Portsmouth Square Reports Decrease in Revenue and Increased Losses Amid Ongoing Hospitality Challenges

Portsmouth Square, Inc. reported its financial results for the six months ending December 31, 2024, revealing a total hotel revenue of $5.1 million, a decrease from $5.5 million in the same period last year. The company experienced a net loss of $4.0 million, compared to a net loss of $2.6 million for the prior year. The decline in revenue and increase in losses were attributed to ongoing challenges in the San Francisco hospitality market, which has been slow to recover from the COVID-19 pandemic, particularly affecting business travel and convention bookings.

The company’s operational metrics indicate a continued struggle with profitability. Total costs and operating expenses for the six months reached $9.1 million, up from $8.1 million in the previous year. This increase was driven by higher hotel operating expenses and depreciation costs. As of December 31, 2024, Portsmouth Square had cash and cash equivalents of $3.1 million, down from $3.5 million at the end of June 2024, alongside restricted cash of $987,000. The company’s accumulated deficit has grown to $123.0 million, reflecting ongoing financial pressures.

Strategically, Portsmouth Square has been focused on refinancing its existing debt, which includes a senior mortgage loan and a mezzanine loan totaling approximately $100.3 million. The company entered into forbearance agreements with its lenders in April 2024, extending the maturity date to January 1, 2025. However, as of January 2025, the company received notices of default from both lenders, raising concerns about its ability to meet financial obligations. Despite these challenges, Portsmouth Square is in advanced discussions to refinance its loans and believes it can complete this process by March 2025.

Operationally, the company has made significant capital improvements to its hotel property, investing $614,000 in renovations during the reporting period. These upgrades are aimed at enhancing guest experience and increasing occupancy rates. However, the company continues to face headwinds due to the local economic environment, which has been adversely affected by political and social issues in San Francisco. The hotel’s management has implemented cost-cutting measures to preserve capital and improve liquidity, including renegotiating recurring expenses and temporarily closing certain services.

Looking ahead, Portsmouth Square remains focused on stabilizing its financial position and enhancing operational performance. The company is actively pursuing refinancing options and is optimistic about securing new terms with its lenders. However, substantial doubt remains regarding its ability to continue as a going concern if these refinancing efforts do not materialize. The management emphasizes that the successful completion of refinancing is critical to meeting its obligations and ensuring the long-term viability of the business.