Company’s Form 10-K for the year ended June 30, 2016.

The results of operations for the three months ended September 30, 2016 are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2017.

Santa Fe Financial Corporation, a Nevada corporation, (“Santa Fe” or the “Company”) owns approximately 68.8% of the outstanding common shares of Portsmouth Square, Inc. (“Portsmouth”), a public company. Santa Fe is an 81.7%-owned subsidiary of The InterGroup Corporation (“InterGroup”), a public company. InterGroup also directly owns approximately 13.3% of the common stock of Portsmouth, a public company.

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 controls approximately 93% of the voting interest in Justice and is the sole general partner.

Justice, through its subsidiaries Justice Holdings Company, LLC (“Holdings”), a Delaware Limited Liability Company, Justice Operating Company, LLC (“Operating”) and Justice Mezzanine Company, LLC (“Mezzanine”), 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. Holdings and Mezzanine are both wholly-owned subsidiaries of the Partnership; Operating is a wholly-owned subsidiary of Mezzanine. Mezzanine is the borrower under certain mezzanine indebtedness of Justice, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating. The Hotel is operated by the partnership as a full service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (Hilton). Justice has a management agreement with Prism Hospitality L.P. (“Prism”) to perform certain management functions for the Hotel. The management agreement with Prism had an original term of ten years, subject to the Partnership’s right to terminate at any time with or without cause. Effective January 2014, the management agreement with Prism was amended by the Partnership to change the nature of the services provided by Prism and the compensation payable to Prism, among other things. Effective December 1, 2013, GMP Management, Inc. (“GMP”), a company owned by a Justice limited partner and a related party, also provided management services for the Partnership pursuant to a management services agreement, with a three year term, subject to the Partnership’s right to terminate earlier for cause. In June 2016, GMP resigned and the Company is currently interviewing several national third party hotel management companies to replace GMP.

The parking garage that is part of the Hotel property was managed by Ace Parking pursuant to a contract with the Partnership. The contract was terminated with an effective termination date of October 4, 2016. The Company began managing the parking garage in-house after the termination of Ace Parking.

Management believes that the revenues expected to be generated from the operations of the hotel, garage and leases will be sufficient to meet all of the Partnership’s current and future obligations and financial requirements.

In addition to the operations of the Hotel, the Company also generates income from the ownership and management of real estate. On December 31, 1997, the Company acquired a controlling 55.4% interest in Intergroup Woodland Village, Inc. ("Woodland Village") from InterGroup. Woodland Village's major asset is a 27-unit apartment complex located in Los Angeles, California. The Company also owns a two-unit apartment building in Los Angeles, California.

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Recently Issued Accounting Pronouncements

On June 16, 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU No. 2016-13 will be effective for us as of January 1, 2020. The Company is currently reviewing the effect of ASU No. 2016-13.

On August 26, 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic230).” This ASU is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. The Company adopted ASU No. 2016-15 in the first quarter of 2017 with no material impact to our financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 is effective for annual and interim periods within these annual periods beginning after December 15, 2015 and early application is permitted. This standard did not have material impact on the Company’s consolidated financial statements. The Company adopted this standard during the quarter and reclassified the debt issuance costs on the June 30, 2016 consolidated balance sheet.

NOTE 2 – INVESTMENT IN HOTEL, NET

Investment in hotel consisted of the following as of:

			Accumulated			Net Book
September 30, 2016	Cost		Depreciation			Value
Land	$	1,896,000	$	-		$	1,896,000
Furniture and equipment		29,070,000		(23,445,000	)		5,625,000
Building and improvements		58,388,000		(25,349,000	)		33,039,000
	$	89,354,000	$	(48,794,000	)	$	40,560,000

			Accumulated			Net Book
June 30, 2016	Cost		Depreciation			Value
Land	$	1,896,000	$	-		$	1,896,000
Furniture and equipment		28,857,000		(23,097,000	)		5,760,000
Building and improvements		58,370,000		(25,008,000	)		33,362,000
	$	89,123,000	$	(48,105,000	)	$	41,018,000

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NOTE 3 – INVESTMENT IN REAL ESTATE, NET

The Company owns and operates a 27-unit and 2-unit multi-family apartment complex located in Los Angeles, California and owns land held for development located in Maui, Hawaii. Investment in real estate consisted of the following:

As of	September 30, 2016			June 30, 2016
Land	$	2,430,000		$	2,430,000
Buildings, improvements and equipment		2,861,000			2,797,000
Accumulated depreciation		(1,173,000	)		(1,149,000	)
		4,118,000			4,078,000
Land held for development		973,000			973,000
Investment in real estate, net	$	5,091,000		$	5,051,000

NOTE 4 - INVESTMENT IN MARKETABLE SECURITIES

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

At September 30, 2016 and June 30, 2016, 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 Loss			Value
As of September 30, 2016
Corporate
Equities	$	11,672,000		$	393,000	$	(4,325,000	)	$	(3,932,000	)	$	7,740,000
As of June 30, 2016
Corporate
Equities	$	10,613,000	#	$	435,000	$	(4,690,000	)	$	(4,255,000	)	$	6,358,000

As of September 30, 2016 and June 30, 2016, approximately 64% and 74%, respectively, of the investment marketable securities balance above is comprised of the common stock of Comstock Mining, Inc.

As of September 30, 2016 and June 30, 2016, the Company had $1,814,000 and $1,770,000, respectively, of unrealized losses related to securities held for over one year.

Net 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 months ended September 30, 2016 and 2015, respectively.

For the three months ended September 30,	2016		2015
Realized gain (loss) on marketable securities	$	120,000	$	(23,000	)
Unrealized gain on marketable securities		305,000		201,000
Net gain on marketable securities	$	425,000	$	178,000

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NOTE 5 – 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	September 30, 2016		June 30, 2016
Private equity hedge fund, at cost	$	568,000	$	568,000
Other preferred stock, at cost		43,000		53,000
Warrants - at fair value		-		-
	$	611,000	$	621,000

NOTE 6 - 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) 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 September 30, 2016	Total
Assets:	Level 1
Investment in marketable securities:
Basic materials	$	4,962,000
Energy		732,000
Financial services		514,000
Other		1,532,000
		7,740,000
	$	7,740,000

As of June 30, 2016	Total
Assets:	Level 1
Investment in marketable securities:
Basic materials	$	4,684,000
Energy		733,000
Financial services		366,000
Other		575,000
		6,358,000
	$	6,358,000

The fair values of investments in marketable securities are determined by the most recently traded price of each security at the balance sheet date.

