InterGroup Corporation — Form 10-Q
Reporting period: Quarter and six months ended December 31, 2020 (fiscal Q2 and first half of fiscal 2021). The unaudited consolidated results include the Hotel, real estate operations, and investment transactions.
Financial performance and position
- Quarter: Revenue was $6.663 million, down 64% from $18.740 million a year earlier. Consolidated net loss was $1.063 million, versus net income of $380,000. The loss attributable to InterGroup was $65,000, or $0.03 per basic share.
- Six months: Revenue was $13.572 million, down 64% from $37.886 million. Consolidated net income was $3.756 million, versus $1.024 million; net income attributable to InterGroup was $4.485 million, or $1.96 per basic share. Results included a $12.043 million gain on a real estate sale and $3.299 million net gain on marketable securities.
- Hotel: Revenue fell 79% year over year in both the quarter and half-year. Quarterly occupancy was 48% versus 98%, average daily rate was $107 versus $255, and RevPAR was $52 versus $250. Hotel operations recorded losses of $4.274 million for the quarter and $8.161 million for six months.
- Margins and operating costs: The Hotel had a $2.024 million quarterly operating loss before mortgage interest, depreciation and amortization, compared with $3.171 million of operating income a year earlier. Companywide operating loss was $2.311 million for the quarter. The filing does not provide a consolidated gross-margin percentage.
- Cash flow: Operating activities used $17.032 million in the six months, versus $2.429 million provided a year earlier. Investing activities provided $14.480 million, including $15.178 million of real estate sale proceeds; financing activities used $684,000. Cash, cash equivalents and restricted cash totaled $25.050 million at December 31, 2020.
- Balance sheet and debt: Total assets were $138.536 million and total liabilities were $209.273 million; shareholders’ deficit was $70.737 million. Cash and cash equivalents were $16.815 million, restricted cash $8.235 million, and marketable securities $22.008 million. Mortgage notes were about $180.013 million, SBA and other notes payable totaled $10.443 million, and finance lease obligations were $901,000. Total contractual obligations, including interest, were reported at $221.371 million.
Changes, outlook and risks
- COVID-19 restrictions and reduced travel sharply weakened Hotel demand. Management reported furloughs, minimum staffing, closure of several hotel services and outlets, expense reductions, and deferred capital expenditures. It cautioned that the pandemic’s duration and severity could materially adversely affect business, liquidity and results.
- Six-month earnings improved despite severe Hotel losses, primarily because of the Santa Monica property sale and marketable-securities gains. Securities gains include unrealized amounts and may fluctuate substantially; management cautions they have limited predictive value.
- Liquidity actions included property refinancings and sale proceeds. The company reported an undrawn $8 million CIBC revolving line of credit at quarter-end and additional property refinancing proceeds in January 2021. Justice and InterGroup each applied for full forgiveness of their CARES Act SBA loans, totaling $5.172 million; forgiveness had not been confirmed in the filing.
- Management believed available cash and potential funding sources would cover anticipated needs for at least 12 months, even if low Hotel occupancy and RevPAR persisted, but stated there was no guarantee its plan would succeed. The Hotel’s senior mortgage matures in January 2024; the mezzanine loan matures in January 2024. The filing also discusses potential covenant pressure from low Hotel occupancy.
- Santa Fe shareholders approved a plan to distribute its assets and liquidate the company. The stated distribution included Portsmouth shares and cash, subject to the plan’s terms and applicable taxes. A subsequent January 2021 refinancing generated approximately $1.057 million in net proceeds; another January refinancing generated approximately $1.0 million.
- No formal financial guidance is provided. The company reported no pending or threatened legal actions, no off-balance-sheet arrangements, and effective disclosure controls.
Key facts for investors to verify
- Whether Hotel demand, occupancy and RevPAR recover, and how long pandemic-related restrictions continue.
- Whether the two SBA loans receive forgiveness and whether the company can meet debt service and refinancing needs, particularly the 2024 Hotel loan maturities.
- How much of reported earnings reflects realized operating performance versus the property-sale gain and unrealized securities gains.
- The liquidity available after considering broker financing and securities-sale obligations, restricted cash, and ongoing cash use.
- The final timing, distribution amounts, tax treatment and completion of Santa Fe’s liquidation.