Intergroup Corp. (INTG, Financial) filed Annual Report for the period ended 2010-06-30.
Intergroup Corp. has a market cap of $38.46 million; its shares were traded at around $16.03 with and P/S ratio of 0.84.
of Santa Fe Financial Corporation ("Santa Fe"), a public company (OTCBB: SFEF).
Santa Fe's revenue is primarily generated through its 68.8% owned subsidiary,
Portsmouth Square, Inc. ("Portsmouth"), a public company (OTCBB: PRSI).
InterGroup also directly owns approximately 11.7% of Portsmouth. Portsmouth's
principal business is conducted through its general and limited partnership
interest in the Justice Investors limited partnership ("Justice" or the
"Partnership"). The Company has a 50.0% limited partnership interest in Justice
and serves as one of the general partners. Justice owns a 544 room hotel
property located at 750 Kearny Street, San Francisco, California 94108, known
as the "Hilton San Francisco Financial District" (the "Hotel") and related
facilities, including a five level underground parking garage. The financial
statements of Justice are consolidated with those of the Company. See Note 2 to
the consolidated financial statements.
On December 1, 2008, Portsmouth and Evon, as the two general partners of
Justice, entered into a 2008 Amendment to the Limited Partnership Agreement
(the "Amendment") that provides for a change in the respective roles of the
general partners. Pursuant to the Amendment, Portsmouth assumed the role of
Managing General Partner and Evon continued on as the Co-General Partner of
Justice. The Amendment was ratified by approximately 98% of the limited
partnership interests. The Amendment also provides that future amendments to
the Limited Partnership Agreement may be made only upon the consent of the
general partners and at least seventy five percent (75%) of the interests of
the limited partners. Consent of at least 75% of the interests of the limited
partners will also be required to remove a general partner pursuant to the
Amendment.
Concurrent with the Amendment to the Limited Partnership Agreement, a new
General Partner Compensation Agreement (the "Compensation Agreement") was
entered into on December 1, 2008, among Justice, Portsmouth and Evon to
terminate and supersede all prior compensation agreement for the general
partners. Pursuant to the Compensation Agreement, the general partners of
Justice will be entitled to receive an amount equal to 1.5% of the gross annual
revenues of the Partnership (as defined), less $75,000 to be used as a
contribution toward the cost of Justice engaging an asset manager. In no event
shall the annual compensation be less than a minimum base of approximately
$285,000, with eighty percent (80%) of that amount being allocated to
Portsmouth for its services as managing general partner and twenty percent
(20%) allocated to Evon as the co-general partner. Compensation earned by the
general partners in each calendar year in excess of the minimum base, will be
payable in equal fifty percent (50%) shares to Portsmouth and Evon.
During the years ended June 30, 2010 and 2009, the general partners were paid
approximately $417,000 and $435,000 respectively, under the applicable
compensation agreements. Of those amounts, approximately $264,000 and $222,000
was paid to Portsmouth for fiscal 2010 and 2009.
Pursuant to the Franchise Agreement, the Partnership paid monthly royalty fees
for the first two years of three percent (3%) of the Hotel's gross room
revenue, as defined, for the preceding calendar month; the third year was at
four percent (4%) of the Hotel's gross room revenue; and the fourth year until
the end of the term will be five percent (5%) of the Hotel's gross room
revenue. Justice also pays a monthly program fee of four percent (4%) of the
Hotel's gross room revenue. The amount of the monthly program fee is subject to
change; however, the increase cannot exceed one percent (1%) of the Hotel gross
room revenue in any calendar year, and the cumulative increases in the monthly
fees will not exceed five percent (5%) of gross room revenue. The Partnership
also pays a monthly information technology recapture charge of 0.75% of the
Hotel's gross revenue. In this difficult economic environment, Hilton agreed to
reduce its information technology fees to 0.65% for the 2010 calendar year.
The Partnership had a $2,500,000 unsecured revolving line of credit facility
with a bank that was to mature on April 30, 2010. Borrowings under that line of
credit bore interest at Prime plus 3.0% per annum or based on the Wall Street
Journal Prime Rate (3.25%) plus 3.0% per annum, floating, (but subject to a
minimum floor rate at 5.0% per annum). Borrowings under the line of credit were
subject to certain financial covenants, which are measured annually at June
30th and December 31st based on the credit arrangement. Effective April 29,
2010, the Partnership obtained a modification from the bank which converted its
revolving line of credit facility to a term loan. The Partnership also obtained
a waiver of any prior noncompliance with financial covenants.
The modification provides that Justice will pay the $2,500,000 balance on its
line of credit facility over a period of four years, to mature on April 30,
2014. This term loan calls for monthly principal and interest payments of
$41,000, calculated on a six-year amortization schedule, with interest only
from May 1, 2010 to August 31, 2010. Pursuant to the modification, the annual
floating interest rate was reduced by 0.5% to the WSJ Prime Rate plus 2.5%
(with a minimum floor rate of 5.0% per annum). The modification includes
financial covenants written to reflect financial conditions that all hotels are
facing. The covenants include specific financial ratios and a return to minimum
profitability by June 2011. Management believes that the Partnership has the
ability to meet the specific covenants and the Partnership was in compliance
with the covenants as of June 30, 2010. The Partnership paid a loan
modification fee of $10,000. The loan continues as unsecured. As of June 30,
2010, the interest rate was 5.75% and the outstanding balance was $2,500,000.
As of June 30, 2009, the interest rate was 6.25% and the outstanding balance on
the line of credit was $1,811,000.
