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MORTGAGE NOTES PAYABLE | 12 Months Ended
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Jun. 30, 2025
Debt Disclosure [Abstract] |
MORTGAGE NOTES PAYABLE | NOTE 10 – MORTGAGE NOTES PAYABLE Presentation and borrower entities unless otherwise noted, “the Company” refers to The InterGroup Corporation on a consolidated basis. The Hotel mortgage and mezzanine debt described in Sections A–E are obligations of Portsmouth Square, Inc. (“Portsmouth”) subsidiaries Justice Operating Company, LLC (“Operating”), and Justice Mezzanine Company, LLC (“Mezzanine”). These loans are secured at the Hotel-subsidiary level and are non-recourse to InterGroup except to the extent of limited guaranties described in Section D. InterGroup’s separate real estate mortgages (non-Hotel) are presented in Section F. Obligor and recourse overview (as of and for the periods presented):
Facility |  | Primary obligor |  | Collateral |  | Recourse to InterGroup
Hilton San Francisco Financial District – senior mortgage |  | Justice Operating Company, LLC (Portsmouth subsidiary) |  | Hotel and related assets |  | Limited guaranty by Portsmouth; InterGroup as additional guarantor (see Section D)
Hilton San Francisco Financial District – mezzanine |  | Justice Mezzanine Company, LLC (Portsmouth subsidiary) |  | Equity interests in Operating |  | Limited guaranty by Portsmouth; InterGroup as additional guarantor (see Section D)
InterGroup non-hotel property mortgages (e.g., Florence, KY; St. Louis, MO; Las Colinas, TX) |  | InterGroup or its property-owning subsidiaries (non-Portsmouth) |  | Related multifamily/commercial properties |  | Obligations of InterGroup (parent-level real estate portfolio)
A. Mortgage and Mezzanine Loan History In December 2013, Justice Investors Limited Partnership (“Justice”), then a consolidated subsidiary of Portsmouth, obtained a $97,000,000 mortgage loan and a $20,000,000 mezzanine loan to fund the redemption of limited partnership interests and repay a prior $42,940,000 mortgage loan. The mortgage loan was secured by Portsmouth’s principal asset, the Hilton San Francisco Financial District (the “Hotel”), and bore interest at 5.275% per annum. The loan required interest-only payments through January 2017 and began amortizing thereafter on a 30-year schedule, maturing on January 1, 2024. The mortgage loan was guaranteed in part by Portsmouth. The mezzanine loan, originally bearing interest at 9.75% per annum and maturing concurrently with the senior loan, was secured by the membership interests of Justice Operating Company, LLC (“Operating”), held by Justice Mezzanine Company, LLC (“Mezzanine”), and was subordinated to the mortgage debt. The mezzanine loan was refinanced in July 2019 through a new agreement with CRED REIT Holdco LLC (“Mezzanine Lender”) in the amount of $20,000,000, at a reduced fixed interest rate of 7.25%, also maturing on January 1, 2024. As of June 30, 2024, the outstanding senior mortgage loan balance was $76,962,000. As of December 31, 2024, the outstanding balance was $75,789,000. B. Forbearance Agreements and Defaults Due to the maturity of both loans on January 1, 2024, and the absence of full repayment by that date, Portsmouth (through Operating and Mezzanine) negotiated forbearance agreements with both lenders on April 29, 2024. Mortgage Loan Forbearance Agreement (U.S. Bank and others, the “Mortgage Lender”):
| ● | Provided forbearance through January 1, 2025, assuming no termination event.
| ● | Required a 10% principal paydown of $8,590,000.
| ● | Included accrual of 4% default interest, retroactive to January 1, 2024, payable upon final maturity or prepayment.
| ● | Included a 1% forbearance fee of $859,000, paid at execution.
| ● | Operating continued timely monthly payments during the forbearance period.
| ● | Guaranteed by Portsmouth.
Mezzanine Loan Forbearance Agreement (CRED REIT Holdco LLC):
| ● | Provided forbearance through January 1, 2025, contingent on no termination event.
| ● | Mezzanine Lender advanced $4.5 million to cover the senior loan principal paydown.
| ● | Required 4% default interest accrual and a 1% forbearance fee ($245,000), both payable at final maturity or prepayment.
| ● | No payments were required during the forbearance period.
| ● | Guaranteed by Portsmouth.