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 three months
Assets	Level 3		September 30, 2016		ended September 30, 2016
Other non-marketable investments	$	611,000	$	611,000	$	(10,000	)

					Net loss for the three months
Assets	Level 3		June 30, 2016		ended September 30, 2015
Other non-marketable investments	$	621,000	$	621,000	$	-

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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.

NOTE 7 – SEGMENT INFORMATION

The Company operates in four reportable segments, the operation of the hotel (“Hotel Operations”), its multi-family residential properties (“Real Estate Operations) and the investment of its cash in marketable securities and other investments (“Investment Transactions”). These three operating segments, as presented in the 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 months ended September 30, 2016 and 2015, respectively. Operating income for rental properties consist of rental income. Operating income from hotel operations consists of the operation of the hotel and operation of the garage. Income (loss) from investment transactions consist of net investment gain (loss), impairment loss on other investments, net unrealized gain (loss) on other investments, dividend and interest income and trading and margin interest expense. The other segment consists of corporate general and administrative expenses and the income tax expense for the entire Company.

As of and for the three months	Hotel			Real Estate			Investment
ended September 30, 2016	Operations			Operations			Transactions		Other			Total
Revenues	$	14,605,000		$	90,000		$	-	$	-		$	14,695,000
Segment operating expenses		(10,256,000	)		(48,000	)		-		(245,000	)		(10,549,000	)
Segment income (loss)		4,349,000			42,000			-		(245,000	)		4,146,000
Interest expense - mortgage		(1,988,000	)		(23,000	)		-		-			(2,011,000	)
Depreciation and amortization expense		(688,000	)		(24,000	)		-		-			(712,000	)
Income from investments		-			-			370,000		-			370,000
Income tax expense		-			-			-		(705,000	)		(705,000	)
Net income (loss)	$	1,673,000		$	(5,000	)	$	370,000	$	(950,000	)	$	1,088,000
Total assets	$	47,207,000		$	5,091,000		$	8,351,000	$	11,685,000		$	72,334,000

As of and for the three months	Hotel			Real Estate			Investment
ended September 30, 2015	Operations			Operations			Transactions		Other			Total
Revenues	$	15,138,000		$	123,000		$	-	$	-		$	15,261,000
Segment operating expenses		(11,193,000	)		(64,000	)		-		(298,000	)		(11,555,000	)
Segment income (loss)		3,945,000			59,000			-		(298,000	)		3,706,000
Loss on disposal of assets		(30,000	)		-			-		-			(30,000	)
Interest expense - mortgage		(1,941,000	)		(24,000	)		-		-			(1,965,000	)
Depreciation and amortization expense		(737,000	)		(19,000	)		-		-			(756,000	)
Income from investments		-			-			84,000		-			84,000
Income tax expense		-			-			-		(443,000	)		(443,000	)
Net income (loss)	$	1,237,000		$	16,000		$	84,000	$	(741,000	)	$	596,000
Total assets	$	48,321,000		$	5,015,000		$	9,612,000	$	11,260,000		$	74,208,000

NOTE 8 – RELATED PARTY TRANSACTIONS

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, Portsmouth, and InterGroup. Depending on certain market conditions and various risk factors, the Chief Executive Officer, Portsmouth 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 the resources of Portsmouth and InterGroup, at risk in connection with investment decisions made on behalf of the Company.

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Item 1 – LEGAL PROCEEDINGS

We are involved from time to time in legal proceedings of types regarded as common in our business, including administrative or judicial proceedings, such as employment or labor disputes, breach of contract liability and premises liability litigation. Where appropriate, we may establish financial reserves for such proceedings. We also maintain insurance to mitigate certain of such risks.

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, 2016, 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 sources of revenue continue to be derived from the investment of its 68.8% owned subsidiary, Portsmouth, in the Justice Investors limited partnership (“Justice” or the “Partnership”), rental income from its investments in multi-family real estate properties and income received from investment of its cash and securities assets. 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” or the “Property”) 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 (the “License Agreement”) with HLT Franchise Holding LLC (Hilton). The Partnership entered into the License Agreement on December 10, 2004. The term of the License Agreement was for an initial period of 15 years commencing on the opening date, with an option to extend the License Agreement for another five years, subject to certain conditions. On June 26, 2015, the Partnership and Hilton entered into an amended franchise agreement which extended the License Agreement through 2030, modified the monthly royalty rate, extended geographic protection to the Partnership and also provided the Partnership certain key money cash incentives to be earned through 2030. The key money cash incentives were received on July 1, 2015.

Justice also has a management agreement with Prism Hospitality L.P. (“Prism”) to perform management functions for the Hotel. The management agreement with Prism had an original term of ten years and can be terminated at any time with or without cause by the Partnership. Effective January 2014, the management agreement with Prism was amended by the Partnership to change the nature of the services provided by Prism and the compensation payable to Prism, among other things. Effective December 1, 2013, GMP Management, Inc. (“GMP”), a company owned by a Justice limited partner and a related party, began to provide management services for the Partnership pursuant to a management services agreement with a term of three years, subject to the Partnership’s right to terminate earlier, for cause. In June 2016, GMP resigned and the Company is currently interviewing several national third party hotel management companies to replace GMP.

- 11 -

The parking garage that is part of the Hotel property was managed by Ace Parking pursuant to a contract with the Partnership. The contract was terminated with an effective termination date of October 4, 2016. The Company began managing the parking garage in-house after the termination of Ace Parking.

In addition to the operations of the Hotel, the Company also generates income from the ownership and management of real estate. On December 31, 1997, the Company acquired a controlling 55.4% interest in Intergroup Woodland Village, Inc. ("Woodland Village") from InterGroup. Woodland Village's major asset is a 27-unit apartment complex located in Los Angeles, California. The Company also owns a two-unit apartment building in Los Angeles, California.

Three months Ended September 30, 2016 Compared to Three months Ended September 30, 2015

The Company had net income of $1,088,000 for the three months ended September 30, 2016 compared to net income of $596,000 for the three months ended September 30, 2015. The increase in net income is primarily attributable to the higher income from the Hotel operations.

Net income from Hotel operations increased to $1,673,000 for the three months ended September 30, 2016 from net income of $1,237,000 for the three months ended September 30, 2015. The increase is primarily due to the reduction of expenses as the result of the resignation of GMP management in June 2016 and the decrease in legal expenses as the result of the legal settlement that was reached in May 2016. Please see Note 17 of the Company’s June 30, 2016 10-K report for further information. The decrease in operating expenses was partially offset by the decrease in total Hotel revenues.

