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BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | 12 Months Ended
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Jun. 30, 2025
Accounting Policies [Abstract] |
BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | NOTE 1 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES Description of the Business The InterGroup Corporation, a Delaware corporation, (“InterGroup” or the “Company”) was formed to buy, develop, operate and dispose of real property and to engage in various investment activities to benefit the Company and its shareholders. Effective February 19, 2021, the Company’s 83.7% owned subsidiary, Santa Fe Financial Corporation (“Santa Fe”), a public company (OTC: SFEF), was liquidated and all of its assets including its 68.8% interest in Portsmouth Square, Inc. (“Portsmouth”), a public company (OTC: PRSI) were distributed to its shareholders in exchange for their Santa Fe common stock. In June 2022, InterGroup received distribution of $1,159,000 from Santa Fe as the entity received federal and state tax refunds from previously filed final tax returns. As of June 30, 2025, InterGroup owns approximately 75.9% of the outstanding common shares of Portsmouth and the Company’s President, Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of Portsmouth. Mr. Winfield also serves as the Chairman of the Board and Chief Executive Officer of Portsmouth. Portsmouth’s primary business has historically been conducted through its general and limited partnership interest in Justice Investors Limited Partnership, a California limited partnership (“Justice” or the “Partnership”). Effective July 15, 2021, Portsmouth completed the purchase of 100% of the limited partnership interest of Justice through the acquisition of the remaining 0.7% non-controlling interest. Effective December 23, 2021, the partnership was dissolved. The financial statements of Justice were consolidated with those of Portsmouth. Prior to its dissolution effective December 23, 2021, Justice owned and operated a 544-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 through its subsidiaries Justice Operating Company, LLC (“Operating”) and Justice Mezzanine Company, LLC (“Mezzanine”). Mezzanine was a wholly owned subsidiary of the Partnership; Operating was a wholly owned subsidiary of Mezzanine. Effective December 23, 2021, Portsmouth replaced Justice as the single member 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 a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030. Aimbridge Hospitality (“Aimbridge”) manages the Hotel, along with its five-level parking garage, under a certain hotel management agreement (the “HMA”) with Operating. The term of the management agreement is for an initial period of ten years commencing on February 3, 2017 and automatically renews for successive one (1) year periods, not to exceed five years in the aggregate, subject to certain conditions. Under the terms of the HMA, base management fee (“Basic Fee”) payable to Aimbridge equals one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge may be entitled to an annual incentive fee for each fiscal year equal to ten percent (10%) of the amount by which Gross Operating Profit in the current fiscal year exceeds the previous fiscal year’s Gross Operating Profit. In addition to the operations of the Hotel, the Company also generates income from the ownership of real estate and investments in marketable securities. Properties include apartment complexes, commercial real estate, and three single-family houses as strategic investments. The properties are located throughout the United States, but are concentrated in Texas and Southern California. The Company also has investments in unimproved real property. All of the Company’s residential rental properties are managed in-house. Principles of Consolidation The consolidated financial statements include the accounts of the Company and Portsmouth. All significant inter-company transactions and balances have been eliminated. The Company evaluates its interests in other entities to determine whether such entities are variable interest entities (“VIEs”) and consolidates any VIEs for which the Company is the primary beneficiary pursuant to ASC 810. Investment in Hotel, Net Property and equipment are stated at cost. Building improvements are depreciated on a straight-line basis over their useful lives ranging from 3 to 39 years. Furniture, fixtures, and equipment are depreciated on a straight-line basis over their useful lives ranging from 3 to 7 years. Repairs and maintenance are charged to expense as incurred. Costs of significant renewals and improvements are capitalized and depreciated over the shorter of the remaining estimated useful life or life of the asset. The cost of assets sold or retired, and the related accumulated depreciation are removed from the accounts; any resulting gain or loss is included in other income (expense). The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360. If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company records an impairment loss equal to the difference between the asset’s carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset becomes its new cost. For a depreciable asset, the new cost is depreciated over the asset’s remaining useful life. Generally, fair values are estimated using discounted cash