FORWARD-LOOKING STATEMENTS AND PROJECTIONS

The Company may from time to time make forward-looking statements and projections concerning future expectations. When used in this discussion, the words "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "may," "could," "might" and similar expressions, are intended to identify forward-looking statements.


Such statements are subject to certain risks and uncertainties. These risks and
uncertainties include, but are not limited to, the following: national and
worldwide economic conditions, including the impact of recessionary conditions
on tourism, travel and the lodging industry; the impact of terrorism and war on
the national and international economies, including tourism, securities markets,
energy and fuel costs; natural disasters; general economic conditions and
competition in the hotel industry in the San Francisco area; seasonality, labor
relations and labor disruptions; actual and threatened pandemics such as swine
flu or the outbreak of COVID-19 or similar outbreaks; partnership distributions;
the ability to obtain financing at favorable interest rates and terms;
securities markets, regulatory factors, litigation and other factors discussed
below in this Report and in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2020. These risks and uncertainties could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as to the date hereof. The Company undertakes no obligation to publicly
release the results of any revisions to those forward-looking statements, which
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.

NEGATIVE EFFECTS OF CIVIL AUTHORITY ACTIONS ON OUR BUSINESS


On February 25, 2020, the City of San Francisco issued the proclamation by the
Mayor declaring the existence of a local emergency. The negative effects of the
civil authority actions related to the novel strain of coronavirus ("COVID-19")
on our business have been significant. In March 2020, the World Health
Organization declared COVID-19 a global pandemic. This contagious virus, which
has continued to spread, has adversely affected workforces, customers, economies
and financial markets globally. It has also disrupted the normal operations of
many businesses, including ours. To mitigate the harm from the pandemic, on
March 16, 2020, the City and County of San Francisco, along with a group of five
other Bay Area counties and the City of Berkeley, issued parallel health officer
orders imposing shelter in place limitations across the Bay Area, requiring
everyone to stay safe at home except for certain essential needs. Since February
2020, several unfavorable events and civil authority actions have unfolded
causing demand for our hotel rooms to suffer including cancellations of all
citywide conventions, reduction of flights in and out of the Bay Area and
decline in both leisure and business travel.



In response to the decrease in demand, we have since furloughed all managers at
the Hotel except for members of the executive team and continue to limit hourly
staff to a minimum. By the end of March 2020, we had temporarily closed all of
our food and beverage outlets, valet parking, concierge and bell services,
fitness center, as well as the executive lounge facility. We continue to
implement social distancing standards and cleaning processes designed by
Interstate and Hilton to keep employees and guests safe. The full impact and
duration of the COVID-19 outbreak continues to evolve as of the date of this
report. The pandemic effectively eliminated our ability to generate any profits,
due to the drastic decline in both leisure and business travel. As a result,
management believes the ongoing length and severity of the economic downturn
caused by the pandemic will have a material adverse impact on our future
business, financial condition, liquidity and financial results. We are also
assessing the potential impact on the impairment analysis of our long-lived
assets and the realization of our deferred tax assets. As of the date of this
report, the effects of the pandemic continue to affect our economy, business and
leisure travel, and our needs to continue to curtail certain revenue generating
activities at the Hotel, and until there are vaccines or other methodologies to
effectively combat this pandemic, we expect that the effects will have a
material adverse effect on our business.



As a result of the CARES Act signed into law on March 27, 2020, additional
avenues of relief may be available to workers and families through enhanced
unemployment insurance provisions and to small businesses through programs
administered by the Small Business Administration ("SBA"). The CARES Act
includes, among other things, provisions relating to payroll tax credits and
deferrals, net operating loss carryback periods, alternative minimum tax credits
and technical corrections to tax depreciation methods for qualified improvement
property. The CARES Act also established a Paycheck Protection Program ("PPP"),
whereby certain small businesses are eligible for a loan to fund payroll
expenses, rent, and related costs. On April 9, 2020, Justice entered into a loan
agreement ("SBA Loan") with CIBC Bank USA under the CARES Act. Justice received
proceeds of $4,719,000 from the SBA Loan. In accordance with the requirements of
the CARES Act, Justice has used proceeds from the SBA Loan primarily for payroll
costs. As of September 30, 2020, Justice had used all proceeds of the SBA Loan
in qualified expenses. The SBA Loan is scheduled to mature on April 9, 2022 with
a 1.00% interest rate and is subject to the terms and conditions applicable to
loans administered by the SBA under the CARES Act. All payments of principal and
interest are deferred until July 2021, and the repayment obligations under the
loan may be forgiven if the funds are used for payroll and other qualified
expenses. All unforgiven portion of the principal and accrued interest will

be
due at maturity.