The following table sets forth a more detailed presentation of Hotel operations for the three months ended September 30, 2016 and 2015

For the three months ended September 30,	2016			2015
Hotel revenues:
Hotel rooms	$	12,298,000		$	12,607,000
Food and beverage		1,449,000			1,650,000
Garage		681,000			685,000
Other operating departments		177,000			196,000
Total hotel revenues		14,605,000			15,138,000
Operating expenses excluding depreciation and amortization		(10,256,000	)		(11,193,000	)
Operating income before loss on disposal of assets,  interest, depreciation and amortization		4,349,000			3,945,000
Loss on disposal of assets		-			(30,000	)
Interest expense - mortgage		(1,988,000	)		(1,941,000	)
Depreciation and amortization expense		(688,000	)		(737,000	)
Net income from Hotel operations	$	1,673,000		$	1,237,000

For the three months ended September 30, 2016, the Hotel had operating income of $4,349,000 before disposal of assets, interest, depreciation and amortization on total operating revenues of $14,605,000 compared to operating income of $3,945,000 before disposal of assets, interest, depreciation and amortization on total operating revenues of $15,138,000 for the three months ended September 30, 2015.  Room revenues decreased by $309,000 for the three months ended September 30, 2016 compared to the three months ended September 30, 2015 primarily as the result of the decrease in group business and the decrease in the average daily rate. Food and beverage revenue decreased by $201,000 as the result of the reduction in the catering and banquet services from the decrease in the group business.

Total operating expenses decreased by $937,000 this quarter as compared to the previous comparable quarter primarily due decrease in operating expenses related to the resignation of GMP management and the reduction in legal expenses as discussed above.  

- 12 -

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 September 30, 2016 and 2015.

Three Months Ended September 30,	Average Daily Rate		Average Occupancy %			RevPAR
2016	$	255		97	%	$	246
2015	$	265		95	%	$	252

The Hotel’s revenues decreased by 3.5% this quarter as compared to the previous comparable quarter. Average daily rate decreased by $10 and RevPAR decreased by $6 for the three months ended September 30, 2016 compared to the three months ended September 30, 2015. The decrease in the average daily rate was partially offset by an increase in occupancy to 97% from 95%.

Our highest priority is guest satisfaction. We believe that enhancing the guest experience differentiates the Hotel from our competition and is critical to the Hotel’s objective of building sustainable guest loyalty. In order to make a large impact on guest experience, the Hotel will continue training team members on Hilton brand standards and guest satisfaction, hiring and retaining talents in key operations and enhancing the arrival experience. In addition, the Hotel replaced the carpet flooring in the lobby and the fourth floor with oak wood, creating an open and welcoming environment; modernized the furniture in the lobby, the porte cochere, and the second floor; and replaced the third floor carpets and doors. The Wellness Center on the fifth floor features a new spa with two treatment rooms and a room for manicures and pedicures. During the fiscal year ended June 30, 2016, the Hotel partially remodeled 14 floors of guest rooms by updating the tables and the night stands with granite tops for a sleek and modern look. As the Hotel continues to further develop its ties with the financial district community and the City of San Francisco, the Hotel is also committed to promoting innovative business ideas and good corporate citizenship.

With the high demand in guest rooms, the Hotel can focus more attention on length and patterns of stay that benefit the Hotel. The Hotel is also focusing on high end clients with more banquet and meeting room requirements. Moving forward, the Hotel will continue to focus on cultivating international business and capturing a greater percentage of the higher rated business, leisure and group travel. The Hotel will continue to 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. 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 and adverse business conditions.

Rental revenue from the Company’s real estate operations decreased to $90,000 for the three months ended September 30, 2016 from $123,000 for the three months ended September 30, 2015 as the result of the on-going renovations to approximately 30% of the units in the 27-unit apartment complex. Operating expenses also decreased to $48,000 from $64,000 in the same comparable period due to the renovations. Management continues to review and analyze the Company’s real estate operations to improve occupancy and rental rates, reduce expenses and improve efficiencies.

The Company had a gain on marketable securities of $425,000 for the three months ended September 30, 2016 compared to a net gain on marketable securities of $178,000 for the three months ended September 30, 2015. As of September 30, 2016 and 2015, approximately 64% and 95%, respectively, of the investment in marketable securities balance above is comprised of the common stock of Comstock Mining, Inc. (Comstock). As the result, the change in the market price of the common stock of Comstock will have a significant impact on the gain (loss) on marketable securities. For the three months ended September 30, 2016, the Company had a net realized gain of $120,000 and a net unrealized gain of $305,000. For the three months ended September 30, 2015, the Company had a net realized loss of $23,000 and a net unrealized gain of $201,000. 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 and its subsidiary, Portsmouth, compute and file income tax returns and prepare discrete income tax provisions for financial reporting.  The income tax expense during the three months ended September 30, 2016 and 2015 represents primarily the income tax effect on the Portsmouth’s pretax income which includes its share in net income of the Hotel.

- 13 -

MARKETABLE SECURITIES

The following table shows the composition of the Company’s marketable securities portfolio as of September 30, 2016 and June 30, 2016 by selected industry groups.

			% of Total
As of September 30, 2016			Investment
Industry Group	Fair Value		Securities
Basic materials	$	4,962,000		64.1	%
Energy		732,000		9.5	%
Financial services		514,000		6.6	%
Other		1,532,000		19.8	%
	$	7,740,000		100.0	%

			% of Total
As of June 30, 2016			Investment
Industry Group	Fair Value		Securities
Basic materials	$	4,684,000		73.7	%
Energy		733,000		11.5	%
Financial services		366,000		5.8	%
Other		575,000		9.0	%
	$	6,358,000		100.0	%

As of September 30, 2016, the Company’s investment in marketable securities portfolio consists primarily of (64.1%) of the common stock of Comstock Mining, Inc. (“Comstock” - NYSE MKT: LODE) which is included in the basic materials industry group.

The following table shows the net gain or loss on the Company’s marketable securities and the associated margin interest and trading expenses for the respective periods

For the three months ended September 30,	2016			2015
Net gain on marketable securities	$	425,000		$	178,000
Net unrealized loss on other investments		-			(37,000	)
Impairment loss on other investments		(10,000	)		-
Dividend and interest income		18,000			2,000
Margin interest expense		(27,000	)		(11,000	)
Trading and management expenses		(36,000	)		(48,000	)
.	$	370,000		$	84,000

FINANCIAL CONDITION AND LIQUIDITY

The Company’s cash flows are primarily generated from its Hotel operations. The Company also generates cash from the investment of its cash and marketable securities, other investments and the ownership of real estate.