Both agreements contained customary covenants, events of default, and representations and warranties. On January 3, 2025, Operating received a Notice of Termination from the Mortgage Lender, citing a termination event for failure to repay the debt by the forbearance expiration. On January 14, 2025, the Mezzanine Lender issued a Notice of Default, asserting its rights to pursue all remedies under the agreement. These defaults were the primary contributors to Portsmouth’s substantial doubt assessment under ASC 205-40, as disclosed in Note 2 – Liquidity. C. Debt Refinancing Completed on March 28, 2025 On January 21, 2025, Portsmouth executed a non-binding term sheet with Prime Finance (“Prime”) for a new senior loan. On March 28, 2025, Portsmouth’s subsidiaries closed on both a senior mortgage loan and modified mezzanine loan (collectively, the “Loan Agreements”), fully retiring the prior debt with U.S. Bank and CRED REIT Holdco LLC. In connection with the March 28, 2025 closing, all prior guaranties and credit documents related to the 2013/2017 facilities were terminated and replaced by the 2025 senior Loan Agreement and amended mezzanine documents.
| ● | Senior Mortgage Loan (PRIME Finance): Justice Operating Company, LLC entered into a $67,000,000 mortgage loan. The loan bears interest at a floating rate equal to the greater of (i) 7.65% or (ii) the Benchmark (initially Term SOFR) + 4.75% (the “Spread”); and is interest-only through maturity. Matures April 9, 2027, with three one-year extension options (2028, 2029 and 2030) subject to customary conditions (including satisfaction of financial/operational covenants and maintenance/renewal of required rate protection). Upon an Event of Default, the contractual default rate is the Interest Rate + 5%. The loan is secured by the Hotel. Concurrently, Operating purchased a two-year interest-rate cap that caps Term SOFR at 4.50% and must be maintained or replaced for any extension period. Operating paid a premium of approximately $136,000 for the rate cap.
| ● | Mezzanine Loan (Amended and Restated). Justice Mezzanine Company, LLC executed an amended and restated mezzanine loan with CRED REIT Holdco LLC in the principal amount of $36,300,000. The loan bears interest at a fixed 7.25% per annum through March 28, 2027, and 11.25% thereafter, and shares the April 9, 2027 stated maturity with the senior loan, with extension mechanics that align with the senior facility’s extensions (subject to conditions, including the senior loan being extended). The mezzanine loan is secured by a pledge of Mezzanine’s membership interest in Operating; the mezzanine default rate is the Interest Rate + 4%. The loan modifications were material in nature and therefore the transaction under ASC 470-50 accounted for as an extinguishment. The lender agreed to waive a forbearance fee of $245,000 and default interest of approximately $1.17 million, for a total waiver of $1.416 million. The waived amounts were recorded as a gain on extinguishment of debt.
| ● | Obligor/Guarantor structure. The senior mortgage is an obligation of Operating, and the mezzanine loan is an obligation of Mezzanine. Neither loan is a general obligation of InterGroup.
Portsmouth continues to provide a limited guaranty in connection with both facilities. These borrower entities are also subject to customary covenants, including financial ratios and affirmative obligations. Copies of the senior Loan Agreement, the Mezzanine Loan Amendment, and the Cash Management Agreement are incorporated by reference to the Annual Report on Form 10-K of Portsmouth Square, Inc. for the fiscal year ended June 30, 2025 (see Item 15(a)(3)-Exhibits. D. Guaranties Under the March 28, 2025, refinancing, all guaranties associated with the prior 2013 senior mortgage and 2019 mezzanine facilities were terminated. The current senior mortgage and amended mezzanine facilities include customary limited non-recourse carve-out and performance undertakings provided at the Portsmouth/operating-entity level. InterGroup is not a guarantor of the March 28, 2025, senior mortgage loan or the amended mezzanine loan. E. DSCR and Lockbox Arrangements Operating has ongoing DSCR, cash-trap