Hersha Hospitality Trust
Annual Report 2015

Plain-text annual report

HERSHA h e r s h a h o s p i t a l i t y t r u s t HT2015 HERSHA hersha hospitality trust www.hersha.com 2015 Financial Highlights (In thousands, except per share data) Consolidated Hotel Operating Results Hotel Operating Revenues Average Daily Rate Occupancy Revenue per Available Room (In thousands, except per share data) Hersha Hospitality Trust Operating Data: (Excluding Impairment Charges) (1) Total Revenues (Including Discontinued Operations) Net Income applicable to Common Shareholders Adjusted EBITDA(2) (4) Adjusted Funds from Operations (3) (4) Per Share Data: (Excluding Impairment Charges) (1) Basic/Diluted Earnings Per Common Share AFFO Distributions to Common Shareholders Year Ended December 31, 2015 2014 2013 2012 2011 470,272 417,226 338,064 299,005 229,156 197.34 84.1% 165.88 187.82 82.6% 155.19 179.70 79.7% 143.30 175.23 78.6% 137.78 166.58 76.6% 127.64 Year Ended December 31, 2015 2014 2013 2012 2011 470,385 27,440 177,289 118,093 419,346 54,638 162,506 102,832 396,458 44,467 145,064 86,487 364,690 8,376 143,291 76,046 329,868 (5,133 ) 132,969 68,710 0.56 2.35 1.12 1.08 1.96 1.04 0.88 1.64 0.96 0.16 1.52 0.96 (0.12 ) 1.52 0.92 $ $ $ $ $ Balance Sheet Data: (as of December 31st) Total Assets Total Debt Noncontrolling Interest in Partnership Total Liabilities and Equity $ 1,969,772 1,177,087 30,116 1,855,539 1,748,097 1,707,679 1,630,909 918,923 28,007 819,336 29,181 792,708 31,281 820,132 32,124 1,969,772 1,855,539 1,748,097 1,707,679 1,630,909 (1) Operating and Per Share Data exclude charges recorded during 2011-2014 relating to impairment losses on investment in unconsolidated joint ventures and and assets held for sale. (2) Adjusted Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA) is a non-GAAP financial measure within the meaning of the Securities and Exchange Commission rules. Our interpretation of Adjusted EBITDA is that EBITDA derived from our investment in unconsolidated joint ventures should be added back to net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. Our Adjusted EBITDA computation may not be comparable to EBITDA or Adjusted EBITDA reported by other companies that interpret the definition of EBITDA differently than we do. Management believes Adjusted EBITDA to be a meaningful measure of a REIT's performance because it is widely followed by industry analysts, lenders and investors and that it should be considered along with, but not as an alternative to, net income, cash flow, FFO and AFFO, as a measure of the Company's operating performance. (3) Funds from Operations (FFO) as defined by NAREIT represents net income (loss) (computed in accordance with generally accepted accounting principles), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated assets, plus certain non-cash items, such as loss from impairment of assets and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We present Adjusted Funds From Operations (AFFO), which reflects FFO in accordance with the NAREIT definition plus the following additional adjustments: adding back write-offs of deferred financing costs on debt extinguishment, both for consolidated and unconsolidated properties, adding back amortization of deferred financing costs, adding back non-cash stock expense, adding back acquisition and terminated transaction expenses, adding back preferred share extinguishment costs, adding back prior period tax assessment expenses, adding back FFO attributed to our partners in consolidated joint ventures, and making adjustments to ground lease payments, which are required by GAAP to be amortized on a straight-line basis over the term of the lease, to reflect the actual lease payment. (4) In these financial highlights and in the Letter to our Shareholders from our Chief Executive Officer and our President and Chief Operating Officer that follows, we present non-GAAP financial measures, including EBITDA, Adjusted EBITDA, hotel EBITDA, FFO and AFFO. We have provided reconciliations of these non-GAAP financial measures to the applicable GAAP measures in the appendix section that follows the letter to our shareholders, in portions of our Annual Report on Form 10-K for the year ended December 31, 2015, which accompanies this letter or can be viewed at www.hersha.com, under “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Because hotel EBITDA is specific to individual hotels or groups of hotels and not to our Company as a whole, it is not directly comparable to any GAAP measure and should not be relied on as a measure of performance for our portfolio of hotels taken as a whole. HERSHA h e r s h a h o s p i ta l i t y t r u st Hersha Hospitality Trust (HT) is a self-advised real estate investment trust in the hospitality sector, which owns and operates high quality upscale hotels in urban gateway markets. The Company's 56 hotels totaling 8,892 rooms are located in New York, Boston, Philadelphia, Washington, DC, Miami and select markets on the West Coast. The Company's shares are traded on The New York Stock Exchange under the ticker 'HT'. hersha total returns since ipo in 1999 (1) 230% 207% 186% 255% 266% A H S R E H 124% 124% 94% 91% 56% D o w J o n e s S N L U S H o t e l I n d e x S & P 5 0 0 W a l m a r t N A R E I T I n d e x G E -38% F o r d R M Z I n d e x R u s s e ll 2 0 0 0 I n d e x s h i r e H a t h a w a y k B e r hersha portfolio by location (2) hersha portfolio by market segment (3) New York City 38% Washington, DC 16% California 16% Miami 11% Boston 10% Philadelphia 9% Upscale 47% Upper Midscale 34% Luxury/Upper Upscale 19% hersha portfolio by hotel brand (3) Marriott 25% Hilton 25% Intercontinental 17% Independent 16% Hyatt 14% Other 3% (1) Source: Bloomberg and SNL Financial. Total Returns from January 20, 1999 through December 31, 2015. Assumes dividends are reinvested. (2) Reflects portfolio concentration by room count for consolidated operations. (3) Reflects portfolio EBITDA concentration for consolidated operations. Annual Report 20 1 5 hersha hospitality trust Fellow Shareholders Last year, we wrote that a clear path to earnings Even though stock multiples were dislocated last growth in 2015 was more apparent than at any year, we continued to deliver value to our other time in the Company’s past, and despite shareholders. Our execution and results the cautious investment sentiment in the broader distinguished us as an endgame winner, and firmly markets and the REIT sector last year, our established our best-in-class leadership position in financial results reflected robust underlying the sector. Performance last year highlighted performance across the portfolio. Our results the competitive advantage of our well developed, confirm the enterprise is strong and healthy. pure play portfolio strategy and the strength of Investors lacked the confidence and conviction our financial management and capital recycling needed to fuel investment and pursued discipline. Operations at our young, high quality conservative strategies across the past year, hotels outperformed in each of our 6 key resulting in one of the best hotel operating gateway markets, and delivered 13.5% EBITDA environments of the last 3 decades going growth for portfolio-wide EBITDA of $178.6 unnoticed by the equity capital markets. Hotel million, and a margin increase of 30 basis points REIT stocks did not perform well, posting a 26% to 38.1%. price decline for the year. We performed relatively well versus other hotel REIT stocks, We have carefully crafted a differentiated beating the average by 3 percentage points. portfolio of high quality hotels in key urban gateway and destination markets that meet the Annual Report hersha hospitality trust 20 1 5 tastes and preferences of today’s traveler and produce a unique combination of high absolute RevPAR and sector-leading profit margins. Often, REIT hotel portfolios are baskets of similar hotels that offer only varying geographic market exposure. There is nothing wrong with the typical hotel REIT, but we are decidedly not that. We study our customers, innovate and build new capabilities in markets where we have true conviction. We manage our business as operators, providing hospitality to our corporate and individual customers at the level of service and experience that they seek; in the cities and destinations that they travel to the most. Clustering hotels in our focus markets - Boston, New York City, Philadelphia, Washington, DC, Miami and California - provides us with useful customer insights and local market knowledge that inform our pricing and sales strategies and create valuable economies of scope and scale. The mix of hotels in the portfolio, across the upscale, upper upscale and luxury segments, both branded and independent, leads to effective cross-selling opportunities and substantial competitive advantage driving better overall RevPAR share. Our hotels continued to win share in 2015, which happens when you deliver to your guests what they want, where they want it and charge fairly for anticipating their need for it. We believe this is a truly differentiated value proposition for our customers – brand prolifera- tion and broad electronic distribution platforms commoditize everything else. Leading Operating Fundamentals Hersha delivered strong results across the past several years and 2015 was no exception. Our consolidated portfolio reported 6.9% RevPAR growth to $166 as ADR increased 5.1% to $197, and occupancy increased 143 basis points to a robust 84.1%. We are particularly proud that much of this growth was organic, driven by greater RevPAR share. We outperformed the market in RevPAR growth in each of our 6 key gateway markets, reporting double-digit RevPAR growth in Boston, Philadelphia, Miami and California. Our strong top-line performance efficiently flowed-through to earnings generating another year of best-in-class operating margins. Our Adjusted Funds from Operations (“AFFO”) increased by a significant 14.8%, or $15.3 million to $118.1 million. The growth is more impressive considering it follows AFFO growth of 18.9% in 2014. A good company generates competitive margins regardless of economic conditions through a combination of internal and external growth. We have tailored our strategy and operating model to that end. We also do not underestimate the advantage of alignment that we have with our operators who are cycle-tested and best-in-class in their discipline. Our strong, seasoned relationship is unique in the sector, designed and incentivized to encourage early response to micro-trends in our submarkets and results-driven operations. Annual Report 20 1 5 hersha hospitality trust Strategic Acquisitions Our disciplined investments have created great value for the Company and continue to strengthen the moat around our business. We found as We are already seeing improvements in sales, distribution and operating efficiency. The hotels require little to no disruptive renovations and will contribute meaningful incremental EBITDA in volatility in the capital markets continued to build 2016. across 2015 and most buyers pulled back, strategic acquisition opportunities became available at attractive yields where we could bring operating advantage to drive strong growth. We take a long-term view on investing and do not manage to volatile metrics such as EBITDA multiple or stock price, focusing instead on economic value and concrete metrics. Some of our most productive assets were acquired during periods of dislocation and have proven to be strong additions for the enterprise. Our decisions to purchase have stood the test of time. We acquired 3 impressive hotel properties last year for $135 million. We purchased the Ritz- Carlton Georgetown, the St. Gregory in Washington, DC and the Marriott TownePlace Suites in Sunnyvale, CA. In addition, prior to April 2016, we closed on 2 more hotels totaling $146 million, the Sanctuary Beach Resort on Monterey Bay, CA and the Hilton Garden Inn M Street in Washington, DC. These hotels add scale to our existing hotel clusters in Northern California and Washington, DC. The business plan for each hotel is thoughtfully and aggressively managed by our asset management and revenue management teams. Portfolio Balance and Capital Recycling We continuously look for opportunities to recycle capital through the sale of mature hotels with lower growth expectations than the remainder of our portfolio. In February 2016, we announced a transformative portfolio sale in Manhattan to Cindat Capital Management Ltd. In that transaction we will sell 7 of the Company’s limited service hotels in Manhattan for a total purchase price of $571.4 million to a newly formed joint venture with Cindat, in which Hersha will retain a minority promoted interest. The sale to a sophisticated Chinese investor demonstrates the strong demand from offshore institutional capital sources seeking exposure to global gateway markets in the United States where Hersha is well-positioned. The Cindat transaction in Manhattan, combined with our acquisitions in Washington, DC and in Northern California, highlight our capital recycling discipline and capability to monetize high yielding, stabilized assets and reinvest the capital into high growth hotels in high growth strategic markets. Since 2012, we have recycled more than $500 million of capital from mature hotels into higher growth, higher quality acquisitions. Annual Report hersha hospitality trust 20 1 5 Financial Flexibility for Value Creation Since becoming a publicly traded enterprise in 1999, all of our significant capital decisions have been focused on long term and sustainable value - creation consistent with our absolute return philosophy and commitment to total shareholder returns. At different times during 2015, we took advantage of the irrational variance between the trading price of our stock and the Company’s net asset value, purchasing 10.7% of our outstanding common shares in the open market under the Company’s stock buyback program, and returning $127.9 million of value to shareholders. We continue to believe that opportunistic share buybacks are an attractive use of capital and an effective way to drive shareholder returns when the stock price is temporarily dislocated and at a material discount to the Company’s net asset value. The ability to simultaneously execute accretive acquisitions and repurchase shares is testament to a solid, yet flexible balance sheet. In August, we announced a new $300 million senior unse- cured term loan, which together with the Company’s $500 million senior unsecured credit facility, expanded our borrowing capacity from $500 million to $800 million. Throughout 2015, we accessed attractive secured and unsecured debt to refinance, or repay, existing debt at 5 properties. We finished 2015 with the lowest weighted average cost of debt in the Company’s history at 3.68%. We continue to see good opportunities to refinance 2006 and 2007 vintage ten-year CMBS loans, which will allow us to further reduce our weighted average cost of debt and remove burdensome encumbrances allowing for more effective and efficient capital allocation. Build for the Endgame While there will always be volatility to manage through, we need to keep our eye on other important factors as well - the outlook for growth in our industry is excellent. In the near-term, the underlying drivers for sustained, domestic economic growth remain in place. GDP growth is anticipated to increase this year and next year at rates slightly below the 2015 GDP increase of 2.4%. Forecasts continue to show healthy decreases in unemployment through 2017, with inflation expected to remain below the long-term average into 2017. These indicators combined with lower fuel prices, a strengthening housing market and higher consumer and government spending, provide a favorable environment for lodging to thrive, and our young, geographically diverse, and differentiated hotel portfolio to outperform and generate sustained cash flow growth. The critical drivers of a lodging microeconomic cycle are simply supply and demand. The expansion of a cycle typically comes to an end when supply growth accelerates, which tends to occur as demand growth approaches its peak. Annual Report 20 1 5 hersha hospitality trust At 70 months into the current lodging expansion, balance sheet and the cash we will generate from demand is higher and supply growth is lower asset sales and operations, we are confident we than the peak of the two previous cycles. are positioned to benefit from the continuing Although supply growth is accelerating, it is economic expansion in 2016. We are aware that expected to remain below the long-term average we have to keep an eye on potentially for the next two years. Occupancy at hotels is decelerating RevPAR growth, as well as domestic also at record levels, driving strong pricing and international economic concerns, but we are power and increased profitability from efficient prepared for the tough times, and will manage flow-through of incremental rate growth. through them. Should the current cycle falter, there is a lot we can do - we will continue to We are even more optimistic regarding the relentlessly serve our customers, modify long-term outlook for the industry. Last year, operations at our hotels to maintain margins, the International Monetary Fund and the World reconsider capital allocation and further control Bank estimated that across the coming decade, costs. The talented and hard working teams that global GDP would grow at a 5.5% compounded we are privileged to lead, do outstanding work annual growth rate; world exports would everyday and have the tested know-how to increase by 70%; global investable capital would outperform in varying economic conditions. grow at a 6% compounded annual growth rate and the number of companies around the world We think like long-term investors and manage with $1 billion or more in revenue would increase like operators. Our goal is to continue to build by 90%. These macro themes point to this industry leading enterprise, hone our significant growth in global commerce and competitive advantage and deliver market leading wealth creation, and the continuing growth of financial results. We are proud to be fellow international travel. Here at home, technology is shareholders and a part of Hersha’s exceptional democratizing travel by providing greater journey across the last three cycles. transparency, less friction and broad access, fueling a lifestyle preference that is driving We move forward feeling confident that our demand for travel to new levels. We believe work through the years positions us to continue lodging to be one of the greatest growth the remarkable legacy that we have built together. industries today, and Hersha is well-positioned to take advantage of the secular changes afoot. When we look at the enhancements made to our portfolio, the strength and security of our jay h. shah chief executive officer neil h. shah president and chief operating officer Annual Report 20 1 5 hersha hospitality trust ® EarthView®, Hersha’s award winning sustainability program, was created internally in 2010 as a strategic initiative to create value through a comprehensive and analytically-based program focused on investments that reduce our environmental impact, enhance our community stewardship, and positively impact a hotel’s financial performance. In 2015, Hersha continued to make strides in its commitment to sustainable hospitality. Starting in Q2 2015, each hotel across the portfolio underwent a lighting audit to determine opportunities for LED (light emitting diode) replacements. LEDs are two to three times more efficient than florescent and incandescent lighting and also have a much longer lifespan. With a capital cost of $1.1 million and an annual savings of roughly $800K, the payback period is under 1.5 years. LED Lighting is being installed across the portfolio. Once installed, this energy efficient lighting will save over 4 million kWh of electricity and $800,000 annually. In April 2015, Hersha partnered with Autism Speaks to host over 30 families of children with Autism at the Philadelphia Zoo. This day featured a scavenger hunt and celebrated the conclusion of Hersha’s month-long fundraising campaign for Autism Awareness, which raised a total of $90,000. In 2015, Hersha was awarded Marriott’s Spirit to Serve Award. This award honors Marriott partners who go above and beyond to ensure their communities are healthier, more vibrant, and more prosperous as a direct result of their properties’ presence and engagement. In November 2015, Hersha was recognized for its sustainability efforts by the Hotel Association of New York City. The Hyatt Union Square was awarded the 2015 Environmental Protection Award, while the Holiday Inn Express Times Square was awarded the 2015 Sustainability Innovation and Leadership Award. The Ecolab Aquanomic laundry program has been implemented across all hotels with in-house laundry. This system has helped our properties reduce natural gas and water costs associated with laundry cycles by utilizing cold water and shorter washing times. Initiatives such as LED Lighting and the implementation of Guestroom Energy Management Systems have led the way for energy savings across the portfolio. Since 2010, initiatives rolled out as part of the EarthView program have achieved $4.8 million in savings for the Company. In 2015, Hersha was pleased to be awarded NAREIT’s 2015 Lodging & Resorts Leader in the Light award for superior portfolio-wide energy use practices and sustainability initiatives. Hersha has won this award in three of the past four years and is this year’s co-winner, sharing the top spot with Host Hotels & Resorts. Additionally, eight of Hersha’s hotels received the EPA’s Energy Star Certification in 2015. Buildings that earn EPA’s Energy Star Certification use 35 percent less energy and generate 35 percent fewer greenhouse gas emissions than similar buildings across the nation. Hersha also has a long tradition of social responsibility and community engagement. This tradition began with Hersha's founders, and con- tinues today with the EarthView program. We believe this focus on community stewardship is important to our guests, investors, and business partners who would like to ensure they engage with corporate citizens that uphold ethical standards and values, and operate in a way that is beneficial to the communities in which they operate. We continue to embrace our ongoing partnerships with organizations such as United Way, Cornell University and the AH&LA Education Foundation, as well as fostering business practices that promote the public good. Sustainability Brief FINANCIAL IMPACT $4.8 million EarthView’s recorded savings since inception from energy initiatives implemented across our portfolio. ENVIRONMENTAL PERFORMANCE 16% carbon reduction Reduced energy consumption across our portfolio resulted in a decrease in carbon emissions per occupied room versus our baseline year of 2010. 8% water reduction Reduced water consumption per occupied room versus our baseline year of 2010. 45% waste reduction Reduced waste sent to landfills per occupied room versus our baseline year of 2010. COMMUNITY ENGAGEMENT 21,000 pounds of soap Donated to Clean the World, creating 58,000 new bars sent to developing nations. $90,000 for autism speaks Donated for research and awareness of Autism through Hersha’s 2015 Autism Speaks Campaign. 51,000 clothing items Donated by clothing drives in 2015. 920 people Provided clean water for 920 people for 21 years through funding from EarthView water sales. Annual Report 20 1 5 hersha hospitality trust Property Portfolio New York City The Hyatt Union Square Duane Street Hotel, Tribeca NU Hotel, Brooklyn Hilton Garden Inn, Midtown East Hilton Garden Inn, Tribeca Hampton Inn, Times Square South Hampton Inn, Madison Square Garden Hampton Inn, Chelsea Hampton Inn, Seaport Hampton Inn, Downtown Financial District Holiday Inn, Wall Street Holiday Inn Express, Water Street Holiday Inn Express, Times Square South Holiday Inn Express, Madison Square Garden Candlewood Suites, Times Square South Sheraton Hotel, JFK International Airport Hilton Garden Inn, JFK International Airport Hyatt House, White Plains Holiday Inn Express, Chester Boston The Boxer, Boston Courtyard by Marriott, Boston/Brookline Courtyard by Marriott, South Boston Holiday Inn Express, Cambridge Holiday Inn Express, South Boston Residence Inn by Marriott, Framingham Residence Inn by Marriott, Norwood Hawthorn Suites, Franklin Connecticut Marriott Downtown, Hartford Hilton Hotel, Hartford Mystic Marriott Hotel and Spa, Mystic/Groton Philaldelphia The Rittenhouse Hampton Inn, Center City/Convention Center Hyatt Place, King of Prussia/Valley Forge Sheraton Wilmington South, Wilmington, DE Washington, D.C. The Ritz-Carlton Georgetown The St. Gregory Hotel Hilton Garden Inn-M Street Hampton Inn, Convention Center The Capitol Hill Hotel Residence Inn by Marriott, Tyson’s Corner, VA Courtyard by Marriott, Alexandria, VA Residence Inn by Marriott, Greenbelt, MD Hyatt House, Gaithersburg, MD Miami Cadillac Courtyard Miami Beach Oceanfront Blue Moon Hotel, Miami Beach Winter Haven, Miami Beach Residence Inn by Marriott, Coconut Grove Parrot Key Hotel & Resort, Key West California Courtyard by Marriott Westside, Los Angeles Courtyard by Marriott, Downtown San Diego Hotel Milo, Santa Barbara The Sanctuary Beach Resort, Monterey Bay TownePlace Suites Sunnyvale Hyatt House, Pleasant Hill/Walnut Creek Hyatt House, Pleasanton/Dublin Hyatt House, Scottsdale, AZ Information contained in this Annual Report supercedes the information filed in Hersha Hospitality Trust’s 10-K filed on February 17, 2016. Please see our website for the definition and reconciliation of our historical non-GAAP financial measures. 2015 Consolidated Financial Statements INDEX section part i item 1. item 2. part ii item 5. item 6. item 7. item 7a. item 8. item 9. item 9a. Business Properties Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Mark Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures page 2 7 9 12 14 33 34 86 86 hersha hospitality trust The Annual Report contains excerpts from our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and substantially conforms with the version filed with the Securities and Exchange Commission (“SEC”). However, the Form 10-K also contains additional information. For a free copy of our Form 10-K, please contact: Investor Relations Hersha Hospitality Trust 44 Hersha Drive Harrisburg, PA 17102 Our Form 10-K and other filings with the SEC are also available on our website, www.hersha.com. The most recent certifications by our chief executive officer and chief financial officer pursuant to the Sarbanes-Oxley Act of 2002 are filed as exhibits to our Form 10-K. Annual Report 2015 Item  1.   Business   OVERVIEW   PART  I   Hersha  Hospitality  Trust  is  a  self-­‐advised  Maryland  real  estate  investment  trust  that  was  organized  in  1998  and  completed   its  initial  public  offering  in  January  of  1999.  Our  common  shares  are  traded  on  the  New  York  Stock  Exchange  under  the  symbol  “HT.”   We  invest  primarily  in  institutional  grade  hotels  in  major  urban  gateway  markets  including  New  York,  Washington  DC,  Boston,   Philadelphia,  South  Florida  and  select  markets  on  the  West  Coast.  Our  primary  strategy  is  to  continue  to  own  and  acquire  high   quality,  upscale,  mid-­‐scale  and  extended-­‐stay  hotels  in  metropolitan  markets  with  high  barriers  to  entry  and  independent  boutique   hotels  in  markets  with  similar  characteristics.  We  have  operated  and  intend  to  continue  to  operate  so  as  to  qualify  as  a  REIT  for   federal  income  tax  purposes.   We  aim  to  create  value  through  our  ability  to  source  capital  and  identify  high  growth  acquisition  targets.     We  seek   acquisition  candidates  located  in  markets  with  economic,  demographic  and  supply  dynamics  favorable  to  hotel  owners  and   operators.  Through  our  due  diligence  process,  we  select  those  acquisition  targets  where  we  believe  selective  capital  improvements   and  intensive  management  will  increase  the  hotel’s  ability  to  attract  key  demand  segments,  enhance  hotel  operations  and  increase   long-­‐term  value.     To  drive  sustainable  shareholder  value,  we  also  seek  to  recycle  capital  from  stabilized  assets,  as  evidenced  by  our   recently  announced  joint  venture  for  seven  hotel  assets  (see  “Dispositions”  below  for  more  information)  and  our  sales  of  non-­‐core   hotels  in  secondary  and  tertiary  markets.     Capital  from  these  types  of  transactions  is  intended  to  be  redeployed  into  high  growth   acquisitions  and  share  buybacks.   As  of  December  31,  2015,  our  portfolio  consisted  of  49  wholly  owned  limited  and  full  service  properties  with  a  total  of  7,225   rooms  and  interests  in  five  limited  and  full  service  properties  owned  through  joint  venture  investments  with  a  total  of  1,369  rooms.   These  54  properties,  with  a  total  of  8,594  rooms,  are  located  in  Arizona,  California,  Connecticut,  Delaware,  District  of  Columbia,   Florida,  Maryland,  Massachusetts,  New  York,  Pennsylvania,  and  Virginia  and  operate  under  leading  brands,  owned  by  Marriott   International,  Inc.  (“Marriott”),  Hilton  Worldwide,  Inc.  (“Hilton”),  InterContinental  Hotels  Group  (“IHG”),  Hyatt  Corporation  (“Hyatt”),   or  Starwood  Hotels  and  Resorts  Worldwide,  Inc.  (“Starwood”).  In  addition,  some  of  our  hotels  operate  as  independent  boutique   hotels  or  with  other  brands.     We  are  structured  as  an  umbrella  partnership  REIT,  or  UPREIT,  and  we  own  our  hotels  and  our  investments  in  joint  ventures   through  our  operating  partnership,  Hersha  Hospitality  Limited  Partnership,  for  which  we  serve  as  the  sole  general  partner.  As  of   December  31,  2015,  we  owned  an  approximate  95.0%  partnership  interest  in  our  operating  partnership  including  all  general   partnership  interest.   The  majority  of  our  wholly-­‐owned  hotels  are  managed  by  Hersha  Hospitality  Management,  L.P.  (“HHMLP”),  a  privately  held,   qualified  management  company  owned  by  certain  of  our  trustees  and  executive  officers  and  other  unaffiliated  third  party  investors.   Third  party  qualified  management  companies  manage  the  hotels  that  we  own  through  joint  venture  interests.  We  lease  our   wholly-­‐owned  hotels  to  44  New  England  Management  Company  (“44  New  England”),  our  wholly-­‐owned  taxable  REIT  subsidiary   (“TRS”).  Each  of  the  hotels  that  we  own  through  a  joint  venture  investment  is  leased  to  another  TRS  that  is  owned  by  the  respective   joint  venture  or  an  entity  owned  in  part  by  44  New  England.   Our  principal  executive  office  is  located  at  44  Hersha  Drive,  Harrisburg,  Pennsylvania  17102.  Our  telephone  number  is  (717)   236-­‐4400.  Our  website  address  is  www.hersha.com.  The  information  found  on,  or  otherwise  accessible  through,  our  website  is  not   incorporated  into,  and  does  not  form  a  part  of,  this  report.   AVAILABLE  INFORMATION   We  make  available  free  of  charge  through  our  website  (www.hersha.com)  our  code  of  ethics,  corporate  governance   guidelines  and  the  charters  of  the  committees  of  our  Board  of  Trustees  (Acquisition  Committee,  Audit  Committee,  Compensation   Committee,  Nominating  and  Corporate  Governance  Committee  and  Risk  Sub-­‐Committee  of  the  Audit  Committee).  We  also  make   available  through  our  website  our  annual  reports  on  Form  10-­‐K,  quarterly  reports  on  Form  10-­‐Q,  current  reports  on  Form  8-­‐K  and   amendments  to  those  reports  filed  or  furnished  pursuant  to  Section  13(a)  or  15(d)  of  the  Exchange  Act  as  soon  as  reasonably     2                                 hersha hospitality trust practicable  after  such  documents  are  electronically  filed  with,  or  furnished  to,  the  SEC.  All  reports  that  we  have  filed  with  the  SEC     including  this  annual  report  on  Form  10-­‐K,  our  quarterly  reports  on  Form  10-­‐Q  and  our  current  reports  on  Form  8-­‐K,  can  also  be   obtained  free  of  charge  from  the  SEC’s  website  at  www.sec.gov.  In  addition,  all  reports  filed  with  the  SEC  may  be  read  and  copied  at   the  SEC’s  Public  Reference  Room  at  100  F  Street,  NE,  Washington,  D.C.  20549-­‐1090.  Further  information  regarding  the  operation  of   the  public  reference  room  may  be  obtained  by  calling  the  SEC  at  1-­‐800-­‐SEC-­‐0330.  The  information  available  on  our  website  is  not,   and  shall  not  be  deemed  to  be,  a  part  of  this  report  or  incorporated  into  any  other  filings  we  make  with  the  SEC.   INVESTMENT  IN  HOTEL  PROPERTIES   Our  operating  strategy  focuses  on  increasing  hotel  performance  for  our  portfolio.  The  key  elements  of  this  strategy  are:   •   •   working  together  with  our  hotel  management  companies  to  increase  revenue  per  available  room,  or  RevPAR,  and  to  maximize   the   average   daily   rate,   or   ADR,   and   occupancy   levels   at   each   of   our   hotels   through   active   property-­‐level   management,   including  intensive  marketing  efforts  to  tour  groups,  corporate  and  government  extended  stay  customers  and  other  wholesale   customers  and  expanded  yield  management  programs,  which  are  calculated  to  better  match  room  rates  to  room  demand;  and   maximizing   our   hotel-­‐level   earnings   by   managing   hotel-­‐level   costs   and   positioning   our   hotels   to   capitalize   on   increased   demand  in  the  high  quality,  upper-­‐upscale,  upscale,  mid-­‐scale  and  extended-­‐stay  lodging  segments,  which  we  believe  can  be   expected  to  follow  from  improving  economic  conditions,  and  maximizing  our  operating  margins.   ACQUISITIONS   We  selectively  acquire  high  quality  branded  upper-­‐upscale,  upscale,  mid-­‐scale  and  extended-­‐stay  hotels  in  metropolitan   markets  with  high  barriers-­‐to-­‐entry  and  independent  boutique  hotels  in  similar  markets.  Through  our  due  diligence  process,  we   select  those  acquisition  targets  where  we  believe  selective  capital  improvements  and  intensive  management  will  increase  the  hotel’s   ability  to  attract  key  demand  segments,  enhance  hotel  operations  and  increase  long-­‐term  value.  In  executing  our  disciplined   acquisition  program,  we  will  consider  acquiring  hotels  that  meet  the  following  additional  criteria:   •   •   •   •   nationally-­‐franchised   hotels   operating   under   popular   brands,   such   as   Ritz-­‐Carlton,   Marriott,   Residence   Inn   by   Marriott,   Courtyard  by  Marriott,  Hilton  Hotels,  Hilton  Garden  Inn,  Hampton  Inn,  Holiday  Inn,  Holiday  Inn  Express,  Holiday  Inn  Express   and  Suites,  Candlewood  Suites,  Hyatt  House,  Hyatt  Place,  Hyatt  and  Sheraton  Hotels;   hotels  in  locations  with  significant  barriers-­‐to-­‐entry,  such  as  high  development  costs,  limited  availability  of  land  and  lengthy   entitlement  processes;   hotels  in  our  target  markets  where  we  can  realize  operating  efficiencies  and  economies  of  scale;  and   independent  boutique  hotels  in  similar  markets   Since  our  initial  public  offering  in  January  1999  and  through  December  31,  2015,  we  have  acquired,  wholly  or  through  joint   ventures,  a  total  of  110  hotels,  including  28  hotels  acquired  from  entities  controlled  by  certain  of  our  trustees  and  executive  officers.   Of  the  28  acquisitions  from  entities  controlled  by  certain  of  our  trustees  and  executive  officers,  25  were  newly  constructed  or   substantially  renovated  by  these  entities  prior  to  our  acquisition.  We  take  advantage  of  our  relationships  with  entities  that  are   developing  or  substantially  renovating  hotels,  including  entities  controlled  by  certain  of  our  trustees  and  executive  officers,  to   identify  future  hotel  acquisitions  that  we  believe  may  be  attractive  to  us.  We  intend  to  continue  to  acquire  hotels  from  entities   controlled  by  certain  of  our  trustees  and  executive  officers  if  approved  by  a  majority  of  our  independent  trustees  in  accordance  with   our  related  party  transaction  policy.   DISPOSITIONS   We  evaluate  our  hotels  and  the  markets  in  which  they  operate  on  a  periodic  basis  to  determine  if  these  hotels  continue  to   satisfy  our  investment  criteria.  We  may  sell  hotels  opportunistically  based  upon  management’s  forecast  and  review  of  the  cash  flow   potential  of  each  hotel  and  re-­‐deploy  the  proceeds  into  debt  reduction,  acquisitions  of  hotels  and  share  buybacks.  