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RELATED PARTY TRANSACTIONS
 12 Months Ended
Jun. 30, 2025
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 14 – RELATED PARTY TRANSACTIONS

 

Related Party Credit Facility – InterGroup

 

The Company maintains an unsecured revolving credit facility with its majority shareholder, The InterGroup Corporation (“InterGroup”). While the facility remains available, management is not currently relying on it to fund ongoing Hotel operations, which—following the March 28, 2025 refinancing—have been self-funding from operating cash flows.

 

Key modifications include:

 

  ● December 2021: Portsmouth assumed $11.35 million in outstanding debt upon the dissolution of Justice Investors L.P.
  ● July 2023: Increased available borrowings to $20,000,000 and extended maturity to July 31, 2025 with a 0.5% loan modification fee.
  ● March 2024: Increased available borrowings to $30,000,000 with a 0.5% loan modification fee
  ● March 2025: Further increased available borrowing capacity to $40,000,000 and extended the maturity to July 31, 2027.
  ● May 2025: Reduction of interest rate from 12% to 9%.

 

 

The facility now bears interest at 9% and does not require monthly principal or interest payments; instead, accrued interest and principal are payable in full at maturity. The loan may be prepaid at any time without penalty. During the fiscal year ended June 30, 2025, the Company borrowed an additional $11,615,000 primarily to fund certain requirements due in connection with the Hotel’s March 2025 refinancing, including senior mortgage principal paydown, the establishment of lender-required $5 million escrow reserves for potential hotel operating shortfalls, and approximately $1.350 million in capital improvement reserves to complete the conversion of 14 guest rooms that had been used as administrative offices for decades and are now being returned to guest inventory. As of June 30, 2025, the outstanding balance was $38,108,000. The facility is maintained as a contingent source of liquidity; management currently expects to meet near-term working capital needs from operating cash flows and cash on hand.

 

The Company may also consider amending its by-laws to increase authorized shares and pursue public capital market offerings if deemed necessary to support liquidity.

 

Certain shared costs and expenses, primarily administrative expenses, rent and insurance are allocated between the Company and InterGroup based on management’s estimate of the pro rata utilization of resources. For the years ended June 30, 2025 and 2024, these expenses were approximately $144,000 for each year.

 

All of the Company’s Directors serve as directors of InterGroup.

 

As Chairman of the Executive Strategic Real Estate and Securities Investment Committee and Chief Executive Officer (CEO), John V. Winfield, directs the investment activity of the Company in public and private markets pursuant to authority granted by the Board of Directors. Mr. Winfield also serves as President, Chief Executive Officer, and Chairman of InterGroup and oversees the investment activity of InterGroup. Effective June 2016, Mr. Winfield became the Managing Director of Justice until its dissolution in December 2021. Depending on certain market conditions and various risk factors, the Chief Executive Officer and InterGroup may, at times, invest in the same companies in which the Company invests. Such investments align the interests of the Company with the interests of these related parties because it places the personal resources of the Chief Executive Officer and the resources of InterGroup at risk in substantially the same manner as the Company in connection with investment decisions made on behalf of the Company.