On December 18, 2013, the Partnership completed an Offer to Redeem any and all limited partnership interests not held by Portsmouth. As a result, Portsmouth, which prior to the Offer to Redeem owned 50% of the then outstanding limited partnership interests now controls approximately 93% of the voting interest in Justice and is now its sole General Partner.

To fund the redemption of limited partnership interests and to repay the prior mortgage of $42,940,000. Justice obtained a $97,000,000 mortgage loan and a $20,000,000 mezzanine loan. The mortgage loan is secured by the Partnership’s principal asset, the Hotel. The mortgage loan bears an interest rate of 5.275% per annum with interest only payments due thru January 2017. Beginning in February 2017, the loan will begin to amortize over a thirty year period thru its maturity date of 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 interest only loan 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.

- 14 -

On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. The proceeds of the loan were applied to the July 2014 payments to Holdings as described in Note 2 of the Company’s June 30, 2016 10-K Report. The loan was extended to November 30, 2016. InterGroup is currently working on amending the loan agreement to extend the loan for a longer period.

Despite an uncertain economy, the Hotel has continued to generate positive operating income growth. While the debt service requirements related the 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.

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, other investments, real estate operations and the cash flows generated from those assets and from the partnership 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 September 30, 2016, the Company’s material financial obligations which also including interest payments:

			9 Months
	Total		Year 1		Year 2		Year 3		Year 4		Year 5		Thereafter
Mortgage notes payable	$	120,327,000	$	726,000	$	1,473,000	$	1,552,000	$	1,636,000	$	1,685,000	$	113,255,000
Related party and other notes payable		10,726,000		7,085,000		317,000		317,000		317,000		317,000		2,373,000
Interest		50,613,000		5,497,000		7,153,000		7,073,000		6,991,000		6,838,000		17,061,000
Total	$	181,666,000	$	13,308,000	$	8,943,000	$	8,942,000	$	8,944,000	$	8,840,000	$	132,689,000

OFF BALANCE SHEET ARRANGEMENTS

The Company has no 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 the Company has the power and ability 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.

The Company's residential rental properties provide income from short-term operating leases and no lease extends beyond one year. Rental increases are expected to offset anticipated increased property operating expenses.

- 15 -

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Critical accounting policies are those that are most significant to the presentation 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 condensed 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 three months ended September 30, 2016. Please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2016 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.

- 16 -

PART II.

OTHER INFORMATION

Item 6. Exhibits.

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

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

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

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

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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.

	SANTA FE FINANCIAL CORPORATION
	(Registrant)
Date: November 4, 2016	by	/s/ John V. Winfield
		John V. Winfield, President,
		Chairman of the Board and
		Chief Executive Officer
Date: November 4, 2016	by	/s/ David T. Nguyen
		David T. Nguyen, Treasurer
		and Controller

- 17 -

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 Santa Fe Financial Corporation;

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: November 4, 2016

/s/ John V. Winfield

John V. Winfield

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, David Nguyen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Santa Fe Financial Corporation;

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: November 4, 2016

/s/ David Nguyen

David 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 Santa Fe Financial Corporation (the "Company") on Form 10-Q for the quarterly period ended September 30, 2016, 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: November 4, 2016

A signed original of this written statement required by Section 906 has been provided to Santa Fe Financial Corporation and will be retained by Santa Fe Financial Corporation 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 Santa Fe Financial Corporation (the "Company") on Form 10-Q for the quarterly period ended September 30, 2016, 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 Nguyen

David Nguyen

Treasurer and Controller

(Principal Financial Officer)

Date: November 4, 2016

A signed original of this written statement required by Section 906 has been provided to Santa Fe Financial Corporation and will be retained by Santa Fe Financial Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2016	Oct. 21, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Entity Registrant Name	SANTA FE FINANCIAL CORP
Entity Central Index Key	0000086759
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	SFEF
Entity Common Stock, Shares Outstanding		1,241,810

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2016	Jun. 30, 2016
ASSETS
Investment in Hotel, net	$ 40,560,000	$ 41,018,000
Investment in real estate, net	5,091,000	5,051,000
Investment in marketable securities	7,740,000	6,358,000
Other investments, net	611,000	621,000
Cash and cash equivalents	1,404,000	3,397,000
Restricted cash - mortgage impounds	1,754,000	966,000
Accounts receivable - Hotel, net	3,012,000	3,218,000
Other assets, net	1,779,000	2,145,000
Deferred tax assets	10,383,000	11,088,000
Total assets	72,334,000	73,862,000
Liabilities:
Accounts payable and other liabilities	15,903,000	18,966,000
Due to securities broker	1,120,000	586,000
Obligations for securities sold	478,000	57,000
Related party and other notes payable	10,726,000	11,246,000
Mortgage notes payable - real estate	3,327,000	3,343,000
Mortgage notes payable - Hotel, net	116,188,000	116,160,000
Total liabilities	147,742,000	150,358,000
Commitments and contingencies
Shareholders' deficit:
Common stock - par value $.10 per share; Authorized - 2,000,000; Issued 1,339,638 and outstanding 1,241,810	134,000	134,000
Additional paid-in capital	8,808,000	8,808,000
Accumulated deficit	(57,070,000)	(57,756,000)
Treasury stock, at cost, 97,828 shares	(951,000)	(951,000)
Total Santa Fe shareholders' deficit	(49,079,000)	(49,765,000)
Noncontrolling interest	(26,329,000)	(26,731,000)
Total shareholders' deficit	(75,408,000)	(76,496,000)
Total liabilities and shareholders' deficit	$ 72,334,000	$ 73,862,000

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares	Sep. 30, 2016	Jun. 30, 2016
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common Stock, Shares Authorized	2,000,000	2,000,000
Common Stock, Shares, Issued	1,339,638	1,339,638
Common Stock, Shares, Outstanding	1,241,810	1,241,810
Treasury Stock, Shares	97,828	97,828

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Revenues:
Hotel	$ 14,605,000	$ 15,138,000
Real estate	90,000	123,000
Total revenues	14,695,000	15,261,000
Costs and operating expenses:
Hotel operating expenses	(10,256,000)	(11,193,000)
Real estate operating expenses	(48,000)	(64,000)
Depreciation and amortization expense	(712,000)	(756,000)
General and administrative expense	(245,000)	(298,000)
Total costs and operating expenses	(11,261,000)	(12,311,000)
Income from operations	3,434,000	2,950,000
Other income (expense):
Interest expense - mortgage	(2,011,000)	(1,965,000)
Net loss on disposal of assets	0	(30,000)
Net gain on marketable securities	425,000	178,000
Net unrealized loss on other investments	0	(37,000)
Impairment loss on other investments	(10,000)	0
Dividend and interest income	18,000	2,000
Trading and margin interest expense	(63,000)	(59,000)
Other expense, net	(1,641,000)	(1,911,000)
Income before income taxes	1,793,000	1,039,000
Income tax expense	(705,000)	(443,000)
Net income	1,088,000	596,000
Less: Net income attributable to the noncontrolling interest	(402,000)	(265,000)
Net income attributable to Santa Fe	$ 686,000	$ 331,000
Basic and diluted net income per share attributable to Santa Fe (in dollars per share)	$ 0.55	$ 0.27
Weighted average number of common shares outstanding - basic and diluted (in shares)	1,241,810	1,241,810