We  utilize  several   criteria  to  determine  the  long-­‐term  potential  of  our  hotels.  Hotels  are  identified  for  sale  based  upon  management’s  forecast  of  the   strength  of  each  hotel’s  cash  flows,  its  ability  to  remain  accretive  to  our  portfolio,  and  the  expectations  for  the  market  in  which  the   hotel  operates.  Our  decision  to  sell  a  hotel  is  often  predicated  upon  the  size  of  the  hotel,  strength  of  the  franchise,  property   condition  and  related  costs  to  renovate  the  property,  strength  of  market  demand  generators,  projected  supply  of  hotel  rooms  in  the     3                         Annual Report 2015 market,  probability  of  increased  valuation  and  geographic  profile  of  the  hotel.  All  asset  sales  are  comprehensively  reviewed  by  the   Acquisition  Committee  of  our  Board  of  Trustees,  which  committee  consists  solely  of  independent  trustees.  During  the  time  since  our   initial  public  offering  in  1999  through  December  31,  2015,  we  have  sold  a  total  of  62  hotels.   In  accordance  with  our  strategy,  on  February  2,  2016,  we  entered  into  asset  purchase  and  contribution  agreements   (collectively,  the  “Contribution  Agreements”)  to  make  an  equity  investment  in  a  joint  venture  (the  “Owner  JV”)  with  Cindat   Manhattan  Hotel  Portfolio  (US)  LLC  (“Cindat”).     The  Owner  JV,  through  its  direct  subsidiaries,  will  own  seven  hotels  currently  in  the   Company’s  NYC  Urban  portfolio  (collectively,  the  “Cindat  JV  Properties”).     The  Contribution  Agreements  value  the  Cindat  JV   Properties  at  approximately  $543.5  million  in  the  aggregate  (subject  to  working  capital  and  similar  adjustments).     The  total  purchase   price,  including  closing  costs,  is  expected  to  be  approximately  $574.1  million.   The  Company  intends  to  hold  the  proceeds  of  sale  in  escrow  pending  reinvestment  in  replacement  properties  to  be   identified  and  acquired  in  2016  in  transactions  qualifying  for  deferral  of  federal  income  taxes  as  permitted  by  the  Code.   For  additional  information,  see  “Management’s  Discussion  and  Analysis  of  Financial  Condition  and  Results  of  Operation”   and  Note  2,  “Investment  in  Hotel  Properties”.   FINANCING   We  intend  to  finance  our  long-­‐term  growth  with  common  and  preferred  equity  issuances  and  debt  financing  having   staggered  maturities.  Our  debt  includes  unsecured  debt  provided  primarily  under  our  $500  million  unsecured  credit  facility  which   provides  for  a  $250  million  unsecured  term  loan  and  a  $250  million  unsecured  revolving  credit  facility  and  secured  mortgage  debt  in   our  hotel  properties.  In  August  2015,  we  entered  into  a  senior  unsecured  term  loan  for  $300  million.  This  expands  our  senior   unsecured  borrowing  capacity  from  $500  million  to  $800  million.  We  intend  to  use  our  loan  capacity  and  the  undrawn  portion  of  our   $500  million  senior  unsecured  credit  facility  to  pay  down  mortgage  debt,  repurchase  common  shares,  fund  future  acquisitions,  as   well  as  for  capital  improvements  and  working  capital  requirements.  Subject  to  market  conditions,  we  intend  to  repay  amounts   outstanding  under  the  revolving  line  of  credit  portion  of  our  credit  facility  from  time  to  time  with  proceeds  from  periodic  common   and  preferred  equity  issuances,  long-­‐term  debt  financings  and  cash  flows  from  operations.  When  purchasing  hotel  properties,  we   may  issue  common  and  preferred  limited  partnership  interests  in  our  operating  partnership  as  full  or  partial  consideration  to  sellers.   FRANCHISE  AGREEMENTS   We  believe  that  the  public’s  perception  of  quality  associated  with  a  franchisor  is  an  important  feature  in  the  operation  of  a   hotel.  Franchisors  provide  a  variety  of  benefits  for  franchisees,  which  include  national  advertising,  publicity  and  other  marketing   programs  designed  to  increase  brand  awareness,  training  of  personnel,  continuous  review  of  quality  standards  and  centralized   reservation  systems.  Most  of  our  hotels  operate  under  franchise  licenses  from  national  hotel  franchisors,  including:   Franchisor   Marriott  International   Hilton  Hotels  Corporation   IHG   Hyatt  Hotels  Corporation   Starwood  Hotels   Franchises     Ritz-­‐Carlton,  Marriott,  Residence  Inn  by  Marriott,  Courtyard  by  Marriott,  TownePlace  Suites     Hilton  Hotels,  Hilton  Garden  Inn,  Hampton  Inn     Holiday  Inn,  Holiday  Inn  Express,  Holiday  Inn  Express  &  Suites,  Candlewood  Suites     Hyatt  House,  Hyatt  Place,  Hyatt     Sheraton  Hotels   We  anticipate  that  most  of  the  hotels  in  which  we  invest  will  be  operated  pursuant  to  franchise  licenses.   The  franchise  licenses  generally  specify  certain  management,  operational,  record-­‐keeping,  accounting,  reporting  and   marketing  standards  and  procedures  with  which  the  franchisee  must  comply.  The  franchise  licenses  generally  obligate  our  lessees  to   comply  with  the  franchisors’  standards  and  requirements  with  respect  to  training  of  operational  personnel,  safety,  maintaining   specified  insurance,  the  types  of  services  and  products  ancillary  to  guest  room  services  that  may  be  provided  by  our  lessees,  display   of  signage,  and  the  type,  quality  and  age  of  furniture,  fixtures  and  equipment  included  in  guest  rooms,  lobbies  and  other  common   areas.  In  general,  the  franchise  licenses  require  us  to  pay  the  franchisor  a  fee  typically  ranging  between  6.0%  and  9.3%  of  such  hotel’s   revenues  annually.   4                             hersha hospitality trust PROPERTY  MANAGEMENT   We  work  closely  with  our  hotel  management  companies  to  operate  our  hotels  and  increase  same  hotel  performance  for  our   portfolio.   Through  our  TRS  and  our  investment  in  joint  ventures,  we  have  retained  the  following  management  companies  to  operate   our  hotels,  as  of  December  31,  2015:   Manager   Hotels     Rooms   Hotels   Rooms   Hotels   Rooms   Wholly  Owned   Joint  Ventures   Total   Hersha  Hospitality  Management,  L.P.   Waterford  Hotel  Group,  Inc.   South  Bay  Boston  Management,  Inc.   Marriott  Management   Total     48       -­‐       -­‐       1       49       7,139       -­‐       -­‐     86       7,225       1       2       2     -     5       285       802       282     -     1,369       49       2       2       1       54       7,424     802     282     86     8,594   Each  management  agreement  provides  for  a  set  term  and  is  subject  to  early  termination  upon  the  occurrence  of  defaults   and  certain  other  events  described  therein.  As  required  under  the  REIT  qualification  rules,  all  managers,  including  HHMLP,  must   qualify  as  an  “eligible  independent  contractor”  during  the  term  of  the  management  agreements.   Under  the  management  agreements,  the  manager  generally  pays  the  operating  expenses  of  our  hotels.  All  operating   expenses  or  other  expenses  incurred  by  the  manager  in  performing  its  authorized  duties  are  reimbursed  or  borne  by  our  applicable   TRS  to  the  extent  the  operating  expenses  or  other  expenses  are  incurred  within  the  limits  of  the  applicable  approved  hotel  operating   budget.  Our  managers  are  not  obligated  to  advance  any  of  their  own  funds  for  operating  expenses  of  a  hotel  or  to  incur  any  liability   in  connection  with  operating  a  hotel.   For  their  services,  the  managers  receive  a  base  management  fee,  and  if  a  hotel  meets  and  exceeds  certain  thresholds,  an   additional  incentive  management  fee.  For  the  year  ended  December  31,  2015,  these  thresholds  were  not  met  and  incentive   management  fees  were  not  earned.  The  base  management  fee  for  a  hotel  is  due  monthly  and  is  generally  equal  to  3%  of  the  gross   revenues  associated  with  that  hotel  for  the  related  month.   EMPLOYEES   As  of  December  31,  2015,  we  had  51  employees  who  were  principally  engaged  in  managing  the  affairs  of  the  Company   unrelated  to  property  operations.     We  believe  that  our  relations  with  our  employees  are  satisfactory.   TAX  STATUS   We  elected  to  be  taxed  as  a  REIT  under  Sections  856  through  860  of  the  Code,  commencing  with  our  taxable  year  ended   December  31,  1999.  As  long  as  we  qualify  for  taxation  as  a  REIT,  we  generally  will  not  be  subject  to  federal  income  tax  on  the  portion   of  our  income  that  is  currently  distributed  to  our  shareholders.  If  we  fail  to  qualify  as  a  REIT  in  any  taxable  year  and  do  not  qualify  for   certain  statutory  relief  provisions,  we  will  be  subject  to  federal  income  tax  (including  any  applicable  alternative  minimum  tax)  on  our   taxable  income  at  regular  corporate  tax  rates.     Additionally,  we  will  generally  be  unable  to  qualify  as  a  REIT  for  four  years  following   the  year  in  which  qualification  is  lost.     Even  if  we  qualify  for  taxation  as  a  REIT,  we  will  be  subject  to  certain  state  and  local  taxes  on   our  income  and  property  and  to  federal  income  and  excise  taxes  on  our  undistributed  income.   We  own  interests  in  several  TRSs.  We  may  own  up  to  100%  of  the  stock  of  a  TRS.  A  TRS  is  a  taxable  corporation  that  may   lease  hotels  from  our  operating  partnership  and  its  subsidiaries  under  certain  circumstances.  Overall,  no  more  than  25%  (or  20%  for   taxable  years  beginning  after  December  31,  2017)  of  the  value  of  our  assets  may  consist  of  securities  of  one  or  more  TRSs.  In   addition,  no  more  than  25%  of  our  gross  income  for  any  year  may  consist  of  dividends  from  one  or  more  TRSs  and  income  from   certain  non-­‐real  estate  related  sources.   5                                                                                       Annual Report 2015 A  TRS  is  permitted  to  lease  hotels  from  us  as  long  as  the  hotels  are  operated  on  behalf  of  the  TRS  by  a  third  party  manager   that  qualifies  as  an  "eligible  independent  contractor."  To  qualify  for  that  treatment,  the  manager  must  satisfy  the  following   requirements:   1.   2.   3.   4.   such   manager   is,   or   is   related   to   a   person   who   is,   actively   engaged   in   the   trade   or   business   of   operating   “qualified   lodging   facilities”  for  any  person  unrelated  to  us  and  the  TRS;   such  manager  does  not  own,  directly  or  indirectly,  more  than  35%  of  our  shares;   no   more   than   35%   of   such   manager   is   owned,   directly   or   indirectly,   by   one   or   more   persons   owning   35%   or   more   of   our   shares;  and   we  do  not,  directly  or  indirectly,  derive  any  income  from  such  manager.   The  deductibility  of  interest  paid  or  accrued  by  a  TRS  to  us  is  limited  to  assure  that  the  TRS  is  subject  to  an  appropriate  level   of  corporate  taxation.  A  100%  excise  tax  is  imposed  on  transactions  between  a  TRS  and  us  that  are  not  on  an  arm’s-­‐length  basis.   FINANCIAL  INFORMATION  ABOUT  SEGMENTS   We  are  in  the  business  of  acquiring  equity  interests  in  hotels,  and  we  manage  our  hotels  as  individual  operating  segments   that  meet  the  aggregation  criteria  and  are  therefore  disclosed  as  one  reportable  segment.  See  “Note  1  -­‐  Organization  and  Summary   of  Significant  Accounting  Policies”  in  Item  8  of  this  Annual  Report  on  Form  10-­‐K  for  segment  financial  information.   6               Item  2.   Properties   The  following  table  sets  forth  certain  information  with  respect  to  the  49  hotels  we  wholly  owned  as  of  December  31,  2015,  all  of   which  are  consolidated  on  the  Company’s  financial  statements.   Market   Name   Location   Year  Opened     Number  of  Rooms   hersha hospitality trust Boston  Urban  and  Metro     Courtyard       Brookline/Boston,  MA*     The  Boxer     Holiday  Inn  Express     Residence  Inn       Residence  Inn       Boston,  MA     Cambridge,  MA       Framingham,  MA     Norwood,  MA       Hawthorn  Suites  by  Wyndham     Franklin,  MA     California  -­‐  Arizona     Courtyard       Courtyard       Hyatt  House     Hyatt  House     Hyatt  House     Hotel  Milo     San  Diego,  CA     Los  Angeles,  CA     Pleasant  Hill,  CA     Pleasanton,  CA       Scottsdale,  AZ       Santa  Barbara,  CA*   South  Florida     TownePlace  Suites     Sunnyvale,  CA*     Blue  Moon     Courtyard       Residence  Inn     Winter  Haven     Miami,  FL     Miami,  FL     Coconut  Grove,  FL     Miami,  FL     Parrot  Key  Hotel  &  Resort     Key  West,  FL   NYC  Urban     Candlewood  Suites     Times  Square,  NY     Duane  Street     Hampton  Inn     Hampton  Inn     Hampton  Inn     Hampton  Inn     Hampton  Inn     Hilton  Garden  Inn     Hilton  Garden  Inn     Holiday  Inn       TriBeCa,  NY       Chelsea/Manhattan,  NY     Herald  Square,  Manhattan,  NY       Seaport,  NY       Times  Square,  NY     Pearl  Street,  Manhattan,  NY     JFK  Airport,  NY*       TriBeCa,  NY       Wall  Street,  NY     Holiday  Inn  Express     Times  Square,  NY     Holiday  Inn  Express     Water  Street,  Manhattan,  NY     Holiday  Inn  Express     Madison  Square  Garden,  Manhattan,  NY       Hyatt     Nu  Hotel     Sheraton  Hotel     Union  Square,  NY     Brooklyn,  NY       JFK  Airport,  NY*     Hilton  Garden  Inn     Midtown  East,  Manhattan,  NY   NY-­‐NJ  Metro     Holiday  Inn  Express     Chester,  NY       Hyatt  House     White  Plains,  NY     2003   2004   1997   2000   2006   1999   1999   2008   2003   1998   1999   2001   2003   2013   2004   2000   2013   2013   2009   2008   2003   2005   2006   2009   2012   2005   2009   2010   2009   2010   2006   2013   2008   2008   2014   2006   2000   188   80   112   125   96   100   245   260   142   128   164   122   94   75   357   140   70   148   188   43   144   136   65   184   81   192   151   113   210   112   228   178   93   150   205   80   159   7                                                                                                                                                                                                                                                                                                                                                         Annual Report 2015 Market   Name   Location   Year  Opened     Number  of  Rooms   Philadelphia   Washington  D.C.     Hampton  Inn     Hyatt  Place     Sheraton  Hotel     Philadelphia,  PA       King  of  Prussia,  PA     New  Castle,  DE     The  Rittenhouse  Hotel     Philadelphia,  PA       Ritz  Carlton     Courtyard       Hampton  Inn     Hyatt  House     Residence  Inn       Residence  Inn       Georgetown,  DC     Alexandria,  VA       Washington,  DC     Gaithersburg,  MD       Tysons  Corner,  VA       Greenbelt,  MD     The  Capitol  Hill  Hotel     Washington,  DC     St.  Gregory  Hotel     Washington,  DC   2001   2010   2011   2004   2014   2006   2005   1998   1984   2002   2007   2014   250   129   192   116   86   203   228   140   96   120   152   155   *   Our  interests  in  these  hotels  are  subject  to  ground  leases  which,  in  most  cases,  require  monthly  rental  payment  as   determined  by  the  applicable  ground  lease  agreement.  These  ground  lease  agreements  typically  have  initial  terms  of  99   years  and  all  have  a  remaining  term  of  at  least  85  years.   The  following  table  sets  forth  certain  information  with  respect  to  the  five  hotels  we  owned  through  unconsolidated  joint   ventures  with  third  parties  as  of  December  31,  2015.     TOTAL  ROOMS   7,225   Market   Name   Location   Boston     Connecticut       Courtyard       Holiday  Inn  Express     South  Boston,  MA**     South  Boston,  MA**     Hilton     Marriott     Marriott     Hartford,  CT       Mystic,  CT     Hartford,  CT     Year   Opened   Number  of   Rooms   HHLP   Ownership   in  Asset   HHLP   Preferred   Return   2005     1998     2005     2001     2005     164     118     393     285     409     50.0%     50.0%     8.8%     66.7%     15.0%     N/A     N/A     8.5%     8.5%     8.5%     **   The  joint  ventures  interests  in  these  hotels  are  subject  to  ground  leases  which,  in  most  cases,  require  monthly  rental   payment  as  determined  by  the  applicable  ground  lease  agreements.  These  ground  lease  agreements  typically  have  terms  of   60  years  and  all  have  a  remaining  term  of  at  least  47  years.   TOTAL  ROOMS     1,369   8                                                                                                                                                                                                                                                                                                                                                                                                             PART  II   hersha hospitality trust Item  5.   Market  for  Registrant’s  Common  Equity,  Related  Stockholder  Matters  and  Issuer  Purchases  of  Equity  Securities   MARKET  INFORMATION   Our  common  shares  trade  on  the  New  York  Stock  Exchange  under  the  symbol  “HT.”  As  of  February  16,  2016,  the  last   reported  closing  price  per  common  share  on  the  New  York  Stock  Exchange  was  $18.92.  The  following  table  sets  forth  the  high  and   low  sales  price  per  common  share  reported  on  the  New  York  Stock  Exchange  as  traded  and  the  dividends  paid  on  the  common  shares   for  each  of  the  quarters  indicated.   Year  Ended  December  31,  2015   High   Low   Fourth  Quarter   Third  Quarter   Second  Quarter   First  Quarter   Year  Ended  December  31,  2014   Fourth  Quarter   Third  Quarter   Second  Quarter   First  Quarter   $   $   $   $   $   $   $   $     25.63       28.60       26.92       28.84     $   $   $   $     21.47       22.20       25.04       25.12     High   Low     29.96     $     27.80     $     26.96     $     24.20     $     24.60       25.41       22.08       20.72     $   $   $   $   $   $   $   $   Dividend  Per  Common   Share     0.28       0.28       0.28       0.28  *   Dividend  Per  Common   Share     0.28  *     0.28  *     0.24  *     0.24  *   *Adjusted  for  4-­‐for-­‐1  reverse  share  split  effective  as  of  June  22,  2015.   SHAREHOLDER  INFORMATION   At  December  31,  2015  we  had  approximately  123  shareholders  of  record  of  our  common  shares.  Common  Units  (which  are   redeemable  by  holders  for  cash  or,  at  our  option,  for  common  shares  on  a  one  for  one  basis,  subject  to  certain  limitations)  were  held   by  approximately  32  entities  and  persons,  including  our  company.   DISTRIBUTION  INFORMATION   Future  distributions,  if  any,  will  be  at  the  discretion  of  our  Board  of  Trustees  and  will  depend  on  our  actual  cash  flow,   financial  condition,  capital  requirements,  the  annual  distribution  requirements  under  the  REIT  provisions  of  the  Internal  Revenue   Code  and  such  other  factors  as  we  may  deem  relevant.  Our  ability  to  make  distributions  will  depend  on  our  receipt  of  distributions   from  our  operating  partnership  and  lease  payments  from  our  lessees  with  respect  to  the  hotels.  We  rely  on  the  profitability  and  cash   flows  of  our  hotels  to  generate  sufficient  cash  flow  for  distributions.  Additionally,  we  may,  if  necessary  and  allowable,  pay  taxable   dividends  of  our  shares  or  debt  securities  to  meet  the  distribution  requirements.   9                                                                                                                                   Annual Report 2015 SHARE  PERFORMANCE  GRAPH   The  following  graph  compares  the  yearly  change  in  our  cumulative  total  shareholder  return  on  our  common  shares  for  the   period  beginning  December  31,  2008  and  ending  December  31,  2015,  with  the  yearly  changes  in  the  Standard  &  Poor’s  500  Stock   Index  (the  S&P  500  Index),  the  Russell  2000  Index,  and  the  SNL  Hotel  REIT  Index  for  the  same  period,  assuming  a  base  share  price  of   $100.00  for  our  common  shares,  the  S&P  500  Index,  the  Russell  2000  Index  and  the  Hotel  REIT  Index  for  comparative  purposes.  The   Hotel  REIT  Index  is  comprised  of  publicly  traded  REITs  which  focus  on  investments  in  hotel  properties.  Total  shareholder  return   equals  appreciation  in  stock  price  plus  dividends  paid  and  assumes  that  all  dividends  are  reinvested.  The  performance  graph  is  not   indicative  of  future  investment  performance.  We  do  not  make  or  endorse  any  predictions  as  to  future  share  price  performance.   Hersha  Hospitality  Trust   S&P  500   Russell  2000   SNL  Hotel  REIT  Index     $   2010     100.00   $     100.00     100.00     100.00   2011     73.94   $   2012     75.76   $   2013     84.39   $     100.00     94.55     84.91     113.40     108.38     93.04     146.97     148.49     113.81   2014     110.45   $     166.84     155.66     150.22   2015     89.53     169.14     148.80     116.21   10                                                                                                                   hersha hospitality trust UNREGISTERED  SALES  OF  EQUITY  SECURITIES  AND  USE  OF  PROCEEDS     A  summary  of  our  common  share  repurchases  (in  millions,  except  average  price  per  share)  during  the  year  ended  December   31,  2015  under  the  $100  million  repurchase  program  authorized  by  our  Board  of  Trustees  in  December  2012  and  reauthorized  in   February  2015  is  set  forth  in  the  table  below.  All  such  common  shares  were  repurchased  pursuant  to  open  market  transactions.     In  October  2015,  our  Board  of  Trustees  authorized  us  to  repurchase  from  time  to  time  up  to  an  aggregate  of  $100,000  of   our  outstanding  common  shares.  This  new  program  is  in  addition  to  the  existing  $100,000  program  authorized  in  February  2015  and   will  commence  upon  completion  of  the  existing  $100,000  common  share  repurchase  program,  and  will  expire  on  December  31,   2016.     We  may  seek  Board  of  Trustee  approval  to  increase  the  2016  authorization.   In  May  2015,  our  Board  of  Trustees  approved  a  reverse  share  split  of  our  issued  and  outstanding  common  shares  at  a  ratio   of  1-­‐for-­‐4.  This  reverse  share  split  converted  every  four  issued  and  outstanding  common  shares  into  one  common  share.  The  reverse   share  split  was  effective  as  of  5:00  PM  Eastern  time  on  June  22,  2015.  All  common  share  and  per  share  data  shown  below  have  been   updated  to  reflect  this  share  split  as  if  it  occurred  on  January  1,  2015.   Issuer  Purchases  of  Common  Stock   Total  Number   of  Shares   Purchased   Average   Price  Paid   Per  Share     Total  Number  of  Shares   Purchased  As  Part  of   Publicly  Announced   Plans  or  Programs   Maximum  Number  (or   Approximate  Dollar  Value)   of  Shares  That  May  Yet  Be   Purchased  Under  the  Plans   or  Programs  (in  thousands)       -­‐       -­‐     N/A   N/A   N/A   N/A     494,441     $     160,167       1,002,970       306,573       -­‐       643,334       813,453       297,600       516,128       1,075,705     25.44     25.56     25.68     25.36     N/A   24.38     23.57     22.56     23.31     22.45       494,441     $     654,608       1,657,578       1,964,151       1,964,151       2,607,485       3,420,938       3,718,538       4,234,666       5,310,371       -­‐       -­‐       87,413       83,317       57,568       49,791       49,791       34,109       17,174       108,227       96,197       72,053     Period   January  1  to  January  31,  2015   February  1  to  February  28,  2015   March  1  to  March  31,  2015   April  1  to  April  30,  2015   May  1  to  May  31,  2015   June  1  to  June  30,  2015   July  1  to  July  31,  2015   August  1  to  August  31,  2015   September  1  to  September  30,  2015   October  1  to  October  31,  2015   November  1  to  November  30,  2015   December  1  to  December  31,  2015   11                                                                                                                                                                                     Annual Report 2015 Item  6.   Selected  Financial  Data   The  following  sets  forth  selected  financial  and  operating  data  on  a  historical  consolidated  basis.  The  following  data  should   be  read  in  conjunction  with  the  financial  statements  and  notes  thereto  and  Management’s  Discussion  and  Analysis  of  Financial   Condition  and  Results  of  Operations  included  elsewhere  in  this  Form  10-­‐K.       As  a  result  of  the  early  adoption  on  January  1,  2014  of   ASU  Update  No.  2014-­‐08,  we  do  not  expect  to  classify  most  of  our  hotel  dispositions  as  discontinued  operations.     For  purposes  of   this  table  below,  the  operating  results  of  certain  real  estate  assets  which  have  been  sold  prior  to  the  adoption  of  ASU  Update  No.   2014-­‐08  are  included  in  discontinued  operations  for  all  periods  presented.   HERSHA  HOSPITALITY  TRUST   SELECTED  FINANCIAL  DATA   (In  thousands,  except  per  share  data)   2015   2014   2013   2012   2011   Revenue:     Hotel  Operating  Revenues     Interest  Income  From  Development  Loans   Other  Revenues   Total  Revenue     Operating  Expenses:     Hotel  Operating  Expenses     Gain  on  Insurance  Settlements   Hotel  Ground  Rent   Real  Estate  and  Personal  Property  Taxes  and  Property  Insurance     General  and  Administrative  (including  Share  Based  Payments  of  $6,523,   $6,028,  $9,746,  $9,678,  $7,590)   Acquisition  and  Terminated  Transaction  Costs   Depreciation  and  Amortization     Contingent  Consideration   Total  Operating  Expenses     Operating  Income   Interest  Income   Interest  Expense     Other  Expense   Gain  on  Disposition  of  Hotel  Properties   Gain  on  Hotel  Acquisitions,  net   Development  Loan  Recovery   Loss  on  Debt  Extinguishment   Income  (Loss)  before  (Loss)  Income  from  Unconsolidated  Joint  Venture   Investments  and  Discontinued  Operations     Income  (Loss)  from  Unconsolidated  Joint  Ventures   Impairment  of  Investment  in  Unconsolidated  Joint  Ventures   (Loss)  Gain  from  Remeasurement  of  Investment  in  Unconsolidated  Joint   Ventures   Income  (Loss)  from  Unconsolidated  Joint  Venture  Investments   Income  Before  Income  Taxes   Income  Tax  Benefit   Income  from  Continuing  Operations   Discontinued  Operations:   (Loss)  Gain  on  Disposition  of  Hotel  Properties   Impairment  of  Assets  Held  for  Sale   Income  from  Discontinued  Operations     (Loss)  Income  from  Discontinued  Operations   Net  Income  (Loss)   (Income)  Loss  Allocated  to  Noncontrolling  Interests   Issuance  Costs  of  Redeemed  Preferred  Shares   Preferred  Distributions   $     470,272     $     417,226     $     -­‐       113         470,385         254,313         -­‐       3,137         34,518         20,515         1,119         74,390         -­‐       387,992         82,393         193         (43,557)       (367)       -­‐       -­‐       -­‐       (561)       38,101         965         -­‐       -­‐       965         39,066         3,141         42,207         -­‐       -­‐       -­‐       -­‐       42,207         (411)       -­‐       -­‐       180         417,406         227,324         (4,604)       2,433         30,342         20,363         2,472         69,167         2,000         349,497         67,909         805         (43,357)       (485)       7,195         12,667         22,494         (670)       66,558         693         -­‐       -­‐       693         67,251         2,685         69,936         (128)       (1,800)       263         (1,665)       68,271         (1,016)       -­‐       338,064     $     158         191         338,413         299,005     $     1,998         212         301,215         229,156       3,427       330       232,913       188,431         (403)       985         24,083         23,869         974         55,784         -­‐       293,723         44,690         1,784         (40,935)       (102)       -­‐       12,096         -­‐       (545)       16,988         (22)       (1,813)       -­‐       (1,835)       15,153         5,600         20,753         32,121         (10,314)       7,388         29,195         49,948         (335)       (2,250)       161,982         -­‐       835         19,341         23,377         1,179         48,243         -­‐       254,957         46,258         1,311         (38,070)       (43)       -­‐       -­‐       -­‐       (3,189)       6,267         (232)       -­‐       (1,892)       (2,124)       4,143         3,355         7,498         121,402       -­‐     877       15,936       18,449       2,734       40,562       -­‐     199,960       32,953       456       (34,266)     (231)     -­‐     -­‐     -­‐     (102)     (1,190)     210       (1,677)     2,757       1,290       100       -­‐     100       11,231         991       -­‐       (30,248)     3,489         14,720         22,218         158         -­‐       2,189       (27,068)     (26,968)     1,734       -­‐     (14,356)       (14,356)       (14,611)       (14,000)       (10,499)   Net  Income  (Loss)  applicable  to  Common  Shareholders   $     27,440     $     52,899     $     32,752     $     8,376     $     (35,733)   12                                                                                                                                                                               hersha hospitality trust HERSHA  HOSPITALITY  TRUST   SELECTED  FINANCIAL  DATA   (In  thousands,  except  per  share  data)   Basic  Income  (Loss)  from  Continuing  Operations  applicable  to  Common   Shareholders   Diluted  Income  (Loss)  from  Continuing  Operations  applicable  to  Common   Shareholders  (1)   Dividends  declared  per  Common  Share     $     0.56     $     1.08     $     0.07     $     (0.12)   $     (0.24)     0.56         1.12         1.07         1.04         0.07         0.96         (0.12)       0.96         (0.24)     0.92     2015   2014   2013   2012   2011   Balance  Sheet  Data     Net  investment  in  hotel  properties     Assets  Held  for  Sale     Noncontrolling  Interests  Common  Units   Redeemable  Noncontrolling  Interest   Noncontrolling  Interests  Consolidated  Joint  Ventures   $     1,831,119     $     1,745,483     $     1,535,835     $     1,466,713     $     1,341,536       -­‐       -­‐       31,876         29,082         -­‐       -­‐       -­‐       -­‐       56,583         29,523         -­‐       -­‐       -­‐       15,484         15,321         -­‐       476         93,829       16,862       14,955       307       -­‐   Noncontrolling  Interests  Consolidated  Variable  Interest  Entity     (1,760)       (1,075)       (342)     Shareholder's  equity     Total  assets     Total  debt       678,039         829,381         837,958         829,828         730,673       1,969,772         1,855,539         1,748,097         1,707,679         1,630,909       1,177,087         918,923         773,501         792,708         758,374     Liabilities  related  to  Assets  Held  for  Sale       -­‐       -­‐       45,835         -­‐       61,758     Other  Data     Net  cash  provided  by  operating  activities     Net  cash  used  in  investing  activities     Net  cash  provided  by  financing  activities     Weighted  average  shares  outstanding     Basic     Diluted  (1)   $   $   $     121,817     $     112,894     $     90,261     $     71,756     $     58,668       (143,909)   $     (180,504)   $     (125,474)   $     (55,817)   $     (230,758)     28,372     $     53,072     $     2,367     $     28,552     $     131,062       47,786,811       49,777,302         49,597,613       46,853,818         42,188,346       48,369,658       50,307,506         50,479,545       46,853,818         42,188,346     (1)     Income  allocated  to  noncontrolling  interest  in  HHLP  has  been  excluded  from  the  numerator  and  Common  Units  have  been   omitted  from  the  denominator  for  the  purpose  of  computing  diluted  earnings  per  share  because  the  effect  of  including   these  amounts  in  the  numerator  and  denominator  would  have  no  impact.   13                                                                                                                                                                   Annual Report 2015 Item  7.   Management’s  Discussion  and  Analysis  of  Financial  Condition  and  Results  of  Operations   Certain  statements  appearing  in  this  Item  7  are  forward-­‐looking  statements  within  the  meaning  of  the  federal  securities   laws.  Our  actual  results  may  differ  materially.  We  caution  you  not  to  place  undue  reliance  on  any  such  forward-­‐looking  statements.   See  “Cautionary  Factors  That  May  Affect  Future  Results”  for  additional  information  regarding  our  forward-­‐looking  statements.   BACKGROUND   As  of  December  31,  2015,  we  owned  interests  in  54  hotels  in  major  urban  gateway  markets  including  New  York,  Washington   DC,  Boston,  Philadelphia,  San  Diego,  Los  Angeles  and  Miami,  including  49  wholly-­‐owned  hotels  and  interests  in  five  hotels  owned   through  unconsolidated  joint  ventures.  Our  "Summary  of  Operating  Results"  section  below  contains  operating  results  for  49   consolidated  hotel  assets  and  five  hotel  assets  owned  through  unconsolidated  joint  ventures.    We  have  elected  to  be  taxed  as  a  REIT   for  federal  income  tax  purposes,  beginning  with  the  taxable  year  ended  December  31,  1999.  For  purposes  of  the  REIT  qualification   rules,  we  cannot  directly  operate  any  of  our  hotels.  Instead,  we  must  lease  our  hotels  to  a  third  party  lessee  or  to  a  TRS,  provided   that  the  TRS  engages  an  eligible  independent  contractor  to  manage  the  hotels.  As  of  December  31,  2015,  we  have  leased  all  of  our   hotels  to  a  wholly-­‐owned  TRS,  a  joint  venture  owned  TRS,  or  an  entity  owned  by  our  wholly-­‐owned  TRS.  Each  of  these  TRS  entities   will  pay  qualifying  rent,  and  the  TRS  entities  have  entered  into  management  contracts  with  qualified  independent  managers,   including  HHMLP,  with  respect  to  our  hotels.  We  intend  to  lease  all  newly  acquired  hotels  to  a  TRS.  The  TRS  structure  enables  us  to   participate  more  directly  in  the  operating  performance  of  our  hotels.  The  TRS  directly  receives  all  revenue  from,  and  funds  all   expenses  relating  to,  hotel  operations.  The  TRS  is  also  subject  to  income  tax  on  its  earnings.     OVERVIEW   We  believe  the  improvements  in  our  equity  and  debt  capitalization  and  repositioning  of  our  portfolio  better  enables  us  to   capitalize  on  further  improvement  in  lodging  fundamentals.  During  2015,  we  continued  to  see  improvements  in  ADR,  RevPAR  and   operating  margins,  led  by  hotels  in  most  of  our  major  locations.  We  continue  to  seek  acquisition  opportunities  in  urban  centers  and   central  business  districts.  In  addition,  we  will  continue  to  look  for  attractive  opportunities  to  divest  of  properties  at  favorable  prices,   potentially  redeploying  that  capital  in  our  focus  markets  or  opportunistically  repurchasing  our  common  shares.  We  do  not  expect  to   actively  pursue  acquisitions  of  new  hotels  in  joint  ventures  in  the  near  term;  however,  we  may  seek  to  buy  out,  or  sell  our  joint   venture  interests  to  select  existing  joint  venture  partners.   Since  2010,  the  lodging  cycle  has  been  characterized  by  limited  new  supply  and  muted  GDP  growth.  