Company: INTG
Filing Date: 2025-09-30
Form Type: 10-K
Source: 0001493152-25-016154
Chunk: 3

Company: INTERGROUP CORP
Filing Date: 2025-09-30
Form: 10-K
Item: Item 1
Chunk 3
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1A – Risk Factors.

HOTEL
MANAGEMENT COMPANY AGREEMENT

Operating
entered into a hotel management agreement (“HMA”) with Aimbridge Hospitality (“Aimbridge”) to manage the Hotel,
along with its five-level parking garage, with an effective date of February 3, 2017. The term of the management agreement is for an
initial period of ten years commencing February 3, 2017 and automatically renews for successive one (1) year periods, not to exceed five
years in the aggregate, subject to certain conditions. Under the terms of the HMA, base management fee (“Basic Fee”) payable
to Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge shall be entitled
to an annual incentive fee for each fiscal year equal to ten percent (10%) of the amount by which Gross Operating Profit in the current
fiscal year exceeds the previous fiscal year’s Gross Operating Profit.

For
the fiscal years ended June 30, 2025 and 2024, hotel management fees were $783,000 and $706,000, respectively, and incentive fees were
$0 in both periods, offset by key money amortization of $250,000 for both years, and such amounts are included in Hotel operating expenses
in the consolidated statements of operations. However, following discussions with Aimbridge regarding the impact of the COVID-19 pandemic
on incentive fee eligibility, the parties agreed that no incentive fees were payable for fiscal years 2019 through 2023. Specifically,
Aimbridge agreed to waive $1,030,134 in previously recorded incentive fees, and both parties established a performance threshold for
future incentive fee eligibility of $15,257,301 in earnings before interest, taxes, depreciation, and amortization (“EBITDA”),
equal to, the EBITDA in 2017 when Aimbridge began managing the Hotel. As a result, the Company recorded a reduction in Hotel operating
expenses of $1,030,134 for the year ended June 30, 2025. As part of the Hotel management agreement, Aimbridge, through the Company’s
wholly owned subsidiary, Kearny Street Parking LLC, manages the parking garage in-house. The loss or replacement of the hotel management
company, or a failure by Aimbridge to meet performance benchmarks, could have a material adverse impact on hotel operations, as discussed
in Item 1A –