LIQUIDITY

12 Months Ended

Jun. 30, 2025

NOTE 2 – LIQUIDITY

Historically, the Company has relied primarily on cash flows generated from operations at its hotel property, the Hilton San Francisco Financial District (the “Hotel”), as its primary source of liquidity. However, the pace of recovery in the San Francisco hospitality market remains slower than anticipated due to several factors, including a sustained decline in business travel driven by remote work trends, as well as broader municipal challenges such as safety concerns, homelessness, and increased crime. These conditions have limited demand in key customer segments and shifted the Hotel’s revenue base toward lower-yielding leisure travel.

As a result, the Company experienced net cash used in operating activities of $2,148,000 as of June 30, 2025. In response to ongoing market pressures, the Company has adopted several capital preservation initiatives, including deferral of non-essential capital projects, temporary suspension of certain Hotel services, renegotiation of vendor agreements, and reduction of controllable operating expenses. During the same period, the Company continued to invest in property enhancements, incurring capital expenditure of $2,252,000 including the renovation of 14 additional guest rooms that had been converted from administrative offices to return them to inventory.

As of June 30, 2025, the Company had:

	●	Cash and cash equivalents of $4,470,000 (compared to $3,511,000 as of June 30, 2024),
	●	Restricted cash of $7,252,000 (compared to $1,264,000 as of June 30, 2024), and
	●	Marketable securities, net of margin balances, of $127,000 (compared to $209,000 as of June 30, 2024).

These securities are considered liquid and available for short-term needs.

Related Party Financing

To supplement its liquidity position, the Company maintains access to an unsecured loan facility with its parent company, The InterGroup Corporation (“InterGroup”), a related party. The initial facility, dated July 2, 2014, has undergone several amendments.

In March 2025, the facility was amended to:

	●	Increase the available borrowing capacity to $40,000,000, and
	●	Extend the maturity date to July 31, 2027.

In May 2025, the facility was amended to:

●

Reduction of interest rate from 12% to 9%.

During the year ended June 30, 2025, the Company borrowed an additional $11,615,000 under this facility. As of June 30, 2025, the outstanding loan balance was $38,108,000, with no principal repayments made to date. Principal and accrued interest are due in full at maturity; no monthly principal or interest payments are required prior to that date.

To further enhance liquidity flexibility, the Company may consider amending its by-laws to authorize the issuance of additional shares for potential equity capital raises, should public market conditions permit.

Liquidity Outlook

The Company remains current on all debt service obligations, and management’s forecasts indicate adequate liquidity for the twelve-month period following the issuance of these financial statements.

Forward-looking risks remain primarily tied to the performance of the San Francisco hospitality market, including:

	●	The pace of recovery in business travel,
	●	Competitive dynamics among local hotels,
	●	Broader municipal issues affecting the city’s perception among travelers, and
	●	Potential impacts from macroeconomic trends on leisure travel demand.

Management will continue to monitor these market-specific conditions and adjust operations, capital allocation, and marketing strategies to maintain the Hotel’s competitive position.

The following table provides a summary as of June 30, 2025, of the Company’s material financial obligations which also includes interest:

			Year		Year		Year		Year		Year
	Total		2026		2027		2028		2029		2030		Thereafter
Mortgage notes payable	$	103,300,000	$	-	$	103,300,000	$	-	$	-	$	-	$	-
Hilton/Aimbridge other notes payable		1,979,000		567,000		463,000		317,000		317,000		315,000		-
Related party notes payable		38,108,000		-		-		38,108,000		-		-		-
Interest mortgage notes payable		19,693,000		8,916,000		10,777,000		-		-		-		-
Interest related party notes payable		17,053,000		4,580,000		4,573,000		7,900,000		-		-		-
Total	$	180,133,000	$	14,063,000	$	119,113,000	$	46,325,000	$	317,000	$	315,000	$	-

Mortgage Notes Payable

Operating entered into a $67,000,000 Mortgage Loan Agreement with Prime. The loan bears interest at SOFR + 4.75%, with a SOFR cap of 4.50%, and is interest-only through maturity. Matures April 9, 2027, with three one-year extension options, subject to satisfaction of financial and operational covenants. The Interest Rate Cap caps Term SOFR at 4.50% and has a notional amount equal to or greater than the outstanding principal balance of the loan. The Company paid a premium of approximately $136,000 for the cap at inception. The loan is secured by the Hotel. Mezzanine executed a modified Mezzanine Loan Agreement with CRED REIT Holdco LLC for a principal amount of $36,300,000. The loan accrues interest at a fixed rate of 7.25% per annum, on matching maturity and extension terms to the senior loan. The loan is secured by Mezzanine’s membership interest in Operating.

Related Party Notes Payable

Principal and accrued interest are due in full at maturity; no monthly principal or interest payments are required prior.