Favorable  supply  and   demand  fundamentals  are  expected  for  the  next  2-­‐to-­‐3  years  and  increasing  domestic  and  leisure  transient  business,  combined  with   the  resurgence  of  group  travelers,  is  expected  to  offset  global  macroeconomic  uncertainty  and  drive  lodging  demand  moving   forward.  Limited  new  supply  and  strong  demand  has  resulted  in  historically  high  occupancies  across  the  United  States  (“U.S.”),  with   RevPAR  growth  forecast  to  be  rate-­‐driven  for  the  remainder  of  the  cycle.  We  expect  moderate  improvement  in  consumer  and   commercial  spending  and  lodging  demand  during  2016.  However,  the  manner  in  which  the  economy  will  continue  to  grow,  if  at  all,   is  not  predictable.  In  addition,  the  availability  of  hotel-­‐level  financing  for  the  acquisition  of  new  hotels  is  not  within  our  control.  As  a   result,  there  can  be  no  assurances  that  we  will  be  able  to  grow  hotel  revenues,  occupancy,  ADR  or  RevPAR  at  our  properties  as  we   hope.     Factors  that  might  contribute  to  less  than  anticipated  performance  include  those  described  under  the  heading  “Item  1A.  Risk   Factors”  and  other  documents  that  we  may  file  with  the  SEC  in  the  future.  We  will  continue  to  cautiously  monitor  recovery  in  lodging   demand  and  rates,  our  third  party  hotel  managers  and  our  performance  generally.   SUMMARY  OF  OPERATING  RESULTS   The  following  table  outlines  operating  results  for  the  Company’s  portfolio  of  wholly  owned  hotels  and  those  owned  through   joint  venture  interests  (excluding  hotel  assets  classified  as  discontinued  operations)  that  are  consolidated  in  our  financial  statements   for  the  three  years  ended  December  31,  2015,  2014  and  2013.   14                         hersha hospitality trust CONSOLIDATED  HOTELS:   Year  Ended   2015   Year  Ended   2014   2015  vs.  2014   %  Variance   Year  Ended   2013   2014  vs.  2013   %  Variance   Occupancy   Average  Daily  Rate  (ADR)   Revenue  Per  Available  Room  (RevPAR)   Room  Revenues   Hotel  Operating  Revenues   84.1%       197.34     $     165.88     $   82.6%       187.82       155.19     1.5%   5.1%   6.9%     424,383     $     470,272     $     380,461       417,226     11.5%   12.7%   $   $   $   $   79.7%       179.70       143.30       309,452       338,064       $     $     $     $   2.9%   4.5%   8.3%   22.9%   23.4%   RevPAR  for  the  year  ended  December  31,  2015  increased  6.9%  for  our  consolidated  hotels  when  compared  to  the  same   period  in  2014.  This  increase  represents  a  continued  growth  trend  in  RevPAR,  which  is  primarily  due  to  the  improving  economic   conditions  in  2015  and  the  acquisition  of  hotel  properties  consummated  in  2015  and  2014  that  are  accretive  to  RevPAR.  The   increase,  as  noted  in  the  table  above,  was  the  result  of  increases  in  both  occupancy  and  ADR.  Performing  particularly  well  in  2015   were  hotels  in  our  Boston,  West  Coast,  and  South  Florida  markets,  each  of  which  posted  RevPAR  growth  in  excess  of  11.0%  versus   the  same  period  in  2014.     The  following  table  outlines  operating  results  for  the  three  years  ended  December  31,  2015,  2014  and  2013  for  hotels  we   own  through  unconsolidated  joint  venture  interests  (excluding  those  hotel  assets  that  have  been  sold  to  an  independent  third  party   during  the  period  presented).  These  operating  results  reflect  100%  of  the  operating  results  of  the  property  including  our  interest  and   the  interests  of  our  joint  venture  partners  and  other  noncontrolling  interest  holders.   UNCONSOLIDATED  JOINT  VENTURES:   Year  Ended   2015   Year  Ended   2014   2015  vs.  2014   %  Variance   Year  Ended   2013   2014  vs.  2013   %  Variance   Occupancy   Average  Daily  Rate  (ADR)   Revenue  Per  Available  Room  (RevPAR)   Room  Revenues   Total  Revenues   68.1%       170.20     $     115.93     $   67.2%       164.10       110.33       57,927     $     80,703     $     59,135       80,860     $   $   $   $   0.9%   3.7%   5.1%   -­‐2.0%   -­‐0.2%   68.3%       154.57       105.52       58,273       80,879       $     $     $     $   -­‐1.1%   6.2%   4.6%   1.5%   0.0%   For  our  unconsolidated  hotels,  RevPAR  for  the  year  ended  December  31,  2015  increased  5.1%  compared  to  RevPAR   achieved  during  the  year  ended  December  31,  2014.  The  2015  results  reflect  the  overall  condition  of  the  market  in  which  our   unconsolidated  joint  venture  hotels  operate,  particularly  Boston,  where  our  2  hotels  posted  RevPAR  growth  of  8.1%.  In  addition,  the   Courtyard  Norwich,  CT  is  included  in  the  results  for  the  year  ended  2014,  but  is  not  included  in  the  results  for  the  year  ended  2015.   The  owner  of  the  property,  Mystic  Partners,  LLC,  transferred  the  title  of  the  property,  of  which  we  held  a  66.7%  interest,  to  the   lender  during  the  fourth  quarter  of  2014.  This  property  had  occupancy  of  56.6%,  ADR  of  $115.52  and  RevPAR  of  $65.42  for  the  year   ended  2014,  which  was  the  lowest  operating  statistics  for  the  Mystic  Partners,  LLC  portfolio.   As  noted  in  “Item  1  –  Business,”  we  entered  into  Contribution  Agreements  to  make  an  equity  investment  in  a  joint  venture,   which  will  own  seven  hotels  currently  included  in  the  Company’s  consolidated  hotels  noted  above.     Upon  contribution  of  the  Cindat   JV  Properties  into  the  joint  venture,  we  believe  the  properties  will  be  accounted  for  as  an  unconsolidated  joint  venture.  The  impact   of  this  transaction  on  future  occupancy,  ADR  and  RevPAR  reported  for  our  consolidated  hotels  and  unconsolidated  joint  ventures  will   depend  upon  the  timing  of  contribution  and  the  future  results  of  the  Cindat  JV  Properties.   15                                                                                                                                                                                                                                                                                                             Annual Report 2015 We  define  a  same  store  consolidated  hotel  as  one  that  is  currently  consolidated,  that  we  have  owned  in  whole  or  in  part  for   the  entire  period  being  reported  and  the  comparable  period  in  each  of  the  periods  being  presented,  and  is  deemed  fully  operational.   Based  on  this  definition,  for  the  years  ended  December  31,  2015  and  2014,  there  are  41  same  store  consolidated  hotels  and  34  same   store  consolidated  hotels  for  the  years  ended  December  31,  2014  and  2013.  The  following  table  outlines  operating  results  for  the   years  ended  December  31,  2015,  2014,  and  2013,  for  our  same  store  consolidated  hotels:   SAME  STORE  CONSOLIDATED   HOTELS:   (includes  41  hotels  in  both  years)   Year  Ended   2014   2015  vs.  2014   %  Variance     Year  Ended   2015   (includes  34  hotels  in  both  years)   Year  Ended   2013   2014  vs.  2013   %  Variance   Year  Ended   2014   Occupancy   $   Average  Daily  Rate  (ADR)   Revenue  Per  Available  Room  (RevPAR)  $   83.7%       193.62     $     162.06     $   82.1%       185.13       152.03     Room  Revenues   Total  Revenues   $   $     374,679     $     415,395     $     351,248       385,065     1.6%   4.6%   6.6%   6.7%   7.9%   82.9%       179.76     $     148.97     $     $     $   79.7%       176.85       140.95       $     280,421     $     $     305,961     $     265,142       288,635     3.2%   1.6%   5.7%   5.8%   6.0%   Driven  by  strong  performance  in  our  Boston,  West  Coast,  and  Washington  DC  markets,  RevPAR  for  our  same  store   consolidated  hotels  increased  6.6%  during  the  year  ended  December  31,  2015,  when  compared  to  the  same  period  in  2014.   COMPARISON  OF  THE  YEAR  ENDED  DECEMBER  31,  2015  TO  DECEMBER  31,  2014   (dollars  in  thousands,  except  ADR  and  per  share  data)   Revenue   Our  total  revenues  for  the  years  ended  December  31,  2015  and  2014  consisted  entirely  of  hotel  operating  revenues  and   other  revenue.  Hotel  operating  revenues  are  recorded  for  wholly  owned  hotels  that  are  leased  to  our  wholly  owned  TRS  and  hotels   owned  through  joint  venture  interests  that  were  consolidated  in  our  financial  statements  during  the  period.  Hotel  operating   revenues  increased  $53,046,  or  12.7%,  from  $417,226  for  the  year  ended  December  31,  2014  to  $470,272  for  the  same  period  in   2015.  This  increase  in  hotel  operating  revenues  was  primarily  attributable  to  the  acquisition  of  hotel  properties  consummated  in   2015  and  2014  as  well  as  the  continued  growth  and  stabilization  of  our  existing  assets.     Since  December  31,  2014,  we  have  acquired  interests  in  three  consolidated  hotels.  These  three  hotels  contributed  the   following  operating  revenues  for  the  twelve  months  ended  December  31,  2015.   Brand   St.  Gregory  Hotel   TownePlace  Suites     Ritz  Carlton  Georgetown   Location     Washington,  DC     Sunnyvale,  CA     Washington,  DC   Acquisition  Date     Rooms   2015  Hotel  Operating   Revenues     June  16,  2015     August  25,  2015     December  29,  2015     155     $     94       86       335     $     5,257     1,744     149     7,150   Revenues  for  all  hotels  were  recorded  from  the  date  of  acquisition  as  hotel  operating  revenues.  Further,  hotel  operating   revenues  for  the  year  ended  December  31,  2015  included  revenues  for  the  following  hotels  that  were  purchased  during  the  year   ended  December  31,  2014.  Hotels  acquired  during  the  year  ended  December  31,  2014  would  have  a  full  year  of  results  included  in   the  year  ended  December  31,  2015  but  not  necessarily  a  full  year  of  results  during  the  same  period  in  2014.     16                                                                                                                                                                                                                                                             hersha hospitality trust We  acquired  interests  in  the  following  consolidated  hotels  during  the  year  ended  December  31,  2014:   Brand   Location     Santa  Barbara,  CA   Hotel  Milo   Parrot  Key  Resort     Key  West,  FL   Hilton  Garden  Inn  52nd     New  York,  NY   Street   Hampton  Inn  Pearl  Street     New  York,  NY   *Date  the  hotel  began  operations.     Acquisition  Date     February  28,  2014     May  7,  2014     May  30,  2014*     June  23,  2014*     Rooms     122     $     148       205       81       556     $   2015  Hotel   Operating   Revenues     9,141     $     15,089       17,935       5,563       47,728     $   2014  Hotel   Operating   Revenues     8,655     9,145     10,439     2,867     31,106   In  addition,  our  same  store  consolidated  portfolio  experienced  improvements  in  ADR  and  occupancy  during  the  year  ended   December  31,  2015  when  compared  to  the  same  period  in  2014.  Occupancy  in  our  same  store  consolidated  hotels  increased  158   basis  points  from  82.1%  during  the  year  ended  December  31,  2014  to  83.7%  for  the  same  period  in  2015.  ADR  improved  4.6%,   increasing  from  $185.13  for  the  year  ended  December  31,  2014  to  $193.62  during  the  same  period  in  2015.  These  improvements   were  due  to  improvements  in  lodging  trends  in  the  markets  in  which  our  hotels  are  located.   Expenses   Total  hotel  operating  expenses  increased  11.9%  to  approximately  $254,313  for  the  year  ended  December  31,  2015  from   $227,324  for  the  year  ended  December  31,  2014.  Consistent  with  the  increase  in  hotel  operating  revenues,  hotel  operating  expenses   increased  primarily  due  to  the  acquisitions  consummated  since  the  comparable  period  in  2014,  as  mentioned  above.  The  acquisitions   also  resulted  in  an  increase  in  depreciation  and  amortization  of  7.6%,  or  $5,223,  to  $74,390  for  the  year  ended  December  31,  2015   from  $69,167  for  the  year  ended  December  31,  2014.  Real  estate  and  personal  property  tax  and  property  insurance  increased   $4,176,  or  13.8%,  for  the  year  ended  December  31,  2015  when  compared  to  the  same  period  in  2014.  This  increase  is  due  to  our   acquisitions  along  with  a  general  overall  increase  in  tax  assessments  and  tax  rates  as  the  economy  improves,  but  was  partially  offset   by  reductions  resulting  from  our  rigorous  management  of  this  expense.   General  and  administrative  expense  increased  by  approximately  $152  to  $20,515  for  the  year  ended  December  31,  2015   from  $20,363  for  the  year  ended  December  31,  2014.  General  and  administrative  expense  includes  expense  related  to  non-­‐cash   share  based  payments  issued  as  incentive  compensation  to  the  Company’s  trustees,  executives,  and  employees.  Expense  related  to   share  based  compensation  increased  $495  when  comparing  the  year  ended  December  31,  2015  to  the  same  period  in  2014.  The   increase  in  share  based  compensation  expense  is  due  primarily  to  the  issuance  of  the  shares  attributable  to  the  2014  ALTIP  Plan   during  the  first  quarter  of  2015.  Please  refer  to  “Note  8  –  Share  Based  Payments”  of  the  notes  to  the  consolidated  financial   statements  for  more  information  about  our  stock  based  compensation.     Amounts  recorded  on  our  consolidated  statement  of  operations  for  acquisition  and  terminated  transactions  costs  will   fluctuate  from  period  to  period  based  on  our  acquisition  activities.  Acquisition  costs  typically  consist  of  transfer  taxes,  legal  fees  and   other  costs  associated  with  acquiring  a  hotel  property  and  transactions  that  were  terminated  during  the  year.  Acquisition  and   terminated  transaction  costs  decreased  $1,353  from  $2,472  for  the  year  ended  December  31,  2014  to  $1,119  for  the  year  ended   December  31,  2015.  While  we  acquired  more  properties  in  2014,  the  manners  in  which  acquisition  targets  are  found  can  and  do   dictate  the  costs  necessary  to  complete  the  acquisition.  The  costs  incurred  in  2015  were  related  to  the  following  hotels:  $76  related   to  our  St.  Gregory  acquisition,  $84  related  to  our  TownePlace  Suites  acquisition,  and  $548  related  to  our  Ritz  Carlton  Georgetown   acquisition.  The  costs  incurred  in  2014  were  related  to  the  following  hotels:  $1,836  related  to  our  Hilton  Garden  Inn  52nd  Street   acquisition;  $173  related  to  our  Hotel  Milo  acquisition;  and  $169  related  to  our  Parrot  Key  Resort  acquisition.  Also  included  in  these   costs  are  charges  related  to  transactions  that  were  terminated  during  the  year.   17                                                                                               Annual Report 2015 Operating  Income   Operating  income  for  the  year  ended  December  31,  2015  was  $82,393  compared  to  operating  income  of  $67,909  during  the   same  period  in  2014.  Operating  income  was  positively  impacted  by  the  improved  operating  results  of  our  hotels  discussed  above.   Offsetting  this  increase  was  insurance  recoveries  of  approximately  $4,604  recognized  during  the  year  ended  December  31,  2014   related  to  the  settlement  of  insurance  claims  from  Hurricane  Sandy.  A  similar  event  did  not  occur  during  the  year  ended  December   31,  2015.   Interest  Expense   Interest  expense  increased  $200  from  $43,357  for  the  year  ended  December  31,  2014  to  $43,557  for  the  year  ended   December  31,  2015.  Our  borrowings  have  increased  in  total  since  December  31,  2014,  largely  in  part  because  of  increased   borrowings  drawn  on  our  unsecured  credit  facility  and  unsecured  term  loan.  However,  these  borrowings  were  used  to  repay  several   secured  mortgage  indebtedness  during  the  year  ended  December  31,  2015.  The  borrowings  on  our  unsecured  credit  facility  and   unsecured  term  loan  bear  interest  at  a  lower  interest  rate  than  the  mortgage  loans  in  which  the  proceeds  were  used  to  repay,   thereby  compressing  the  increase  in  interest  expense  for  the  year  ended  December  31,  2015  as  compared  to  the  same  period  in   2014.  During  2014,  we  entered  into  a  new  credit  facility  which  allowed  for  an  additional  $100,000  unsecured  term  loan,  which  we   drew  during  the  second  quarter  of  2014.  On  August  10,  2015,  we  entered  into  a  $300,000  senior  unsecured  term  loan  with  Citigroup   Global  Markets  Inc.  and  various  other  lenders,  which  was  fully  drawn  down  by  December  31,  2015.   Gain  on  Disposition  of  Hotel  Properties   During  the  year  ended  December  31,  2014,  the  Company  recorded  a  gain  of  $7,195  related  to  its  sale  of  Hotel  373  in   Manhattan.   Gain  on  Hotel  Acquisitions,  net   During  the  year  ended  December  31,  2014,  the  Company  recorded  a  gain  of  $12,667  related  primarily  to  its  purchase  of  the   Hilton  Garden  Inn  on  52nd  Street  in  Manhattan  as  the  purchase  price  of  the  asset  was  less  than  the  appraised  fair  value  as  of  the   closing  date.     A  similar  event  did  not  occur  during  the  year  ended  December  31,  2015.   Development  Loan  Recovery   Consideration  given  in  exchange  for  the  Hilton  Garden  Inn  52nd  Street  included  cash  to  the  seller  and  our  reinstatement   and  cancellation  of  a  development  loan  receivable  in  the  original  principal  amount  of  $10,000  and  $12,494  of  accrued  interest  and   late  fees.  This  development  loan  receivable  had  previously  been  fully  impaired  in  2009,  but  was  recovered  as  part  of  this  acquisition.   As  a  result,  we  recognized  a  gain  of  $22,494  on  the  recovery  of  the  previously  impaired  development  loan  during  the  year  ended   December  31,  2014.     A  similar  event  did  not  occur  during  the  year  ended  December  31,  2015.   Unconsolidated  Joint  Venture  Investments   The  income  from  unconsolidated  joint  ventures  consists  of  our  interest  in  the  operating  results  of  the  properties  we  own  in   joint  ventures.  The  operating  results  of  the  unconsolidated  joint  ventures  improved  by  $272  for  the  year  ended  December  31,  2015.   This  is  primarily  because  of  the  improved  performance  in  our  Boston  market,  where  two  of  our  five  properties  owned  in  joint   ventures  are  located.     Income  Tax  Benefit   During  the  year  ended  December  31,  2015,  the  Company  recorded  an  income  tax  benefit  of  $3,141  compared  to  an  income   tax  benefit  of  $2,685  in  2014.     18                                           hersha hospitality trust Net  Income  Applicable  to  Common  Shareholders   Net  income  applicable  to  common  shareholders  for  the  year  ended  December  31,  2015  was  $27,440  compared  to  net   income  applicable  to  common  shareholders  of  $52,899  for  the  same  period  in  2014.  Net  income  applicable  to  common  shareholders   for  the  year  ended  December  31,  2014  was  positively  impacted  by  the  improved  operating  results  of  our  hotels  and  one-­‐time  gains   discussed  above  which  occurred  for  the  year  ended  December  31,  2014  only.   Comprehensive  Income  Attributable  to  Common  Shareholders   Comprehensive  income  applicable  to  common  shareholders  for  the  year  ended  December  31,  2015  was  $27,332  compared   to  $52,917  for  the  same  period  in  2014.  This  amount  was  primarily  attributable  to  net  income  as  more  fully  described  above.  Further   change  in  other  comprehensive  income  was  primarily  the  result  of  the  decrease  in  fair  value  of  our  interest  rate  swaps  and  caps  used   as  cash  flow  hedges.  The  decrease  in  fair  value  of  these  instruments  is  attributed  to  changes  in  the  forecasted  LIBOR  rates  from   period  to  period,  as  interest  rates  continue  to  be  forecasted  at  historic  lows.  For  the  year  ended  December  31,  2015,  we  recorded   other  comprehensive  loss  of  $108  when  compared  to  $18  of  other  comprehensive  income  for  the  year  ended  December  31,  2014.   The  decrease  in  other  comprehensive  income  was  primarily  due  to  the  decrease  in  fair  value  of  our  interest  rate  swaps  and  caps   used  as  cash  flow  hedges.  The  decrease  in  fair  value  of  these  instruments  is  attributed  to  changes  in  the  forecasted  LIBOR  rates  from   period  to  period,  as  interest  rates  continue  to  be  forecasted  at  historic  lows.   COMPARISON  OF  THE  YEAR  ENDED  DECEMBER  31,  2014  TO  DECEMBER  31,  2013   (dollars  in  thousands,  except  per  share  data)   Revenue   Our  total  revenues  for  the  years  ended  December  31,  2014  and  2013  consisted  of  hotel  operating  revenues  and  other   revenue.  Hotel  operating  revenues  were  approximately  99.9%  of  total  revenues  for  the  years  ended  December  31,  2014  and  2013,   respectively.  Hotel  operating  revenues  are  recorded  for  wholly  owned  hotels  that  are  leased  to  our  wholly  owned  TRS  and  hotels   owned  through  joint  venture  interests  that  were  consolidated  in  our  financial  statements  during  the  period.  Hotel  operating   revenues  increased  $79,162,  or  23.4%,  from  $338,064  for  the  year  ended  December  31,  2013  to  $417,226  for  the  same  period  in   2014.  This  increase  in  hotel  operating  revenues  was  primarily  attributable  to  the  acquisitions  consummated  in  2014  and  2013  as  well   as  increases  in  hotel  operating  revenues  for  our  same  store  consolidated  hotels.     We  acquired  interests  in  the  following  consolidated  hotels  that  contributed  the  following  operating  revenues  for  the  year   ended  December  31,  2014:   Brand   Hotel  Milo   Parrot  Key  Resort   Hilton  Garden  Inn  52nd  Street   Hampton  Inn  Pearl  Street   Location     Santa  Barbara,  CA     Key  West,  FL     New  York,  NY     New  York,  NY   *   Date  the  hotel  began  operations.   Acquisition  Date     Rooms   2014  Hotel  Operating   Revenues     February  28,  2014     May  7,  2014     May  30,  2014*     June  23,  2014*   122     $     148       205       81       556     $     8,655     9,145     10,439     2,867     31,106   Revenues  for  all  hotels  were  recorded  from  the  date  of  acquisition  as  hotel  operating  revenues.  Further,  hotel  operating   revenues  for  the  year  ended  December  31,  2014  included  revenues  for  the  following  hotels  that  were  purchased  during  the  year   ended  December  31,  2013.  Hotels  acquired  during  the  year  ended  December  31,  2013  would  have  a  full  year  of  results  included  in   the  year  ended  December  31,  2014  but  not  necessarily  a  full  year  of  results  during  the  same  period  in  2013.     19                                                                                         Annual Report 2015 We  acquired  interests  in  the  following  consolidated  hotels  during  the  year  ended  December  31,  2013:   Brand   Hyatt  Union  Square   Courtyard  by  Marriott   Residence  Inn   Winter  Haven   Blue  Moon   Location     New  York,  NY     San  Diego,  CA     Coconut  Grove,  FL     Miami,  FL     Miami,  FL     Acquisition  Date     April  9,  2013     May  30,  2013     June  12,  2013     December  20,  2013     December  20,  2013     Rooms       178     $     245       140       70       75       708     $   2014  Hotel   Operating   Revenues     19,066     $     16,205       4,424       4,185       4,446       48,326     $   2013  Hotel   Operating   Revenues     11,272     8,350     2,889     203     175     22,889   In  addition,  our  same  store  consolidated  portfolio  experienced  improvements  in  ADR  and  occupancy  during  the  year  ended   December  31,  2014  when  compared  to  the  same  period  in  2013.  Occupancy  in  our  same  store  consolidated  hotels  increased  320   basis  points  from  79.7%  during  the  year  ended  December  31,  2013  to  82.9%  for  the  same  period  in  2014.  ADR  improved  1.6%,   increasing  from  $176.85  for  the  year  ended  December  31,  2013  to  $179.76  during  the  same  period  in  2014.  These  improvements   were  due  to  improvements  in  lodging  trends  in  the  markets  in  which  our  hotels  are  located.   Expenses   Total  hotel  operating  expenses  increased  20.6%  to  approximately  $227,324  for  the  year  ended  December  31,  2014  from   $188,431  for  the  year  ended  December  31,  2013.  Consistent  with  the  increase  in  hotel  operating  revenues,  hotel  operating  expenses   increased  primarily  due  to  the  acquisitions  consummated  since  the  comparable  period  in  2013,  as  mentioned  above.  The  acquisitions   also  resulted  in  an  increase  in  depreciation  and  amortization  of  24.0%,  or  $13,383,  to  $69,167  for  the  year  ended  December  31,  2014   from  $55,784  for  the  year  ended  December  31,  2013.  Real  estate  and  personal  property  tax  and  property  insurance  increased   $6,259,  or  26.0%,  for  the  year  ended  December  31,  2014  when  compared  to  the  same  period  in  2013  due  to  our  acquisitions  along   with  a  general  overall  increase  in  tax  assessments  and  tax  rates  as  the  economy  improves,  but  was  partially  offset  by  reductions   resulting  from  our  rigorous  management  of  this  expense.   General  and  administrative  expense  decreased  by  approximately  $3,506  from  $23,869  in  2013  to  $20,363  in  2014.  General   and  administrative  expense  includes  expense  related  to  non-­‐cash  share  based  payments  issued  as  incentive  compensation  to  the   Company’s  trustees,  executives,  and  employees.  Expense  related  to  share  based  compensation  decreased  $3,718  when  comparing   the  year  ended  December  31,  2014  to  the  same  period  in  2013.  This  decrease  in  share  based  compensation  expense  is  due  primarily   to  the  vesting  of  the  2010  Multi-­‐Year  LTIP  Plan  as  of  December  31,  2016  as  well  as  a  lesser  amount  of  restricted  shares  issued  since   December  31,  2013.  Please  refer  to  “Note  8  –  Share  Based  Payments”  of  the  notes  to  the  consolidated  financial  statements  for  more   information  about  our  stock  based  compensation.     Amounts  recorded  on  our  consolidated  statement  of  operations  for  acquisition  and  terminated  transactions  costs  will   fluctuate  from  period  to  period  based  on  our  acquisition  activities.  Acquisition  costs  typically  consist  of  transfer  taxes,  legal  fees  and   other  costs  associated  with  acquiring  a  hotel  property  and  transactions  that  were  terminated  during  the  year.  Acquisition  and   terminated  transaction  costs  increased  $1,498  from  $974  for  the  year  ended  December  31,  2013  to  $2,472  for  the  year  ended   December  31,  2014.  While  we  acquired  more  properties  during  the  year  ended  December  31,  2013  when  compared  to  the  same   period  in  2012,  the  manner  in  which  acquisition  targets  are  found  can  and  do  dictate  the  costs  necessary  to  complete  the  acquisition.   The  costs  incurred  in  2014  were  related  to  the  following  hotels:  $1,836  related  to  our  Hilton  Garden  Inn  52nd  Street  acquisition;  $173   related  to  our  Hotel  Milo  acquisition;  and  $169  related  to  our  Parrot  Key  Resort  acquisition.  The  costs  incurred  in  2013  were  related   to  following  hotels:  $500  related  to  our  Hyatt  Union  Square  acquisition;  $152  related  to  our  Residence  Inn  Coconut  Grove   acquisition;  $65  related  to  our  Courtyard  San  Diego  acquisition;  and  $138  for  our  Winter  Haven  and  Blue  Moon  Hotel  acquisitions.   The  remaining  costs  were  primarily  related  to  transactions  that  were  terminated  during  the  year.   20                                                                                                   hersha hospitality trust Operating  Income   Operating  income  for  the  year  ended  December  31,  2014  was  $67,909  compared  to  operating  income  of  $44,690  during  the   same  period  in  2013.  Operating  income  was  positively  impacted  by  the  improved  operating  results  of  our  hotels  discussed  above  as   well  as  insurance  recoveries  of  $4,604,  much  of  which  represents  settlement  of  business  interruption  insurance  claims  that  arose   from  the  Hurricane  Sandy  natural  disaster  in  2012.   Interest  Expense   Interest  expense  increased  $2,422  from  $40,935  for  the  year  ended  December  31,  2013  to  $43,357  for  the  year  ended   December  31,  2014.  The  increase  in  interest  expense  is  due  primarily  to  increased  borrowings  drawn  on  our  unsecured  credit   facilities.  During  2014,  we  entered  into  a  new  credit  facility  which  allowed  for  an  additional  $100,000  in  unsecured  term  loan,  which   we  drew  during  the  second  quarter  of  2014.   Gain  on  Disposition  of  Hotel  Properties   During  the  year  ended  December  31,  2014,  the  Company  recorded  a  gain  of  $7,195  related  to  its  sale  of  Hotel  373  in   Manhattan.   Gain  on  Hotel  Acquisitions,  net   During  the  year  ended  December  31,  2014,  the  Company  recorded  a  net  gain  of  $12,667  related  primarily  to  its  purchase  of   the  Hilton  Garden  Inn  on  52nd  Street  in  Manhattan  as  the  purchase  price  of  the  asset  was  less  than  the  appraised  fair  value  as  of  the   closing  date.  During  the  year  ended  December  31,  2013,  the  Company  had  recorded  a  similar  net  gain  of  $12,096  related  to  its   purchase  of  Hyatt  Union  Square.   Development  Loan  Recovery   Consideration  given  in  exchange  for  the  Hilton  Garden  Inn  52nd  Street  included  cash  to  the  seller  and  our  reinstatement  and   cancellation  of  a  development  loan  receivable  in  the  original  principal  amount  of  $10,000  and  $12,494  of  accrued  interest  and  late   fees.  This  development  loan  receivable  had  previously  been  fully  impaired  in  2009,  but  was  recovered  as  part  of  this  acquisition.  As  a   result,  we  recognized  a  gain  of  $22,494  on  the  recovery  of  the  previously  impaired  development  laon.   Unconsolidated  Joint  Venture  Investments   The  income  from  unconsolidated  joint  ventures  consists  of  our  interest  in  the  operating  results  of  the  properties  we  own  in   joint  ventures.  The  operating  results  of  the  unconsolidated  joint  ventures  improved  by  $715  for  the  year  ended  December  31,  2014.   This  is  primarily  because  of  the  improved  performance  in  our  Boston  market,  where  two  of  our  five  properties  owned  in  joint   ventures  are  located.   We  recorded  an  impairment  loss  of  $1,813  related  to  the  Courtyard,  Norwich,  CT,  one  of  the  properties  owned  by  Mystic   Partners,  LLC  during  the  year  ended  December  31,  2013.  At  that  time,  we  did  not  anticipate  recovering  our  investment  balance  in   this  asset,  and  as  such  we  reduced  our  investment  attributed  to  this  property  to  $0  as  of  December  31,  2013.  During  the  third   quarter  of  2014,  the  title  on  this  property  was  transferred  to  the  lender.   Income  Tax  Benefit   During  the  year  ended  December  31,  2014,  the  Company  recorded  an  income  tax  benefit  of  $2,685  compared  an  income  tax   benefit  of  $5,600  in  2013.  Prior  year  income  tax  benefit  included  the  reversal  of  allowances  against  state  deferred  tax  assets  resulting   from  cumulative  net  operating  losses  that  were  deemed  to  be  realizable  based  on  projections  of  future  performance  of  the  hotels   generating  these  net  operating  losses.   21                                           Annual Report 2015 Discontinued  Operations   On  September  20,  2013,  the  Company  entered  into  a  purchase  and  sale  agreement  to  sell  a  portfolio  of  16  non-­‐core  hotels   for  an  aggregate  purchase  price  of  approximately  $217,000.  During  the  third  quarter  of  2013,  the  Company  had  recorded  an   impairment  of  $6,591  in  connection  with  the  anticipated  disposition.  As  of  December  31,  2013,  the  Company  had  closed  on  the  sale   of  12  of  the  hotels,  with  the  remaining  four  hotels  closing  during  the  first  quarter  of  2014.  Accordingly,  a  gain  of  $31,559  was   recognized  during  the  fourth  quarter  of  2013  as  the  proceeds  from  the  sale  exceeded  the  carrying  value.     For  the  year  ended  December  31,  2014,  the  Company  recorded  a  loss  of  $128  in  connection  with  the  closing  of  the   remaining  four  properties.  In  addition,  we  recorded  an  impairment  loss  of  $1,800  in  the  first  quarter  of  2014,  as  the  proceeds  did  not   exceed  the  carrying  value  for  certain  of  these  properties.   On  June  12,  2013,  we  closed  on  the  sale  of  our  Comfort  Inn,  Harrisburg,  PA.  The  Company  sold  the  hotel  for  $3,700  and   recorded  a  gain  on  sale  of  $442.  Additionally,  on  September  17,  2013,  we  closed  on  the  sale  of  Holiday  Inn  Express  Camp  Springs,  MD   property.  The  Company  sold  the  hotel  for  $8,500  and  recorded  a  gain  on  the  sale  of  $120  and  an  impairment  charge  of  $3,723  during   the  second  quarter  of  2013  as  the  anticipated  net  proceeds  did  not  exceed  the  carrying  value.   The  operating  results  for  all  18  of  the  above  described  hotel  properties  and  one  land  parcel  have  been  reclassified  to   discontinued  operations  in  the  statement  of  operations  for  the  years  ended  December  31,  2014  and  2013,  respectively.     We  recorded  income  from  discontinued  operations  of  approximately  $263  during  the  twelve  months  ended  December  31,   2014,  compared  to  income  of  approximately  $7,388  during  the  twelve  months  ended  December  31,  2013.  See  “Note  11  –  Hotel   Dispositions”  for  more  information.   Effective  January  1,  2014,  we  early  adopted  ASU  Update  No.  2014-­‐08  concerning  the  classification  and  reporting  of   discontinued  operations.  This  amendment  defines  discontinued  operations  as  a  component  of  an  entity  that  represents  a  strategic   shift  that  has  (or  will  have)  a  major  effect  on  an  entity’s  operations  and  financial  results.  As  a  result  of  the  early  adoption  of  ASU   Update  No.  2014-­‐08,  we  anticipate  that  most  of  our  hotel  dispositions  will  not  be  classified  as  discontinued  operations  as  most  will   not  fit  this  definition.   Net  Income  Applicable  to  Common  Shareholders   Net  income  applicable  to  common  shareholders  for  the  year  ended  December  31,  2014  was  $52,899  compared  to  net   income  applicable  to  common  shareholders  of  $32,752  for  the  same  period  in  2013.  Net  income  applicable  to  common  shareholders   for  the  year  ended  December  31,  2014  was  positively  impacted  by  the  improved  operating  results  of  our  hotels  and  one-­‐time  gains   discussed  above.  Net  income  applicable  to  common  shareholders  for  the  year  ended  December  31,  2013  was  negatively  impacted  by   the  extinguishment  of  $2,250  of  issuance  costs  associated  with  the  redemption  of  all  of  our  outstanding  Series  A  Preferred  Shares.   Comprehensive  Income  Applicable  to  Common  Shareholders   Comprehensive  income  applicable  to  common  shareholders  for  the  year  ended  December  31,  2014  was  $52,917  compared   to  $34,162  for  the  same  period  in  2013.  This  amount  was  primarily  attributable  to  net  income  as  more  fully  described  above.  Further   change  in  other  comprehensive  income  was  primarily  the  result  of  the  positive  shift  in  the  position  of  the  fair  value  of  our  derivative   instruments.  