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Intergroup Corp. has a market cap of $38.46 million; its shares were traded at around $16.03 with and P/S ratio of 0.84.
Highlight of Business Operations:
As of June 30, 2010, the Company owned approximately 76% of the common sharesof Santa Fe Financial Corporation ("Santa Fe"), a public company (OTCBB: SFEF).
Santa Fe's revenue is primarily generated through its 68.8% owned subsidiary,
Portsmouth Square, Inc. ("Portsmouth"), a public company (OTCBB: PRSI).
InterGroup also directly owns approximately 11.7% of Portsmouth. Portsmouth's
principal business is conducted through its general and limited partnership
interest in the Justice Investors limited partnership ("Justice" or the
"Partnership"). The Company has a 50.0% limited partnership interest in Justice
and serves as one of the general partners. Justice owns a 544 room hotel
property located at 750 Kearny Street, San Francisco, California 94108, known
as the "Hilton San Francisco Financial District" (the "Hotel") and related
facilities, including a five level underground parking garage. The financial
statements of Justice are consolidated with those of the Company. See Note 2 to
the consolidated financial statements.
On December 1, 2008, Portsmouth and Evon, as the two general partners of
Justice, entered into a 2008 Amendment to the Limited Partnership Agreement
(the "Amendment") that provides for a change in the respective roles of the
general partners. Pursuant to the Amendment, Portsmouth assumed the role of
Managing General Partner and Evon continued on as the Co-General Partner of
Justice. The Amendment was ratified by approximately 98% of the limited
partnership interests. The Amendment also provides that future amendments to
the Limited Partnership Agreement may be made only upon the consent of the
general partners and at least seventy five percent (75%) of the interests of
the limited partners. Consent of at least 75% of the interests of the limited
partners will also be required to remove a general partner pursuant to the
Amendment.
Concurrent with the Amendment to the Limited Partnership Agreement, a new
General Partner Compensation Agreement (the "Compensation Agreement") was
entered into on December 1, 2008, among Justice, Portsmouth and Evon to
terminate and supersede all prior compensation agreement for the general
partners. Pursuant to the Compensation Agreement, the general partners of
Justice will be entitled to receive an amount equal to 1.5% of the gross annual
revenues of the Partnership (as defined), less $75,000 to be used as a
contribution toward the cost of Justice engaging an asset manager. In no event
shall the annual compensation be less than a minimum base of approximately
$285,000, with eighty percent (80%) of that amount being allocated to
Portsmouth for its services as managing general partner and twenty percent
(20%) allocated to Evon as the co-general partner. Compensation earned by the
general partners in each calendar year in excess of the minimum base, will be
payable in equal fifty percent (50%) shares to Portsmouth and Evon.
During the years ended June 30, 2010 and 2009, the general partners were paid
approximately $417,000 and $435,000 respectively, under the applicable
compensation agreements. Of those amounts, approximately $264,000 and $222,000
was paid to Portsmouth for fiscal 2010 and 2009.
Pursuant to the Franchise Agreement, the Partnership paid monthly royalty fees
for the first two years of three percent (3%) of the Hotel's gross room
revenue, as defined, for the preceding calendar month; the third year was at
four percent (4%) of the Hotel's gross room revenue; and the fourth year until
the end of the term will be five percent (5%) of the Hotel's gross room
revenue. Justice also pays a monthly program fee of four percent (4%) of the
Hotel's gross room revenue. The amount of the monthly program fee is subject to
change; however, the increase cannot exceed one percent (1%) of the Hotel gross
room revenue in any calendar year, and the cumulative increases in the monthly
fees will not exceed five percent (5%) of gross room revenue. The Partnership
also pays a monthly information technology recapture charge of 0.75% of the
Hotel's gross revenue. In this difficult economic environment, Hilton agreed to
reduce its information technology fees to 0.65% for the 2010 calendar year.
The Partnership had a $2,500,000 unsecured revolving line of credit facility
with a bank that was to mature on April 30, 2010. Borrowings under that line of
credit bore interest at Prime plus 3.0% per annum or based on the Wall Street
Journal Prime Rate (3.25%) plus 3.0% per annum, floating, (but subject to a
minimum floor rate at 5.0% per annum). Borrowings under the line of credit were
subject to certain financial covenants, which are measured annually at June
30th and December 31st based on the credit arrangement. Effective April 29,
2010, the Partnership obtained a modification from the bank which converted its
revolving line of credit facility to a term loan. The Partnership also obtained
a waiver of any prior noncompliance with financial covenants.
The modification provides that Justice will pay the $2,500,000 balance on its
line of credit facility over a period of four years, to mature on April 30,
2014. This term loan calls for monthly principal and interest payments of
$41,000, calculated on a six-year amortization schedule, with interest only
from May 1, 2010 to August 31, 2010. Pursuant to the modification, the annual
floating interest rate was reduced by 0.5% to the WSJ Prime Rate plus 2.5%
(with a minimum floor rate of 5.0% per annum). The modification includes
financial covenants written to reflect financial conditions that all hotels are
facing. The covenants include specific financial ratios and a return to minimum
profitability by June 2011. Management believes that the Partnership has the
ability to meet the specific covenants and the Partnership was in compliance
with the covenants as of June 30, 2010. The Partnership paid a loan
modification fee of $10,000. The loan continues as unsecured. As of June 30,
2010, the interest rate was 5.75% and the outstanding balance was $2,500,000.
As of June 30, 2009, the interest rate was 6.25% and the outstanding balance on
the line of credit was $1,811,000.
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