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RESULTS OF OPERATIONS




The Company's principal source of revenue continues to be derived from the
investment of its 68.8% owned subsidiary, Portsmouth, in the Justice Investors
Limited Partnership ("Justice" or the "Partnership") inclusive of hotel room
revenue, food and beverage revenue, garage revenue, and revenue from other
operating departments. The Company also generates income from its investments in
multi-family real estate properties and from investment of its cash and
securities assets. Justice owns the Hotel and related facilities, including a
five-level underground parking garage. The financial statements of Justice have
been consolidated with those of the Company.



The Hotel is operated by the Partnership as a full-service Hilton brand hotel
pursuant to a Franchise License Agreement (the "License Agreement") with Hilton.
The Partnership entered into the License Agreement on December 10, 2004. The
term of the License Agreement was for an initial period of 15 years commencing
on the opening date, with an option to extend the License Agreement for another
five years, subject to certain conditions. On June 26, 2015, the Partnership and
Hilton entered into an amended franchise agreement which extended the License
Agreement through 2030, modified the monthly royalty rate, extended geographic
protection to the Partnership and also provided the Partnership certain key
money cash incentives to be earned through 2030. The key money cash incentives
were received on July 1, 2015.



On February 1, 2017, Justice entered into a Hotel management agreement ("HMA")
with Interstate Management Company, LLC ("Interstate") to manage the Hotel and
related facilities with an effective takeover date of February 3, 2017. The term
of HMA is for an initial period of ten years commencing on the takeover date and
automatically renews for an additional year not to exceed five years in
aggregate subject to certain conditions. The HMA also provides for Interstate to
advance a key money incentive fee to the Hotel for capital improvements in the
amount of $2,000,000 under certain terms and conditions described in a separate
key money agreement. In addition to the operations of the Hotel, the Company
also generates income from the ownership and management of real estate. On
December 31, 1997, the Company acquired a controlling 55.4% interest in
Intergroup Woodland Village, Inc. ("Woodland Village") from InterGroup. Woodland
Village's major asset is a 27-unit apartment complex located in Santa Monica,
California. On February 5, 2020, the Company acquired the additional 44.6%
interest in Woodland Village from InterGroup by issuing 97,500 shares of its
common stock to InterGroup. As a result of the transaction, Woodland Village has
become a wholly owned subsidiary of the Company. The transaction is being made
pursuant to a Contribution Agreement (the "Contribution Agreement") between the
Company and InterGroup, dated February 5, 2020. The Contribution Agreement also
contains a provision for a potential subsequent earn out to InterGroup pursuant
to terms set forth therein. On August 28, 2020, Santa Fe sold its 27-unit
apartment complex located in Santa Monica, California for $15,650,000 and
realized a gain on the sale of approximately $12,043,000. Santa Fe received net
proceeds of $12,163,000 after selling costs and repayment of InterGroup's RLOC
of $2,985,000 as InterGroup had drawn on its RLOC in July 2018 to pay off the
previous Fannie Mae mortgage on the property. Santa Fe paid InterGroup $662,000
from the sale pursuant to the earn out provision in the Contribution Agreement.
Santa Fe will not seek a replacement property.

The Company also owns a 2-unit apartment building in West Los Angeles, California.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019





The Company had net income of $5,088,000 for the three months ended September
30, 2020 compared to net income of $711,000 for the three months ended September
30, 2019. The change is primarily attributable to the gain from sale of real
estate.



- 20 -







Hotel Operations
The Company had net loss from Hotel operations of $3,953,000 for the three
months ended September 30, 2020 compared to net income of $1,614,000 for the
three months ended September 30, 2019. The change is primarily attributable to
the decrease in Hotel revenue.

The following table sets forth a more detailed presentation of Hotel operations for the three months ended September 30, 2020 and 2019.