For  the  year  ended  December  31,  2014,  we  recorded  other  comprehensive  income  of  $18  when  compared  to  $1,410  of   other  comprehensive  income  for  the  year  ended  December  31,  2013.     LIQUIDITY,  CAPITAL  RESOURCES,  AND  EQUITY  OFFERINGS   (dollars  in  thousands,  except  per  share  data)   Potential  Sources  of  Capital   Our  organizational  documents  do  not  limit  the  amount  of  indebtedness  that  we  may  incur.  Our  ability  to  incur  additional   debt  is  dependent  upon  a  number  of  factors,  including  the  current  state  of  the  overall  credit  markets,  our  degree  of  leverage  and     22                                   hersha hospitality trust borrowing  restrictions  imposed  by  existing  lenders.  Our  ability  to  raise  funds  through  the  issuance  of  debt  and  equity  securities  is   dependent  upon,  among  other  things,  capital  market  volatility,  risk  tolerance  of  investors,  general  market  conditions  for  REITs  and   market  perceptions  related  to  the  Company’s  ability  to  generate  cash  flow  and  positive  returns  on  its  investments.   In  addition,  our  mortgage  indebtedness  contains  various  financial  and  non-­‐financial  covenants  customarily  found  in   secured,  nonrecourse  financing  arrangements.  If  the  specified  criteria  are  not  satisfied,  the  lender  may  be  able  to  escrow  cash  flow   generated  by  the  property  securing  the  applicable  mortgage  loan.  We  have  determined  that  certain  debt  service  coverage  ratio   covenants  contained  in  the  loan  agreements  securing  a  number  of  our  hotel  properties  were  not  met  as  of  December  31,  2015.   Pursuant  to  the  loan  agreements,  certain  lenders  have  elected  to  escrow  the  operating  cash  flow  for  these  properties.  However,   these  covenants  do  not  constitute  an  event  of  default  for  these  loans.  Future  deterioration  in  market  conditions  could  cause   restrictions  in  our  access  to  the  cash  flow  of  additional  properties.   We  maintain  a  senior  unsecured  credit  agreement  with  Citigroup  Global  Markets  Inc.  and  various  other  lenders.  The  credit   agreement  provides  for  a  $500,000  senior  unsecured  credit  facility  consisting  of  a  $250,000  senior  unsecured  revolving  line  of  credit   and  a  $250,000  senior  unsecured  term  loan.  This  new  facility  amended  and  restated  the  existing  $400,000  senior  secured  credit   facility.  The  $500,000  unsecured  credit  facility  expires  on  February  28,  2018  and,  provided  no  event  of  default  has  occurred,  we  may   request  that  the  lenders  renew  the  credit  facility  for  an  additional  one-­‐year  period.  The  credit  facility  is  also  expandable  to  $850,000   at  our  request,  subject  to  the  satisfaction  of  certain  conditions.  On  August  10,  2015,  we  entered  into  a  $300,000  senior  unsecured   term  loan  agreement  with  Citigroup  Global  Markets  Inc.  and  various  other  lenders.     As  of  December  31,  2015,  we  had  fully  drawn   this  term  loan.  This  new  term  loan  expands  our  senior  unsecured  borrowing  capacity  from  $500,000  to  $800,000.   As  of  December  31,  2015,  the  outstanding  unsecured  term  loan  balance  under  the  $500,000  senior  unsecured  credit  facility   and  unsecured  term  loan  agreement  was  $550,000  and  we  had  $27,000  outstanding  borrowings  under  the  $250,000  revolving  line   of  credit.  As  of  December  31,  2015,  our  remaining  borrowing  capacity  under  the  $500,000  unsecured  credit  facility’s  revolving  line  of   credit  was  $218,745,  which  is  based  on  certain  operating  metrics  of  unencumbered  hotel  properties  designated  as  borrowing  base   assets.  We  intend  to  repay  indebtedness  incurred  under  the  $500,000  unsecured  credit  facility  from  time  to  time,  for  acquisitions  or   otherwise,  out  of  cash  flow  and  from  the  proceeds  of  issuances  of  additional  common  and  preferred  shares  and  potentially  other   securities.   We  will  continue  to  monitor  our  debt  maturities  to  manage  our  liquidity  needs.  However,  no  assurances  can  be  given  that   we  will  be  successful  in  refinancing  all  or  a  portion  of  our  future  debt  obligations  due  to  factors  beyond  our  control  or  that,  if   refinanced,  the  terms  of  such  debt  will  not  vary  from  the  existing  terms.  As  of  December  31,  2015,  we  have  $158,167  of   indebtedness  maturing  on  or  before  December  31,  2016.  We  currently  expect  that  cash  requirements  for  all  debt  that  is  not   refinanced  by  our  existing  lenders  for  which  the  maturity  date  is  not  extended  will  be  met  through  a  combination  of  cash  on  hand,   refinancing  the  existing  debt  with  new  lenders,  draws  on  the  $250,000  revolving  line  of  credit  portion  of  our  $500,000  credit  facility   and  the  issuance  of  our  securities.   On  February  25,  2013,  we  completed  a  public  offering  of  3,000,000  6.875%  Series  C  preferred  shares.  These  shares  have  a   par  value  of  $0.01  per  share  with  a  $25.00  liquidation  preference  per  share.  Net  proceeds  of  the  offering,  after  deducting   underwriting  discounts  and  offering  expenses,  were  approximately  $72,370.  We  utilized  the  net  proceeds  of  the  offering  to  redeem   all  outstanding  8.00%  Series  A  preferred  shares  on  March  28,  2013,  and  for  general  corporate  purposes.  The  Series  A  preferred   shares  were  redeemed  at  a  per  share  redemption  price  of  $25.00  together  with  accrued  and  unpaid  dividends  to  the  redemption   date  for  an  aggregate  per  share  redemption  price  of  $25.4056.  Dividends  ceased  accruing  on  the  Series  A  preferred  shares  on  March   28,  2013.   In  addition  to  the  incurrence  of  debt  and  the  offering  of  equity  securities,  disposition  of  property  or  investment  from  a  joint   venture  partner  serve  as  additional  capital  resources  and  sources  of  liquidity.  We  may  recycle  capital  from  stabilized  assets,  as   evidenced  by  our  recently  announced  transaction  involving  the  Cindat  JV  Properties  or  from  sales  of  non-­‐core  hotels  in  secondary   and  tertiary  markets.     Capital  from  these  types  of  transactions  is  intended  to  be  redeployed  into  high  growth  acquisitions,  share   buybacks,  or  to  pay  down  existing  debt.     Common  Share  Repurchase  Plan   In  February  2015,  our  Board  of  Trustees  authorized  us  to  repurchase  from  time  to  time  up  to  an  aggregate  of  $100,000  of     our  outstanding  shares.  In  October  2015,  our  Board  of  Trustees  authorized  a  new  $100,000  share  repurchase  program  which  would     23                                 Annual Report 2015 commence  up  on  the  completion  of  the  existing  program.     The  new  program  will  expire  on  December  31,  2016  unless  extended  by     the  Board  of  Trustees.     We  may  seek  Board  of  Trustee  approval  to  increase  the  2016  authorization.     For  the  year  ended  December   31,  2015,  the  Company  repurchased  5,310,371  common  shares  for  an  aggregate  purchase  price  of  $128,239  under  the  February   2015  and  October  2015  repurchase  programs.  Upon  repurchase  by  the  Company,  these  common  shares  ceased  to  be  outstanding   and  became  authorized  but  unissued  common  shares.     Acquisitions   During  the  year  ended  December  31,  2015,  we  acquired  the  following  wholly-­‐owned  hotel  properties:   Hotel     Acquisition   Date   Land     Buildings  and   Improvements         Furniture   Fixtures   and   Equipment         Other   Intangibles     Loan  Costs       Total   Purchase   Price     Assumption   of  Debt   St.  Gregory  Hotel,  Washington,  DC     6/16/2015     $     23,764      $     33,005      $     3,240      $     45       $     978      $     61,032       $     28,902    *   TownePlace  Suites,  Sunnyvale,  CA     8/25/2015       -­‐         18,999           2,348           6,453    **     -­‐         27,800       Ritz-­‐Carlton  Georgetown,  DC     12/29/2015       17,570           29,160           3,270           -­‐     -­‐         50,000       -   -   TOTAL   *   **     $     41,334      $     81,164      $     8,858      $     6,498       $     978      $     138,832       $     28,902       Includes  a  $3,050  premium  as  we  determined  that  the  stated  rate  of  interest  on  the  assumed  mortgage  debt  was  above   market.   Acquired  ground  lease  asset  of  $6,353  and  intangible  asset  related  to  the  franchise  agreement  of  $100  with  purchase  of  the   property.   We  intend  to  invest  in  additional  hotels  only  as  suitable  opportunities  arise  and  adequate  sources  of  financing  are  available.   We  expect  that  future  investments  in  hotels  will  depend  on  and  will  be  financed  by,  in  whole  or  in  part,  our  existing  cash,  the   proceeds  from  additional  issuances  of  common  or  preferred  shares,  proceeds  from  the  sale  of  assets,  issuances  of  Common  Units,   issuances  of  preferred  units  or  other  securities  or  borrowings.   Operating  Liquidity  and  Capital  Expenditures   We  expect  to  meet  our  short-­‐term  liquidity  requirements  generally  through  net  cash  provided  by  operations,  existing  cash   balances  and,  if  necessary,  short-­‐term  borrowings  under  the  $250,000  unsecured  revolving  line  of  credit  portion  of  our  $500,000   unsecured  credit  facility.  We  believe  that  the  net  cash  provided  by  operations  in  the  coming  year  and  borrowings  drawn  on  the   $250,000  revolving  line  of  credit  portion  of  our  $500,000  unsecured  credit  facility  will  be  adequate  to  fund  the  Company’s  operating   requirements,  monthly  recurring  debt  service  and  the  payment  of  dividends  in  accordance  with  REIT  requirements  of  the  Internal   Revenue  Code  of  1986,  as  amended.   To  qualify  as  a  REIT,  we  must  distribute  annually  at  least  90%  of  our  taxable  income.  This  distribution  requirement  limits  our   ability  to  retain  earnings  and  requires  us  to  raise  additional  capital  in  order  to  grow  our  business  and  acquire  additional  hotel   properties.  However,  there  is  no  assurance  that  we  will  be  able  to  borrow  funds  or  raise  additional  equity  capital  on  terms   acceptable  to  us,  if  at  all.  In  addition,  we  cannot  guarantee  that  we  will  continue  to  make  distributions  to  our  shareholders  at  the   current  rate  or  at  all.  Due  to  the  seasonality  of  our  business,  cash  provided  by  operating  activities  fluctuates  significantly  from   quarter  to  quarter.  However,  we  believe  that,  based  on  our  current  estimates,  which  include  the  addition  of  cash  provided  by  hotels   acquired  during  2015,  our  cash  provided  by  operating  activities  will  be  sufficient  over  the  next  12  months  to  fund  the  payment  of  our   dividend  at  its  current  level.  However,  our  Board  of  Trustees  continues  to  evaluate  the  dividend  policy  in  the  context  of  our  overall   liquidity  and  market  conditions  and  may  elect  to  reduce  or  suspend  these  distributions.  Net  cash  provided  by  operating  activities  for   the  year  ended  December  31,  2015  was  $121,817  and  cash  used  for  the  payment  of  distributions  and  dividends  for  the  year  ended   December  31,  2015  was  $70,971.   24                                                                                                                                                             hersha hospitality trust We  also  project  that  our  operating  cash  flow  and  available  borrowings  under  the  $250,000  revolving  line  of  credit  portion  of   our  $800,000  unsecured  credit  facility  will  be  sufficient  to  satisfy  our  liquidity  and  other  capital  needs  over  the  next  twelve  to   eighteen  months.     Our  long-­‐term  liquidity  requirements  consist  primarily  of  the  costs  of  acquiring  additional  hotel  properties,  renovation  and   other  non-­‐recurring  capital  expenditures  that  need  to  be  made  periodically  with  respect  to  hotel  properties  and  scheduled  debt   repayments.  We  will  seek  to  satisfy  these  long-­‐term  liquidity  requirements  through  various  sources  of  capital,  including  borrowings   under  the  $250,000  revolving  line  of  credit  portion  of  our  $800,000  unsecured  credit  facility  and  through  secured,  non-­‐recourse   mortgage  financings  with  respect  to  our  unencumbered  hotel  properties.  In  addition,  we  may  seek  to  raise  capital  through  public  or   private  offerings  of  our  securities.  Certain  factors  may  have  a  material  adverse  effect  on  our  ability  to  access  these  capital  sources,   including  our  degree  of  leverage,  the  value  of  our  unencumbered  hotel  properties  and  borrowing  restrictions  imposed  by  lenders  or   franchisors.  We  will  continue  to  analyze  which  source  of  capital  is  most  advantageous  to  us  at  any  particular  point  in  time,  but   financing  may  not  be  consistently  available  to  us  on  terms  that  are  attractive,  or  at  all.     Spending  on  capital  improvements  during  the  year  ended  December  31,  2015  decreased  when  compared  to  spending  on   capital  improvements  during  the  year  ended  December  31,  2014.  During  the  year  ended  December  31,  2015,  we  spent  $27,366  on   capital  expenditures  to  renovate,  improve  or  replace  assets  at  our  hotels.  This  compares  to  $38,342  during  the  same  period  in  2014.   These  capital  expenditures  were  undertaken  to  comply  with  brand  mandated  improvements  and  to  initiate  projects  that  we  believe   will  generate  a  return  on  investment  to  take  advantage  of  the  continuing  recovery  in  the  lodging  sector.     In  addition  to  capital  reserves  required  under  certain  loan  agreements  and  capital  expenditures  to  renovate,  improve  or   replace  assets  at  our  hotels,  we  have  opportunistically  engaged  in  hotel  development  projects.  During  the  twelve  months  ended   December  31,  2015,  we  spent  $2,814  less  on  hotel  development  projects  than  during  the  same  period  of  2014  as  both  the  new  tower   construction  at  Courtyard  Miami  Beach  and  re-­‐development  project  at  Hampton  Inn  Pearl  Street  hotels  neared  completion.  Projects     such  as  these  require  significant  capital,  which  we  expect  to  fund  with  various  sources  of  capital,  including  available  borrowings   under  the  $250,000  revolving  line  of  credit  portion  of  our  credit  facility  and  through  secured,  non-­‐recourse  mortgage  financings.  In   addition,  we  may  seek  to  raise  capital  through  public  or  private  offerings  of  our  securities  to  fund  these  capital  improvements.     We  may  spend  additional  amounts,  if  necessary,  to  comply  with  the  reasonable  requirements  of  any  franchise  license  under   which  any  of  our  hotels  operate  and  otherwise  to  the  extent  we  deem  such  expenditures  to  be  in  our  best  interests.  We  are  also   obligated  to  fund  the  cost  of  certain  capital  improvements  to  our  hotels.  We  expect  to  use  operating  cash  flow,  borrowings  under   the  $250,000  revolving  line  of  credit  portion  of  our  credit  facility,  and  proceeds  from  issuances  of  our  securities  to  pay  for  the  cost  of   capital  improvements  and  any  furniture,  fixture  and  equipment  requirements  in  excess  of  the  set  aside  referenced  above.   CASH  FLOW  ANALYSIS  (dollars  in  thousands,  except  per  share  data)   Comparison  of  the  Years  Ended  December  31,  2015  and  December  31,  2014   Net  cash  provided  by  operating  activities  increased  $8,923  from  $112,894  for  the  year  ended  December  31,  2014  to   $121,817  for  the  comparable  period  in  2015.  Net  income,  adjusted  for  non-­‐cash  items  reflected  in  the  statement  of  cash  flows  for   the  years  ended  December  31,  2015  and  2014,  increased  $16,769  for  the  year  ended  December  31,  2015  when  compared  to  2014.   This  is  primarily  due  to  cash  provided  by  properties  acquired  over  the  past  twelve  months  and  improving  operating  results  within  our   existing  portfolio.  Further,  a  net  decrease  in  working  capital  assets  provided  additional  cash  from  operating  activities.     Net  cash  used  in  investing  activities  for  the  year  ended  December  31,  2015  decreased  $36,595  from  $180,504  for  the  year   ended  December  31,  2014  compared  to  $143,909  for  2015.  While  spending  on  the  purchase  of  hotel  properties  and  deposits  on   hotel  acquisitions  was  $60,060  higher  during  the  year  ended  December  31,  2014,  compared  to  same  period  in  2015,  proceeds  from   the  disposition  of  hotel  properties  was  $30,056  less  during  the  year  ended  December  31,  2015  when  compared  to  the  year  ended   December  31,  2014.  Offsetting  this  was  spending  on  hotel  development  projects  which  were  $2,814  less  during  the  year  ended   December  31,  2015  when  compared  to  the  year  ended  December  31,  2014.  During  the  year  ended  December  31,  2014  we  received   $30,056  in  proceeds  from  the  disposition  of  Hotel  373  in  the  second  quarter  and  the  remaining  4  non-­‐core  properties  during  the  first   quarter.     25                           Annual Report 2015 Net  cash  provided  by  financing  activities  for  the  year  ended  December  31,  2015  was  $28,372  compared  to  net  cash   provided  by  financing  activities  for  the  year  ended  December  31,  2014  of  $53,072.  Net  proceeds  received  during  the  year  ended   December  31,  2015  under  our  unsecured  credit  facility  were  $227,000  higher  than  during  the  same  period  in  2014.  Net  proceeds   from  mortgages  and  notes  payable  were  $136,258  lower  during  the  year  ended  December  31,  2015,  when  compared  to  the  same   period  in  2014.  During  the  year  ended  December  31,  2015,  we  used  $128,239  for  the  repurchase  of  common  shares.  Dividends  and   distributions  payable  increased  $4,605  during  the  year  ended  December  31,  2015,  compared  to  2014,  due  to  the  increase  in  our   dividend  paid  on  common  shares  from  $1.04  to  $1.12  per  share.  This  was  partially  offset  by  the  reduction  of  dividends  paid  on   common  shares  due  to  our  common  share  repurchases.   Comparison  of  the  Years  Ended  December  31,  2014  and  December  31,  2013   Net  cash  provided  by  operating  activities  increased  $22,633,  from  $90,261  for  the  year  ended  December  31,  2013  to   $112,894  for  the  same  period  2014.  Net  income,  adjusted  for  non-­‐cash  items  reflected  in  the  statement  of  cash  flows  for  the  years   ended  December  31,  2014  and  2013,  increased  $17,698  for  the  year  ended  December  31,  2014  when  compared  to  2013.  This  is   primarily  due  to  cash  provided  by  properties  acquired  over  the  past  twelve  months  and  improving  operating  results  within  our   existing  portfolio.  The  offsetting  decrease  in  cash  provided  by  operating  activities  was  attributable  to  an  increase  in  working  capital   assets.   Net  cash  used  in  investing  activities  increased  $55,030,  from  $125,474  for  year  ended  December  31,  2013  to  $180,504  for   2014.  Spending  on  the  purchase  of  hotel  properties  and  deposits  on  hotel  acquisitions  was  $43,742  less  during  2014  compared  to   2013,  proceeds  from  the  disposition  of  hotel  properties  was  $105,959  less  during  the  year  ended  December  31,  2014  when   compared  to  the  year  ended  December  31,  2013.  Offsetting  this  was  spending  on  hotel  development  projects  which  was  $16,290   less  during  the  year  ended  December  31,  2014  when  compared  to  the  year  ended  December  31,  2013  and  a  repayment  of  note   receivable  of  $15,122  which  occurred  during  the  year  ended  December  31,  2013.  During  the  year  ended  December  31,  2014  we   received  $30,056  in  proceeds  from  the  disposition  of  Hotel  373  in  the  second  quarter  and  the  remaining  four  non-­‐core  properties   during  the  first  quarter.     Net  cash  provided  by  financing  activities  for  year  ended  December  31,  2014  was  $53,072  compared  to  $2,367  during  the   same  period  in  2013.  Net  proceeds  received  during  the  year  ended  December  31,  2014  under  our  unsecured  credit  facility  were   $50,000  higher  than  during  the  same  period  in  2013.  Net  proceeds  from  mortgages  and  notes  payable  were  $29,050  higher  during   the  year  ended  December  31,  2014,  when  compared  to  the  same  period  in  2013.  During  the  first  quarter  of  2013,  we  completed  an   offering  of  Series  C  Preferred  Shares  with  net  proceeds  of  $72,370,  after  deducting  underwriting  discounts  and  offering  expenses,   which  was  primarily  used  to  redeem  all  of  the  issued  and  outstanding  Series  A  Preferred  Shares  with  a  redemption  value  of  $60,000.   During  the  year  ended  December  31,  2014,  we  used  $15,418  for  the  repurchase  of  common  shares.  Dividends  and  distributions   payable  decreased  $391  during  the  year  ended  December  31,  2014,  compared  to  2013,  due  to  a  decrease  in  the  number  of   outstanding  common  shares.   OFF  BALANCE  SHEET  ARRANGEMENTS   The  Company  does  not  have  off  balance  sheet  arrangements  that  have  or  are  reasonably  likely  to  have  a  current  or  future   effect  on  our  financial  condition,  revenues  or  expenses,  results  of  operations,  liquidity,  capital  expenditures  or  capital  resources.   FUNDS  FROM  OPERATIONS   (in  thousands,  except  share  data)   The  National  Association  of  Real  Estate  Investment  Trusts  (“NAREIT”)  developed  Funds  from  Operations  (“FFO”)  as  a   non-­‐GAAP  financial  measure  of  performance  of  an  equity  REIT  in  order  to  recognize  that  income-­‐producing  real  estate  historically   has  not  depreciated  on  the  basis  determined  under  GAAP.  We  calculate  FFO  applicable  to  common  shares  and  Common  Units  in   accordance  with  the  April  2002  National  Policy  Bulletin  of  NAREIT,  which  we  refer  to  as  the  White  Paper.  The  White  Paper  defines     26                     hersha hospitality trust FFO  as  net  income  (loss)  (computed  in  accordance  with  GAAP)  excluding  extraordinary  items  as  defined  under  GAAP  and  gains  or   losses  from  sales  of  previously  depreciated  assets,  gains  on  hotel  acquisitions,  plus  certain  non-­‐cash  items,  such  as  loss  from   impairment  of  assets  and  depreciation  and  amortization,  and  after  adjustments  for  unconsolidated  partnerships  and  joint  ventures.   Our  interpretation  of  the  NAREIT  definition  is  that  noncontrolling  interest  in  net  income  (loss)  should  be  added  back  to  (deducted   from)  net  income  (loss)  as  part  of  reconciling  net  income  (loss)  to  FFO.  Our  FFO  computation  may  not  be  comparable  to  FFO  reported   by  other  REITs  that  do  not  compute  FFO  in  accordance  with  the  NAREIT  definition,  or  that  interpret  the  NAREIT  definition  differently   than  we  do.   The  GAAP  measure  that  we  believe  to  be  most  directly  comparable  to  FFO,  net  income  (loss)  applicable  to  common   shareholders,  includes  loss  from  the  impairment  of  certain  depreciable  assets,  our  investment  in  unconsolidated  joint  ventures  and   land,  depreciation  and  amortization  expenses,  gains  or  losses  on  property  sales,  gains  on  hotel  acquisitions,  noncontrolling  interest   and  preferred  dividends.  In  computing  FFO,  we  eliminate  these  items  because,  in  our  view,  they  are  not  indicative  of  the  results  from   our  property  operations.  We  determined  that  the  loss  from  the  impairment  of  certain  depreciable  assets  including  investments  in   unconsolidated  joint  ventures  and  land,  was  driven  by  a  measurable  decrease  in  the  fair  value  of  certain  hotel  properties  and  other   assets  as  determined  by  our  analysis  of  those  assets  in  accordance  with  applicable  GAAP.  As  such,  these  impairments  have  been   eliminated  from  net  loss  to  determine  FFO.   FFO  does  not  represent  cash  flows  from  operating  activities  in  accordance  with  GAAP  and  should  not  be  considered  an   alternative  to  net  income  as  an  indication  of  the  Company’s  performance  or  to  cash  flow  as  a  measure  of  liquidity  or  ability  to  make   distributions.  We  consider  FFO  to  be  a  meaningful,  additional  measure  of  operating  performance  because  it  excludes  the  effects  of   the  assumption  that  the  value  of  real  estate  assets  diminishes  predictably  over  time,  and  because  it  is  widely  used  by  industry   analysts  as  a  performance  measure.  We  show  both  FFO  from  consolidated  hotel  operations  and  FFO  from  unconsolidated  joint   ventures  because  we  believe  it  is  meaningful  for  the  investor  to  understand  the  relative  contributions  from  our  consolidated  and   unconsolidated  hotels.  The  display  of  both  FFO  from  consolidated  hotels  and  FFO  from  unconsolidated  joint  ventures  allows  for  a   detailed  analysis  of  the  operating  performance  of  our  hotel  portfolio  by  management  and  investors.  We  present  FFO  applicable  to   common  shares  and  Common  Units  because  our  Common  Units  are  redeemable  for  common  shares.  We  believe  it  is  meaningful  for   the  investor  to  understand  FFO  applicable  to  all  common  shares  and  Common  Units.   27           Annual Report 2015 The  following  table  reconciles  FFO  for  the  periods  presented  to  the  most  directly  comparable  GAAP  measure,  net  income,  for  the   same  periods  (dollars  in  thousands):   December  31,  2015   December  31,  2014   December  31,  2013   Year  Ended   Net  income  applicable  to  common  shareholders   Income  allocated  to  noncontrolling  interests   (Income)  loss  from  unconsolidated  joint  ventures   Gain  on  hotel  acquisition   Development  Loan  Recovery   Gain  on  disposition  of  hotel  properties   Loss  from  impairment  of  depreciable  assets   Depreciation  and  amortization     Depreciation  and  amortization  from  discontinued  operations   Funds  from  consolidated  hotel  operations   applicable  to  common  shareholders  and  Partnership  units   Income  (loss)  from  Unconsolidated  Joint  Ventures   Impairment  of  investment  in  unconsolidated  joint  ventures   Depreciation  and  amortization  of  purchase  price         in  excess  of  historical  cost  (1)   Interest  in  depreciation  and  amortization         of  unconsolidated  joint  ventures  (2)   Funds  from  unconsolidated  joint  ventures  operations   applicable  to  common  shareholders  and  Partnership  units   Funds  from  Operations   applicable  to  common  shareholders  and  Partnership  units   Weighted  Average  Common  Shares  and  Units  Outstanding   Basic   Diluted     (1)   (2)     $     27,440       $     411         (965)       -­‐       -­‐       -­‐       -­‐       74,390         -­‐       101,276         965         -­‐       481         5,027         6,473         52,899       $     1,016         (693)       (12,667)       (22,494)       (7,067)       1,800         69,167         -­‐       81,961         693         -­‐       570         5,915         7,178         32,752       335       1,835       (12,096)     -­‐     (32,121)     10,314       55,784       7,050       63,853       (1,835)     1,813       596       6,502       7,076       $     107,749       $     89,139       $     70,929     47,786,811     50,276,867     49,777,302     52,035,256     49,597,613   52,221,554   Adjustment  made  to  add  depreciation  of  purchase  price  in  excess  of  historical  cost  of  the  assets  in  the  unconsolidated  joint   venture  at  the  time  of  our  investment.   Adjustment   made   to   add   our   interest   in   real   estate   related   depreciation   and   amortization   of   our   unconsolidated   joint   ventures.  Allocation  of  depreciation  and  amortization  is  consistent  with  allocation  of  income  and  loss.   Certain  amounts  related  to  depreciation  and  amortization  and  depreciation  and  amortization  from  discontinued  operations   in  the  prior  year  FFO  reconciliation  have  been  recast  to  conform  to  the  current  year  presentation.  In  addition,  based  on  guidance   provided  by  NAREIT,  we  have  eliminated  loss  from  the  impairment  of  certain  depreciable  assets,  including  investments  in   unconsolidated  joint  ventures  and  land,  from  net  income  (loss)  to  arrive  at  FFO  in  each  year  presented.   INFLATION   Operators  of  hotel  properties,  in  general,  possess  the  ability  to  adjust  room  rates  daily  to  reflect  the  effects  of  inflation.   However,  competitive  pressures  may  limit  the  ability  of  our  management  companies  to  raise  room  rates.   CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES   Our  discussion  and  analysis  of  our  financial  condition  and  results  of  operations  are  based  upon  our  consolidated  financial   statements,  which  have  been  prepared  in  accordance  with  accounting  principles  generally  accepted  in  the  United  States.  The   preparation  of  these  financial  statements  requires  us  to  make  estimates  and  judgments  that  affect  the  reported  amounts  of  assets,   liabilities,  revenues  and  expenses,  and  related  disclosure  of  contingent  assets  and  liabilities.   28                                                                                                                                                                                                                                                                                       hersha hospitality trust On  an  on-­‐going  basis,  estimates  are  evaluated  by  us,  including  those  related  to  carrying  value  of  investments  in  hotel   properties.  Our  estimates  are  based  upon  historical  experience  and  on  various  other  assumptions  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  that   are  not  readily  apparent  from  other  sources.  Actual  results  may  differ  from  these  estimates  under  different  assumptions  or   conditions.   We  believe  the  following  critical  accounting  policies  affect  our  more  significant  judgments  and  estimates  used  in  the   preparation  of  our  consolidated  financial  statements:   Revenue  Recognition   Approximately  95%  of  our  revenues  are  derived  from  hotel  room  revenues  and  revenue  from  other  hotel  operating   departments.  We  directly  recognize  revenue  and  expense  for  all  consolidated  hotels  as  hotel  operating  revenue  and  hotel  operating   expense  when  earned  and  incurred.  These  revenues  are  recorded  net  of  any  sales  or  occupancy  taxes  collected  from  our  guests.  All   revenues  are  recorded  on  an  accrual  basis,  as  earned.  We  participate  in  frequent  guest  programs  sponsored  by  the  brand  owners  of   our  hotels  and  we  expense  the  charges  associated  with  those  programs,  as  incurred.   Revenue  for  interest  on  development  loan  financing  is  recorded  in  the  period  earned  based  on  the  interest  rate  of  the  loan   and  outstanding  balance  during  the  period.  Development  loans  receivable  and  accrued  interest  on  the  development  loans  receivable   are  evaluated  to  determine  if  outstanding  balances  are  collectible.  Interest  is  recorded  only  if  it  is  determined  the  outstanding  loan   balance  and  accrued  interest  balance  are  collectible.   Other  revenues  consist  primarily  of  fees  earned  for  asset  management  services  provided  to  hotels  we  own  through   unconsolidated  joint  ventures.  Fees  are  earned  as  a  percentage  of  hotel  revenue  and  are  recorded  in  the  period  earned.   New  Accounting  Pronouncements     On  May  28,  2014,  the  FASB  issued  ASU  No.  2014-­‐09,  Revenue  from  Contracts  with  Customers,  which  requires  an  entity  to   recognize  the  amount  of  revenue  to  which  it  expects  to  be  entitled  for  the  transfer  of  promised  goods  or  services  to  customers.    The   ASU  will  replace  most  existing  revenue  recognition  guidance  in  U.S.  GAAP  when  it  becomes  effective.    The  new  standard  is  effective   for  the  Company  on  January  1,  2018.    Early  adoption  is  permitted,  but  not  prior  to  the  original  effective  date  of  January  1,  2017.    The   standard  permits  the  use  of  either  the  retrospective  or  cumulative  effect  transition  method.    The  Company  is  evaluating  the  effect   that  ASU  No.  2014-­‐09  will  have  on  its  consolidated  financial  statements  and  related  disclosures.    The  Company  has  not  yet  selected  a   transition  method  nor  has  it  determined  the  effect  of  the  standard  on  its  ongoing  financial  reporting.   On  February  18,  2015,  the  FASB  issued  ASU  No.  2015-­‐02,  Consolidation  –  Amendments  to  the  Consolidation  Analysis,  which   amends  the  current  consolidation  guidance  affecting  both  the  variable  interest  entity  (VIE)  and  voting  interest  entity  (VOE)   consolidation  models.    The  standard  does  not  add  or  remove  any  of  the  characteristics  in  determining  if  an  entity  is  a  VIE  or  VOE,  but   rather  enhances  the  way  the  Company  assesses  some  of  these  characteristics.  The  new  standard  is  effective  for  the  Company  on   January  1,  2016.    The  Company  does  not  expect  ASU  No.  2015-­‐02  to  have  a  significant  impact  on  its  consolidated  financial   statements  and  related  disclosures.   On  April  17,  2015,  the  FASB  issued  ASU  No.  2015-­‐03,  Simplifying  the  Presentation  of  Debt  Issuance  Costs,  which  requires   debt  issuance  costs  to  be  presented  in  the  balance  sheet  as  a  direct  deduction  from  the  associated  debt  liability.  ASU  2015-­‐03  does   not  address  debt  issuance  costs  related  to  line-­‐of-­‐credit  arrangements.  The  SEC  staff  announced  at  the  June  18,  2015  Emerging   Issues  Task  Force  Meeting  that  it  would  not  object  to  an  entity  deferring  and  presenting  debt  issuance  costs  as  an  asset  and   subsequently  amortizing  deferred  debt  issuance  costs  ratably  over  the  term  of  a  line-­‐of-­‐credit  arrangement,  regardless  of  whether   there  are  outstanding  borrowings  under  that  line-­‐of-­‐credit  arrangement.  In  August  2015,  the  FASB  issued  ASU  2015-­‐15,  Presentation   and  Subsequent  Measurement  of  Debt  Issuance  Costs  Associated  with  Line-­‐of-­‐Credit  Arrangements,  which  incorporates  the  SEC  staff   guidance  into  the  FASB  Accounting  Standards  Codification.   Currently,  debt  issuance  costs  are  recorded  as  an  asset  and   amortization  of  these  deferred  financing  costs  is  recorded  in  interest  expense.     Under  the  new  standard,  debt  issuance  costs  will   continue  to  be  amortized  over  the  life  of  the  debt  instrument  and  amortization  will  continue  to  be  recorded  in  interest  expense.     The  new  standard  is  effective  for  the  Company  on  January  1,  2016  and  will  be  applied  on  a  retrospective  basis.     The  Company   anticipates  a  change  in  our  balance  sheet  presentation  only  because  the  standard  does  not  alter  the  accounting  for  amortization  of   debt  issuance  costs.   29                           Annual Report 2015 Investment  in  Hotel  Properties   Investments  in  hotel  properties  are  recorded  at  cost.  Improvements  and  replacements  are  capitalized  when  they  extend  the     useful  life  of  the  asset.  Costs  of  repairs  and  maintenance  are  expensed  as  incurred.  Depreciation  is  computed  using  the  straight-­‐line   method  over  the  estimated  useful  life  of  up  to  40  years  for  buildings  and  improvements,  two  to  seven  years  for  furniture,  fixtures   and  equipment.  