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net income	$ 1,088,000	$ 596,000
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Net unrealized gain on marketable securities	(305,000)	(201,000)
Unrealized loss on other investments	0	37,000
Impairment loss on other investments	10,000	0
Loss on disposal of assets	0	30,000
Depreciation and amortization	712,000	756,000
Changes in assets and liabilities:
Investment in marketable securities	(1,077,000)	218,000
Accounts receivable	206,000	4,562,000
Other assets	436,000	250,000
Accounts payable and other liabilities	(3,063,000)	(2,134,000)
Due to securities broker	534,000	0
Obligations for securities sold	421,000	0
Deferred tax asset	705,000	443,000
Net cash (used in) provided by operating activities	(333,000)	4,557,000
Cash flows from investing activities:
Payments for hotel and real estate investments	(336,000)	(1,351,000)
Net cash used in investing activities	(336,000)	(1,351,000)
Cash flows from financing activities:
Restricted cash - payments to mortgage impounds, net	(788,000)	(264,000)
Net payments of related party and other notes payable	(536,000)	(140,000)
Net cash used in financing activities	(1,324,000)	(404,000)
Net (decrease) increase in cash and cash equivalents:	(1,993,000)	2,802,000
Cash and cash equivalents at the beginning of the period	3,397,000	1,146,000
Cash and cash equivalents at the end of the period	1,404,000	3,948,000
Supplemental information:
Interest paid	2,038,000	1,976,000
Non-cash transaction:
Conversion of other investments to marketable securities	$ 0	$ 6,659,000

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Sep. 30, 2016

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 Santa Fe Financial Corporation (“Santa Fe” 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 Santa Fe and the notes therein included in the Company's Annual Report on Form 10-K for the year ended June 30, 2016. The June 30, 2016 Condensed Consolidated Balance Sheet was derived from the Company’s Form 10-K for the year ended June 30, 2016.

The results of operations for the three months ended September 30, 2016 are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2017.

Santa Fe Financial Corporation, a Nevada corporation, (“Santa Fe” or the “Company”) owns approximately 68.8% of the outstanding common shares of Portsmouth Square, Inc. (“Portsmouth”), a public company. Santa Fe is an 81.7%-owned subsidiary of The InterGroup Corporation (“InterGroup”), a public company. InterGroup also directly owns approximately 13.3% of the common stock of Portsmouth, a public company.

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 controls approximately 93% of the voting interest in Justice and is the sole general partner.

Justice, through its subsidiaries Justice Holdings Company, LLC (“Holdings”), a Delaware Limited Liability Company, Justice Operating Company, LLC (“Operating”) and Justice Mezzanine Company, LLC (“Mezzanine”), 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. Holdings and Mezzanine are both wholly-owned subsidiaries of the Partnership; Operating is a wholly-owned subsidiary of Mezzanine. Mezzanine is the borrower under certain mezzanine indebtedness of Justice, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating. The Hotel is operated by the partnership as a full service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (Hilton). Justice has a management agreement with Prism Hospitality L.P. (“Prism”) to perform certain management functions for the Hotel. The management agreement with Prism had an original term of ten years, subject to the Partnership’s right to terminate at any time with or without cause. Effective January 2014, the management agreement with Prism was amended by the Partnership to change the nature of the services provided by Prism and the compensation payable to Prism, among other things. Effective December 1, 2013, GMP Management, Inc. (“GMP”), a company owned by a Justice limited partner and a related party, also provided management services for the Partnership pursuant to a management services agreement, with a three year term, subject to the Partnership’s right to terminate earlier for cause. In June 2016, GMP resigned and the Company is currently interviewing several national third party hotel management companies to replace GMP.

The parking garage that is part of the Hotel property was managed by Ace Parking pursuant to a contract with the Partnership. The contract was terminated with an effective termination date of October 4, 2016. The Company began managing the parking garage in-house after the termination of Ace Parking.

Management believes that the revenues expected to be generated from the operations of the hotel, garage and leases will be sufficient to meet all of the Partnership’s current and future obligations and financial requirements.

In addition to the operations of the Hotel, the Company also generates income from the ownership and management of real estate. On December 31, 1997, the Company acquired a controlling 55.4% interest in Intergroup Woodland Village, Inc. ("Woodland Village") from InterGroup. Woodland Village's major asset is a 27-unit apartment complex located in Los Angeles, California. The Company also owns a two-unit apartment building in Los Angeles, California.

Recently Issued Accounting Pronouncements 

On June 16, 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU No. 2016-13 will be effective for us as of January 1, 2020. The Company is currently reviewing the effect of ASU No. 2016-13.

On August 26, 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic230).” This ASU is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. The Company adopted ASU No. 2016-15 in the first quarter of 2017 with no material impact to our financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 is effective for annual and interim periods within these annual periods beginning after December 15, 2015 and early application is permitted. This standard did not have material impact on the Company’s consolidated financial statements. The Company adopted this standard during the quarter and reclassified the debt issuance costs on the June 30, 2016 consolidated balance sheet.   