For the three months ended September 30,                     2020
  2019
Hotel revenues:
Hotel rooms                                              $  2,890,000     $  13,314,000
Food and beverage                                              37,000         1,222,000
Garage                                                        470,000           736,000
Other operating departments                                    28,000           157,000
Total hotel revenues                                        3,425,000        15,429,000
Operating expenses excluding depreciation and
amortization                                               (5,033,000 )

(11,348,000 ) Operating (loss) income before interest, depreciation and amortization

                                           (1,608,000 )

4,081,000


Interest expense - mortgage                                (1,791,000 )      (1,923,000 )
Depreciation and amortization expense                        (554,000 )        (544,000 )
Net (loss) income from Hotel operations                  $ (3,953,000 )   $

  1,614,000





For the three months ended September 30, 2020, the Hotel had operating loss of
$1,608,000 before interest expense, depreciation and amortization on total
operating revenues of $3,425,000 compared to operating income of $4,081,000
before interest expense, depreciation and amortization on total operating
revenues of $15,429,000 for the three months ended September 30, 2019. For the
three months ended September 30, 2020, room revenues decreased by $10,424,000,
food and beverage revenue decreased by $1,185,000, and garage revenue decreased
by $266,000, compared to the three months ended September 30, 2019. The year
over year decline in all areas are result of the business interruption
attributable to a variety of responses by federal, state, and local civil
authority to the COVID-19 outbreak since March 2020. Total operating expenses
decreased by $6,315,000 due to decrease in salaries and wages, rooms commission,
credit card fees, management fees, and franchise fees.



The following table sets forth the average daily room rate, average occupancy
percentage and RevPAR of the Hotel for the three months ended September 30, 2020
and 2019.



               Three Months         Average           Average
            Ended September 30,    Daily Rate       Occupancy %       RevPAR

                   2020           $        108                54 %   $     58
                   2019           $        271                98 %   $    266




The Hotel's revenues decreased by 78% this quarter as compared to the previous
comparable quarter. Average daily rate decreased by $163, average occupancy
dropped 44%, and RevPAR decreased by $208 for the three months ended September
30, 2020 compared to the three months ended September 30, 2019.



Real Estate Operations



The Company had net income from real estate operations of $12,023,000 for the
three months ended September 30, 2020 compared to net loss of $8,000 for the
three months ended September 30, 2019. The year over year increase is due to the
sale of the Company's 27-unit apartment complex located in Santa Monica,
California for $15,650,000.



Investment Transactions



The Company had a net gain on marketable securities of $96,000 for the three
months ended September 30, 2020 compared to a net loss on marketable securities
of $291,000 for the three months ended September 30, 2019. For the three months
ended September 30, 2020, the Company had a net realized gain of $24,000 and a
net unrealized gain of $72,000. For the three months ended September 30, 2019,
the Company had a net realized loss of $4,000 and a net unrealized loss of
$287,000.



- 21 -

Gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company's results of operations. However, the amount of gain or loss on marketable securities for any given period may have no predictive value and variations in amount from period to period may have no analytical value. For a more detailed description of the composition of the Company's marketable securities see the Marketable Securities section below.

The Company consolidates Justice ("Hotel") for financial reporting purposes and is not taxed on its non-controlling interest in the Hotel. The income tax expense (benefit) during the three months ended September 30, 2020 and 2019 represent the income tax effect on the Company's pretax income (loss) which includes its share in the net income (loss) of the Hotel.





MARKETABLE SECURITIES



The following table shows the composition of the Company's marketable securities
portfolio as of September 30, 2020 and June 30, 2020 by selected industry
groups:



                                                    % of Total
   As of September 30, 2020                         Investment
        Industry Group             Fair Value       Securities

Basic materials                   $    628,000             71.3 %
REITs and real estate companies        250,000             28.4 %
Industrials                              3,000              0.3 %
                                  $    881,000            100.0 %




                                                    % of Total
      As of June 30, 2020                           Investment
        Industry Group             Fair Value       Securities

Basic materials                   $    575,000             66.1 %
REITs and real estate companies        253,000             29.1 %
Energy                                  39,000              4.5 %
Industrials                              3,000              0.3 %
                                  $    870,000            100.0 %





As of September 30, 2020, the Company's investment portfolio includes five
equity positions. The Company holds two equity securities that comprised more
than 10% of the equity value of the portfolio. The largest security position
represents 66% of the portfolio and consists of the common stock of Comstock
included in the basic materials industry group.