We  are  required  to  make  subjective  assessments  as  to  the  useful  lives  of  our  properties  for  purposes  of  determining   the  amount  of  depreciation  to  record  on  an  annual  basis  with  respect  to  our  investments  in  hotel  properties.  These  assessments   have  a  direct  impact  on  our  net  income  because  if  we  were  to  shorten  the  expected  useful  lives  of  our  investments  in  hotel   properties  we  would  depreciate  these  investments  over  fewer  years,  resulting  in  more  depreciation  expense  and  lower  net  income   on  an  annual  basis.   Most  identifiable  assets,  liabilities,  noncontrolling  interests,  and  goodwill  related  to  hotel  properties  acquired  in  a  business   combination  are  recorded  at  full  fair  value.  Estimating  techniques  and  assumptions  used  in  determining  fair  values  involve  significant   estimates  and  judgments.  These  estimates  and  judgments  have  a  direct  impact  on  the  carrying  value  of  our  assets  and  liabilities   which  can  directly  impact  the  amount  of  depreciation  expense  recorded  on  an  annual  basis  and  could  have  an  impact  on  our   assessment  of  potential  impairment  of  our  investment  in  hotel  properties.   The  operations  related  to  properties  that  have  been  sold  or  properties  that  are  intended  to  be  sold  are  presented  as   discontinued  operations  in  the  statement  of  operations  for  all  periods  presented,  and  properties  intended  to  be  sold  are  designated   as  “held  for  sale”  on  the  balance  sheet.   Based  on  the  occurrence  of  certain  events  or  changes  in  circumstances,  we  review  the  recoverability  of  the  property’s   carrying  value.  Such  events  or  changes  in  circumstances  include  the  following:   •   •   •   a  significant  decrease  in  the  market  price  of  a  long-­‐lived  asset;   a  significant  adverse  change  in  the  extent  or  manner  in  which  a  long-­‐lived  asset  is  being  used  or  in  its  physical  condition;   a   significant   adverse   change   in   legal   factors   or   in   the   business   climate   that   could   affect   the   value   of   a   long-­‐lived   asset,   including  an  adverse  action  or  assessment  by  a  regulator;   an   accumulation   of   costs   significantly   in   excess   of   the   amount   originally   expected   for   the   acquisition   or   construction   of   a   long-­‐lived  asset;   a   current-­‐period   operating   or   cash   flow   loss   combined   with   a   history   of   operating   or   cash   flow   losses   or   a   projection   or   forecast  that  demonstrates  continuing  losses  associated  with  the  use  of  a  long-­‐lived  asset;  and   a  current  expectation  that,  it  is  more  likely  than  not  that,  a  long-­‐lived  asset  will  be  sold  or  otherwise  disposed  of  significantly   before  the  end  of  its  previously  estimated  useful  life.   •   •   •   We  review  our  portfolio  on  an  on-­‐going  basis  to  evaluate  the  existence  of  any  of  the  aforementioned  events  or  changes  in   circumstances  that  would  require  us  to  test  for  recoverability.  In  general,  our  review  of  recoverability  is  based  on  an  estimate  of  the   future  undiscounted  cash  flows,  excluding  interest  charges,  expected  to  result  from  the  property’s  use  and  eventual  disposition.   These  estimates  consider  factors  such  as  expected  future  operating  income,  market  and  other  applicable  trends  and  residual  value   expected,  as  well  as  the  effects  of  hotel  demand,  competition  and  other  factors.  If  impairment  exists  due  to  the  inability  to  recover   the  carrying  value  of  a  property,  an  impairment  loss  is  recorded  to  the  extent  that  the  carrying  value  exceeds  the  estimated  fair  value   of  the  property.  We  are  required  to  make  subjective  assessments  as  to  whether  there  are  impairments  in  the  values  of  our   investments  in  hotel  properties.   As  of  December  31,  2015,  based  on  our  analysis,  we  have  determined  that  the  future  cash  flow  of  each  of  the  properties  in   our  portfolio  is  sufficient  to  recover  its  carrying  value.   Investment  in  Joint  Ventures   Properties  owned  in  joint  ventures  are  consolidated  if  the  determination  is  made  that  we  are  the  primary  beneficiary  in  a   variable  interest  entity  (VIE)  or  we  maintain  control  of  the  asset  through  our  voting  interest  or  other  rights  in  the  operation  of  the   entity.  To  determine  if  we  are  the  primary  beneficiary  of  a  VIE,  we  evaluate  whether  we  have  a  controlling  financial  interest  in  that   VIE.  An  enterprise  is  deemed  to  have  a  controlling  financial  interest  if  it  has  i)  the  power  to  direct  the  activities  of  a  variable  interest     30                     hersha hospitality trust entity  that  most  significantly  impact  the  entity’s  economic  performance,  and  ii)  the  obligation  to  absorb  losses  of  the  VIE  that  could   be  significant  to  the  VIE  or  the  rights  to  receive  benefits  from  the  VIE  that  could  be  significant  to  the  VIE.  Control  can  also  be   demonstrated  by  the  ability  of  a  member  to  manage  day-­‐to-­‐day  operations,  refinance  debt  and  sell  the  assets  of  the  partnerships   without  the  consent  of  the  other  member  and  the  inability  of  the  members  to  replace  the  managing  member.  This  evaluation   requires  significant  judgment.   If  it  is  determined  that  we  do  not  have  a  controlling  interest  in  a  joint  venture,  either  through  our  financial  interest  in  a  VIE   or  our  voting  interest  in  a  voting  interest  entity,  the  equity  method  of  accounting  is  used.  Under  this  method,  the  investment,   originally  recorded  at  cost,  is  adjusted  to  recognize  our  share  of  net  earnings  or  losses  of  the  affiliates  as  they  occur  rather  than  as   dividends  or  other  distributions  are  received,  limited  to  the  extent  of  our  investment  in,  advances  to  and  commitments  for  the   investee.  Pursuant  to  our  joint  venture  agreements,  allocations  of  profits  and  losses  of  some  of  our  investments  in  unconsolidated   joint  ventures  may  be  allocated  disproportionately  as  compared  to  nominal  ownership  percentages  due  to  specified  preferred  return   rate  thresholds.   The  Company  periodically  reviews  the  carrying  value  of  its  investment  in  unconsolidated  joint  ventures  to  determine  if   circumstances  exist  indicating  impairment  to  the  carrying  value  of  the  investment  that  is  other  than  temporary.  When  an  impairment   indicator  is  present,  we  will  estimate  the  fair  value  of  the  investment.  Our  estimate  of  fair  value  takes  into  consideration  factors  such   as  expected  future  operating  income,  trends  and  prospects,  as  well  as  the  effects  of  demand,  competition  and  other  factors.  This   determination  requires  significant  estimates  by  management,  including  the  expected  cash  flows  to  be  generated  by  the  assets   owned  and  operated  by  the  joint  venture.  Subsequent  changes  in  estimates  could  impact  the  determination  of  whether  impairment   exists.  To  the  extent  impairment  has  occurred,  the  loss  will  be  measured  as  the  excess  of  the  carrying  amount  over  the  fair  value  of   our  investment  in  the  unconsolidated  joint  venture.   Accounting  for  Derivative  Financial  Investments  and  Hedging  Activities   We  use  derivatives  to  hedge,  fix  and  cap  interest  rate  risk  and  we  account  for  our  derivative  and  hedging  activities  by   recording  all  derivative  instruments  at  fair  value  on  the  balance  sheet.  Derivative  instruments  designated  in  a  hedge  relationship  to   mitigate  exposure  to  variability  in  expected  future  cash  flows,  or  other  types  of  forecasted  transactions,  are  considered  cash  flow   hedges.  We  formally  document  all  relationships  between  hedging  instruments  and  hedged  items,  as  well  as  our  risk-­‐management   objective  and  strategy  for  undertaking  each  hedge  transaction.  Cash  flow  hedges  that  are  considered  highly  effective  are  accounted   for  by  recording  the  fair  value  of  the  derivative  instrument  on  the  balance  sheet  as  either  an  asset  or  liability,  with  a  corresponding   amount  recorded  in  other  comprehensive  income  within  shareholders’  equity.  Amounts  are  reclassified  from  other  comprehensive   income  to  the  income  statements  in  the  period  or  periods  the  hedged  forecasted  transaction  affects  earnings.   Under  cash  flow  hedges,  derivative  gains  and  losses  not  considered  highly  effective  in  hedging  the  change  in  expected  cash   flows  of  the  hedged  item  are  recognized  immediately  in  the  income  statement.  For  hedge  transactions  that  do  not  qualify  for  the   short-­‐cut  method,  at  the  hedge’s  inception  and  on  a  regular  basis  thereafter,  a  formal  assessment  is  performed  to  determine   whether  changes  in  the  cash  flows  of  the  derivative  instruments  have  been  highly  effective  in  offsetting  changes  in  cash  flows  of  the   hedged  items  and  whether  they  are  expected  to  be  highly  effective  in  the  future.   RELATED  PARTY  TRANSACTIONS   We  have  entered  into  a  number  of  transactions  and  arrangements  that  involve  related  parties.  For  a  description  of  the   transactions  and  arrangements,  please  see  Note  6,  “Commitments  and  Contingencies  and  Related  Party  Transactions,”  to  the   consolidated  financial  statements.   31                         Annual Report 2015 CONTRACTUAL  OBLIGATIONS  AND  COMMERCIAL  COMMITMENTS   The  following  table  summarizes  our  contractual  obligations  and  commitments  to  make  future  payments  under  contracts,   such  as  debt  and  lease  agreements,  as  of  December  31,  2015.   Contractual  Obligations   Total   2016   2017   2018   2019   2020   Thereafter   Long  Term  Debt     $     596,584       $     158,167       $     203,737       $     101,871       $     2,872       $     2,912       $     127,025     Interest  Expense  on  Long  Term  Debt   Unsecured  Term  Loan     Unsecured  Line  of  Credit   Interest  Expense  on  Credit  Facility   Hotel  Ground  Rent         Total     87,982         550,000         27,000         73,159         262,944         25,812         9,954         7,243         5,309         5,194         34,470       -­‐       -­‐       -­‐       -­‐       15,662         2,701         15,662         2,706         -­‐       250,000         300,000         27,000         15,662         2,714         -­‐       9,764         2,719         -­‐       8,584         2,744         -­‐     -­‐     7,825       249,360       $     1,597,669       $     202,342       $     232,059       $     154,490       $     270,664       $     319,434       $     418,680     32                                                                                                                                                                                                     hersha hospitality trust Item  7A  .   Quantitative  and  Qualitative  Disclosures  About  Market  Risk  (in  thousands,  except  per  share  data)   Our  primary  market  risk  exposure  is  to  changes  in  interest  rates  on  our  variable  rate  debt  which  has  not  been  effectively   hedged  with  interest  swaps  or  interest  rate  caps.  As  of  December  31,  2015,  we  are  exposed  to  interest  rate  risk  with  respect  to   variable  rate  borrowings  under  our  $500,000  credit  facility  and  $300,000  unsecured  term  loan  and  certain  variable  rate  mortgages   and  notes  payable.  As  of  December  31,  2015,  we  had  total  variable  rate  debt  outstanding  of  $640,798  with  a  weighted  average   interest  rate  of  2.65%.  The  effect  of  a  100  basis  point  increase  or  decrease  in  the  interest  rate  on  our  variable  rate  debt  outstanding   as  of  December  31,  2015  would  be  an  increase  or  decrease  in  our  interest  expense  for  the  twelve  months  ended  December  31,  2015   of  $4,215.   Our  interest  rate  risk  objectives  are  to  limit  the  impact  of  interest  rate  fluctuations  on  earnings  and  cash  flows  and  to  lower   our  overall  borrowing  costs.  To  achieve  these  objectives,  we  manage  our  exposure  to  fluctuations  in  market  interest  rates  for  a   portion  of  our  borrowings  through  the  use  of  fixed  rate  debt  instruments  to  the  extent  that  reasonably  favorable  rates  are   obtainable  with  such  arrangements.  We  have  also  entered  into  derivative  financial  instruments  such  as  interest  rate  swaps  or  caps,   and  in  the  future  may  enter  into  treasury  options  or  locks,  to  mitigate  our  interest  rate  risk  on  a  related  financial  instrument  or  to   effectively  lock  the  interest  rate  on  a  portion  of  our  variable  rate  debt.  As  of  December  31,  2015,  we  have  an  interest  rate  cap  related   to  debt  on  the  Hyatt  Union  Square,  New  York,  NY  and  Courtyard  by  Marriott,  Westside,  Los  Angeles,  CA     and  we  have  four  interest   rate  swaps  related  to  debt  on  the  Duane  Street  Hotel,  New  York,  NY,  Hilton  Garden  Inn,  52nd  Street,  New  York,  NY  and  our  unsecured   credit  facility.  We  do  not  intend  to  enter  into  derivative  or  interest  rate  transactions  for  speculative  purposes.   As  of  December  31,  2015  approximately  53%  of  our  outstanding  consolidated  long-­‐term  indebtedness  is  subject  to  fixed   rates  or  effectively  capped,  while  47%  of  our  outstanding  long  term  indebtedness  is  subject  to  floating  rates,  including  borrowings   under  our  revolving  credit  facility.   Changes  in  market  interest  rates  on  our  fixed-­‐rate  debt  impact  the  fair  value  of  the  debt,  but  such  changes  have  no  impact   on  interest  expense  incurred.  If  interest  rates  rise  100  basis  points  and  our  fixed  rate  debt  balance  remains  constant,  we  expect  the   fair  value  of  our  debt  to  decrease.  The  sensitivity  analysis  related  to  our  fixed-­‐rate  debt  assumes  an  immediate  100  basis  point  move   in  interest  rates  from  their  December  31,  2015  levels,  with  all  other  variables  held  constant.  A  100  basis  point  increase  in  market   interest  rates  would  cause  the  fair  value  of  our  fixed-­‐rate  debt  outstanding  at  December  31,  2015  to  be  approximately  $1,159,874   and  a  100  basis  point  decrease  in  market  interest  rates  would  cause  the  fair  value  of  our  fixed-­‐rate  debt  outstanding  at  December  31,   2015  to  be  approximately  $1,182,336.   2016   2017   2018   2019   2020     Thereafter   Total   Fixed  Rate  Debt     $     157,120       $     177,492       $     828       $     150,872       $     912       $     45,563       $     532,787     Weighted  Average  Interest  Rate   4.32%   3.51%   3.51%   5.39%   5.40%   5.39%   4.59%   Floating  Rate  Debt     $     1,047       $     26,245       $     101,043       $     102,000       $     2,000       $     381,462       $     613,797     Weighted  Average  Interest  Rate   2.74%   2.74%   2.76%   2.77%   2.77%   2.77%   2.76%     $     158,167       $     203,737       $     101,871       $     252,872       $     2,912       $     427,025       $     1,146,584     Line  of  Credit  Facility     $   Weighted  Average  Interest  Rate     -­‐     $   -   -­‐     $     27,000       $   - 2.81%     -­‐     $   -     -­‐     $     -­‐     -­‐     $     27,000       -­‐   2.81%       $     158,167       $     203,737       $     128,871       $     252,872       $     2,912       $     427,025       $     1,173,584     The  table  incorporates  only  those  exposures  that  existed  as  of  December  31,  2015,  and  does  not  consider  exposure  or   positions  that  could  arise  after  that  date.  As  a  result,  our  ultimate  realized  gain  or  loss  with  respect  to  interest  rate  fluctuations  will   depend  on  the  exposures  that  arise  during  the  future  period,  prevailing  interest  rates,  and  our  hedging  strategies  at  that  time.   33                                                                                                                                                                                                                                                                                                                                                                                                                                             Annual Report 2015 Item  8.     Financial  Statements  and  Supplementary  Data   Hersha  Hospitality  Trust       Report  of  Independent  Registered  Public  Accounting  Firm       Consolidated  Balance  Sheets  as  of  December  31,  2015  and  2014       Consolidated  Statement  of  Operations  for  the  years  ended  December  31,  2015,  2014  and  2013       Consolidated  Statements  of  Comprehensive  Income  for  the  years  ended  December  31,  2015,  2014  and  2013       Consolidated  Statements  of  Equity  for  the  years  ended  December  31,  2015,  2014  and  2013       Consolidated  Statements  of  Cash  Flows  for  the  years  ended  December  31,  2015,  2014  and  2013       Notes  to  Consolidated  Financial  Statements       Schedule  III  -­‐  Real  Estate  and  Accumulated  Depreciation  for  the  year  ended  December  31,  2015   Page   35   36   37   39   40   42   44   82   34                                             Report  of  Independent  Registered  Public  Accounting  Firm   hersha hospitality trust The  Board  of  Trustees  and  Stockholders   Hersha  Hospitality  Trust:   We   have   audited   the   accompanying   consolidated   balance   sheets   of   Hersha   Hospitality   Trust   and   subsidiaries   as   of   December  31,   2015  and  2014,  and  the  related  consolidated  statements  of  operations,  comprehensive  income,  equity,  and  cash  flows  for  each  of   the  years  in  the  three-­‐year  period  ended  December  31,  2015.  In  connection  with  our  audits  of  the  consolidated  financial  statements,   we  have  also  audited  the  financial  statement  schedule  as  listed  in  the  accompanying  index.  These  consolidated  financial  statements   and  financial  statement  schedule  are  the  responsibility  of  the  Hersha  Hospitality  Trust’s  management.  Our  responsibility  is  to  express   an  opinion  on  these  consolidated  financial  statements  and  financial  statement  schedule  based  on  our  audits.   We  conducted  our  audits  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United  States).  Those   standards  require  that  we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the  financial  statements  are   free  of  material  misstatement.  An  audit  includes  examining,  on  a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in  the   financial  statements.  An  audit  also  includes  assessing  the  accounting  principles  used  and  significant  estimates  made  by  management,   as   well   as   evaluating   the   overall   financial   statement   presentation.   We   believe   that   our   audits   provide   a   reasonable   basis   for   our   opinion.   In  our  opinion,  the  consolidated  financial  statements  referred  to  above  present  fairly,  in  all  material  respects,  the  financial  position  of   Hersha  Hospitality  Trust  and  subsidiaries  as  of  December  31,  2015  and  2014,  and  the  results  of  their  operations  and  their  cash  flows   for   each   of   the   years   in   the   three-­‐year   period   ended   December  31,   2015,   in   conformity   with   U.S.  generally   accepted   accounting   principles.   Also   in   our   opinion,   the   related   financial   statement   schedule,   when   considered   in   relation   to   the   basic   consolidated   financial  statements  taken  as  a  whole,  presents  fairly,  in  all  material  respects,  the  information  set  forth  therein.   As  discussed  in  Note  11  to  the  consolidated  financial  statements,  the  Company  has  changed  its  method  for  reporting  discontinued   operations  as  of  January  1,  2014.   We  also  have  audited,  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United  States),  Hersha   Hospitality  Trust’s  internal  control  over  financial  reporting  as  of  December  31,  2015,  based  on  criteria  established  in  Internal  Control   -­‐  Integrated  Framework  (2013)  issued  by  the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (COSO),  and  our   report  dated  February  17,  2016,  expressed  an  unqualified  opinion  on  the  effectiveness  of  Hersha  Hospitality  Trust’s  internal  control   over  financial  reporting. /s/  KPMG  LLP   Philadelphia,  Pennsylvania   February  17,  2016   35             hersha hospitality trust and subsidiaries consolidated balance sheets as of december 31, 2015 and 2014 [in thousands, except share/unit and per share amounts] Assets:   Investment  in  Hotel  Properties,  Net  of  Accumulated  Depreciation,  Including  Consolidation  of  Variable   Interest  Entity  Assets  of  $82,787  and  $84,247   Investment  in  Unconsolidated  Joint  Ventures   Cash  and  Cash  Equivalents   Escrow  Deposits   Hotel  Accounts  Receivable,  Net  of  Allowance  for  Doubtful  Accounts  of  $12  and  $39   Deferred  Financing  Costs,  Net  of  Accumulated  Amortization  of  $8,024  and  $6,938   Due  from  Related  Parties   Intangible  Assets,  Net  of  Accumulated  Amortization  of  $3,951  and  $3,514   Deposits  on  Hotel  Acquisitions   Other  Assets   Total  Assets   Liabilities  and  Equity:   Line  of  Credit   Unsecured  Term  Loan   Unsecured  Notes  Payable   Mortgages  Payable,  including  Net  Unamortized  Premium  and  Consolidation  of  Variable  Interest  Entity   Debt  of  $52,509  and  $54,132   Accounts  Payable,  Accrued  Expenses  and  Other  Liabilities   Dividends  and  Distributions  Payable   Due  to  Related  Parties   Total  Liabilities   Equity:   Shareholders'  Equity:   Preferred  Shares:     $.01  Par  Value,  29,000,000  Shares  Authorized,  4,600,000  Series  B  and  3,000,000   Series  C  Shares  Issued  and  Outstanding  at  December  31,  2015  and  December  31,  2014,  with   Liquidation  Preferences  of  $25  Per  Share  (Note  1)   Common  Shares:     Class  A,  $.01  Par  Value,  300,000,000  Shares  Authorized  at  December  31,  2015   and  December  31,  2014,  44,457,368  and  49,708,771  Shares  Issued  and  Outstanding  at  December   31,  2015  and  December  31,  2014,  respectively   Common  Shares:     Class  B,  $.01  Par  Value,  1,000,000  Shares  Authorized,  None  Issued  and   Outstanding  at  December  31,  2015  and  December  31,  2014   Accumulated  Other  Comprehensive  Loss   Additional  Paid-­‐in  Capital   Distributions  in  Excess  of  Net  Income   Total  Shareholders'  Equity   Noncontrolling  Interests  (Note  1):   Noncontrolling  Interests  -­‐  Common  Units  and  LTIP  Units   Noncontrolling  Interests  -­‐  Consolidated  Variable  Interest  Entity   Total  Noncontrolling  Interests   Total  Equity   Total  Liabilities  and  Equity     December  31,  2015     December  31,  2014   $   $   $   $   $   $     1,831,119         10,316         27,955         19,204         9,465         8,971         6,243         13,389         5,000         38,110         1,969,772       $     $     27,000       550,000       51,548       548,539       59,226       16,515       8,789       1,261,617       $     1,745,483       11,150       21,675       16,941       9,363       8,605       6,580       7,316       -­‐     28,426       1,855,539       -­‐     250,000       51,548       617,375       54,116       17,909       7,203       998,151       76       $     76       444       497       -­‐     (466)     1,086,259       (408,274)     678,039       31,876       (1,760)     30,116       -­‐     (358)     1,194,547       (365,381)     829,381       29,082       (1,075)     28,007       708,155       857,388     $     1,969,772       $     1,855,539     The  Accompanying  Notes  Are  an  Integral  Part  of  These  Consolidated  Financial  Statements.   36                                                                                                                                                                                                                                                                                                                                                                               hersha hospitality trust and subsidiaries consolidated statements of operations for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts]   Revenue:   Hotel  Operating  Revenues   Interest  Income  from  Development  Loans   Other  Revenues     Total  Revenues   Operating  Expenses:   Hotel  Operating  Expenses   Insurance  Recoveries   Hotel  Ground  Rent   Real  Estate  and  Personal  Property  Taxes  and  Property  Insurance   General  and  Administrative  (including  Share  Based  Payments  of  $6,523,  $6,028  and  $9,746   for  the  year  ended  December  31,  2015,  2014  and  2013,  respectively)   Acquisition  and  Terminated  Transaction  Costs   Depreciation  and  Amortization   Contingent  Consideration  Related  to  Acquisition  of  Hotel  Property   Total  Operating  Expenses   Operating  Income     Interest  Income   Interest  Expense   Other  Expense   Gain  on  Disposition  of  Hotel  Properties   Gain  on  Hotel  Acquisitions,  net   Development  Loan  Recovery   Loss  on  Debt  Extinguishment   Year  Ended  December  31,   2015   2014   2013     $   $     470,272         -­‐       113         470,385         $     417,226       -­‐     180       417,406       254,313         -­‐       3,137         34,518         20,515         1,119         74,390         -­‐       387,992         82,393         193         (43,557)       (367)       -­‐       -­‐       -­‐       (561)       227,324       (4,604)     2,433       30,342       20,363       2,472       69,167       2,000       349,497       805       (43,357)     (485)     7,195       12,667       22,494       (670)     67,909       44,690     Income  Before  Income  (Loss)  from  Unconsolidated  Joint  Venture  Investments,  Income  Taxes   and  Discontinued  Operations     38,101         66,558     Income  (Loss)  from  Unconsolidated  Joint  Ventures   Impairment  of  Investment  in  Unconsolidated  Joint  Venture   Income  (loss)  from  Unconsolidated  Joint  Venture  Investments   Income  Before  Income  Taxes   Income  Tax  Benefit   Income  from  Continuing  Operations   Discontinued  Operations     (Note  11):   (Loss)  Gain  on  Disposition  of  Discontinued  Assets   Impairment  of  Discontinued  Assets   Income  from  Discontinued  Operations,  Net  of  Income  Taxes   (Loss)  Income  from  Discontinued  Operations   Net  Income   Income  Allocated  to  Noncontrolling  Interests   Preferred  Distributions   Extinguishment  of  Issuance  Costs  Upon  Redemption  of  Series  A  Preferred  Shares     965         -­‐       965         39,066         3,141         42,207         -­‐       -­‐       -­‐       -­‐       42,207         (411)       (14,356)       -­‐       693       -­‐     693       67,251       2,685       69,936       (128)     (1,800)     263       (1,665)     68,271       (1,016)     (14,356)     -­‐   Net  Income  Applicable  to  Common  Shareholders     $     27,440       $     52,899       $     32,752     The  Accompanying  Notes  Are  an  Integral  Part  of  These  Consolidated  Financial  Statements.   37   338,064       158       191       338,413       188,431       (403)     985       24,083       23,869       974       55,784       -­‐     293,723       1,784       (40,935)     (102)     -­‐     12,096       -­‐     (545)     16,988       (22)     (1,813)     (1,835)     15,153       5,600       20,753       32,121       (10,314)     7,388       29,195       49,948       (335)     (14,611)     (2,250)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     hersha hospitality trust and subsidiaries consolidated statements of operations (continued) for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts]   Earnings  Per  Share:   BASIC   Income  from  Continuing  Operations  Applicable  to  Common  Shareholders   (Loss)  Income  from  Discontinued  Operations  Applicable  to  Common  Shareholders   Net  Income  Applicable  to  Common  Shareholders   DILUTED   Income  from  Continuing  Operations  Applicable  to  Common  Shareholders   (Loss)  Income  from  Discontinued  Operations  Applicable  to  Common  Shareholders   Net  Income  Applicable  to  Common  Shareholders   Weighted  Average  Common  Shares  Outstanding:   Basic     Diluted*   *   Year  Ended  December  31,   2015   2014   2013   $   $   $   $     0.56       $     1.08       $     0.00         (0.03)     0.56       $     1.05       $     0.56       $     1.07       $     0.00         (0.03)     0.56       $     1.04       $     0.07         0.57         0.64         0.07         0.56         0.63         47,786,811         49,777,302       49,597,613         48,369,658       50,307,506       50,479,545     Income  (loss)  allocated  to  noncontrolling  interest  in  Hersha  Hospitality  Limited  Partnership  (the  “Operating  Partnership”  or   “HHLP”)  has  been  excluded  from  the  numerator  and  common  units  of  limited  partnership  interest  (“Common  Units”)  in  the   Operating  Partnership  have  been  omitted  from  the  denominator  for  the  purpose  of  computing  diluted  earnings  per  share   since  the  effect  of  including  these  shares  and  units  in  the  numerator  and  denominator  would  have  no  impact.    In  addition,   potentially  dilutive  common  shares,  if  any,  have  been  excluded  from  the  denominator  if  they  are  anti-­‐dilutive  to  income  (loss)   from  continuing  operations  applicable  to  common  shareholders.   The  following  table  summarizes  potentially  dilutive  securities  that  have  been  excluded  from  the  denominator  for  the  purpose   of  computing  diluted  earnings  per  share:   Common  Units  and  Vested  LTIP  Units   Total  Potentially  Dilutive  Securities  Excluded  from  the  Denominator   Year  Ended  December  31,   2015   2014     1,907,209       1,907,209       1,727,750       1,727,750     2013     1,742,009     1,742,009   The  Accompanying  Notes  Are  an  Integral  Part  of  These  Consolidated  Financial  Statements.   38                                                                                                                                                                                                                                                                                                                                                                   hersha hospitality trust and subsidiaries consolidated statements of comprehensive income for the years ended december 31, 2015, 2014, and 2013 [in thousands]   Net  Income   Other  Comprehensive  Income   Change  in  Fair  Value  of  Derivative  Instruments   Year  Ended  December  31,   2015   2014   2013   $     42,207       $     68,271       $     49,948       1,459       1,527         2,694     Less:     Reclassification  Adjustment  for  Change  in  Fair  Value  of  Derivative  Instruments   Included  in  Net  Income     (1,567)   $     (108)     $     (1,509)       18       $   Comprehensive  Income   Less:     Comprehensive  Income  Attributable  to  Noncontrolling  Interests   Less:     Preferred  Distributions     42,099       (411)     (14,356)   Less:     Extinguishment  of  Issuance  Costs  Upon  Redemption  of  Series  A  Preferred  Shares     -­‐   Comprehensive  Income  Attributable  to  Common  Shareholders   $     27,332       $     68,289         (1,016)       (14,356)       -­‐       52,917       $     (1,284)     1,410       51,358       (335)     (14,611)     (2,250)     34,162     The  Accompanying  Notes  are  an  Integral  Part  of  These  Consolidated  Financial  Statements.   39                                                                                                                                       hersha hospitality trust and subsidiaries consolidated statements of equity for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts]   Balance  at  December  31,  2012   Unit  Conversion     Reallocation  of  Noncontrolling  Interest   Preferred  Shares   Preferred  Shares  Offering,  Net  of  Costs   Preferred  Shares  Redemption   Dividends  and  Distributions  declared:   Common  Stock  ($0.24  per  share)   Preferred  Shares   Common  Units  ($0.24  per  share)   Dividend  Reinvestment  Plan     Share  Based  Compensation:   Grants   Amortization   Change  in  Fair  Value  of  Derivative  Instruments   Net  Income  (Loss)   Balance  at  December  31,  2013   Unit  Conversion/Redemption   Restricted  Shares  Forfeiture/LTIP  Unit  Issuance   Repurchase  of  Common  Shares   Dividends  and  Distributions  declared:   Common  Shares  ($0.26  per  share)   Preferred  Shares   Common  Units  ($0.26  per  share)   LTIP  Units  ($0.07  per  share)   Dividend  Reinvestment  Plan     Share  Based  Compensation:   Grants   Amortization   Change  in  Fair  Value  of  Derivative  Instruments   Net  Income  (Loss)   Balance  at  December  31,  2014   Unit  Conversion   Restricted  Shares  Forfeiture/LTIP  Unit  Issuance   Repurchase  of  Common  Shares   Dividends  and  Distributions  declared:   Common  Shares   Preferred  Shares   Common  Units   LTIP  Units   Dividend  Reinvestment  Plan     Share  Based  Compensation:   Grants   Amortization   Change  in  Fair  Value  of  Derivative  Instruments   Net  Income  (Loss)   Balance  at  December  31,  2015   Common   Shares     49,668,102     Class  A   Common   Shares  ($)     497       6,948       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       1,802       1,013,017       -­‐       -­‐       -­‐       50,689,868       4,725       (487,081)       (656,714)       -­‐       -­‐       -­‐       -­‐       2,162       155,811       -­‐       -­‐       -­‐       49,708,771       8,965       -­‐       (5,310,371)       -­‐         -­‐       -­‐       -­‐       -­‐       2,018       47,985       -­‐       -­‐       -­‐       44,457,368       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       10       -­‐       -­‐       -­‐       507       -­‐       (5)       (7)       -­‐       -­‐       -­‐       -­‐       -­‐       2       -­‐       -­‐       -­‐       497       -­‐       -­‐       (53)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       444     Class  B   Common   Shares   ($)     -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐     Shareholders'  Equity   Preferred   Shares     7,000,000     Preferred   Shares  ($)       70     Additional   Paid-­‐In  Capital   ($)     1,179,780       -­‐       -­‐       -­‐       -­‐       (234)       -­‐       3,000,000       (2,400,000)       30       (24)       72,340       (59,976)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       7,600,000       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       7,600,000       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       7,600,000       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       76       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       76       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       76       -­‐       -­‐       -­‐       38       497       9,871       -­‐       -­‐       1,202,316       (77)       5       (13,791)       -­‐       -­‐       -­‐       -­‐       50       647       5,397       -­‐       -­‐       1,194,547       132       -­‐       (110,517)       -­‐       -­‐       -­‐       -­‐       50       620       1,427       -­‐       -­‐       1,086,259     Accumulated   Other   Comprehensive   Loss  ($)   Distributions  in   Excess  of  Net   Earnings  ($)   Total   Shareholders'   Equity  ($)     (1,786)       (348,734)       829,827     -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       1,410       -­‐       (376)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       18       -­‐       (358)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       (108)       -­‐       (466)       -­‐       -­‐       -­‐       -­‐       (50,836)       (14,611)       -­‐       -­‐       -­‐       -­‐       -­‐       49,613       (364,568)       -­‐       -­‐       (1,621)       (52,091)       (14,356)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       67,255       (365,381)       -­‐       -­‐       (17,669)       (52,664)       (14,356)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       41,796       (408,274)       (234)     -­‐     72,370     (60,000)     (50,836)     (14,611)     -­‐     38     507     9,871     1,410     49,613     837,955     (77)     0     (15,419)     (52,091)     (14,356)   - -   50     649     5,397     18     67,255     829,381     132     -­‐     (128,239)     (52,664)     (14,356)     -­‐     -­‐     50     620     1,427     (108)     41,796     678,039   The  Accompanying  Notes  are  an  Integral  Part  of  These  Consolidated  Financial  Statements.   