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INVESTMENT IN HOTEL, NET

3 Months Ended

Sep. 30, 2016

Real Estate [Abstract]

Real Estate Disclosure [Text Block]

NOTE 2 – INVESTMENT IN HOTEL, NET

Investment in hotel consisted of the following as of:

			Accumulated		Net Book
September 30, 2016	Cost		Depreciation		Value
Land	$	1,896,000	$	-	$	1,896,000
Furniture and equipment		29,070,000		(23,445,000)		5,625,000
Building and improvements		58,388,000		(25,349,000)		33,039,000
	$	89,354,000	$	(48,794,000)	$	40,560,000

			Accumulated		Net Book
June 30, 2016	Cost		Depreciation		Value
Land	$	1,896,000	$	-	$	1,896,000
Furniture and equipment		28,857,000		(23,097,000)		5,760,000
Building and improvements		58,370,000		(25,008,000)		33,362,000
	$	89,123,000	$	(48,105,000)	$	41,018,000

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INVESTMENT IN REAL ESTATE, NET

3 Months Ended

Sep. 30, 2016

Real Estate [Abstract]

Investment In Real Estate [Text Block]

NOTE 3 – INVESTMENT IN REAL ESTATE, NET

The Company owns and operates a 27-unit and 2-unit multi-family apartment complex located in Los Angeles, California and owns land held for development located in Maui, Hawaii. Investment in real estate consisted of the following:

As of	September 30, 2016		June 30, 2016
Land	$	2,430,000	$	2,430,000
Buildings, improvements and equipment		2,861,000		2,797,000
Accumulated depreciation		(1,173,000)		(1,149,000)
		4,118,000		4,078,000
Land held for development		973,000		973,000
Investment in real estate, net	$	5,091,000	$	5,051,000

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INVESTMENT IN MARKETABLE SECURITIES

3 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

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

NOTE 4 - INVESTMENT IN MARKETABLE SECURITIES

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

At September 30, 2016 and June 30, 2016, 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 Loss		Value
As of September 30, 2016
Corporate
Equities	$	11,672,000	$	393,000	$	(4,325,000)	$	(3,932,000)	$	7,740,000
As of June 30, 2016
Corporate
Equities	$	10,613,000	$	435,000	$	(4,690,000)	$	(4,255,000)	$	6,358,000

As of September 30, 2016 and June 30, 2016, approximately 64% and 74%, respectively, of the investment marketable securities balance above is comprised of the common stock of Comstock Mining, Inc.

As of September 30, 2016 and June 30, 2016, the Company had $1,814,000 and $1,770,000, respectively, of unrealized losses related to securities held for over one year.

Net 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 months ended September 30, 2016 and 2015, respectively.

For the three months ended September 30,	2016		2015
Realized gain (loss) on marketable securities	$	120,000	$	(23,000)
Unrealized gain on marketable securities		305,000		201,000
Net gain on marketable securities	$	425,000	$	178,000

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OTHER INVESTMENTS, NET

3 Months Ended

Sep. 30, 2016

Investments, All Other Investments [Abstract]

Other Investments Disclosure [Text Block]

NOTE 5 – 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	September 30, 2016		June 30, 2016
Private equity hedge fund, at cost	$	568,000	$	568,000
Other preferred stock, at cost		43,000		53,000
Warrants - at fair value		-		-
	$	611,000	$	621,000

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FAIR VALUE MEASUREMENTS

3 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 6 - 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) 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 September 30, 2016	Total
Assets:	Level 1
Investment in marketable securities:
Basic materials	$	4,962,000
Energy		732,000
Financial services		514,000
Other		1,532,000
		7,740,000
	$	7,740,000

As of June 30, 2016	Total
Assets:	Level 1
Investment in marketable securities:
Basic materials	$	4,684,000
Energy		733,000
Financial services		366,000
Other		575,000
		6,358,000
	$	6,358,000

The fair values of investments in marketable securities are determined by the most recently traded price of each security at the balance sheet date.

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 three months
Assets	Level 3		September 30, 2016		ended September 30, 2016
Other non-marketable investments	$	611,000	$	611,000	$	(10,000)

					Net loss for the three months
Assets	Level 3		June 30, 2016		ended September 30, 2015
Other non-marketable investments	$	621,000	$	621,000	$	-

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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SEGMENT INFORMATION

3 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

NOTE 7 – SEGMENT INFORMATION

The Company operates in four reportable segments, the operation of the hotel (“Hotel Operations”), its multi-family residential properties (“Real Estate Operations) and the investment of its cash in marketable securities and other investments (“Investment Transactions”). These three operating segments, as presented in the 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 months ended September 30, 2016 and 2015, respectively. Operating income for rental properties consist of rental income. Operating income from hotel operations consists of the operation of the hotel and operation of the garage. Income (loss) from investment transactions consist of net investment gain (loss), impairment loss on other investments, net unrealized gain (loss) on other investments, dividend and interest income and trading and margin interest expense. The other segment consists of corporate general and administrative expenses and the income tax expense for the entire Company.

As of and for the three months	Hotel		Real Estate		Investment
ended September 30, 2016	Operations		Operations		Transactions		Other		Total
Revenues	$	14,605,000	$	90,000	$	-	$	-	$	14,695,000
Segment operating expenses		(10,256,000)		(48,000)		-		(245,000)		(10,549,000)
Segment income (loss)		4,349,000		42,000		-		(245,000)		4,146,000
Interest expense - mortgage		(1,988,000)		(23,000)		-		-		(2,011,000)
Depreciation and amortization expense		(688,000)		(24,000)		-		-		(712,000)
Income from investments		-		-		370,000		-		370,000
Income tax expense		-		-		-		(705,000)		(705,000)
Net income (loss)	$	1,673,000	$	(5,000)	$	370,000	$	(950,000)	$	1,088,000
Total assets	$	47,207,000	$	5,091,000	$	8,351,000	$	11,685,000	$	72,334,000

As of and for the three months	Hotel		Real Estate		Investment
ended September 30, 2015	Operations		Operations		Transactions		Other		Total
Revenues	$	15,138,000	$	123,000	$	-	$	-	$	15,261,000
Segment operating expenses		(11,193,000)		(64,000)		-		(298,000)		(11,555,000)
Segment income (loss)		3,945,000		59,000		-		(298,000)		3,706,000
Loss on disposal of assets		(30,000)		-		-		-		(30,000)
Interest expense - mortgage		(1,941,000)		(24,000)		-		-		(1,965,000)
Depreciation and amortization expense		(737,000)		(19,000)		-		-		(756,000)
Income from investments		-		-		84,000		-		84,000
Income tax expense		-		-		-		(443,000)		(443,000)
Net income (loss)	$	1,237,000	$	16,000	$	84,000	$	(741,000)	$	596,000
Total assets	$	48,321,000	$	5,015,000	$	9,612,000	$	11,260,000	$	74,208,000

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RELATED PARTY TRANSACTIONS

3 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 8 – RELATED PARTY TRANSACTIONS

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, Portsmouth, and InterGroup. Depending on certain market conditions and various risk factors, the Chief Executive Officer, Portsmouth 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 the resources of Portsmouth and InterGroup, at risk in connection with investment decisions made on behalf of the Company.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements 

On June 16, 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU No. 2016-13 will be effective for us as of January 1, 2020. The Company is currently reviewing the effect of ASU No. 2016-13.