As of June 30, 2020, the Company held four different equity positions in its
investment portfolio. The Company held two equity securities that comprised more
than 10% of the equity value of the portfolio. The largest security position
represents 60% of the portfolio and consists of the common stock of Comstock.

The following table shows the net gains (losses) on the Company's marketable securities and the associated margin

interest and trading expenses for the respective periods:





For the three months ended September 30,     2020           2019

Net gain (loss) on marketable securities $ 96,000 $ (291,000 ) Impairment loss on other investments (38,000 )

            -
Dividend and interest income                  27,000         60,000
Margin interest expense                            -        (28,000 )
Trading and management expenses              (47,000 )      (45,000 )
                                           $  38,000     $ (304,000 )




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FINANCIAL CONDITION AND LIQUIDITY





Historically, our cash flows have been primarily generated from our Hotel
operations. However, the responses by federal, state, and local civil
authorities to the COVID-19 pandemic has had a material detrimental impact on
our liquidity. For the three months ended September 30, 2020, our net cash flow
used in operations was $5,437,000. For the three months ended September 30,
2019, our net cash flow provided by operations was $1,705,000. We have taken
several steps to preserve capital and increase liquidity at our Hotel, including
implementing strict cost management measures to eliminate non-essential
expenses, postponing capital expenditures, renegotiating certain reoccurring
expenses, and temporarily closing certain hotel services and outlets.



The Hotel had $9,562,000 and $10,666,000 of restricted cash held by its senior
lender Wells Fargo Bank, N.A. ("Lender") as of September 30, 2020 and June 30,
2020, respectively. Of the $10,666,000 restricted cash held as of June 30, 2020,
$2,432,000 was for a possible future property improvement plan ("PIP") requested
by our franchisor, Hilton. On August 19, 2020, Lender released PIP deposits in
the amount of $2,379,000 to the Hotel. The funds were utilized to fund operating
expenses, including franchise and management fees and other expenses.



On April 9, 2020, Justice entered into a loan agreement ("SBA Loan") with CIBC
Bank USA under the recently enacted Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act") administered by the U.S. Small Business
Administration. Justice received proceeds of $4,719,000 from the SBA Loan. In
accordance with the requirements of the CARES Act, Justice has used the proceeds
from the SBA Loan primarily for payroll costs. As of September 30, 2020, Justice
had used all proceeds of the SBA Loan in qualified expenses. The SBA Loan is
scheduled to mature on April 9, 2022 with a 1.00% interest rate and is subject
to the terms and conditions applicable to loans administered by the U.S. Small
Business Administration under the CARES Act. All payments of principal and
interest are deferred until July 2021, and the repayment obligations under the
loan may be forgiven if the funds are used for payroll and other qualified
expenses. All unforgiven portion of the principal and accrued interest will

be
due at maturity.



In order to increase its liquidity position and to take advantage of the
favorable interest rate environment, InterGroup refinanced its 151-unit
apartment complex in Parsippany, New Jersey on April 30, 2020, generating net
proceeds of $6,814,000. In June 2020, InterGroup refinanced one of its
California properties and generated net proceeds of $1,144,000. InterGroup is
currently evaluating other refinancing opportunities and it could refinance
additional multifamily properties should the need arise, or should management
consider the interest rate environment favorable. InterGroup has an
uncollateralized $8,000,000 revolving line of credit from CIBC Bank USA ("CIBC")
and the entire $8,000,000 is available to be drawn down as of September 30, 2020
should additional liquidity be necessary. On August 28, 2020, Santa Fe sold its
27-unit apartment complex located in Santa Monica, California for $15,650,000
and realized a gain on the sale of approximately $12,043,000. The Company
included the gain in the calculation of tax provision for the three months ended
September 30, 2020. Santa Fe will manage its federal and state income tax
liability, and anticipates the utilization of its available net operating losses
and capital loss carryforwards. Santa Fe received net proceeds of $12,163,000
after selling costs and repayment of InterGroup's RLOC of $2,985,000 as
InterGroup had drawn on its RLOC in July 2018 to pay off the previous Fannie Mae
mortgage on the property. Furthermore, pursuant to the Contribution Agreement
between Santa Fe and InterGroup, Santa Fe paid InterGroup $662,000 from the
sale. Santa Fe will not seek a replacement property.