40                                                                                                                                                                                                                                                                                                                     hersha hospitality trust and subsidiaries consolidated statements of equity (continued) for the years ended december 31, 2015, 2014 and 2013 [in thousands, except shares and per share amounts] Noncontrolling  Interests     Redeemable  Noncontrolling  Interests   Total  Equity  ($)   Shares     Common  Units  ($)     845,787       (1,000)       3,064,252       -­‐       15,365       (3,064,252)       15,321     -­‐     (15,365)   Balance  at  December  31,  2012   Unit  Conversion     Reallocation  of  Noncontrolling  Interest   Preferred  Shares   Preferred  Shares  Offering,  Net  of  Costs   Preferred  Shares  Redemption   Dividends  and  Distributions  declared:   Common  Stock  ($0.24  per  share)   Preferred  Shares   Common  Units  ($0.24  per  share)   Dividend  Reinvestment  Plan     Share  Based  Compensation:   Grants   Amortization   Change  in  Fair  Value  of  Derivative  Instruments   Net  Income  (Loss)   Balance  at  December  31,  2013   Unit  Conversion/Redemption   Restricted  Shares  Forfeiture/LTIP  Unit  Issuance   Repurchase  of  Common  Shares   Dividends  and  Distributions  declared:   Common  Shares  ($0.26  per  share)   Preferred  Shares   Common  Units  ($0.26  per  share)   LTIP  Units  ($0.07  per  share)   Dividend  Reinvestment  Plan     Share  Based  Compensation:   Grants   Amortization   Change  in  Fair  Value  of  Derivative  Instruments   Net  Income  (Loss)   Balance  at  December  31,  2014   Unit  Conversion   Restricted  Shares  Forfeiture/LTIP  Unit  Issuance   Repurchase  of  Common  Shares   Dividends  and  Distributions  declared:   Common  Shares   Preferred  Shares   Common  Units   LTIP  Units   Dividend  Reinvestment  Plan     Share  Based  Compensation:   Grants   Amortization   Change  in  Fair  Value  of  Derivative  Instruments   Net  Income  (Loss)   Balance  at  December  31,  2015   Total   Shareholders'   Equity  ($)   Shares     Common  Units  ($)   Consolidated   Variable  Interest   Entity  ($)   Total   Noncontrolling   Interests  ($)     829,827     (234)     1,012,064       (49,448)       -­‐     766,063       72,370     (60,000)     (50,836)     (14,611)     -­‐     38     507     9,871     1,410     49,613     837,955     (77)     0     (15,419)     (52,091)     (14,356)   -   -     50     649     5,397     18     -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       1,728,679       (16,326)       487,081       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       67,255     829,381     -­‐     132     -­‐     (128,239)     -­‐       2,199,434       (8,965)       -­‐       -­‐       (52,664)     (14,356)     -­‐     -­‐     50     -­‐       -­‐       -­‐       -­‐       -­‐       620     1,427     (108)     41,796     678,039     -­‐     128,832       -­‐       -­‐       -­‐       2,319,301       15,484       (766)       15,365       -­‐       -­‐       -­‐       -­‐       (1,669)       -­‐       -­‐       -­‐       -­‐       1,109       29,523       (261)       -­‐       -­‐       -­‐       -­‐       (1,793)       (136)       -­‐       -­‐       -­‐       -­‐       1,749       29,082       (132)       -­‐       -­‐       -­‐       -­‐       (1,913)       (694)       -­‐       -­‐       4,437       -­‐       1,096       31,876       476       -­‐       -­‐       -­‐       -­‐       -­‐       (818)       (342)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       (733)       (1,075)       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       (685)       (1,760)       15,960       (766)       15,365       -­‐       -­‐       -­‐       -­‐       (1,669)       -­‐       -­‐       -­‐       -­‐       291       29,181       (261)       -­‐       -­‐       -­‐       -­‐       (1,793)       (136)       -­‐       -­‐       -­‐       -­‐       1,016       28,007       (132)       -­‐       -­‐       -­‐       -­‐       (1,913)       (694)       -­‐       -­‐       4,437       -­‐       411       30,116       72,370       (60,000)       (50,836)       (14,611)       (1,669)       38       507       9,871       1,410       49,904       867,136       (338)       0       (15,419)       (52,091)       (14,356)       (1,793)       (136)       50       649       5,397       18       68,271       857,388       -­‐       -­‐       (128,239)       (52,664)       (14,356)       (1,913)       (694)       50       620       5,864       (108)       42,207       708,155       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐       -­‐     The  Accompanying  Notes  are  an  Integral  Part  of  These  Consolidated  Financial  Statements.     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     44     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐     -­‐   41                                                                                                                                                                                                                                                                                                                                                                                                                         hersha hospitality trust and subsidiaries consolidated statements of cash flows for the years ended december 31, 2015, 2014 and 2013 [in thousands, except shares and per share amounts] Operating  Activities:   Net  Income   Adjustments  to  Reconcile  Net  Income  to  Net  Cash  Provided  by  Operating  Activities:   Year  Ended  December  31,   2015   2014   2013   $     42,207       $     68,271       $     49,948     Gain  on  Acquisition  of  Hotel  Assets,  Net   Gain  on  Hotel  Acquisitions,  Net   Contingent  Consideration   Development  Loan  Recovery   Gain  on  Disposition  of  Hotel  Properties   Impairment  of  Hotel  Assets   Deferred  Taxes   Depreciation   Amortization   Loss  on  Debt  Extinguishment   Equity  in  (Income)  Loss  of  Unconsolidated  Joint  Ventures   Distributions  from  Unconsolidated  Joint  Ventures   Loss  Recognized  on  Change  in  Fair  Value  of  Derivative  Instrument   Share  Based  Compensation  Expense   Change  in  Assets  and  Liabilities:   (Increase)  Decrease  in:   Hotel  Accounts  Receivable     Escrows   Other  Assets   Due  from  Related  Parties   (Decrease)  Increase  in:   Due  to  Related  Parties   Accounts  Payable,  Accrued  Expenses  and  Other  Liabilities   Net  Cash  Provided  by  Operating  Activities   Investing  Activities:   Purchase  of  Hotel  Property  Assets   Deposits  on  Hotel  Acquisitions   Capital  Expenditures   Cash  Paid  for  Hotel  Development  Projects   Proceeds  from  Disposition  of  Hotel  Properties     Net  Changes  in  Capital  Expenditure  Escrows     Proceeds  from  Insurance  Claims   Repayment  of  Development  Loans  Receivable   Distributions  from  Unconsolidated  Joint  Venture   Advances  and  Capital  Contributions  to  Unconsolidated  Joint  Ventures   Net  Cash  Used  in  Investing  Activities     -­‐     -­‐     -­‐     -­‐     -­‐     (3,141)     74,007       1,492       324       (965)     1,446       107       6,523       993       (14)     (6,973)     337       1,586       3,888       121,817       (110,176)     (5,000)     (27,366)     (950)     -­‐     (779)     -­‐     -­‐     362       -­‐     (143,909)     $     $     $     (12,667)     2,000       (22,494)     (7,067)     1,800       (2,685)     68,753       1,979       673       (693)     1,262       71       6,028       (350)     1,272       2,182       4,544       2,388       (2,373)     112,894       (175,236)     -­‐     (38,342)     (3,764)     30,056       4,577       1,881       -­‐     324       -­‐     (180,504)     $     $     $     -­‐     (12,096)     -­‐     -­‐     (32,121)     10,314       (5,500)     61,801       2,545       471       1,835       568       22       9,746       2,419       476       (4,269)     (2,636)     412       6,326       90,261       (217,142)     (1,836)     (42,854)     (20,054)     136,015       (1,287)     5,001       15,122       1,711       (150)     (125,474)     $   $     $   The  Accompanying  Notes  are  an  Integral  Part  of  These  Consolidated  Financial  Statements.   42                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             hersha hospitality trust and subsidiaries consolidated statements of cash flows (continued) for the years ended december 31, 2015, 2014 and 2013 [in thousands] Financing  Activities:   Proceeds  from  Borrowings  Under  Line  of  Credit,  Net   Proceeds  from  Unsecured  Term  Loan  Borrowing   Principal  Repayment  of  Mortgages  and  Notes  Payable   Proceeds  from  Mortgages  and  Notes  Payable   Cash  Paid  for  Deferred  Financing  Costs   Proceeds  from  Issuance  of  Preferred  Shares,  Net   Redemption  of  Series  A  Preferred  Shares   Repurchase  of  Common  Shares   Redemption  of  Common  Partnership  Units   Settlement  of  Interest  Rate  Cap   Dividends  Paid  on  Common  Shares   Dividends  Paid  on  Preferred  Shares   Distributions  Paid  on  Common  Units   Net  Cash  Provided  by  Financing  Activities   Net  Increase  (Decrease)  in  Cash  and  Cash  Equivalents     Cash  and  Cash  Equivalents  -­‐  Beginning  of  Period   Cash  and  Cash  Equivalents  -­‐  End  of  Period   Year  Ended  December  31,   2015   2014   2013     27,000       300,000       (184,356)     87,750       (2,362)     -­‐     -­‐     (128,239)     -­‐     (450)     (54,041)     (14,356)     (2,574)     28,372       6,280       21,675       $     $     $     -­‐     100,000       (61,348)     101,000       (4,450)     -­‐     -­‐     (15,418)     (338)     (8)     (50,286)     (14,356)     (1,724)     53,072       (14,538)     36,213       $     $     $     -­‐     50,000       (54,398)     65,000       (2,283)     72,370       (60,000)     -­‐     (1,000)     (565)     (50,553)     (14,522)     (1,682)     2,367       (32,846)     69,059       27,955       $     21,675       $     36,213     $     $     $     $   The  Accompanying  Notes  are  an  Integral  Part  of  These  Consolidated  Financial  Statements.   43                                                                                                                                                                                                                                                                       hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES   Hersha  Hospitality  Trust  (“we”  or  the  “Company”)  was  formed  in  May  1998  as  a  self-­‐administered,  Maryland  real  estate  investment   trust.  We  have  elected  to  be  taxed  and  expect  to  continue  to  elect  to  be  taxed  as  a  real  estate  investment  trust,  or  REIT,  for  federal   income  tax  purposes.   The  Company  owns  a  controlling  general  partnership  interest  in  Hersha  Hospitality  Limited  Partnership  (“HHLP”  or  the   “Partnership”),  which  owns  a  99%  limited  partnership  interest  in  various  subsidiary  partnerships.  Hersha  Hospitality,  LLC  (“HHLLC”),  a   Virginia  limited  liability  company,  owns  a  1%  general  partnership  interest  in  the  subsidiary  partnerships  and  the  Partnership  is  the   sole  member  of  HHLLC.   The  Partnership  owns  a  taxable  REIT  subsidiary  (“TRS”),  44  New  England  Management  Company  (“44  New  England”  or  “TRS  Lessee”),   which  leases  certain  of  the  Company’s  hotels.   Hersha’s  common  shares  of  beneficial  interest  trade  on  the  New  York  Stock  Exchange  (“the  NYSE”)  under  the  ticker  symbol  "HT",  its   8.0%  Series  B  preferred  shares  of  beneficial  interest  trade  on  the  NYSE  under  the  ticker  symbol  “HT  PR  B”  and  its  6.875%  Series  C   preferred  shares  of  beneficial  interest  trade  on  the  NYSE  under  the  ticker  symbol  “HT  PR  C.”   As  of  December  31,  2015,  the  Company,  through  the  Partnership  and  subsidiary  partnerships,  wholly  owned  49  limited  and  full   service  hotels.  All  of  the  wholly  owned  hotel  facilities  are  leased  to  the  Company’s  TRS,  44  New  England.     In  addition  to  the  wholly  owned  hotel  properties,  as  of  December  31,  2015,  the  Company  owned  joint  venture  interests  in  another   five  properties.  The  properties  owned  by  the  joint  ventures  are  leased  to  a  TRS  owned  by  the  joint  venture  or  to  an  entity  owned  by   the  joint  venture  partners  and  44  New  England.  The  following  table  lists  the  properties  owned  by  these  joint  ventures:   Joint  Venture     Ownership     Property   Location   Lessee/Sublessee   Unconsolidated  Joint  Ventures   Mystic  Partners,  LLC   SB  Partners,  LLC   Hiren  Boston,  LLC   66.7%   8.8%   15.0%   50.0%   50.0%     Marriott     Hilton     Marriott     Holiday  Inn  Express     Courtyard     Mystic,  CT     Hartford,  CT     Hartford,  CT     South  Boston,  MA     South  Boston,  MA     Mystic  Partners  Leaseco,  LLC     Mystic  Partners  Leaseco,  LLC     Mystic  Partners  Leaseco,  LLC     South  Bay  Sandeep,  LLC     South  Bay  Boston,  LLC   Mystic  Partners,  LLC  owns  an  interest  in  three  hotel  properties.  Our  interest  in  Mystic  Partners,  LLC  is  relative  to  our  interest  in  each   of  the  three  properties  owned  by  the  joint  venture  as  defined  in  the  joint  venture’s  governing  documents.  Each  of  the  three   properties  owned  by  Mystic  Partners,  LLC  is  leased  to  a  separate  entity  that  is  consolidated  in  Mystic  Partners  Leaseco,  LLC  which  is   owned  by  44  New  England  and  our  joint  venture  partner  in  Mystic  Partners,  LLC.   The  properties  are  managed  by  eligible  independent  management  companies,  including  Hersha  Hospitality  Management,  LP   (“HHMLP”).  HHMLP  is  owned  in  part  by  certain  of  our  trustees  and  executive  officers  and  other  unaffiliated  third  party  investors.   Principles  of  Consolidation  and  Presentation   The  accompanying  consolidated  financial  statements  have  been  prepared  in  accordance  with  U.S.  generally  accepted  accounting   principles  and  include  all  of  our  accounts  as  well  as  accounts  of  the  Partnership,  subsidiary  partnerships  and  our  wholly  owned  TRS   Lessee.  All  significant  inter-­‐company  amounts  have  been  eliminated.   44                                                                                                         hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)   Consolidated  properties  are  either  wholly  owned  or  owned  less  than  100%  by  the  Partnership  and  are  controlled  by  the  Company  as   general  partner  of  the  Partnership.  Properties  owned  in  joint  ventures  are  also  consolidated  if  the  determination  is  made  that  we  are   the  primary  beneficiary  in  a  variable  interest  entity  (VIE)  or  we  maintain  control  of  the  asset  through  our  voting  interest  in  the  entity.   Control  can  be  demonstrated  when  the  general  partner  has  the  power  to  impact  the  economic  performance  of  the  partnership,   which  includes  the  ability  of  the  general  partner  to  manage  day-­‐to-­‐day  operations,  refinance  debt  and  sell  the  assets  of  the   partnerships  without  the  consent  of  the  limited  partners  and  the  inability  of  the  limited  partners  to  replace  the  general  partner.   Control  can  be  demonstrated  by  the  limited  partners  if  the  limited  partners  have  the  right  to  dissolve  or  liquidate  the  partnership  or   otherwise  remove  the  general  partner  without  cause  or  have  rights  to  participate  in  the  significant  decisions  made  in  the  ordinary   course  of  the  partnership’s  business.   We  evaluate  each  of  our  investments  and  contractual  relationships  to  determine  whether  they  meet  the  guidelines  of  consolidation.   Entities  are  consolidated  if  the  determination  is  made  that  we  are  the  primary  beneficiary  in  a  VIE  or  we  maintain  control  of  the  asset   through  our  voting  interest  or  other  rights  in  the  operation  of  the  entity.  To  determine  if  we  are  the  primary  beneficiary  of  a  VIE,  we   evaluate  whether  we  have  a  controlling  financial  interest  in  that  VIE.  An  enterprise  is  deemed  to  have  a  controlling  financial  interest   if  it  has  i)  the  power  to  direct  the  activities  of  a  variable  interest  entity  that  most  significantly  impact  the  entity’s  economic   performance,  and  ii)  the  obligation  to  absorb  losses  of  the  VIE  that  could  be  significant  to  the  VIE  or  the  rights  to  receive  benefits   from  the  VIE  that  could  be  significant  to  the  VIE.  Control  can  also  be  demonstrated  by  the  ability  of  a  member  to  manage  day-­‐to-­‐day   operations,  refinance  debt  and  sell  the  assets  of  the  partnerships  without  the  consent  of  the  other  member  and  the  inability  of  the   members  to  replace  the  managing  member.  Based  on  our  examination,  the  following  entities  were  determined  to  be  VIE’s:  Mystic   Partners,  LLC;  Mystic  Partners  Leaseco,  LLC;  South  Bay  Boston,  LLC;  Brisam  Management  DE,  LLC;  Hersha  Statutory  Trust  I;  and   Hersha  Statutory  Trust  II.  Mystic  Partners,  LLC  is  a  VIE  entity,  however  because  we  are  not  the  primary  beneficiary  it  is  not   consolidated  by  the  Company.  Our  maximum  exposure  to  losses  due  to  our  investment  in  Mystic  Partners,  LLC  is  limited  to  our   investment  in  the  joint  venture  which  is  $5,022  as  of  December  31,  2015.  Also,  Mystic  Partners  Leaseco,  LLC;  and  South  Bay  Boston,   LLC  lease  hotel  properties  from  our  joint  venture  interests  and  are  VIEs.  These  entities  are  consolidated  by  the  lessors,  the  primary   beneficiaries  of  each  entity.  Brisam  Management  DE,  LLC  is  consolidated  in  our  financial  statements,  as  we  are  considered  to  be  the   primary  beneficiary.  Hersha  Statutory  Trust  I  and  Hersha  Statutory  Trust  II  are  VIEs  but  HHLP  is  not  the  primary  beneficiary  in  these   entities.  Accordingly,  the  accounts  of  Hersha  Statutory  Trust  I  and  Hersha  Statutory  Trust  II  are  not  consolidated  with  and  into  HHLP.   We  allocate  resources  and  assess  operating  performance  based  on  individual  hotels  and  consider  each  one  of  our  hotels  to  be  an   operating  segment.  All  of  our  individual  operating  segments  meet  the  aggregation  criteria.  All  of  our  other  real  estate  investment   activities  are  immaterial  and  meet  the  aggregation  criteria,  and  thus,  we  report  one  segment:  investment  in  hotel  properties.   Use  of  Estimates   The  preparation  of  financial  statements  in  conformity  with  accounting  principles  generally  accepted  in  the  United  States  (US  GAAP)   requires  management  to  make  estimates  and  assumptions  that  affect  the  reported  amount  of  assets  and  liabilities  and  disclosure  of   contingent  assets  and  liabilities  at  the  date  of  the  financial  statements  and  the  reported  amounts  of  revenue  and  expenses  during   the  reporting  period.  Actual  results  could  differ  from  those  estimates.   Although  we  believe  the  assumptions  and  estimates  we  made  are  reasonable  and  appropriate,  as  discussed  in  the  applicable   sections  throughout  these  Consolidated  Financial  Statements,  different  assumptions  and  estimates  could  materially  impact  our   reported  results.  The  current  economic  environment  has  increased  the  degree  of  uncertainty  inherent  in  these  estimates  and   assumptions  and  changes  in  market  conditions  could  impact  our  future  operating  results.   Investment  in  Hotel  Properties   The  Company  allocates  the  purchase  price  of  hotel  properties  acquired  based  on  the  fair  value  of  the  acquired  real  estate,  furniture,   fixtures  and  equipment,  and  intangible  assets  and  the  fair  value  of  liabilities  assumed,  including  debt.  The  fair  value  allocations  were   determined  using  Level  3  inputs,  which  are  typically  unobservable  and  are  based  on  our  own  assumptions,  as  there  is  little,  if  any,     45                           hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)   related  market  activity.  The  Company’s  investments  in  hotel  properties  are  carried  at  cost  and  are  depreciated  using  the  straight-­‐line   method  over  the  following  estimated  useful  lives:   Building  and  Improvements                         7  to  40  Years   Furniture,  Fixtures  and  Equipment                 2  to  7  Years   The  Company  periodically  reviews  the  carrying  value  of  each  hotel  to  determine  if  circumstances  indicate  impairment  to  the  carrying   value  of  the  investment  in  the  hotel  or  that  depreciation  periods  should  be  modified.  If  facts  or  circumstances  support  the  possibility   of  impairment,  the  Company  will  prepare  an  estimate  of  the  undiscounted  future  cash  flows,  without  interest  charges,  of  the  specific   hotel.  Based  on  the  properties  undiscounted  future  cash  flows,  the  Company  will  determine  if  the  investment  in  such  hotel  is   recoverable.  If  impairment  is  indicated,  an  adjustment  will  be  made  to  reduce  the  carrying  value  of  the  hotel  to  reflect  the  hotel  at   fair  value.   We  consider  a  hotel  to  be  held  for  sale  when  management  and  our  independent  trustees  commit  to  a  plan  to  sell  the  property,  the   property  is  available  for  sale,  management  engages  in  an  active  program  to  locate  a  buyer  for  the  property  and  it  is  probable  the  sale   will  be  completed  within  a  year  of  the  initiation  of  the  plan  to  sell.   Acquisition-­‐related  cost,  such  as  due  diligence,  legal  and  accounting  fees,  are  not  capitalized  or  applied  in  determining  the  fair  value   of  the  above  acquired  assets.       Investment  in  Unconsolidated  Joint  Ventures   If  it  is  determined  that  we  do  not  have  a  controlling  interest  in  a  joint  venture,  either  through  our  financial  interest  in  a  VIE  or  our   voting  interest  in  a  voting  interest  entity,  the  equity  method  of  accounting  is  used.  Under  this  method,  the  investment,  originally   recorded  at  cost,  is  adjusted  to  recognize  our  share  of  net  earnings  or  losses  of  the  affiliates  as  they  occur  rather  than  as  dividends  or   other  distributions  are  received,  limited  to  the  extent  of  our  investment  in,  advances  to  and  commitments  for  the  investee.  Pursuant   to  our  joint  venture  agreements,  allocations  of  profits  and  losses  of  some  of  our  investments  in  unconsolidated  joint  ventures  may   be  allocated  disproportionately  as  compared  to  nominal  ownership  percentages  due  to  specified  preferred  return  rate  thresholds.   The  Company  periodically  reviews  the  carrying  value  of  its  investment  in  unconsolidated  joint  ventures  to  determine  if  circumstances   indicate  impairment  to  the  carrying  value  of  the  investment  that  is  other  than  temporary.  When  an  impairment  indicator  is  present,   we  will  estimate  the  fair  value  of  the  investment.  Our  estimate  of  fair  value  takes  into  consideration  factors  such  as  expected  future   operating  income,  trends  and  prospects,  as  well  as  the  effects  of  demand,  competition  and  other  factors.  This  determination   requires  significant  estimates  by  management,  including  the  expected  cash  flows  to  be  generated  by  the  assets  owned  and  operated   by  the  joint  venture.  To  the  extent  impairment  has  occurred  and  the  impairment  is  considered  other  than  temporary,  the  loss  will  be   measured  as  the  excess  of  the  carrying  amount  over  the  fair  value  of  our  investment  in  the  unconsolidated  joint  venture.   Cash  and  Cash  Equivalents   Cash  and  cash  equivalents  represent  cash  on  hand  and  in  banks  plus  short-­‐term  investments  with  an  initial  maturity  of  three  months   or  less  when  purchased.   Escrow  Deposits   Escrow  deposits  include  reserves  for  debt  service,  real  estate  taxes,  and  insurance  and  reserves  for  furniture,  fixtures,  and   equipment  replacements,  as  required  by  certain  mortgage  debt  agreement  restrictions  and  provisions.   Hotel  Accounts  Receivable   Hotel  accounts  receivable  consists  primarily  of  meeting  and  banquet  room  rental  and  hotel  guest  receivables.  The  Company   generally  does  not  require  collateral.  Ongoing  credit  evaluations  are  performed  and  an  allowance  for  potential  losses  from   uncollectible  accounts  is  provided  against  the  portion  of  accounts  receivable  that  is  estimated  to  be  uncollectible.   46                               hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)   Deferred  Financing  Costs   Deferred  financing  costs  are  recorded  at  cost  and  amortized  over  the  terms  of  the  related  indebtedness  using  the  effective  interest   method.   Due  from/to  Related  Parties   Due  from/to  Related  Parties  represents  current  receivables  and  payables  resulting  from  transactions  related  to  hotel  management   and  project  management  with  affiliated  entities.  Due  from  related  parties  results  primarily  from  advances  of  shared  costs  incurred.   Due  to  affiliates  results  primarily  from  hotel  management  and  project  management  fees  incurred.  Both  due  to  and  due  from  related   parties  are  generally  settled  within  a  period  not  to  exceed  one  year.   Intangible  Assets  and  Liabilities   Intangible  assets  consist  of  leasehold  intangibles  for  above-­‐market  value  of  in-­‐place  leases  and  deferred  franchise  fees.  The   leasehold  intangibles  are  amortized  over  the  remaining  lease  term.  Deferred  franchise  fees  are  amortized  using  the  straight-­‐line   method  over  the  life  of  the  franchise  agreement.       Intangible  liabilities  consist  of  leasehold  intangibles  for  below-­‐market  value  of  in-­‐place  leases.  The  leasehold  intangibles  are   amortized  over  the  remaining  lease  term.  Intangible  liabilities  are  included  in  the  accounts  payable,  accrued  expenses  and  other   liabilities  on  the  Company’s  consolidated  balance  sheets.   Development  Project  Capitalization   We  have  opportunistically  engaged  in  the  development  and  re-­‐development  of  hotel  assets.  We  capitalize  expenditures  related  to   hotel  development  projects  and  renovations,  including  indirect  costs  such  as  interest  expense,  real  estate  taxes  and  utilities  related   to  hotel  development  projects  and  renovations.   Noncontrolling  Interest   Noncontrolling  interest  in  the  Partnership  represents  the  limited  partner’s  proportionate  share  of  the  equity  of  the  Partnership.   Income  (loss)  is  allocated  to  noncontrolling  interest  in  accordance  with  the  weighted  average  percentage  ownership  of  the   Partnership  during  the  period.  At  the  end  of  each  reporting  period  the  appropriate  adjustments  to  the  income  (loss)  are  made  based   upon  the  weighted  average  percentage  ownership  of  the  Partnership  during  the  period.  Our  ownership  interest  in  the  Partnership  as   of  December  31,  2015,  2014  and  2013  was  95.0%,  95.8%,  and  96.7%,  respectively.   We  define  a  noncontrolling  interest  as  the  portion  of  equity  in  a  subsidiary  not  attributable,  directly  or  indirectly,  to  a  parent.  Such   noncontrolling  interests  are  reported  on  the  consolidated  balance  sheets  within  equity,  but  separately  from  the  shareholders’   equity.  Revenues,  expenses  and  net  income  or  loss  attributable  to  both  the  Company  and  noncontrolling  interests  are  reported  on   the  consolidated  statements  of  operations.   In  accordance  with  US  GAAP,  we  classify  securities  that  are  redeemable  for  cash  or  other  assets  at  the  option  of  the  holder,  or  not   solely  within  the  control  of  the  issuer,  outside  of  permanent  equity  in  the  consolidated  balance  sheet.  The  Company  makes  this   determination  based  on  terms  in  applicable  agreements,  specifically  in  relation  to  redemption  provisions.  Additionally,  with  respect   to  noncontrolling  interests  for  which  the  Company  has  a  choice  to  settle  the  contract  by  delivery  of  its  own  shares,  the  Company   considers  the  guidance  in  US  GAAP  to  evaluate  whether  the  Company  controls  the  actions  or  events  necessary  to  issue  the  maximum   number  of  common  shares  that  could  be  required  to  be  delivered  at  the  time  of  settlement  of  the  contract.   We  classify  the  noncontrolling  interests  of  our  consolidated  joint  ventures,  consolidated  variable  interest  entity,  and  certain   Common  Units  (“Nonredeemable  Common  Units”)  as  equity.  The  noncontrolling  interests  of  Nonredeemable  Common  Units  totaled   $31,876  as  of  December  31,  2015  and  $29,082  as  of  December  31,  2014.  As  of  December  31,  2015,  there  were  2,319,301     47                                     hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)   Nonredeemable  Common  Units  outstanding  with  a  fair  market  value  of  $50,468,  based  on  the  price  per  share  of  our  common  shares   on  the  NYSE  on  such  date.   In  accordance  with  the  partnership  agreement  of  the  Partnership,  holders  of  these  units  may  redeem  them  for  cash  unless  we,  in  our   sole  and  absolute  discretion,  elect  to  issue  common  shares  on  a  one-­‐for-­‐one  basis  in  lieu  of  paying  cash.   Prior  to  February  1,  2013,  certain  Common  Units  (“Redeemable  Common  Units”)  had  been  pledged  as  collateral  in  connection  with  a   pledge  and  security  agreement  entered  into  by  the  Company  and  the  holders  of  the  Redeemable  Common  Units.  The  redemption   feature  contained  in  the  pledge  and  security  agreement  where  the  Redeemable  Common  Units  served  as  collateral  contains  a   provision  that  could  result  in  a  net  cash  settlement  outside  of  the  control  of  the  Company.  As  a  result,  prior  to  February  1,  2013,  the   Redeemable  Common  Units  were  classified  in  the  mezzanine  section  of  the  consolidated  balance  sheets  as  they  did  not  meet  the   requirements  for  equity  classification  under  US  GAAP.  Effective  February  1,  2013,  the  aforementioned  pledge  and  security   agreement  is  no  longer  in  place  and  therefore  these  Common  Units  have  been  treated  as  Nonredeemable  Common  Units.  The   carrying  value  of  the  Redeemable  Common  Units  equaled  the  greater  of  carrying  value  based  on  the  accumulation  of  historical  cost   or  the  redemption  value.     As  of  December  31,  2015  and  2014,  there  were  no  outstanding  Common  Units  designated  as  Redeemable   Common  Units.     Net  income  or  loss  attributed  to  Nonredeemable  Common  Units  and  Redeemable  Common  Units  (collectively,  “Common  Units”),  as   well  as  the  net  income  or  loss  related  to  the  noncontrolling  interests  of  our  consolidated  joint  venture  and  consolidated  variable   interest  entity,  is  included  in  net  income  or  loss  in  the  consolidated  statements  of  operations.  Net  income  or  loss  attributed  to  the   Common  Units  and  the  noncontrolling  interests  of  our  consolidated  joint  ventures  and  consolidated  variable  interest  entity  is   excluded  from  net  income  or  loss  applicable  to  common  shareholders  in  the  consolidated  statements  of  operations.   Shareholders’  Equity   On  February  25,  2013,  we  completed  a  public  offering  of  3,000,000  6.875%  Series  C  Cumulative  Redeemable  Preferred  Shares.  These   shares  have  a  par  value  of  $0.01  per  share  with  a  $25.00  liquidation  preference  per  share.  Net  proceeds  of  the  offering,  after   deducting  the  underwriting  discount  and  the  offering  expenses  payable  by  us,  were  approximately  $72,370.     We  utilized  the  net  proceeds  of  the  offering  to  redeem  all  outstanding  8.00%  Series  A  Cumulative  Redeemable  Preferred  Shares  on   March  28,  2013,  and  for  general  corporate  purposes.     The  Series  A  Preferred  Shares  were  redeemed  at  a  per  share  redemption   price  of  $25.00  together  with  accrued  and  unpaid  dividends  to  the  redemption  date  for  an  aggregate  per  share  redemption  price  of   $25.4056.    Dividends  ceased  accruing  on  the  Series  A  Preferred  Shares  on  March  28,  2013.   Terms  of  the  Series  B  and  Series  C  Preferred  Shares  outstanding  at  December  31,  2015  and  2014  are  summarized  as  follows:   Shares  Outstanding     December  31,   2015     December  31,   2014   Aggregate   Liquidation   Preference   Distribution   Rate   Dividend  Per  Share         Year  Ended  December  31,     2015   2014     4,600,000       3,000,000       7,600,000         4,600,000       $     3,000,000         7,600,000         115,000       75,000     8.000%     $   6.875%       2.0000       $     1.7188         2.0000       1.7188     Series   Series  B   Series  C   Total   48                                                                                                                                                                                                                                 hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)   In  December  2012,  our  Board  of  Trustees  authorized  us  to  repurchase  from  time  to  time  up  to  an  aggregate  of  $75,000  of  our   outstanding  common  shares  through  December  31,  2013.  We  did  not  repurchase  any  common  shares  prior  to  the  expiration  of  the   share  repurchase  program.  In  January  2014,  our  Board  of  Trustees  again  authorized  us  to  repurchase  from  time  to  time  up  to  an   aggregate  of  $75,000  of  our  outstanding  common  shares.     In  February  2015,  our  Board  of  Trustees  authorized  us  to  repurchase  from  time  to  time  up  to  an  aggregate  of  $100,000  of  our   outstanding  shares.  In  October  2015,  our  Board  of  Trustees  authorized  a  new  share  repurchase  program  for  $100,000  which  would   commence  up  on  the  completion  of  the  existing  program.     The  new  program  will  expire  on  December  31,  2016  unless  extended  by   the  Board  of  Trustees.     We  may  seek  Board  of  Trustee  approval  to  increase  the  2016  authorization.     For  the  year  ended  December   31,  2015,  the  Company  repurchased  5,310,371  common  shares  for  an  aggregate  purchase  price  of  $128,239  under  the  February   2015  and  October  2015  repurchase  programs.  Upon  repurchase  by  the  Company,  these  common  shares  ceased  to  be  outstanding   and  became  authorized  but  unissued  common  shares.     On  December  23,  2014,  we  amended  our  partnership  agreement  to  allow  for  the  issuance  of  profits  interests  in  HHLP  in  the  form  of   LTIP  Units,  a  new  class  of  limited  partnership  units  in  HHLP,  and  to  establish  the  terms  of  the  LTIP  Units.  The  LTIP  Units  vest  on   December  31  and  June  1  of  each  year,  beginning  on  December  31,  2014  and  ending  on  June  1,  2017.  The  LTIP  units  contain   restricted  stock  awards  that  were  forfeited  and  replaced  with  LTIP  unit  awards  with  similar  terms.  The  total  number  of  Restricted   Stock  Awards  forfeited  and  LTIP  Units  awarded  was  1,948,324.   