and other covenant requirements under the refinanced loans. Under the March 28, 2025 refinancing, a Cash Management Agreement with Prime Finance (“Lender”) and Wells Fargo Bank, N.A. (“Cash Management Bank”) requires that all Hotel cash receipts be deposited into a lender-controlled account. This lockbox arrangement remains in effect as provided in the loan documents and related intercreditor arrangements. Funds are disbursed for approved operating expenses, debt service (including senior interest-only), and required reserves (insurance, real estate taxes, and furniture, fixtures and equipment) in accordance with lender-approved budgets. Excess cash, if any, is applied in accordance with the senior waterfall and intercreditor agreement, which may limit current-pay to the mezzanine lender or upstream distributions. These cash-management provisions apply only to the Hotel’s financing at Portsmouth’s subsidiaries; they do not restrict InterGroup’s non-Hotel properties. F. InterGroup Real Estate Mortgages (Non-Hotel) During the fiscal year ending June 30, 2025, InterGroup refinanced the mortgage on its 157-unit apartment located in Florence, Kentucky in the amount of $9,800,000. The term of the loan is approximately 10 years with an interest rate at 5.40%. The loan matures in January 2035. In May 2025 InterGroup amended the agreement on our St. Louis, Missouri property to new loan maturity of June 5, 2028. In May 2025 InterGroup made a principal reduction payment of $344,000. During the fiscal year ending June 30, 2024, InterGroup obtained a second mortgage on its 358-unit apartment located in Las Colinas, Texas in the amount of $4,573,000. The term of the loan is approximately 7 years with interest rate at 7.60%. These non-Hotel property mortgages are obligations of InterGroup (parent-level real estate portfolio) and are separate from, and not cross-defaulted with, the Hotel-level financing of Portsmouth’s subsidiaries. Each mortgage notes payable is secured by real estate or the Hotel. As of June 30, 2025 and 2024, the mortgage notes payables are summarized as follows: SCHEDULE OF MORTGAGE NOTE PAYABLE
|  | As of June 30, 2025 |  |  |  |  |  |
|  | Number |  | Note |  | Note |  | Mortgage |  |
Property |  | of Units |  | Origination Date |  | Maturity Date |  | Balance |  | Interest Rate
SF Hotel |  | 544 rooms |  | March 2025 |  | April 2027 |  | $ | 67,000,000 |  |  |  | Variable at the greater of 7.65% or (Term SOFR + 4.75%) (a) |
SF Hotel |  | 544 rooms |  | March 2025 |  | April 2027 |  |  | 36,300,000 |  |  |  | 7.25% fixed through 03/28/2027; 11.25 thereafter |
|  |  |  | Mortgage notes payable – Hotel |  |  |  |  | 103,300,000 |  |  |  |  |
|  |  |  | Debt issuance costs |  |  |  |  | (1,781,000 | ) |  |  |  |
|  |  |  | Total mortgage notes payable – Hotel |  |  |  | $ | 101,519,000 |  |  |  |  |
Florence |  | 157 |  | December 2024 |  | January 2035 |  | $ | 9,800,000 |  |  |  | 5.40 | %
Las Colinas |  | 358 |  | October 2021 |  | November 2031 |  |  | 28,800,000 |  |  |  | 2.95 | %
Las Colinas |  | 358 |  | December 2023 |  | November 2031 |  |  | 4,573,000 |  |  |  | 7.60 | %
Morris County |  | 151 |  | April 2020 |  | May 2030 |  |  | 16,392,000 |  |  |  | 3.17 | %
St. Louis |  | 264 |  | May 2023 |  | May 2028 |  |  | 4,950,000 |  |  |  | 8.60 | %
Los Angeles |  | 4 |  | July 2021 |  | July 2051 |  |  | 1,064,000 |  |  |  | 3.50 | %
Los Angeles |  | 2 |  | July 2021 |  | July 2051 |  |  | 644,000 |  |  |  | 3.50 | %
Los Angeles |  | 1 |  | June 2021 |  | August 2051 |  |  | 847,000 |  |  |  | 3.50 | %
Los Angeles |  | 31 |  | October 2020 |  | November 2030 |  |  | 7,907,000 |  |  |  | 2.52 | %
Los Angeles |  | 30 |  | June 2022 |  | July 2052 |  |  | 5,558,000 |  |  |  | 4.40 | %
Los Angeles |  | 14 |  | January 2021 |  | February 2031 |  |  | 2,522,000 |  |  |  | 3.05 | %
Los Angeles |  | 12 |  | June 2016 |  | June 2026 |  |  | 1,863,000 |  |  |  | 3.59 | %
Los Angeles |  | 9 |  | June 2020 |  | July 2030 |  |  | 2,326,000 |  |  |  | 3.09 | %
Los Angeles |  | 9 |  | November 2020 |  | December 2030 |  |  | 1,803,000 |  |  |  | 3.05 | %
Los Angeles |  | 8 |  | July 2021 |  | July 2051 |  |  | 1,469,000 |  |  |  | 3.50 | %