On August 26, 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments (Topic230).” This ASU is intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows. The Company adopted ASU No. 2016-15 in the first quarter of 2017 with no material impact to our financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 is effective for annual and interim periods within these annual periods beginning after December 15, 2015 and early application is permitted. This standard did not have material impact on the Company’s consolidated financial statements. The Company adopted this standard during the quarter and reclassified the debt issuance costs on the June 30, 2016 consolidated balance sheet.  

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INVESTMENT IN HOTEL, NET (Tables)

3 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

Schedule of Real Estate Properties [Table Text Block]

Investment in hotel consisted of the following as of:

			Accumulated		Net Book
September 30, 2016	Cost		Depreciation		Value
Land	$	1,896,000	$	-	$	1,896,000
Furniture and equipment		29,070,000		(23,445,000)		5,625,000
Building and improvements		58,388,000		(25,349,000)		33,039,000
	$	89,354,000	$	(48,794,000)	$	40,560,000

			Accumulated		Net Book
June 30, 2016	Cost		Depreciation		Value
Land	$	1,896,000	$	-	$	1,896,000
Furniture and equipment		28,857,000		(23,097,000)		5,760,000
Building and improvements		58,370,000		(25,008,000)		33,362,000
	$	89,123,000	$	(48,105,000)	$	41,018,000

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INVESTMENT IN REAL ESTATE, NET (Tables)

3 Months Ended

Sep. 30, 2016

Real Estate [Abstract]

Schedule of Investment In Real Estate [Table Text Block]

The Company owns and operates a 27-unit and 2-unit multi-family apartment complex located in Los Angeles, California and owns land held for development located in Maui, Hawaii. Investment in real estate consisted of the following:

As of	September 30, 2016		June 30, 2016
Land	$	2,430,000	$	2,430,000
Buildings, improvements and equipment		2,861,000		2,797,000
Accumulated depreciation		(1,173,000)		(1,149,000)
		4,118,000		4,078,000
Land held for development		973,000		973,000
Investment in real estate, net	$	5,091,000	$	5,051,000

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INVESTMENT IN MARKETABLE SECURITIES (Tables)

3 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Marketable Securities [Table Text Block]

At September 30, 2016 and June 30, 2016, 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 Loss		Value
As of September 30, 2016
Corporate
Equities	$	11,672,000	$	393,000	$	(4,325,000)	$	(3,932,000)	$	7,740,000
As of June 30, 2016
Corporate
Equities	$	10,613,000	$	435,000	$	(4,690,000)	$	(4,255,000)	$	6,358,000

Gain (Loss) on Investments [Table Text Block]

Net 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 months ended September 30, 2016 and 2015, respectively.

For the three months ended September 30,	2016		2015
Realized gain (loss) on marketable securities	$	120,000	$	(23,000)
Unrealized gain on marketable securities		305,000		201,000
Net gain on marketable securities	$	425,000	$	178,000

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OTHER INVESTMENTS, NET (Tables)

3 Months Ended

Sep. 30, 2016

Investments, All Other Investments [Abstract]

Schedule of Other Investments Not Readily Marketable [Table Text Block]

Other investments, net consist of the following:

Type	September 30, 2016		June 30, 2016
Private equity hedge fund, at cost	$	568,000	$	568,000
Other preferred stock, at cost		43,000		53,000
Warrants - at fair value		-		-
	$	611,000	$	621,000

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Sep. 30, 2016

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 September 30, 2016	Total
Assets:	Level 1
Investment in marketable securities:
Basic materials	$	4,962,000
Energy		732,000
Financial services		514,000
Other		1,532,000
		7,740,000
	$	7,740,000

As of June 30, 2016	Total
Assets:	Level 1
Investment in marketable securities:
Basic materials	$	4,684,000
Energy		733,000
Financial services		366,000
Other		575,000
		6,358,000
	$	6,358,000

Fair Value Measurements, Nonrecurring [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 three months
Assets	Level 3		September 30, 2016		ended September 30, 2016
Other non-marketable investments	$	611,000	$	611,000	$	(10,000)

					Net loss for the three months
Assets	Level 3		June 30, 2016		ended September 30, 2015
Other non-marketable investments	$	621,000	$	621,000	$	-

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SEGMENT INFORMATION (Tables)

3 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

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

Information below represents reporting segments for the three months ended September 30, 2016 and 2015, respectively. Operating income for rental properties consist of rental income. Operating income from hotel operations consists of the operation of the hotel and operation of the garage. Income (loss) from investment transactions consist of net investment gain (loss), impairment loss on other investments, net unrealized gain (loss) on other investments, dividend and interest income and trading and margin interest expense. The other segment consists of corporate general and administrative expenses and the income tax expense for the entire Company.

As of and for the three months	Hotel		Real Estate		Investment
ended September 30, 2016	Operations		Operations		Transactions		Other		Total
Revenues	$	14,605,000	$	90,000	$	-	$	-	$	14,695,000
Segment operating expenses		(10,256,000)		(48,000)		-		(245,000)		(10,549,000)
Segment income (loss)		4,349,000		42,000		-		(245,000)		4,146,000
Interest expense - mortgage		(1,988,000)		(23,000)		-		-		(2,011,000)
Depreciation and amortization expense		(688,000)		(24,000)		-		-		(712,000)
Income from investments		-		-		370,000		-		370,000
Income tax expense		-		-		-		(705,000)		(705,000)
Net income (loss)	$	1,673,000	$	(5,000)	$	370,000	$	(950,000)	$	1,088,000
Total assets	$	47,207,000	$	5,091,000	$	8,351,000	$	11,685,000	$	72,334,000

As of and for the three months	Hotel		Real Estate		Investment
ended September 30, 2015	Operations		Operations		Transactions		Other		Total
Revenues	$	15,138,000	$	123,000	$	-	$	-	$	15,261,000
Segment operating expenses		(11,193,000)		(64,000)		-		(298,000)		(11,555,000)
Segment income (loss)		3,945,000		59,000		-		(298,000)		3,706,000
Loss on disposal of assets		(30,000)		-		-		-		(30,000)
Interest expense - mortgage		(1,941,000)		(24,000)		-		-		(1,965,000)
Depreciation and amortization expense		(737,000)		(19,000)		-		-		(756,000)
Income from investments		-		-		84,000		-		84,000
Income tax expense		-		-		-		(443,000)		(443,000)
Net income (loss)	$	1,237,000	$	16,000	$	84,000	$	(741,000)	$	596,000
Total assets	$	48,321,000	$	5,015,000	$	9,612,000	$	11,260,000	$	74,208,000