In  May  2015,  our  Board  of  Trustees  approved  a  reverse  share  split  of  our  issued  and  outstanding  common  shares  and  Common  Units   and  LTIP  units  at  a  ratio  of  1-­‐for-­‐4.  This  reverse  share  split  converted  every  four  issued  and  outstanding  common  shares  into  one   common  share.  The  reverse  share  split  was  effective  as  of  5:00  PM  Eastern  time  on  June  22,  2015.  As  a  result  of  the  reverse  share   split,  the  number  of  outstanding  Common  Units  and  LTIP  Units  was  reduced  from  9,313,063  to  2,328,276  units.  In  addition,  the   second  quarter  dividend  was  adjusted  to  $0.28  per  common  share  from  the  previously  announced  $0.07  per  common  share.  All   common  share,  Common  Unit  and  LTIP  Unit  and  per  share  data  related  to  these  classes  of  equity  have  been  updated  in  the   accompanying  consolidated  financial  statements  to  reflect  this  share  split  for  all  periods  presented.     Stock  Based  Compensation   We  measure  the  cost  of  employee  service  received  in  exchange  for  an  award  of  equity  instruments  based  on  the  grant-­‐date  fair  value   of  the  award.  The  compensation  cost  is  amortized  on  a  straight  line  basis  over  the  period  during  which  an  employee  is  required  to   provide  service  in  exchange  for  the  award.  The  compensation  cost  related  to  performance  awards  that  are  contingent  upon   market-­‐based  criteria  being  met  is  recorded  at  the  fair  value  of  the  award  on  the  date  of  the  grant  and  amortized  over  the   performance  period.   Derivatives  and  Hedging   The  Company’s  objective  in  using  derivatives  is  to  add  stability  to  interest  expense  and  to  manage  its  exposure  to  interest  rate   movements.  To  accomplish  this  objective,  the  Company  primarily  uses  interest  rate  swaps  and  interest  rate  caps  as  part  of  its  cash   flow  hedging  strategy.  Interest  rate  swaps  designated  as  cash  flow  hedges  involve  the  receipt  of  variable-­‐rate  amounts  in  exchange   for  fixed-­‐rate  payments  over  the  life  of  the  agreements  without  exchange  of  the  underlying  principal  amount.  Interest  rate  caps   designated  as  cash  flow  hedges  limit  the  Company’s  exposure  to  increased  cash  payments  due  to  increases  in  variable  interest  rates.   49                         hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)   Revenue  Recognition   We  recognize  revenue  and  expense  for  all  consolidated  hotels  as  hotel  operating  revenue  and  hotel  operating  expense  when  earned   and  incurred.  These  revenues  are  recorded  net  of  any  sales  or  occupancy  taxes  collected  from  our  guests.  We  participate  in  frequent   guest  programs  sponsored  by  the  brand  owners  of  our  hotels  and  we  expense  the  charges  associated  with  those  programs,  as   incurred.   Interest  income  on  development  loan  financing  is  recorded  in  the  period  earned  based  on  the  interest  rate  of  the  loan  and   outstanding  balance  during  the  period.  Development  loans  receivable  and  accrued  interest  on  the  development  loans  receivable  are   evaluated  to  determine  if  outstanding  balances  are  collectible.  Interest  is  recorded  only  if  it  is  determined  the  outstanding  loan   balance  and  accrued  interest  balance  are  collectible.   Other  revenues  consist  primarily  of  fees  earned  for  asset  management  services  provided  to  hotels  we  own  through  unconsolidated   joint  ventures.  Fees  are  earned  as  a  percentage  of  hotel  revenue  and  are  recorded  in  the  period  earned  to  the  extent  of  the   noncontrolling  interest  ownership.   Income  Taxes   The  Company  qualifies  as  a  REIT  under  applicable  provisions  of  the  Internal  Revenue  Code,  as  amended,  and  intends  to  continue  to   qualify  as  a  REIT.  In  general,  under  such  provisions,  a  trust  which  has  made  the  required  election  and,  in  the  taxable  year,  meets   certain  requirements  and  distributes  to  its  shareholders  at  least  90%  of  its  REIT  taxable  income  will  not  be  subject  to  Federal  income   tax  to  the  extent  of  the  income  which  it  distributes.  Earnings  and  profits,  which  determine  the  taxability  of  dividends  to  shareholders,   differ  from  net  income  reported  for  financial  reporting  purposes  due  primarily  to  differences  in  depreciation  of  hotel  properties  for   Federal  income  tax  purposes.   Deferred  income  taxes  relate  primarily  to  the  TRS  Lessee  and  are  accounted  for  using  the  asset  and  liability  method.  Under  this   method,  deferred  income  taxes  are  recognized  for  temporary  differences  between  the  financial  reporting  bases  of  assets  and   liabilities  of  the  TRS  Lessee  and  their  respective  tax  bases  and  for  their  operating  loss  and  tax  credit  carry  forwards  based  on  enacted   tax  rates  expected  to  be  in  effect  when  such  amounts  are  realized  or  settled.  However,  deferred  tax  assets  are  recognized  only  to  the   extent  that  it  is  more  likely  than  not  that  they  will  be  realized  based  on  consideration  of  available  evidence,  including  tax  planning   strategies  and  other  factors.   The  Company  may  recognize  a  tax  benefit  from  an  uncertain  tax  position  when  it  is  more-­‐likely-­‐than-­‐not  (defined  as  a  likelihood  of   more  than  50%)  that  the  position  will  be  sustained  upon  examination,  including  resolutions  of  any  related  appeals  or  litigation   processes,  based  on  the  technical  merits.  If  a  tax  position  does  not  meet  the  more-­‐likely-­‐than-­‐not  recognition  threshold,  despite  the   Company’s  belief  that  its  filing  position  is  supportable,  the  benefit  of  that  tax  position  is  not  recognized  in  the  statements  of   operations.  The  Company  recognizes  interest  and  penalties,  as  applicable,  related  to  unrecognized  tax  benefits  as  a  component  of   income  tax  expense.  The  Company  recognizes  unrecognized  tax  benefits  in  the  period  that  the  uncertainty  is  eliminated  by  either   affirmative  agreement  of  the  uncertain  tax  position  by  the  applicable  taxing  authority,  or  by  expiration  of  the  applicable  statute  of   limitation.  For  the  years  ended  December  31,  2015,  2014  and  2013,  the  Company  did  not  record  any  uncertain  tax  positions.  As  of   December  31,  2015,  with  few  exceptions,  the  Company  is  subject  to  tax  examinations  by  U.S.  federal,  state,  and  local  income  tax   authorities  for  years  2003  through  2015.   Reclassification   Certain  amounts  in  the  prior  year  financial  statements  have  been  reclassified  to  conform  to  the  current  year  presentation.   50                         hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  1  –  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)   New  Accounting  Pronouncements     On  May  28,  2014,  the  FASB  issued  ASU  No.  2014-­‐09,  Revenue  from  Contracts  with  Customers,  which  requires  an  entity  to  recognize   the  amount  of  revenue  to  which  it  expects  to  be  entitled  for  the  transfer  of  promised  goods  or  services  to  customers.    The  ASU  will   replace  most  existing  revenue  recognition  guidance  in  U.S.  GAAP  when  it  becomes  effective.    The  new  standard  is  effective  for  the   Company  on  January  1,  2018.    Early  adoption  is  permitted,  but  not  prior  to  the  original  effective  date  of  January  1,  2017.    The   standard  permits  the  use  of  either  the  retrospective  or  cumulative  effect  transition  method.    The  Company  is  evaluating  the  effect   that  ASU  No.  2014-­‐09  will  have  on  its  consolidated  financial  statements  and  related  disclosures.    The  Company  has  not  yet  selected  a   transition  method  nor  has  it  determined  the  effect  of  the  standard  on  its  ongoing  financial  reporting.   On  February  18,  2015,  the  FASB  issued  ASU  No.  2015-­‐02,  Consolidation  –  Amendments  to  the  Consolidation  Analysis,  which  amends   the  current  consolidation  guidance  affecting  both  the  variable  interest  entity  (VIE)  and  voting  interest  entity  (VOE)  consolidation   models.    The  standard  does  not  add  or  remove  any  of  the  characteristics  in  determining  if  an  entity  is  a  VIE  or  VOE,  but  rather   enhances  the  way  the  Company  assesses  some  of  these  characteristics.  The  new  standard  is  effective  for  the  Company  on  January  1,   2016.    The  Company  does  not  expect  ASU  No.  2015-­‐02  to  have  a  significant  impact  on  its  consolidated  financial  statements  and   related  disclosures.   On  April  17,  2015,  the  FASB  issued  ASU  No.  2015-­‐03,  Simplifying  the  Presentation  of  Debt  Issuance  Costs,  which  requires  debt   issuance  costs  to  be  presented  in  the  balance  sheet  as  a  direct  deduction  from  the  associated  debt  liability.    ASU  2015-­‐03  does  not   address  debt  issuance  costs  related  to  line-­‐of-­‐credit  arrangements.  The  SEC  staff  announced  at  the  June  18,  2015  Emerging  Issues   Task  Force  Meeting  that  it  would  not  object  to  an  entity  deferring  and  presenting  debt  issuance  costs  as  an  asset  and  subsequently   amortizing  deferred  debt  issuance  costs  ratably  over  the  term  of  a  line-­‐of-­‐credit  arrangement,  regardless  of  whether  there  are   outstanding  borrowings  under  that  line-­‐of-­‐credit  arrangement.  In  August  2015,  the  FASB  issued  ASU  2015-­‐15,  Presentation  and   Subsequent  Measurement  of  Debt  Issuance  Costs  Associated  with  Line-­‐of-­‐Credit  Arrangements,  which  incorporates  the  SEC  staff   guidance  into  the  FASB  Accounting  Standards  Codification.  Currently,  debt  issuance  costs  are  recorded  as  an  asset  and  amortization   of  these  deferred  financing  costs  is  recorded  in  interest  expense.    Under  the  new  standard,  debt  issuance  costs  will  continue  to  be   amortized  over  the  life  of  the  debt  instrument  and  amortization  will  continue  to  be  recorded  in  interest  expense.    The  new  standard   is  effective  for  the  Company  on  January  1,  2016  and  will  be  applied  on  a  retrospective  basis.    The  Company  anticipates  a  change  in   our  balance  sheet presentation  only  because  the  standard  does  not  alter  the  accounting  for  amortization  of  debt  issuance  costs. 51         hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  2  –  INVESTMENT  IN  HOTEL  PROPERTIES   Investment  in  hotel  properties  consists  of  the  following  at  December  31,  2015  and  December  31,  2014:   Land   Buildings  and  Improvements   Furniture,  Fixtures  and  Equipment   Less  Accumulated  Depreciation   Total  Investment  in  Hotel  Properties     December  31,  2015     December  31,  2014   $   $   $     480,874       1,518,565       227,527       2,226,966       (395,847)       439,540     1,424,842     203,275     2,067,657     (322,174)     1,831,119     $     1,745,483   Depreciation  expense  was  $73,672,  $68,418  and  $61,500  (including  depreciation  on  assets  held  for  sale)  for  the  years  ended   December  31,  2015,  2014  and  2013,  respectively.   During  the  year  ended  December  31,  2015,  we  acquired  the  following  wholly-­‐owned  hotel  properties:   Hotel     Acquisition   Date   Land     Buildings  and   Improvements         Furniture   Fixtures   and   Equipment         Other   Intangibles     Loan  Costs       Total   Purchase   Price     Assumption   of  Debt   St.  Gregory  Hotel,  Washington,  DC     6/16/2015     $     23,764      $     33,005      $     3,240      $     45       $     978      $     61,032       $     28,902    *   TownePlace  Suites,  Sunnyvale,  CA     8/25/2015       -­‐         18,999           2,348           6,453    **     -­‐         27,800       Ritz-­‐Carlton  Georgetown,  DC     12/29/2015       17,570           29,160           3,270           -­‐     -­‐         50,000       -   -   TOTAL   *     $     41,334      $     81,164      $     8,858      $     6,498       $     978      $     138,832       $     28,902       Includes  a  $3,050  premium  as  we  determined  that  the  stated  rate  of  interest  on  the  assumed  mortgage  debt  was  above   market.   **   Acquired  ground  lease  asset  of  $6,353  and  intangible  asset  related  to  the  franchise  agreement  of  $100  with  purchase  of  the   property.   Acquisition-­‐related  costs,  such  as  due  diligence,  legal  and  accounting  fees,  are  not  capitalized  or  applied  in  determining  the  fair  value   of  the  above  acquired  assets.  During  the  year  ended  December  31,  2015,  we  paid  $708  in  acquisition  costs  related  to  the  above   acquired  assets.   Included  in  the  consolidated  statements  of  operations  for  the  year  ended  December  31,  2015  are  total  revenues  of  $7,150  and  a   total  net  income  of  $548  for  hotels  we  have  acquired  and  consolidated  since  the  date  of  acquisition.  These  amounts  represent  the   results  of  operations  for  these  hotels  since  the  date  of  acquisition:   52                                                                                                                                                                                                                                                                                         hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  2  –  INVESTMENT  IN  HOTEL  PROPERTIES  (CONTINUED)   Year  Ended  December  31,     2015   Hotel     Revenue   $   $     5,257       1,744       149       7,150       $     $   Net         Income       164       364       20       548     St.  Gregory  Hotel,  Washington,  DC   TownePlace  Suites,  Sunnyvale,  CA   Ritz-­‐Carlton  Georgetown,  DC   Total   Purchase  and  Sale  Agreement   In  October  2015,  we  entered  into  a  purchase  and  sale  agreement  to  purchase  the  Sanctuary  Beach  Resort  in  Monterey,  CA  from  an   unaffiliated  buyer  for  a  total  purchase  price  of  $39,500.  The  transaction  closed  on  January  28,  2016.  Upon  closing,  we  assumed  debt   of  $14,700.  Accounting  for  this  acquisition  requires  an  allocation  of  the  purchase  price  to  the  assets  acquired  and  the  liabilities   assumed  in  the  transaction  at  their  respective  estimated  fair  values.  The  purchase  price  allocations  are  estimated  based  on  current   available  information;  however,  we  still  are  in  the  process  of  obtaining  appraisals  and  finalizing  the  accounting  for  the  acquisition,   which  was  acquired  subsequent  to  year-­‐end.       On  February  4,  2016,  we  announced  the  signing  of  definitive  agreements  with  Cindat  Capital  Management  Limited  to  form  a  joint   venture  for  7  of  our  limited  service  hotels  in  Manhattan  totaling  1,087  rooms  for  a  total  purchase  price,  including  closing  costs  of   $571,400,  or  $526  per  key.  The  proposed  joint  venture  is  structured  with  Cindat  as  the  preferred  joint  venture  partner  holding  a   70.0%  ownership  stake,  while  we  retain  a  30%  equity  interest.  We  also  announced  the  signing  of  a  purchase  and  sale  agreement  to   acquire  the  238-­‐room  Hilton  Garden  Inn  M  Street,  in  Washington,  DC  for  $106,500.  These  transactions  are  expected  to  close  no  later   than  March  31,  2016,  and  are  subject  to  closing  conditions,  including  the  completion  of  the  buyer’s  due  diligence.  No  assurance  can   be  given  that  these  transactions  will  close  within  the  expected  time  frame  or  at  all.         During  the  year  ended  December  31,  2014,  we  acquired  the  following  wholly-­‐owned  hotel  properties:   Hotel     Hotel  Milo,  Santa  Barbara,  CA   Parrot  Key  Resort,  Key  West,  FL   Hilton  Garden  Inn  52nd  Street,  New   York,  NY   Acquisition   Date   Land     Buildings  and   Improvements       Furniture   Fixtures  and   Equipment       Ground  Lease   Intangible   Franchise   Fees  and   Loan  Costs   Total   Purchase   Price     Assumption   of  Debt     2/28/2014       -­‐     55,080       805       (14,230)     273       41,928       24,924     5/7/2014       57,889       33,959       8,152       5/27/2014       45,480       60,762       4,920       -­‐     -­‐     -­‐     100,000       1,123       112,285       -­‐     -­‐   Total     $     103,369      $     149,801      $     13,877      $     (14,230)    $     1,396      $     254,213      $     24,924     Acquisition-­‐related  costs,  such  as  due  diligence,  legal  and  accounting  fees,  are  not  capitalized  or  applied  in  determining  the  fair  value   of  the  above  acquired  assets.  During  the  year  ended  December  31,  2014,  we  paid  $2,178  in  acquisition  costs  related  to  the  above   acquired  assets.   The  purchase  agreement  for  the  acquisition  of  the  Parrot  Key  Resort  in  Key  West,  FL,  contained  a  provision  that  entitled  the  seller  to   additional  consideration  of  $2,000  contingent  upon  the  hotel  achieving  certain  net  operating  income  thresholds  within  twelve   months  of  acquisition.  At  the  time  of  acquisition,  no  liability  was  recorded  as  the  fair  market  value  of  the  contingent  consideration   was  determined  to  be  $0.  Upon  remeasurement  at  December  31,  2014,  a  liability  was  recorded  as  the  fair  market  value  of  the   contingent  consideration  was  determined  to  be  $2,000.   53                                                                                                                                                                                                                                                                                           hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  2  –  INVESTMENT  IN  HOTEL  PROPERTIES  (CONTINUED)   On  May  27,  2014,  we  completed  the  acquisition  of  the  Hilton  Garden  Inn  52nd  Street  hotel  in  New  York,  NY  from  an  unaffiliated   seller.  Previously,  we  had  entered  into  a  purchase  and  sale  agreement  to  acquire  this  property  for  total  consideration  of  $84,000.     The  purchase  price  for  this  property  was  contractually  fixed  on  August  23,  2012,  the  date  we  entered  into  the  purchase  and  sale   agreement.  During  the  21-­‐month  period  of  time  between  entering  in  the  purchase  and  sale  agreement  on  August  23,  2012  and  the   closing  date,  the  real  estate  market  for  hotels  located  in  Manhattan  experienced  significant  price  appreciation  due  to  improved   economic  conditions  in  the  market  and  in  the  overall  economy.  This  resulted  in  an  increase  in  the  fair  value  of  the  property  at  the   time  of  closing  the  acquisition  and,  as  such,  we  recognized  a  gain  of  approximately  $13,594,  which  is  net  of  preopening  expenses  of   $927  on  the  statement  of  operations,  as  the  fair  value  of  the  asset  acquired  less  any  liabilities  assumed  exceeded  the  consideration   transferred.   Consideration  given  in  exchange  for  the  property  included  $27,500  paid  in  cash  to  the  seller  and  our  reinstatement  and  cancellation   of  a  development  loan  receivable  in  the  original  principal  amount  of  $10,000  and  $12,494  of  accrued  interest  and  late  fees.  This   development  loan  receivable  had  previously  been  fully  impaired  in  2009,  but  was  recovered  as  part  of  this  acquisition.  As  a  result,   we  recognized  a  gain  of  $22,494  on  the  recovery  of  the  previously  impaired  development  loan.  In  addition,  we  paid  off  the  existing   construction  financing  and  entered  into  a  new  mortgage  loan  of  $45,000.  Concurrent  with  our  entry  into  the  new  mortgage  loan,  we   entered  into  an  interest  rate  cap  and  swap  –  see  “Note  7  –  Fair  Measurements  and  Derivative  Instruments”  for  more  information  on   this  derivative.  No  other  consideration  was  exchanged  in  connection  with  the  acquisition  of  this  property.  Below  is  a  tabular   reference  to  illustrate  the  components  of  the  consideration  and  fair  value  of  the  property:   Hotel   Hilton  Garden  Inn  52nd  Street,     New  York,  NY   Initial   Purchase   Price   Interest  and   Late  Fees  on   Development   Loan   Non-­‐Cash   Fair  Market   Value  Gain   on   Acquisition   Fair  Market   Value  At   Acquisition   Franchise   Fees  and   Loan  Costs       Asset  Value   Upon   Acquisition   Other   $     84,000       $     12,494       $     13,594       $     1,074      $     111,162       $     1,123       $     112,285     Included  in  the  consolidated  statement  of  operations  for  the  year  ended  December  31,  2014  are  total  revenues  of  $28,239  and  a   total  net  income  of  $6,219  for  hotels  we  have  acquired  and  consolidated  since  the  date  of  acquisition.  These  amounts  represent  the   results  of  operations  for  these  hotels  since  the  date  of  acquisition:   Hotel     Hotel  Milo,  Santa  Barbara,  CA   Parrot  Key  Resort,  Key  West,  FL   Hilton  Garden  Inn  52nd  Street,  New  York,  NY   Total   Asset  Development  and  Renovation   Year  Ended  December  31,     2014   Revenue   Net       Income     $   $     $     8,655       9,145       10,439       28,239       $     668       2,978       2,573       6,219     The  Company  has  opportunistically  engaged  in  the  development  of  hotel  assets.  On  July  22,  2011,  the  Company  completed  the   acquisition  of  the  real  property  and  improvements  located  at  32  Pearl  Street,  New  York,  NY,  from  an  unaffiliated  seller  for  a  total   purchase  price  of  $28,300.  On  June  23,  2014,  this  property  opened  as  a  Hampton  Inn.  The  total  construction  costs  spent  on  this   property  since  acquisition  were  $9,564,  which  equates  to  a  total  carrying  value  of  approximately  $37,864  when  the  property   opened.   In  January  2014,  the  Company  completed  the  construction  of  an  additional  oceanfront  tower,  additional  meeting  space  and   structured  parking  on  a  land  parcel  adjacent  to  the  Courtyard  by  Marriott,  Miami,  FL,  a  hotel  acquired  on  November  16,   2011.  This  land  parcel  was  included  in  the  acquisition  of  the  hotel.   54                                                                                                                                                                                                           hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  2  –  INVESTMENT  IN  HOTEL  PROPERTIES  (CONTINUED)   We  capitalize  expenditures  related  to  hotel  development  projects  and  renovations,  including  indirect  costs  such  as  interest  expense,   real  estate  taxes  and  utilities  related  to  hotel  development  projects  and  renovations.   We  have  capitalized  the  following  indirect  development  costs  for  the  years  ended  December  31,  2015,  2014  and  2013:   2015   Year  Ended  December  31,     2014   2013   Property  Tax   Interest  Expense   Utilities   Total     $     $     -­‐       -­‐       -­‐       -­‐     $   $   $     223     458   223   458     73     73     754   $     388     1,320     3     1,711   During  the  second  quarter  of  2014,  we  finalized  our  settlement  of  the  insurance  claim  we  had  for  losses  incurred  as  a  result  of   Hurricane  Sandy.  In  October  2012,  Hurricane  Sandy  affected  numerous  hotels  within  our  portfolio.  Two  hotels  within  our  portfolio   were  significantly  impacted  by  this  natural  disaster;  one  hotel  was  inoperable  (Holiday  Inn  Express  Water  Street,   New  York,  NY)  and  one  hotel  development  project,  which  was  subsequently  completed  on  June  23,  2014,  incurred  delays  in   construction  (Hampton  Inn,  Pearl  Street,  New  York,  NY).  Prior  to  March  31,  2014,  we  had  recorded  estimated  property  losses  of   $1,586  on  the  Holiday  Inn  Express  Water  Street  and  a  corresponding  insurance  claim  receivable  of  $1,486.  This  hotel  reopened  in   April  2013.  We  also  had  recorded  estimated  property  losses  of  $1,997  on  the  Hampton  Inn  Pearl  Street  and  a  corresponding   insurance  claim  receivable  of  $1,897.  This  hotel  opened  in  June  2014.  As  a  result  of  the  claim  settlement,  we  recorded  a  gain  on   insurance  settlements  of  approximately  $4,604,  which  included  business  interruption  claims.   754   Pro  Forma  Results  (Unaudited)   The  following  condensed  pro  forma  financial  data  are  presented  as  if  all  acquisitions  completed  since  January  1,  2015  and  2014  had   been  completed  on  January  1,  2014  and  2013.  Properties  acquired  without  any  operating  history  are  excluded  from  the  condensed   pro  forma  operating  results.  The  condensed  pro  forma  financial  data  is  not  necessarily  indicative  of  what  actual  results  of  operations   of  the  Company  would  have  been  assuming  the  acquisitions  had  been  consummated  on  January  1,  2015  and  2014  at  the  beginning   of  the  year  presented,  nor  do  they  purport  to  represent  the  results  of  operations  for  future  periods.   Pro  Forma  Total  Revenues   Pro  Forma  Income  from  Continuing  Operations     Loss  from  Discontinued  Operations   Pro  Forma  Net  Income   (Loss)  Allocated  to  Noncontrolling  Interest   Preferred  Distributions   Year  Ended  December  31,   2015   2014     493,096       456,189       43,180       -­‐     43,180       (448)     (14,356)     73,717       (1,665)     72,052       (1,144)     (14,356)     56,552     Pro  Forma  Net  Income  Applicable  to  Common  Shareholders     $     28,376       $   Pro  Forma  Income  Applicable  to  Common  Shareholders  per  Common  Share   Basic   Diluted   Weighted  Average  Common  Shares  Outstanding   Basic     Diluted   $   $     0.59       0.59       $     $     1.14       1.12       47,786,811       48,369,658       49,777,302       50,307,506     55                                                                                                                                                                                                                                                                                                                             hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  3  –  INVESTMENT  IN  UNCONSOLIDATED  JOINT  VENTURES   As  of  December  31,  2015  and  December  31,  2014  our  investment  in  unconsolidated  joint  ventures  consisted  of  the  following:   Joint  Venture   Hotel  Properties   Percent     Owned   Preferred   Return   December  31,     2015     December  31,     2014   SB  Partners,  LLC     Holiday  Inn  Express,  South  Boston,  MA   50.0%     N/A   $     795     $     913     Hiren  Boston,  LLC     Courtyard  by  Marriott,  South  Boston,  MA     50.0%     Mystic  Partners,  LLC     Hilton  and  Marriott  branded  hotels  in  CT     8.8%-­‐66.7%   N/A   8.5%   non-­‐cumulative       $     4,499       5,022       10,316       $     4,680       5,556       11,150     Income  or  loss  from  our  unconsolidated  joint  ventures  is  allocated  to  us  and  our  joint  venture  partners  consistent  with  the  allocation   of   cash   distributions   in   accordance   with   the   joint   venture   agreements.   Any   difference   between   the   carrying   amount   of   these   investments   and   the   underlying   equity   in   net   assets   is   amortized   over   the   expected   useful   lives   of   the   properties   and   other   intangible  assets.   Income  (loss)  recognized  during  the  years  ended  December  31,  2015,  2014  and  2013,  for  our  investments  in  unconsolidated  joint   ventures  is  as  follows:   SB  Partners,  LLC   Hiren  Boston,  LLC   Mystic  Partners,  LLC   Income  (Loss)  from  Unconsolidated  Joint  Venture  Investments   Impairment  from  Unconsolidated  Joint  Ventures   Income  (Loss)  from  Unconsolidated  Joint  Venture  Investments   Year  Ended  Ended  December  31,     2015   2014   2013   582     $     694         (311)       965         -­‐         965     $   407     $     603         (317)       693         -­‐         693     $   264     113     (399)     (22)     (1,813)     (1,835)    $    $   In  2013,  we  recorded  an  impairment  loss  of  $1,813  related  to  the  Courtyard,  Norwich,  CT,  one  of  the  properties  owned  by  Mystic   Partners,  LLC.    Mystic  Partners,  LLC  transferred  the  title  to  the  property  to  the  lender  during  the  year  ended  December  31,  2014.    As   we  did  not  anticipate  recovering  our  investment  balance  in  this  asset,  we  reduced  the  portion  of  our  Mystic  Partners,  LLC   investment  related  to  this  property  to  $0  as  of  December  31,  2013.     On  February  1,  2013,  the  Company  closed  on  the  sale  of  its  interest  in  one  of  the  unconsolidated  joint  venture  properties  owned  in   part  by  Mystic  Partners,  LLC  to  its  joint  venture  partner.  As  our  investment  in  this  unconsolidated  joint  venture  equated  the  net   proceeds  distributed  to  us,  we  did  not  record  a  gain  or  loss  in  connection  with  the  sale  of  this  hotel.   The  Mystic  Partners,  LLC  joint  venture  agreement  provides  for  an  8.5%  non-­‐cumulative  preferred  return  based  on  our  contributed   equity  interest  in  the  venture.  Cash  distributions  will  be  made  from  cash  available  for  distribution,  first,  to  us  to  provide  an  8.5%   annual  non-­‐compounded  return  on  our  unreturned  capital  contributions  and  then  to  our  joint  venture  partner  to  provide  an  8.5%   annual  non-­‐compounded  return  of  their  unreturned  contributions.  Any  remaining  cash  available  for  distribution  will  be  distributed  to   us  10.5%  with  respect  to  the  net  cash  flow  from  the  Hartford  Marriott,  7.0%  with  respect  to  the  Hartford  Hilton  and  56.7%,  with   respect  to  the  remaining  property.  Mystic  Partners,  LLC  allocates  income  to  us  and  our  joint  venture  partner  consistent  with  the   allocation  of  cash  distributions  in  accordance  with  the  joint  venture  agreements.   The  Hartford  Marriott,  part  of  the  Mystic  Partners,  LLC  joint  venture,  is  under  an  Asset  Management  Agreement  with  44  New   England  to  provide  asset  management  services.  Fees  for  these  services  are  paid  monthly  to  44  New  England  and  recognized  as   income  in  the  amount  of  0.25%  of  operating  revenues.   56                                                                                                                                                                                                                                                                             hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  3  –  INVESTMENT  IN  UNCONSOLIDATED  JOINT  VENTURES  (CONTINUED)   The  following  tables  set  forth  the  total  assets,  liabilities,  equity  and  components  of  net  income  or  loss,  including  the  Company’s   share,  related  to  the  unconsolidated  joint  ventures  discussed  above  as  of  December  31,  2015  and  December  31,  2014  and  for  the   years  ended  December  31,  2015,  2014  and  2013.     Balance  Sheets   Assets   Investment  in  Hotel  Properties,  Net   Other  Assets   Total  Assets   Liabilities  and  Equity   Mortgages  and  Notes  Payable   Other  Liabilities   Equity:   Hersha  Hospitality  Trust   Joint  Venture  Partner(s)   Total  Equity    $    $    $   December  31,     2015   December  31,     2014     105,354     15,558     120,912    $    $     113,532     30,575    $     22,698     (45,893)     (23,195)     106,430     19,032     125,462     115,446     30,832     23,060     (43,876)     (20,816)   Total  Liabilities  and  Equity    $     120,912    $     125,462   Statements  of  Operations   Room  Revenue   Other  Revenue   Operating  Expenses   Lease  Expense   Property  Taxes  and  Insurance   General  and  Administrative   Depreciation  and  Amortization   Interest  Expense   Debt  Extinguishment  and  Gain  on  Debt  Forgiveness   Gain  (Loss)  allocated  to  Noncontrolling  Interests   Net  Income  From  Continuing  Operations   (Loss)  Income  from  Discontinued  Operations   Gain  on  Disposition  of  Hotel  Properties         Net  Income     Year  Ended  December  31,     2015   2014   2013     57,927     $     22,776         (55,178)         (1,115)         (2,948)         (5,609)         (6,549)         (6,677)         -­‐         (341)         59,135     $     21,725         (54,831)         (1,063)         (2,934)         (5,783)         (6,376)         (11,995)         3,016         115         2,286     $     1,009     $     -­‐         -­‐         -­‐         -­‐         58,273     22,606     (55,179)     (996)     (3,034)     (5,794)     (6,697)     (7,526)     -­‐     (179)     1,474     (55)     1,161     2,286     $     1,009     $     2,580    $    $    $   57                                                                                                                                                                                                                                                                                                                                                                     hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  3  –  INVESTMENT  IN  UNCONSOLIDATED  JOINT  VENTURES  (CONTINUED)   The  following  table  is  a  reconciliation  of  the  Company’s  share  in  the  unconsolidated  joint  ventures’  equity  to  the  Company’s   investment  in  the  unconsolidated  joint  ventures  as  presented  on  the  Company’s  balance  sheets  as  of  December  31,  2015  and   December  31,  2014.   Company's  share  of  equity  recorded  on  the  joint  ventures'  financial   statements   Adjustment  to  reconcile  the  Company's  share  of  equity  recorded  on  the   joint  ventures'  financial  statements  to  our  investment  in  unconsolidated   joint  ventures(1)   Investment  in  Unconsolidated  Joint  Ventures      $    $   December  31,     2015   December  31,     2014     22,698    $     23,060     (12,382)     10,316    $     (11,910)     11,150   (1)       Adjustment  to  reconcile  the  Company's  share  of  equity  recorded  on  the  joint  ventures'  financial  statements  to  our   investment  in  unconsolidated  joint  ventures  consists  of  the  following:   • • • cumulative  impairment  of  the  Company’s  investment  in  joint  ventures  not  reflected  on  the  joint  ventures'  financial   statements;   the  Company’s  basis  in  the  investment  in  joint  ventures  not  recorded  on  the  joint  ventures'  financial  statements;  and   accumulated  amortization  of  the  Company’s  equity  in  joint  ventures  that  reflects  the  Company’s  portion  of  the  excess  of   the  fair  value  of  joint  ventures'  assets  on  the  date  of  our  investment  over  the  carrying  value  of  the  assets  recorded  on  the   joint  ventures  financial  statements  (this  excess  investment  is  amortized  over  the  life  of  the  properties,  and  the  amortization   is  included  in  Income  (Loss)  from  Unconsolidated  Joint  Venture  Investments  on  the  Company’s  consolidated  statement  of   operations).   58                                                                       hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  4  –  OTHER  ASSETS  AND  DEPOSITS  ON  HOTEL  ACQUISITIONS   Other  Assets   Other  Assets  consisted  of  the  following  at  December  31,  2015  and  December  31,  2014:   Investment  in  Statutory  Trusts   Prepaid  Expenses   Deferred  Tax  Asset,  Net  of  Valuation  Allowance  of  $804   Other       December  31,  2015       December  31,  2014     1,548     14,434     14,590     7,538     38,110     $     1,548     7,883     11,448     7,547     28,426     $   Investment  in  Statutory  Trusts  -­‐  We  have  an  investment  in  the  common  stock  of  Hersha  Statutory  Trust  I  and  Hersha  Statutory  Trust   II.  Our  investment  is  accounted  for  under  the  equity  method.   Prepaid  Expenses  -­‐  Prepaid  expenses  include  amounts  paid  for  property  tax,  insurance  and  other  expenditures  that  will  be  expensed   in  the  next  twelve  months.   