NOTE 10 – MORTGAGE AND MEZZANINE LOANS

The Hotel senior mortgage and mezzanine loans are obligations of Portsmouth Square, Inc. (“Portsmouth”) subsidiaries Justice Operating Company, LLC (“Operating”) and Justice Mezzanine Company, LLC (“Mezzanine”), respectively. These loans are secured at the Hotel-subsidiary level and are generally non-recourse to InterGroup except for obligations covered by the guaranties described below. InterGroup’s non-Hotel real estate mortgages are obligations of InterGroup or its property-owning subsidiaries and are described separately below.

Obligor and recourse overview (as of and for the periods presented):

Current Senior Mortgage and Mezzanine Loans

On March 28, 2025, Justice Operating Company, LLC (“Operating”) entered into a $67,000,000 senior mortgage loan with Prime Finance Short Duration Holding Company 9, LLC (“Prime”), and Justice Mezzanine Company, LLC (“Mezzanine”) amended and restated its mezzanine loan with CRED REIT Holdco LLC in the principal amount of $36,300,000. The prior senior mortgage loan was repaid in full in connection with the refinancing.

The senior mortgage loan bears interest at a floating rate equal to the greater of 7.65% or Term SOFR plus 4.75% and is interest-only through its initial maturity date of April 9, 2027. The loan is secured by the Hotel. Operating is required to maintain interest-rate protection that currently caps Term SOFR at 4.50%. See Note 7 – Fair Value Measurements.

The mezzanine loan bears interest at a fixed rate of 7.25% through March 28, 2027 and 11.25% beginning March 29, 2027. It has an initial maturity date of April 9, 2027 and is secured by Mezzanine’s ownership interests in the entity that directly or indirectly owns Operating.

Extension Options

The senior mortgage and mezzanine loan agreements provide for three one-year extension options through April 9, 2028, April 9, 2029 and April 9, 2030, subject to satisfaction of specified conditions. Notice of an extension must generally be provided not less than 30 days and not more than 90 days before the then-scheduled maturity date.

For the first extension through April 9, 2028, the senior mortgage loan requires, among other conditions, a Debt Service Coverage Ratio (“DSCR”) of at least 1.10:1.00, calculated as of the last day of the calendar month immediately preceding the initial maturity date. The loan agreement expressly provides that no Debt Yield requirement applies to the first extension.

If DSCR is below 1.10:1.00 at the applicable first-extension measurement date, Operating may satisfy the DSCR condition by depositing additional funds into the lender-controlled Carry Reserve in an amount sufficient to achieve a pro forma DSCR of at least 1.10:1.00, provided the other extension conditions are satisfied or waived.

The second and third senior-loan extensions are subject to Debt Yield requirements of 13% and 14% and DSCR requirements of 1.40:1.00 and 1.50:1.00, respectively, together with the other conditions specified in the loan agreement. The mezzanine loan contains corresponding extension provisions, including the requirement that the senior mortgage loan be extended.

As of June 30, 2026, the Portsmouth and its applicable subsidiaries were in compliance with all applicable covenants under the senior mortgage and mezzanine loan agreements. Based on management’s application of the methodology set forth in the senior loan agreement, the Hotel’s calculated DSCR was approximately 1.45:1.00 as of June 30, 2026, compared with the 1.10:1.00 requirement applicable to the first extension. Management currently expects Portsmouth to exercise the first extension option. See Note 2 – Liquidity.

Cash Management Arrangement

Under the March 28, 2025, senior mortgage loan, Hotel cash receipts are deposited into lender-controlled accounts pursuant to a cash-management arrangement.

Release from the cash-management arrangement requires, among other conditions, Prime’s determination that the Hotel has achieved a Debt Yield of at least 11% and a DSCR of at least 1.10:1.00 for two consecutive applicable calculation dates.

Based on management’s application of the loan-agreement methodology, the Hotel’s calculated trailing-twelve-month DSCR and Debt Yield were approximately 1.45:1.00 and 13.9%, respectively, as of June 30, 2026. However, satisfaction of the cash-management release conditions is determined by Prime, and Prime had not confirmed that the applicable release conditions had been satisfied. Accordingly, the cash-management arrangement remained in effect as of June 30, 2026. The continued operation of the cash-management arrangement does not constitute a default or noncompliance with the Company’s loan covenants.

Funds in the cash-management arrangement are applied to operating expenses, debt service, lender-required reserves and other amounts in accordance with the applicable loan documents.

2025 Debt Extinguishment

The March 2025 amendment and restatement of the mezzanine loan was accounted for as a debt extinguishment under ASC 470-50. In connection with the transaction, CRED REIT Holdco LLC waived a $245,000 deferred forbearance fee and approximately $1,171,000 of accrued default interest. The Company recognized a gain on extinguishment of debt of approximately $1,416,000 during the year ended June 30, 2025.

Limited 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 are generally non-recourse, subject to specified recourse liabilities and performance obligations. Portsmouth and InterGroup each provide limited guaranties of specified recourse obligations under the senior mortgage and mezzanine loan documents. The guaranties may become full recourse upon the occurrence of specified springing-recourse events under the applicable loan documents.

InterGroup Real Estate Mortgages (Non-Hotel)

These non-Hotel property mortgages are obligations of InterGroup or its property-owning subsidiaries and are separate from, and not cross-defaulted with, the Hotel-level financing of Portsmouth’s subsidiaries.

The Company’s mortgage and mezzanine loans are secured by the applicable collateral described above. As of June 30, 2026 and 2025, the loans were as follows:

 SCHEDULE OF MORTGAGE NOTE PAYABLE

Contractual Maturities

Contractual maturities as of June 30, 2026 were as follows:

 SCHEDULE OF CONTRACTUAL MATURITIES