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Textual)	3 Months Ended
	Sep. 30, 2016
Basis Of Presentation And Significant Accounting Policies [Line Items]
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest	93.00%
Portsmouth [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Equity Method Investment, Ownership Percentage	68.80%
Intergroup [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Equity Method Investment, Ownership Percentage	81.70%
Noncontrolling Interest, Ownership Percentage by Parent	13.30%
Woodland Village Inc [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Equity Method Investment, Ownership Percentage	55.40%

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INVESTMENT IN HOTEL, NET (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Property, Plant and Equipment [Line Items]
Cost	$ 89,354,000	$ 89,123,000
Accumulated Depreciation	(48,794,000)	(48,105,000)
Net Book Value	40,560,000	41,018,000
Land [Member]
Property, Plant and Equipment [Line Items]
Cost	1,896,000	1,896,000
Accumulated Depreciation	0	0
Net Book Value	1,896,000	1,896,000
Furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Cost	29,070,000	28,857,000
Accumulated Depreciation	(23,445,000)	(23,097,000)
Net Book Value	5,625,000	5,760,000
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Cost	58,388,000	58,370,000
Accumulated Depreciation	(25,349,000)	(25,008,000)
Net Book Value	$ 33,039,000	$ 33,362,000

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INVESTMENT IN REAL ESTATE, NET (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Property, Plant and Equipment [Line Items]
Land	$ 2,430,000	$ 2,430,000
Buildings, improvements and equipment	2,861,000	2,797,000
Accumulated depreciation	(1,173,000)	(1,149,000)
Real Estate Investment Property Net	4,118,000	4,078,000
Land held for development	973,000	973,000
Investment in real estate, net	$ 5,091,000	$ 5,051,000

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INVESTMENT IN MARKETABLE SECURITIES (Details) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016
Investment - Corporate Equities
Net Unrealized Loss	$ 305,000	$ 201,000
Fair Value	7,740,000		$ 6,358,000
Equity Securities [Member]
Investment - Corporate Equities
Cost	11,672,000		10,613,000
Gross Unrealized Gain	393,000		435,000
Gross Unrealized Loss	(4,325,000)		(4,690,000)
Net Unrealized Loss	(3,932,000)		(4,255,000)
Fair Value	$ 7,740,000		$ 6,358,000

XML

INVESTMENT IN MARKETABLE SECURITIES (Details 1) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Schedule of Trading Securities and Other Trading Assets [Line Items]
Realized gain (loss) on marketable securities	$ 120,000	$ (23,000)
Unrealized gain on marketable securities	305,000	201,000
Net gain on marketable securities	$ 425,000	$ 178,000

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INVESTMENT IN MARKETABLE SECURITIES (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016
Schedule of Trading Securities and Other Trading Assets [Line Items]
Trading Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	$ 1,814,000	$ 1,770,000
Percentage Of Investment Marketable Securities	64.00%	74.00%

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OTHER INVESTMENTS, NET (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Other Investment [Line Items]
Other investments, net	$ 611,000	$ 621,000
Other preferred stock, at cost [Member]
Other Investment [Line Items]
Other investments, net	43,000	53,000
Warrants - at fair value [Member]
Other Investment [Line Items]
Other investments, net	0	0
Private equity hedge fund, at cost [Member]
Other Investment [Line Items]
Other investments, net	$ 568,000	$ 568,000

XML

FAIR VALUE MEASUREMENTS (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment in marketable securities	$ 7,740,000	$ 6,358,000
Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets, Fair Value Disclosure	7,740,000	6,358,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment in marketable securities	7,740,000	6,358,000
Basic materials [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment in marketable securities	4,962,000	4,684,000
Financial services [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment in marketable securities	514,000	366,000
Other [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment in marketable securities	1,532,000	575,000
Energy [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Investment in marketable securities	$ 732,000	$ 733,000

XML

FAIR VALUE MEASUREMENTS (Details 1) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other non-marketable investments	$ 611,000		$ 621,000
Net loss	(10,000)	$ 0
Other Investments [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other non-marketable investments	$ 611,000		$ 621,000

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SEGMENT INFORMATION (Details) - USD ($)	3 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jun. 30, 2016
Segment Reporting Information [Line Items]
Revenues	$ 14,695,000	$ 15,261,000
Segment operating expenses	(10,549,000)	(11,555,000)
Segment income (loss)	3,434,000	2,950,000
Loss on disposal of assets	0	(30,000)
Interest expense - mortgage	(2,011,000)	(1,965,000)
Depreciation and amortization expense	(712,000)	(756,000)
Income from investments	370,000	84,000
Income tax expense	(705,000)	(443,000)
Net income (loss)	1,088,000	596,000
Total assets	72,334,000	74,208,000	$ 73,862,000
Hotel Operations [Member]
Segment Reporting Information [Line Items]
Revenues	14,605,000	15,138,000
Segment operating expenses	(10,256,000)	(11,193,000)
Segment income (loss)	4,349,000	3,945,000
Loss on disposal of assets		(30,000)
Interest expense - mortgage	(1,988,000)	(1,941,000)
Depreciation and amortization expense	(688,000)	(737,000)
Income from investments	0	0
Income tax expense	0	0
Net income (loss)	1,673,000	1,237,000
Total assets	47,207,000	48,321,000
Real Estate Operations [Member]
Segment Reporting Information [Line Items]
Revenues	90,000	123,000
Segment operating expenses	(48,000)	(64,000)
Segment income (loss)	42,000	59,000
Loss on disposal of assets		0
Interest expense - mortgage	(23,000)	(24,000)
Depreciation and amortization expense	(24,000)	(19,000)
Income from investments	0	0
Income tax expense	0	0
Net income (loss)	(5,000)	16,000
Total assets	5,091,000	5,015,000
Investment Transactions [Member]
Segment Reporting Information [Line Items]
Revenues	0	0
Segment operating expenses	0	0
Segment income (loss)	0	0
Loss on disposal of assets		0
Interest expense - mortgage	0	0
Depreciation and amortization expense	0	0
Income from investments	370,000	84,000
Income tax expense	0	0
Net income (loss)	370,000	84,000
Total assets	8,351,000	9,612,000
Other Property [Member]
Segment Reporting Information [Line Items]
Revenues	0	0
Segment operating expenses	(245,000)	(298,000)
Segment income (loss)	(245,000)	(298,000)
Loss on disposal of assets		0
Interest expense - mortgage	0	0
Depreciation and amortization expense	0	0
Income from investments	0	0
Income tax expense	(705,000)	(443,000)
Net income (loss)	(950,000)	(741,000)
Total assets	$ 11,685,000	$ 11,260,000