As the sole general partner of Justice that controls approximately 93.3% of the
voting interest in the Partnership, Portsmouth has the ability to amend the
partnership agreement to allow for capital calls to the limited partners of
Justice if needed. The majority of any capital calls will be met by Portsmouth.
Portsmouth will have financing availability, upon the authorization of the
respective board of directors, to borrow from InterGroup and/or Santa Fe to meet
any capital calls and its other obligations during the next twelve months and
beyond. On August 28, 2020, the Board of InterGroup and Santa Fe passed
resolutions, respectively, to provide funding to Portsmouth if necessary. The
Partnership is also allowed to seek additional loans and sell partnership
interests. Upon the consent of the general partner and a super majority in
interest, the Partnership may sell additional classes or series of units of the
Partnership under certain conditions in order to raise additional capital.



Our known short-term liquidity requirements primarily consist of funds necessary
to pay for operating and other expenditures, including management and franchise
fees, corporate expenses, payroll and related costs, taxes, interest and
principal payments on our outstanding indebtedness, and repairs and maintenance
of the Hotel.



Our long-term liquidity requirements primarily consist of funds necessary to pay
for scheduled debt maturities and capital improvements of the Hotel. We will
continue to finance our business activities primarily with existing cash,
including from the activities described above, and cash generated from our
operations. After considering our approach to liquidity and accessing our
available sources of cash, we believe that our cash position, after giving
effect to the transactions discussed above, will be adequate to meet anticipated
requirements for operating and other expenditures, including corporate expenses,
payroll and related benefits, taxes and compliance costs and other commitments,
for at least twelve months from the date of issuance of these financial
statements, even if current levels of low occupancy and low RevPAR were to
persist. The objectives of our cash management policy are to maintain existing
leverage levels and the availability of liquidity, while minimizing operational
costs. We believe that our cash on hand, along with other potential
aforementioned sources of liquidity that management may be able to obtain, will
be sufficient to fund our working capital needs, as well as our capital lease
and debt obligations for at least the next twelve months and beyond. However,
there can be no guarantee that management will be successful with its plan.




- 23 -

MATERIAL CONTRACTUAL OBLIGATIONS

The following table provides a summary as of September 30, 2020, the Company's material financial obligations which also including interest payments:





                                                  9 Months           Year            Year             Year            Year
                                   Total            2021             2022            2023             2024            2025        Thereafter

Mortgage notes payable         $ 112,258,000     $ 1,185,000     $  1,642,000     $ 1,732,000     $ 107,403,000     $  11,000     $   285,000
Related party and other
notes payable                     13,245,000         854,000        8,767,000         750,000           567,000       567,000       1,740,000
Interest                          21,495,000       5,423,000        6,303,000       6,192,000         3,465,000        11,000         101,000
Total                          $ 146,998,000     $ 7,462,000     $ 16,712,000     $ 8,674,000     $ 111,435,000     $ 589,000     $ 2,126,000

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off balance sheet arrangements.





IMPACT OF INFLATION



Hotel room rates are typically impacted by supply and demand factors, not
inflation, since rental of a hotel room is usually for a limited number of
nights. Room rates can be, and usually are, adjusted to account for inflationary
cost increases. Since Interstate has the power and ability to adjust hotel room
rates on an ongoing basis, there should be minimal impact on partnership
revenues due to inflation. Partnership revenues are also subject to interest
rate risks, which may be influenced by inflation. For the two most recent fiscal
years, the impact of inflation on the Company's income is not viewed by
management as material.

The Company's residential rental properties provide income from short-term operating leases and no lease extends beyond one year. Rental increases are expected to offset anticipated increased property operating expenses.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES





Critical accounting policies are those that are most significant to the
presentation of our financial position and results of operations and require
judgments by management in order to make estimates about the effect of matters
that are inherently uncertain. The preparation of these condensed financial
statements requires us to make estimates and judgments that affect the reported
amounts in our consolidated financial statements. We evaluate our estimates on
an on-going basis, including those related to the consolidation of our
subsidiaries, to our revenues, allowances for bad debts, accruals, asset
impairments, other investments, income taxes and commitments and contingencies.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities. The actual results may differ from these estimates or our estimates
may be affected by different assumptions or conditions. There have been no
material changes to the Company's critical accounting policies during the three
months ended September 30, 2020. Please refer to the Company's Annual Report on
Form 10-K for the year ended June 30, 2020 for a summary of the critical
accounting policies.



- 24 -

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