Los Angeles |  | 7 |  | August 2012 |  | September 2042 |  |  | 715,000 |  |  |  | 3.75 | %
Los Angeles |  | 4 |  | June 2021 |  | August 2051 |  |  | 1,064,000 |  |  |  | 3.50 | %
Los Angeles |  | 1 |  | June 2021 |  | August 2051 |  |  | 511,000 |  |  |  | 3.50 | %
Los Angeles |  | 4 |  | July 2021 |  | August 2051 |  |  | 766,000 |  |  |  | 3.50 | %
Los Angeles |  | 1 |  | September 2018 |  | October 2048 |  |  | 886,000 |  |  |  | 3.50 | %
|  |  |  | Mortgage notes payable – real estate |  |  |  |  | 94,460,000 |  |  |  |  |
|  |  |  | Debt issuance costs |  |  |  |  | (865,000 | ) |  |  |  |
|  |  |  | Total mortgage notes payable – real estate |  |  |  | $ | 93,595,000 |  |  |  |  |
|  | As of June 30, 2024 |  |  |  |  |  |  |  |
|  | Number |  | Note |  | Note |  | Mortgage |  |  | Interest |
Property |  | of Units |  | Origination Date |  | Maturity Date |  | Balance |  |  | Rate |
SF Hotel |  | 544 rooms |  | December 2013 |  | January 2025 |  | $ | 76,962,000 |  |  |  | 5.28 | %
|  |  |  |  |  |  |  |  |  |  |  |  | plus 4% default rate |
SF Hotel |  | 544 rooms |  | July 2019 |  | January 2025 |  |  | 24,500,000 |  |  |  | 7.25 | %
|  |  |  |  |  |  |  |  |  |  |  |  | plus default rate |
|  |  |  | Mortgage notes payable – Hotel |  |  |  |  | 101,462,000 |  |  |  |  |
|  |  |  | Debt issuance costs |  |  |  |  | (679,000 | ) |  |  |  |
|  |  |  | Total mortgage notes payable – Hotel |  |  |  | $ | 100,783,000 |  |  |  |  |
Florence |  | 157 |  | March 2015 |  | April 2025 |  | $ | 2,834,000 |  |  |  | 3.87 | %
Las Colinas |  | 358 |  | October 2021 |  | November 2031 |  |  | 28,800,000 |  |  |  | 2.95 | %
Las Colinas |  | 358 |  | December 2023 |  | November 2031 |  |  | 4,573,000 |  |  |  | 7.60 | %
Morris County |  | 151 |  | April 2020 |  | May 2030 |  |  | 16,807,000 |  |  |  | 3.17 | %
St. Louis |  | 264 |  | May 2013 |  | May 2025 |  |  | 5,355,000 |  |  |  | 8.60 | %
Los Angeles |  | 4 |  | July 2021 |  | July 2051 |  |  | 1,088,000 |  |  |  | 3.50 | %
Los Angeles |  | 2 |  | July 2021 |  | July 2051 |  |  | 659,000 |  |  |  | 3.50 | %
Los Angeles |  | 1 |  | June 2021 |  | August 2051 |  |  | 867,000 |  |  |  | 3.50 | %
Los Angeles |  | 31 |  | October 2020 |  | November 2030 |  |  | 8,102,000 |  |  |  | 2.52 | %
Los Angeles |  | 30 |  | June 2022 |  | July 2052 |  |  | 5,662,000 |  |  |  | 4.40 | %
Los Angeles |  | 14 |  | January 2021 |  | February 2031 |  |  | 2,585,000 |  |  |  | 3.05 | %
Los Angeles |  | 12 |  | June 2016 |  | June 2026 |  |  | 1,919,000 |  |  |  | 3.59 | %
Los Angeles |  | 9 |  | June 2020 |  | July 2030 |  |  | 2,386,000 |  |  |  | 3.09 | %
Los Angeles |  | 9 |  | November 2020 |  | December 2030 |  |  | 1,848,000 |  |  |  | 3.05 | %
Los Angeles |  | 8 |  | July 2021 |  | July 2051 |  |  | 1,503,000 |  |  |  | 3.50 | %
Los Angeles |  | 7 |  | August 2012 |  | September 2042 |  |  | 733,000 |  |  |  | 3.75 | %
Los Angeles |  | 4 |  | June 2021 |  | August 2051 |  |  | 1,088,000 |  |  |  | 3.50 | %
Los Angeles |  | 1 |  | June 2021 |  | August 2051 |  |  | 523,000 |  |  |  | 3.50 | %
Los Angeles |  | 4 |  | July 2021 |  | August 2051 |  |  | 783,000 |  |  |  | 3.50 | %
Los Angeles |  | 1 |  | September 2018 |  | October 2048 |  |  | 910,000 |  |  |  | 3.50 | %
|  |  |  | Mortgage notes payable – real estate |  |  |  |  | 89,025,000 |  |  |  |  |
|  |  |  | Debt issuance costs |  |  |  |  | (852,000 | ) |  |  |  |
|  |  |  | Total mortgage notes payable – real estate |  |  |  | $ | 88,173,000 |  |  |  |  |
(a): |  | The Hotel senior loan includes an interest-rate floor (minimum 7.65%) and requires an interest-rate cap that caps Term SOFR at 4.50%; the mezzanine rate steps to 11.25% after 3/28/2027. Default-rate add-ons are +5% (senior) and +4% (mezzanine).
Future minimum payments for all mortgage notes payable are as follows: SCHEDULE OF FUTURE MINIMUM PAYMENT FOR MORTGAGE NOTES PAYABLE
For the year ending June 30, |  |  |  |
2026 |  | $ | 1,229,000 |
2027 |  |  | 106,663,000 |
2028 |  |  | 6,588,000 |
2029 |  |  | 1,845,000 |
2030 |  |  | 16,032,000 |
Thereafter |  |  | 65,403,000 |
Total Mortgage Notes Payable |  | $ | 197,760,000 |

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