flow, replacement cost or market comparison analyses. The process of evaluating for impairment requires estimates as to future events and conditions, which are subject to varying market and economic factors. Therefore, it is reasonably possible that a change in estimate resulting from judgments as to future events could occur which would affect the recorded amounts of the property. No impairment losses were recorded for the years ended June 30, 2025 and 2024. Investment in Real Estate, Net Rental properties are stated at cost less accumulated depreciation. Depreciation of rental property is provided on the straight-line method based upon estimated useful lives of 5 to 40 years for buildings and improvements and 5 to 10 years for equipment. Expenditures for repairs and maintenance are charged to expense as incurred and major improvements are capitalized. The Company also reviews its rental property assets for impairment. No impairment losses on the investment in real estate have been recorded for the years ended June 30, 2025 and 2024. The fair value of the tangible assets of an acquired property, which includes land, building and improvements, is determined by valuing the property as if it were vacant, and incorporates costs during the lease-up periods considering current market conditions and costs to execute similar leases such as lost rental revenue and tenant improvements. The value of tangible assets is depreciated using straight-line method based upon the assets estimated useful lives. Investment in Marketable Securities Marketable equity securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date in accordance with ASC 321; changes in fair value are recognized in earnings. Marketable debt securities, if any, are classified as trading and measured at fair value with changes recognized in earnings (ASC 320/ASC 825). Other Investments, Net Other investments include non-marketable securities (carried at cost, net of any impairment loss) and non-marketable debt instruments. The Company has no significant influence or control over the entities that issue these 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. For certain equity interests without readily determinable fair values, the Company applies the ASC 321 measurement alternative (cost less impairment, adjusted for observable price changes in orderly transactions). For the years ended June 30, 2025 and 2024, the Company recorded impairment losses related to other investments of $0 and $5,000, respectively. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased and are carried at cost, which approximates fair value. As of June 30, 2025 and 2024, the Company did not have any cash equivalents. Restricted Cash Restricted cash is comprised of amounts held by lenders for payment of real estate taxes, insurance, furniture, fixtures and equipment (“FF&E”) reserves, and amounts subject to cash-management lockbox arrangements under certain loan agreements. Other Assets Other assets include prepaid insurance, accounts receivable, prepaid expenses, and other miscellaneous assets. Accounts receivable from the Hotel and rental property customers are carried at cost less an allowance for doubtful accounts measured under ASC 326 (CECL) using historical loss experience, current conditions, and reasonable and supportable forecasts. As of June 30, 2025, and 2024, the accounts receivable was $525,000 and $654,000, respectively, net of allowance of $772,000 and $653,000 at June 30, 2025 and 2024, respectively. The Company extends unsecured credit to its customers but mitigates the associated credit risk by performing ongoing credit evaluations of its customers. Collection experience may be affected by local tenant-protection measures and economic conditions in the markets in which we operate. Due to Securities Broker The Company may utilize margin for its marketable securities purchases through the use of standard margin agreements with national brokerage firms. Various securities brokers have advanced funds to the Company for the purchase of marketable securities under standard margin agreements. These advanced funds are recorded as a liability and are collateralized by the related marketable securities; related interest is recognized in interest expense. Obligation for Securities Sold Obligations for securities sold short and written options are recognized as liabilities and measured at fair value with changes in fair value recognized in earnings (ASC 815/ASC 860). Short positions may be covered with current holdings or subsequent purchases. Accounts Payable and Other Liabilities Accounts payable and other liabilities include trade payables, advanced customer deposits, accrued wages, accrued real estate taxes, and other liabilities. Treasury Stock The Company records the acquisition of treasury stock under the cost method. During the years ended June 30, 2025 and 2024, the Company purchased 24,550 and 26,972 shares of treasury stock, respectively. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows: Level 1–inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2–inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. Level 3–inputs to the valuation methodology are unobservable and significant to the fair value. Assets Held for Sale – Accounting Policy (Continuing Operations) Long-lived assets are classified as held for sale when management commits to a plan to sell, the assets are available for immediate sale in their present condition, an active program to locate a buyer has been initiated, the sale is probable and expected to be completed within one year, and it is unlikely that the plan will be significantly changed or withdrawn. Upon classification as held for sale, the assets are measured at the lower of their carrying amount or fair value less costs to sell. Any loss resulting from remeasurement is recognized in the consolidated statements of operations. Depreciation of assets classified as held for sale ceases at the time of classification. Assets meeting the held-for-sale criteria are presented separately as Assets held for sale in the consolidated balance sheets. Because the planned sale does not represent a strategic shift that would have a major effect on the Company’s operations or financial results, the results of operations and cash flows of the property continue to be reported within continuing operations. No liabilities have been reclassified to Liabilities held for sale as the related obligations are not expected to transfer to the buyer. Interest Rate Cap The Company uses interest rate cap agreements to manage exposure to increases in interest rates on its variable-rate debt obligations. Interest rate cap premiums are recorded on the balance sheets at fair value on the date the agreements are executed and are subsequently remeasured to fair value at each reporting date. All changes in fair value are recognized in earnings within other income (expense). The Company is required, pursuant to certain debt agreements, to maintain interest rate caps for specified periods or replace them upon expiration. Revenue Recognition The Company recognizes revenue in accordance with ASC 606 (Hotel and ancillary services) and ASC 842 (real estate leasing) Performance Obligations We identified the following performance obligations for which revenue is recognized as the respective performance obligations are satisfied, which results in recognizing the amount we expect to be entitled to for providing the goods or services:
| ● | Cancelable room reservations or ancillary services are typically satisfied as the good or service is transferred to the hotel guest, which is generally when the room stay occurs.
| ● | Non-cancelable room reservations and banquet or conference reservations represent a series of distinct goods or services provided over time and satisfied as each distinct good or service is provided, generally over the reservation/event period; nonrefundable deposits are recognized as revenue when the related services are provided or when cancellation occurs consistent with the contract terms.
| ● | Other ancillary goods and services are purchased independently of the room reservation at standalone selling prices and are considered separate performance obligations, which are satisfied when the related good or service is provided to the hotel guest.
| ● | Components of package reservations for which each component could be sold separately to other hotel guests are considered separate performance obligations and are satisfied as set forth above. Consideration is allocated to performance obligations based on relative standalone selling prices.
Hotel revenue primarily consists of hotel room rentals, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales and other ancillary goods and services (e.g., parking). Revenue is recognized when rooms are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods and services are provided. For package reservations, the transaction price is allocated to the performance obligations within the package based on the estimated standalone selling prices of each component. Service charges are similar amounts collected from customers and are evaluated to determine whether the Company is acting as principal or agent. We do not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less. Due to the nature of our business, our revenue is not significantly impacted by refunds. Cash payments received in advance of guests staying at our hotel are refunded to hotel guests if the guest cancels within the specified time period, before any services are rendered. Refunds related to service are generally recognized as an adjustment to the transaction price at the time the hotel stay occurs or services are rendered. See Note 3 – Revenue. Revenue recognition from apartment rental commences when an apartment unit is placed in service and occupied by a rent-paying tenant. Apartment units are leased on a short-term basis, with no lease extending beyond one year. Rental income is recognized on a straight-line basis over the lease term; variable consideration (e.g., fees) is recognized as earned. Advertising Costs Advertising costs are expensed as incurred and are included in Hotel operating expenses in the consolidated statements of operations. Advertising costs were $263,000 and $150,000 for the years ended June 30, 2025 and 2024, respectively. Income Taxes Deferred income taxes are calculated under the liability method. Deferred income tax assets and liabilities are based on differences between the financial statement and tax basis of assets and liabilities at the current enacted tax rates. Changes in deferred income tax assets and liabilities are included as a component of income tax expense. Changes in deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets where realization is not likely. As of June 30, 2025 and 2024, the Company had $1,665,000 of unrecognized tax benefits, the recognition of which would affect the effective tax rate. Management does not expect these unrecognized tax benefits to reverse within the next twelve months. Interest and penalties related to income tax matters are recognized as a component of income tax expense, and no such amounts were recorded as of June 30, 2025 or June 30, 2024. Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the “more-likely-than-not” threshold based on the technical merits of the positions. Earnings Per Share Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. The computation of diluted net income per share is similar to the computation of basic net income per share except that the weighted-average number of common shares is increased to include the number of additional common shares that would have been outstanding if potential dilutive common shares had been issued. The basic and diluted earnings per share are the same for the fiscal year ended June 30, 2025 and 2024 because the Company had a net loss. Potentially dilutive securities were anti-dilutive for all periods presented. Use of Estimates The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Actual results may differ from those estimates. Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets and when appropriate, records tax valuation allowances based on that evidence and estimates. As of June 30, 2025 based on taxable income that may be available under tax law, the deferred tax asset is not more likely than not to be realized. Debt Issuance Costs Debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the debt liability and are amortized over the life of the debt. Loan amortization costs are included in interest expense in the consolidated statements of operations. Recently Issued and Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). We adopted ASU 2023-07 effective July 1, 2024 (fiscal 2025). The amendments expanded annual segment disclosure (including significant segment expenses and CODM measures) and will expand interim segment disclosures beginning in fiscal 2026. Adoption did not have a material impact on our consolidated financial statements, but resulted in enhanced segment disclosures. In December 2023, the FASB issued ASU No 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 (our fiscal 2026). We expect the standard to expand our income tax rate reconciliation and cash taxes paid disclosures; we do not expect a material impact on our consolidated financial position or results of operations. Going Concern Basis and Management’s Evaluation (ASC 205-40) – Subsidiary-Only (Portsmouth) The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP and on a going concern basis. InterGroup (the parent) has not had a going-concern uncertainty. The disclosure below is provided solely to summarize the going-concern matter at the Company’s majority-owned subsidiary, Portsmouth Square, Inc. (“Portsmouth”); it does not indicate or imply a going-concern issue for InterGroup. As disclosed in prior filings, Portsmouth’s senior mortgage and mezzanine loans secured by the Hilton San Francisco Financial District matured on January 1, 2024 and, after a forbearance period ended in January 2025, default notices were issued. These subsidiary-level factors raised substantial doubt about Portsmouth’s ability to continue as a going concern at that time. On March 28, 2025, Portsmouth completed a comprehensive refinancing of its senior mortgage and modified its mezzanine loan, resulting in extended maturities, favorable interest terms, and improved covenant compliance. Since closing, Portsmouth has remained current on required debt service and continued property upgrades intended to support performance. In March 2025 and May 2025, Portsmouth’s related-party revolving credit facility with InterGroup was amended to increase capacity to $40,000,000, extend maturity to July 31, 2027, and reduce the interest rate to 9%, providing contingency liquidity. (See the notes on mortgage notes payable and related-party financing for terms.) Management evaluated Portsmouth’s ability to continue as a going concern for the twelve months following issuance and concluded that the conditions and events that initially raised substantial doubt have been alleviated and that substantial doubt does not exist for Portsmouth as of issuance under ASC 205-40. While management believes available liquidity and cash generation are sufficient for near-term needs, uncertainties related to the San Francisco hospitality market and broader macroeconomic factors—including potential pressure on occupancy and RevPAR—could adversely affect Portsmouth’s results and, indirectly, consolidated liquidity (e.g., through covenant or cash-management constraints on distributions). Management will continue to monitor conditions and adjust operations and capital allocation as necessary. (See Item 7 MD&A and the notes on mortgage notes payable.) This disclosure relates to Portsmouth and reflects management’s fiscal year 2025 evaluation of that subsidiary; it does not modify or supersede going-concern disclosures in previously issued fiscal year 2024 financial statements and interim filings, and it does not indicate a going-concern uncertainty for InterGroup.

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