Deferred  Tax  Asset  -­‐  We  have  approximately  $14,590  of  net  deferred  tax  assets  as  of  December  31,  2015.  We  have  considered   various  factors,  including  future  reversals  of  existing  taxable  temporary  differences,  future  projected  taxable  income  and  tax   planning  strategies  in  determining  a  valuation  allowance  for  our  deferred  tax  assets,  and  we  believe  that  it  is  more  likely  than  not   that  we  will  be  able  to  realize  the  $14,590  of  net  deferred  tax  assets  in  the  future.   Deposits  on  Hotel  Acquisitions   As  of  December  31,  2015,  we  had  $5,000  in  interest  bearing  deposits  related  to  the  future  acquisition  of  the  Sanctuary  Beach  Resort,   located  in  Marina,  California  (See  “Note  2  –  Investment  in  Hotel  Properties”  for  more  information).    As  of  December  31,  2014,  we   had  no  deposits  on  hotel  acquisitions.     59                                                                                                   hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  5  –  DEBT   Mortgages   We  had  total  mortgages  payable  at  December  31,  2015  and  December  31,  2014  of  $548,539  and  $617,375,  respectively.  These   balances  consisted  of  mortgages  with  fixed  and  variable  interest  rates,  which  ranged  from  2.61%  to  6.50%  as  of  December  31,  2015.   Included  in  these  balances  are  net  premiums  of  $3,503  and  $1,584  as  of  December  31,  2015  and  December  31,  2014,  respectively,   which  are  amortized  over  the  remaining  life  of  the  loans.  Aggregate  interest  expense  incurred  under  the  mortgage  loans  payable   totaled  $26,581,  $31,046  and  $34,854  during  the  years  ended  December  31,  2015,  2014  and  2013,  respectively.   Our  mortgage  indebtedness  contains  various  financial  and  non-­‐financial  covenants  customarily  found  in  secured,  non-­‐recourse   financing  arrangements.  Our  mortgage  loans  payable  typically  require  that  specified  debt  service  coverage  ratios  be  maintained  with   respect  to  the  financed  properties  before  we  can  exercise  certain  rights  under  the  loan  agreements  relating  to  such  properties.  If  the   specified  criteria  are  not  satisfied,  the  lender  may  be  able  to  escrow  cash  flow  generated  by  the  property  securing  the  applicable   mortgage  loan.  We  have  determined  that  certain  debt  service  coverage  ratio  covenants  contained  in  the  loan  agreements  securing   two  of  our  hotel  properties  were  not  met  as  of  December  31,  2015.  Pursuant  to  these  loan  agreements,  the  lender  has  elected  to   escrow  the  operating  cash  flow  for  a  number  of  these  properties.  However,  these  covenants  do  not  constitute  an  event  of  default   for  these  loans.   As  of  December  31,  2015,  the  maturity  dates  for  the  outstanding  mortgage  loans  ranged  from  May  2016  to  April  2023.   Subordinated  Notes  Payable   We  have  two  junior  subordinated  notes  payable  in  the  aggregate  amount  of  $51,548  to  the  Hersha  Statutory  Trusts  pursuant  to   indenture  agreements  which  will  mature  on  July  30,  2035,  but  may  be  redeemed  at  our  option,  in  whole  or  in  part,  prior  to  maturity   in  accordance  with  the  provisions  of  the  indenture  agreements.    The  $25,774  notes  issued  to  Hersha  Statutory  Trust  I  and  Hersha   Statutory  Trust  II,  bear  interest  at  a  variable  rate  of  LIBOR  plus  3%  per  annum.    This  rate  resets  two  business  days  prior  to  each   quarterly  payment.    The  weighted  average  interest  rate  on  our  two  junior  subordinated  notes  payable  during  the  years  ended   December  31,  2015,  2014  and  2013  was  3.33%,  3.28%  and  3.32%,  respectively.    Interest  expense  in  the  amount  of  $1,715,  $1,690   and  $1,712  was  recorded  for  the  years  ended  December  31,  2015,  2014  and  2013,  respectively.   Credit  Facilities   On  August  10,  2015,  we  entered  into  a  $300,000  senior  unsecured  term  loan  agreement  with  Citigroup  Global  Markets  Inc.  and   various  other  lenders.    The  term  loan  expires  on  August  10,  2020.  This  new  term  loan  expands  our  senior  unsecured  borrowing   capacity  from  $500,000  to  $800,000.   On  February  28,  2014,  we  entered  into  a  senior  unsecured  credit  agreement  with  Citigroup  Global  Markets  Inc.  and  various  other   lenders.  The  credit  agreement  provides  for  a  $500,000  senior  unsecured  credit  facility  consisting  of  a  $250,000  senior  unsecured   revolving  line  of  credit  and  a  $250,000  senior  unsecured  term  loan.  This  new  facility  amended  and  restated  the  existing  $400,000   senior  unsecured  credit  facility.  The  $500,000  unsecured  credit  facility  expires  on  February  28,  2018  and,  provided  no  event  of   default  has  occurred,  we  may  request  that  the  lenders  renew  the  credit  facility  for  an  additional  one-­‐year  period.  The  credit  facility  is   also  expandable  to  $850,000  at  our  request,  subject  to  the  satisfaction  of  certain  conditions.   Prior  to  February  28,  2014,  we  maintained  a  senior  unsecured  credit  agreement  with  Citigroup  Global  Markets  Inc.  and  various  other   lenders.  The  credit  agreement  provided  for  a  $400,000  senior  unsecured  credit  facility  consisting  of  a  $250,000  senior  unsecured   revolving  line  of  credit  and  a  $150,000  senior  unsecured  term  loan.   60                           hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  5  –  DEBT  (CONTINUED)   The  amount  that  we  can  borrow  at  any  given  time  on  our  credit  facility  is  governed  by  certain  operating  metrics  of  designated   unencumbered  hotel  properties  known  as  borrowing  base  assets.  As  of  December  31,  2015,  the  following  hotel  properties  were   borrowing  base  assets:   -­‐  Holiday  Inn  Express,  Cambridge,  MA   -­‐  Holiday  Inn,  Wall  Street,  NY   -­‐  Holiday  Inn  Express,  Times  Square,  NY   -­‐  Residence  Inn,  Norwood,  MA   -­‐  Residence  Inn,  Framingham,  MA   -­‐  Sheraton,  Wilmington  South,  DE   -­‐  Sheraton  Hotel,  JFK  Airport,  New  York,  NY   -­‐  Candlewood  Suites,  Times  Square,  NY   -­‐  Hampton  Inn,  Times  Square,  NY   -­‐  Winter  Haven,  Miami,  FL   -­‐  Hampton  Inn,  Pearl  Street,  NY   -­‐  Residence  Inn,  Greenbelt,  MD   -­‐  Courtyard,  Miami,  FL   -­‐  Residence  Inn,  Tyson's  Corner,  VA   -­‐  Hampton  Inn,  Philadelphia,  PA   -­‐  Hampton  Inn,  Washington,  DC   -­‐  Hyatt  Place,  King  of  Prussia,  PA   -­‐  Nu  Hotel,  Brooklyn,  NY   -­‐  The  Rittenhouse  Hotel,  Philadelphia,  PA   -­‐  The  Boxer,  Boston,  MA   -­‐  Holiday  Inn  Express  (Water  Street),  New  York,  NY   -­‐  Courtyard,  San  Diego,  CA   -­‐  Residence  Inn,  Coconut  Grove,  FL   -­‐  Blue  Moon,  Miami,  FL   -­‐  Parrot  Key  Resort,  Key  West,  FL   -­‐  Courtyard,  Brookline,  MA   -­‐  TownePlace  Suites,  Sunnyvale,  CA   The  interest  rate  for  the  $500,000  unsecured  credit  facility  is  based  on  a  pricing  grid  with  a  range  of  one  month  U.S.  LIBOR  plus   1.70%  to  2.45%  for  the  revolving  line  of  credit  and  1.60%  to  2.35%  for  the  unsecured  term  loan.  The  $300,000  unsecured  term  loan’s   interest  rate  is  based  on  a  pricing  grid  with  a  range  of  one  month  U.S  LIBOR  plus  1.50%  to  2.25%.  As  noted  above,  we  refinanced  our   credit  facility  during  February  2014.  Prior  to  this  refinancing,  the  pricing  grid  for  the  evolving  line  of  credit  and  unsecured  term  loan   was  U.S.  LIBOR  plus  1.75%  to  2.65%.   As  of  December  31,  2015,  we  had  borrowed  $250,000  in  unsecured  term  loans  under  the  $500,000  unsecured  credit   facility,  $150,000  for  which  we  had  entered  into  interest  rate  swaps  which  effectively  fix  the  interest  rate  on  these  term  loans  at  a   blended  rate  of  2.914%.  See  “Note  7  –  Fair  Value  Measurements  and  Derivative  Instruments”  for  more  information.  As  of  December   31,  2015,  we  had  fully  drawn  the  $300,000  unsecured  term  loan.     As  of  December  31,  2015,  we  had  a  balance  of  $27,000  outstanding  on  the  revolving  line  of  credit.  As  of  December  31,  2014,  the   outstanding  unsecured  $250,000  term  loan  under  the  $500,000  unsecured  credit  facility  was  fully  drawn  and  the  $250,000  revolving   line  of  credit  had  no  balance  outstanding.   The  credit  agreement  providing  for  the  $500,000  unsecured  credit  facility  and  $300,000  unsecured  term  loan  include  certain   financial  covenants  and  requires  that  we  maintain:  (1)  a  minimum  tangible  net  worth  of  $900,000,  plus  an  amount  equal  to  75%  of   the  net  cash  proceeds  of  all  issuances  and  primary  sales  of  equity  interests  of  the  parent  guarantor  or  any  of  its  subsidiaries   consummated  following  the  closing  date;  (2)  annual  distributions  not  to  exceed  95%  of  adjusted  funds  from  operations;  and  (3)   certain  financial  ratios,  including  the  following:   ·∙   ·∙   ·∙   a  fixed  charge  coverage  ratio  of  not  less  than  1.45  to  1.00,  which  increases  to  1.50  to  1.00  as  of  January  1,  2016;   a  maximum  leverage  ratio  of  not  more  than  60%;  and   a  maximum  secured  debt  leverage  ratio  of  50%,  which  decreases  to  45%  as  of  January  1,  2016   The  Company  is  in  compliance  with  each  of  the  covenants  listed  above  as  of  December  31,  2015.  As  of  December  31,  2015,  our   remaining  borrowing  capacity  under  the  $500,000  unsecured  credit  facility  and  $300,000  unsecured  term  loan  was  $218,745  based   on  the  borrowing  base  assets  at  December  31,  2015.   The  Company  recorded  interest  expense  of  $10,147,  $6,218  and  $5,413  related  to  borrowings  drawn  on  each  of  the  aforementioned   credit  facilities,  for  the  years  ended  December  31,  2015,  2014  and  2013,  respectively.  The  weighted  average  interest  rate  on  our   credit  facilities  was  2.69%,  2.82%  and  3.08%  for  the  years  ended  December  31,  2015,  2014  and  2013,  respectively.   61                                   hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  5  –  DEBT  (CONTINUED)   Aggregate  annual  principal  payments  for  the  Company’s  credit  facility,  unsecured  term  loan  and  mortgages  and  subordinated  notes   payable  for  the  five  years  following  December  31,  2016  and  thereafter  are  as  follows:   Year  Ending  December  31,   Amount   2016   2017   2018   2019   2020   Thereafter   Net  Unamortized  Premium   Capitalized  Interest   $   $     158,167     203,737     128,871     252,872     2,912     427,025     3,503     1,177,087   We  utilize  cash,  mortgage  debt  and  our  unsecured  credit  facility  to  finance  on-­‐going  capital  improvement  projects  at  our  hotels.   Interest  incurred  on  mortgages  and  the  revolving  credit  facility  that  relates  to  our  capital  improvement  projects  is  capitalized   through  the  date  when  the  assets  are  placed  in  service.  For  the  years  ended  December  31,  2015,  2014  and  2013,  we  capitalized  $0,   $458  and  $1,320  respectively,  of  interest  expense  related  to  these  projects.   Deferred  Financing  Costs   Costs  associated  with  entering  into  mortgages,  notes  payable,  unsecured  term  loan  and  our  credit  facilities  are  deferred  and   amortized  over  the  life  of  the  debt  instruments.  Amortization  of  deferred  financing  costs  is  recorded  in  interest  expense.  As  of   December  31,  2015,  deferred  costs  were  $8,971,  net  of  accumulated  amortization  of  $8,024.  Amortization  of  deferred  costs  for  the   years  ended  December  31,  2015,  2014  and  2013  was  $2,650,  $2,768  and  $2,886  respectively.   Debt  Payoff   On  August  10,  2015,  we  repaid  in  full  outstanding  mortgage  debt  with  an  original  principal  balance  of  $60,000  secured  by  the   Courtyard  by  Marriott,  Miami,  FL.  In  connection  with  this  transaction,  we  terminated  the  interest  rate  swap  associated  with  the   mortgage  on  this  property.  See  “Note  7  –  Fair  Value  Measurements  and  Derivative  Instruments”  for  more  information  on  this   transaction.  The  loan  was  due  to  mature  on  July  1,  2016,  and  we  incurred  approximately  $329  in  expense  in  unamortized  deferred   financing  costs  and  fees.   On  October  27,  2014,  we  repaid  $10,179  on  our  mortgage  with  Berkadia  Commercial  Mortgage,  LLC  for  the  Residence  Inn,   Greenbelt,  MD  property.  The  loan  was  due  to  mature  in  October  2014,  and  we  incurred  no  loss  on  debt  extinguishment  in  paying  off   the  loan.   On  June  30,  2013,  we  repaid  $7,928  on  our  mortgage  with  Berkadia  Commercial  Mortgage,  LLC  for  the  Residence  Inn,  Tysons  Corner,   VA  property.     The  loan  was  due  to  mature  in  July  2013,  and  we  incurred  no  loss  on  debt  extinguishment  in  paying  off  the  loan.   On  January  3,  2013,  we  funded  an  additional  $50,000  in  unsecured  term  loan  borrowings  under  our  then  $400,000  unsecured  credit   facility  which  was  used  to  pay  off  the  balance  of  the  mortgage  loan  secured  by  the  Holiday  Inn  Express,  Times  Square,  New  York,  NY   on  January  7,  2013.    This  mortgage  was  also  subject  to  an  interest  rate  swap,  which  was  terminated  as  a  cash  flow  hedge  as  of   December  31,  2012  due  to  this  payoff.    As  a  result  of  this  payoff,  we  expensed  $261  in  unamortized  deferred  financing  costs  and   fees,  which  are  included  in  the  Loss  on  Debt  Extinguishment  caption  of  the  consolidated  statements  of  operations  for  the  year   ended  December  31,  2013.     62                                                                             hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  5  –  DEBT  (CONTINUED)   New  Debt/Refinance   On  October  27,  2015,  we  refinanced  the  outstanding  mortgage  debt  with  an  original  balance  of  $30,000  secured  by  the  Courtyard  by   Marriott,  Los  Angeles,  California  and  simultaneously  entered  into  a  new  mortgage  obligation  of  $35,000,  incurring  a  loss  on  debt   extinguishment  of  approximately  $10.  The  new  mortgage  debt  bears  interest  at  a  variable  rate  of  one  month  U.S.  dollar  LIBOR  plus   3.00%  and  matures  on  September  29,  2017.  Also  on  October  27,  2015,  we  entered  into  an  interest  rate  cap  that  matures  on   September  27,  2017  that  effectively  limits  the  interest  at  3.00%  per  annum.     See  “Note  7  –  Fair  Value  Measurements  and  Derivative   Instruments”  for  more  information  on  the  interest  rate  cap.   On  June  10,  2015,  we  refinanced  the  outstanding  mortgage  debt  with  an  original  principal  balance  of  $55,000  secured  by  the  Hyatt   Union  Square,  New  York,  NY  and  simultaneously  entered  into  a  new  mortgage  obligation  of  $55,750,  incurring  a  loss  on  debt   extinguishment  of  approximately  $212.  The  new  mortgage  debt  bears  interest  at  a  variable  rate  of  one  month  U.S  dollar  LIBOR   plus  2.30%  and  matures  on  June  10,  2019.  Also  on  June  10,  2015,  we  entered  into  an  interest  rate  cap  that  matures  on  June  10,  2016   that  effectively  limits  the  interest  at  3.00%  per  annum.  See  “Note  7  –  Fair  Value  Measurements  and  Derivative  Instruments”  for  more   information  on  the  interest  rate  cap.   On  April  10,  2015,  we  refinanced  the  outstanding  mortgage  debt  with  an  original  principal  balance  of  $38,913  secured  by  the   Courtyard  by  Marriott,  Brookline,  MA.  The  loan  was  due  to  mature  in  July  2015,  and  we  incurred  approximately  $10    in  expense  in   unamortized  deferred  financing  costs  and  fees.   On  January  30,  2015,  we  repaid  in  full  outstanding  mortgage  debt  with  an  original  principal  balance  of  $27,500  secured  by  the   Capitol  Hill  Hotel,  Washington,  DC  and  simultaneously  entered  into  a  new  mortgage  obligation  of  $25,000.  The  new  mortgage  debt   bears  interest  at  a  variable  rate  of  one  month  U.S.  dollar  LIBOR  plus  2.25%  and  matures  on  January  30,  2018.  The  loan  was  due  to   mature  in  January  2015,  and  we  incurred  no  loss  on  debt  extinguishment  in  paying  off  the  loan.  We  had  previously  entered  into  an   interest  rate  swap  with  respect  to  the  $27,500  mortgage  loan  that  matured  on  February  1,  2015.  In  connection  with  this  transaction,   we  did  not  enter  into  a  new  derivative  instrument  to  fix  or  cap  the  rate  of  interest  payable  on  the  $25,000  mortgage  loan.  See  “Note   7  –  Fair  Value  Measurements  and  Derivative  Instruments”  for  more  information  on  this  transaction.   On  November  13,  2014,  we  repaid  outstanding  mortgage  debt  on  with  an  original  principal  balance  of  $32,000  secured  by  the  Hilton   Garden  Inn,  Tribeca,  NY  and  simultaneously  entered  into  a  new  mortgage  obligation  of  $46,500  with  a  new  lender.  The  new   mortgage  debt  bears  interest  at  a  variable  rate  of  one  month  U.S.  dollar  LIBOR  plus  2.30%  and  matures  on  November  1,  2019.   On  February  28,  2014,  we  refinanced  our  previous  $400,000  unsecured  credit  facility  with  a  $500,000  unsecured  credit  facility  with   Citigroup  Global  Markets  Inc.  and  various  other  lenders.  As  a  result  of  this  refinance,  we  expensed  $579  in  unamortized  deferred   financing  costs  and  fees,  which  are  included  in  the  Loss  on  Debt  Extinguishment  caption  of  the  consolidated  statements  of   operations  for  the  year  ended  December  31,  2014.   On  January  31,  2014,  we  paid  down  $5,175  of  the  outstanding  debt  and  modified  the  mortgage  loan  on  the  Duane  Street  Hotel,  New   York,  NY.  As  a  result,  we  entered  into  a  $9,500  loan  with  a  maturity  date  of  February  1,  2017.  The  modified  loan  bears  interest  at  a   variable  rate  of  one  month  U.S.  dollar  LIBOR  plus  4.50%.  The  modification  also  includes  an  interest  rate  swap,  which  effectively  fixes   the  interest  rate  at  5.433%.     As  a  result  of  this  modification,  we  expensed  $91  in  unamortized  deferred  financial  costs  and  fees   during  the  year  ended  December  31,  2014.     On  April  24,  2013,  we  modified  the  $30,000  mortgage  loan  on  the  Courtyard  by  Marriott,  Westside,  Los  Angeles,  CA.     The  modified   loan  bears  interest  at  a  variable  rate  of  one  month  U.S.  dollar  LIBOR  plus  3.00%,  and  matures  on  September  29,  2017.  The   modification  also  contains  an  option  for  the  Company  to  advance  $5,000  in  principal  subject  to  certain  conditions,  including  there   being  no  event  of  default  and  compliance  with  debt  service  coverage  ratio  requirements.     As  a  result  of  this  modification,  we   incurred  a  loss  on  debt  extinguishment  of  $284.     This  modification  did  not  change  the  terms  of  the  interest  rate  swap  that  we   entered  into  in  2011,  which  had  effectively  fixed  the  interest  at  4.947%,  and  now  effectively  fixes  the  interest  at  4.10%  through   September  29,  2015.     After  the  maturity  date  of  the  swap,  the  loan  will  bear  interest  at  the  stated  variable  rate  of  one-­‐month  U.S.   dollar  LIBOR  plus  3.00%,  with  a  LIBOR  floor  of  0.75%.     See  “Note  7  –  Fair  Value  Measurements  and  Derivative  Instruments”  for   more  information.   63                       hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  6  –  COMMITMENTS  AND  CONTINGENCIES  AND  RELATED  PARTY  TRANSACTIONS   Management  Agreements   Our  wholly-­‐owned  taxable  REIT  subsidiary  ("TRS"),  44  New  England,  engages  eligible  independent  contractors  in  accordance  with  the   requirements  for  qualification  as  a  REIT  under  the  internal  revenue  code  of  1986,  as  amended,  including  HHMLP,  as  the  property   managers  for  hotels  it  leases  from  us  pursuant  to  management  agreements.  HHMLP  is  owned,  in  part,  by  certain  executives  and   trustees  of  the  Company.  Our  management  agreements  with  HHMLP  provide  for  five-­‐year  terms  and  are  subject  to  early   termination  upon  the  occurrence  of  defaults  and  certain  other  events  described  therein.  As  required  under  the  REIT  qualification   rules,  HHMLP  must  qualify  as  an  “eligible  independent  contractor”  during  the  term  of  the  management  agreements.  Under  the   management  agreements,  HHMLP  generally  pays  the  operating  expenses  of  our  hotels.  All  operating  expenses  or  other  expenses   incurred  by  HHMLP  in  performing  its  authorized  duties  are  reimbursed  or  borne  by  our  TRS  to  the  extent  the  operating  expenses  or   other  expenses  are  incurred  within  the  limits  of  the  applicable  approved  hotel  operating  budget.  HHMLP  is  not  obligated  to  advance   any  of  its  own  funds  for  operating  expenses  of  a  hotel  or  to  incur  any  liability  in  connection  with  operating  a  hotel.  Management   agreements  with  other  unaffiliated  hotel  management  companies  have  similar  terms.   For  its  services,  HHMLP  receives  a  base  management  fee  and,  if  a  hotel  exceeds  certain  thresholds,  an  incentive  management  fee.   The  base  management  fee  for  a  hotel  is  due  monthly  and  is  equal  to  3%  of  gross  revenues  associated  with  each  hotel  managed  for   the  related  month.  The  incentive  management  fee,  if  any,  for  a  hotel  is  due  annually  in  arrears  on  the  ninetieth  day  following  the   end  of  each  fiscal  year  and  is  based  upon  the  financial  performance  of  the  hotels.  For  the  years  ended  December  31,  2015,  2014  and   2013,  base  management  fees  incurred  totaled  $13,675,  $12,263  and  $11,713  respectively,  and  are  recorded  as  Hotel  Operating   Expenses.  For  the  years  ended  December  31,  2015,  2014  and  2013,  we  did  not  incur  incentive  management  fees.   Franchise  Agreements   Our  branded  hotel  properties  are  operated  under  franchise  agreements  assumed  by  the  hotel  property  lessee.  The  franchise   agreements  have  10  to  20  year  terms,  but  may  be  terminated  by  either  the  franchisee  or  franchisor  on  certain  anniversary  dates   specified  in  the  agreements.  The  franchise  agreements  require  annual  payments  for  franchise  royalties,  reservation,  and  advertising   services,  and  such  payments  are  based  upon  percentages  of  gross  room  revenue.  These  payments  are  paid  by  the  hotels  and   charged  to  expense  as  incurred.  Franchise  fee  expense  for  the  years  ended  December  31,  2015,  2014  and  2013  were  $27,998,   $26,015  and  $26,247  respectively,  and  are  recorded  in  Hotel  Operating  Expenses.  The  initial  fees  incurred  to  enter  into  the  franchise   agreements  are  amortized  over  the  life  of  the  franchise  agreements.   Accounting  and  Information  Technology  Fees   Each  of  the  wholly-­‐owned  hotels  and  consolidated  joint  venture  hotel  properties  managed  by  HHMLP  incurs  a  monthly  accounting   and  information  technology  fee.  Monthly  fees  for  accounting  services  are  between  $2  and  $3  per  property  and  monthly  information   technology  fees  range  from  $1  to  $2  per  property.  For  the  years  ended  December  31,  2015,  2014  and  2013,  the  Company  incurred   accounting  fees  of  $1,484,  $1,410  and  $1,739  respectively.  For  the  years  ended  December  31,  2015,  2014  and  2013,  the  Company   incurred  information  technology  fees  of  $441,  $416  and  $510  respectively.  Accounting  fees  and  information  technology  fees  are   included  in  Hotel  Operating  Expenses.   Capital  Expenditure  Fees   HHMLP  charges  a  5%  fee  on  all  capital  expenditures  and  pending  renovation  projects  at  the  properties  as  compensation  for   procurement  services  related  to  capital  expenditures  and  for  project  management  of  renovation  projects.  For  the  years  ended   December  31,  2015,  2014  and  2013,  we  incurred  fees  of  $996,  $742  and  $1,459  respectively,  which  were  capitalized  with  the  cost  of   fixed  asset  additions.   64                         hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  6  –  COMMITMENTS  AND  CONTINGENCIES  AND  RELATED  PARTY  TRANSACTIONS  (CONTINUED)   Acquisitions  from  Affiliates   We  have  entered  into  an  option  agreement  with  each  of  our  officers  and  certain  trustees  such  that  we  obtain  a  right  of  first  refusal   to  purchase  any  hotel  owned  or  developed  in  the  future  by  these  individuals  or  entities  controlled  by  them  at  fair  market  value.  This   right  of  first  refusal  would  apply  to  each  party  until  one  year  after  such  party  ceases  to  be  an  officer  or  trustee  of  the  Company.  Our   Acquisition  Committee  of  the  Board  of  Trustees  is  comprised  solely  of  independent  trustees,  and  the  purchase  prices  and  all  material   terms  of  the  purchase  of  hotels  from  related  parties  are  approved  by  the  Acquisition  Committee.   Hotel  Supplies   For  the  years  ended  December  31,  2015,  2014  and  2013,  we  incurred  charges  for  hotel  supplies  of  $189,  $163  and  $222  respectively.   For  the  years  ended  December  31,  2015,  2014  and  2013,  we  incurred  charges  for  capital  expenditure  purchases  of  $4,542,  $10,610   and  $19,783  respectively.  These  purchases  were  made  from  Hersha  Purchasing  and  Design,  a  hotel  supply  company  owned,  in  part,   by  certain  executives  and  trustees  of  the  Company.  Hotel  supplies  are  expensed  and  included  in  Hotel  Operating  Expenses  on  our   consolidated  statements  of  operations,  and  capital  expenditure  purchases  are  included  in  investment  in  hotel  properties  on  our   consolidated  balance  sheets.  Approximately  $1  and  $2  is  included  in  accounts  payable  at  December  31,  2015  and  December  31,   2014,  respectively.   Due  From  Related  Parties   The  due  from  related  parties  balance  as  of  December  31,  2015  and  December  31,  2014  was  approximately  $6,243  and  $6,580,   respectively.  The  balances  primarily  consisted  of  working  capital  deposits  made  to  Hersha  affiliates.   Due  to  Related  Parties   The  balance  due  to  related  parties  as  of  December  31,  2015  and  December  31,  2014  was  approximately  $8,789  and  $7,203,   respectively.  The  balances  consisted  of  amounts  payable  to  HHMLP  for  administrative,  management,  and  benefit  related  fees.   Hotel  Ground  Rent   For  the  years  ended  December  31,  2015,  2014  and  2013  we  incurred  $3,137,  $2,433  and  $985  respectively,  of  rent  expense  payable   pursuant  to  ground  leases  related  to  certain  hotel  properties.   Future  minimum  lease  payments  (without  reflecting  future  applicable  Consumer  Price  Index  increases)  under  these  agreements  are   as  follows:   Year  Ending  December  31,   Amount   2016   2017   2018   2019   2020   Thereafter   Contingent  Consideration   $   $     2,701     2,706     2,714     2,719     2,744     249,360     262,944   The  purchase  agreement  for  the  acquisition  of  the  Parrot  Key  Resort  in  Key  West,  FL,  which  we  acquired  in  the  second  quarter  of   2014,  contained  a  provision  that  entitled  the  seller  to  additional  consideration  of  $2,000  contingent  upon  the  hotel  achieving  certain   net  operating  income  thresholds  within  twelve  months  of  acquisition.  At  the  time  of  acquisition,  no  liability  was  recorded  as  the  fair     65                                                                                   hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  6  –  COMMITMENTS  AND  CONTINGENCIES  AND  RELATED  PARTY  TRANSACTIONS  (CONTINUED)   market  value  of  the  contingent  consideration  was  determined  to  be  $0.  Upon  remeasurement  at  the  twelve  months  after     acquisition,  it  was  determined  that  the  hotel  achieved  a  net  operating  income  within  the  agreed  upon  threshold  and  the  liability  of   the  contingent  consideration  was  determined  to  be  $2,000;  and  thus  was  paid  to  the  seller  in  June  2015.   Litigation   We  are  not  presently  subject  to  any  material  litigation  nor,  to  our  knowledge,  is  any  other  litigation  threatened  against  us,  other  than   routine  actions  for  negligence  or  other  claims  and  administrative  proceedings  arising  in  the  ordinary  course  of  business,  some  of   which  are  expected  to  be  covered  by  liability  insurance  and  all  of  which  collectively  are  not  expected  to  have  a  material  adverse   effect  on  our  liquidity,  results  of  operations  or  business  or  financial  condition.   66       hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  7  –  FAIR  VALUE  MEASUREMENTS  AND  DERIVATIVE  INSTRUMENTS   Fair  Value  Measurements   Our  determination  of  fair  value  measurements  are  based  on  the  assumptions  that  market  participants  would  use  in  pricing  the  asset   or  liability.  As  a  basis  for  considering  market  participant  assumptions  in  fair  value  measurements,  we  utilize  a  fair  value  hierarchy   that  distinguishes  between  market  participant  assumptions  based  on  market  data  obtained  from  sources  independent  of  the   reporting  entity  (observable  inputs  that  are  classified  within  Levels  1  and  2  of  the  hierarchy)  and  the  reporting  entity’s  own   assumptions  about  market  participant  assumptions  (unobservable  inputs  classified  within  Level  3  of  the  hierarchy).   Level  1  inputs  utilize  quoted  prices  (unadjusted)  in  active  markets  for  identical  assets  or  liabilities  that  the  Company  has  the  ability  to   access.  Level  2  inputs  are  inputs  other  than  quoted  prices  included  in  Level  1  that  are  observable  for  the  asset  or  liability,  either   directly  or  indirectly.  Level  2  inputs  may  include  quoted  prices  for  similar  assets  and  liabilities  in  active  markets,  as  well  as  inputs  that   are  observable  for  the  asset  or  liability  (other  than  quoted  prices),  such  as  interest  rates,  foreign  exchange  rates  and  yield  curves   that  are  observable  at  commonly  quoted  intervals.  Level  3  inputs  are  unobservable  inputs  for  the  asset  or  liabilities,  which  are   typically  based  on  an  entity’s  own  assumptions,  as  there  is  little,  if  any,  related  market  activity.  In  instances  where  the  determination   of  the  fair  value  measurement  is  based  on  inputs  from  different  levels  of  the  fair  value  hierarchy,  the  level  in  the  fair  value  hierarchy   within  which  the  entire  fair  value  measurement  falls  is  based  on  the  lowest  level  input  that  is  significant  to  the  fair  value   measurement  in  its  entirety.  The  Company’s  assessment  of  the  significance  of  a  particular  input  to  the  fair  value  measurement  in  its   entirety  requires  judgment,  and  considers  factors  specific  to  the  asset  or  liability.   As  of  December  31,  2015,  the  Company’s  derivative  instruments  represented  the  only  financial  instruments  measured  at  fair  value.   Currently,  the  Company  uses  derivative  instruments,  such  as  interest  rate  swaps  and  caps,  to  manage  its  interest  rate  risk.  The   valuation  of  these  instruments  is  determined  using  widely  accepted  valuation  techniques,  including  discounted  cash  flow  analysis  on   the  expected  cash  flows  of  each  derivative.  This  analysis  reflects  the  contractual  terms  of  the  derivatives,  including  the  period  to   maturity,  and  uses  observable  market-­‐based  inputs.   We  incorporate  credit  valuation  adjustments  to  appropriately  reflect  both  our  own  nonperformance  risk  and  the  respective   counterparty’s  nonperformance  risk  in  the  fair  value  measurements.  In  adjusting  the  fair  value  of  its  derivative  contracts  for  the   effect  of  nonperformance  risk,  we  have  considered  the  impact  of  netting  and  any  applicable  credit  enhancements,  such  as  collateral   postings,  thresholds,  mutual  puts  and  guarantees.   Although  we  have  determined  that  the  majority  of  the  inputs  used  to  value  our  derivatives  fall  within  Level  2  of  the  fair  value   hierarchy,  the  credit  valuation  adjustments  associated  with  our  derivatives  utilize  Level  3  inputs,  such  as  estimates  of  current  credit   spreads,  to  evaluate  the  likelihood  of  default  by  us  and  the  counterparties.  However,  as  of  December  31,  2015  we  have  assessed  the   significance  of  the  effect  of  the  credit  valuation  adjustments  on  the  overall  valuation  of  our  derivative  positions  and  have   determined  that  the  credit  valuation  adjustments  are  not  significant  to  the  overall  valuation  of  our  derivatives.  As  a  result,  we  have   determined  that  our  derivative  valuations  in  their  entirety  are  classified  in  Level  2  of  the  fair  value  hierarchy.   67                     hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  7  –  FAIR  VALUE  MEASUREMENTS  AND  DERIVATIVE  INSTRUMENTS  (CONTINUED)   Derivative  Instruments   Hedged  Debt   Strike   Rate    Type   Index     Effective  Date     Maturity  Date   Estimated  Fair  Value     Notional   Amount     December   31,  2015   December  31,   2014   Capitol  Hill  Hotel,  Washington,  DC*   Hilton  Garden  Inn  52nd  Street,  New   York,  NY    Swap    0.540%     Cap    1.100%   1-­‐Month  LIBOR  +   3.25%   1-­‐Month  LIBOR  +   2.90%     February  1,  2012     February  1,  2015   $                                      -­‐      $     -­‐    $     May  27,  2014     June  1,  2015     45,000       Courtyard,  LA  Westside,  Culver  City,   LA****    Swap    1.097%   1-­‐Month  LIBOR  +   3.85%   September  29,   2011   September  29,   2015     -­‐         -­‐     -­‐   Courtyard,  LA  Westside,  Culver  City,   LA****     Cap    3.000%   Hyatt,  Union  Square,  New  York,  NY     Cap    2.000%   Courtyard,  Miami,  FL***    Swap    0.820%   Unsecured  Term  Loan    Swap    0.545%   Unsecured  Term  Loan    Swap    0.600%   Duane  Street  Hotel,  New  York,  NY   Hilton  Garden  Inn  52nd  Street,  New   York,  NY    Swap    0.933%    Swap    1.152%   Hyatt,  Union  Square,  New  York,  NY**     Cap    3.000%   1-­‐Month  LIBOR  +   3.00%   1-­‐Month  LIBOR  +   4.19%   1-­‐Month  LIBOR  +   3.50%   1-­‐Month  LIBOR  +   2.35%   1-­‐Month  LIBOR  +   2.35%   1-­‐Month  LIBOR  +   4.50%   1-­‐Month  LIBOR  +   2.90%   1-­‐Month  LIBOR  +   2.30%   October  27,   2015   September  29,   2017     35,000           19       April  9,  2013     April  9,  2016     55,000         July  2,  2012     July  1,  2016     -­‐     November  5,   2012   December  18,   2012   November  5,   2016   November  5,   2016     100,000         50,000         February  1,  2014     February  1,  2017     9,167         -­‐     -­‐     84       18       (21)     June  1,  2015   February  21,   2017     45,000         (215)     June  10,  2015     June  10,  2019     55,750          $     136       21      $     (8)     -­‐     (174)     9       (218)     272       85       (29)     (149)     -­‐     (212)   *   **     On  February  1,  2015,  the  interest  rate  swap  associated  with  Capitol  Hill  Hotel  matured,  and  we  refinanced  the  debt  on  this   property.  See  “Note  5  –  Debt”  for  more  information  regarding  this  refinance.   On  June  10,  2015,  we  refinanced  the  debt  associated  with  Hyatt  Union  Square.  As  a  result,  we  entered  into  an  interest  rate   cap  with  a  strike  rate  of  3.000%.  The  original  interest  rate  cap  will  mature  on  April  9,  2016.  See  “Note  5  –  Debt”  for  more   information  regarding  this  refinance.   ***     On  August  10,  2015,  we  paid  off  the  debt  associated  with  Courtyard,  Miami,  FL,  and  therefore,  terminated  the  interest  rate   swap  associated  with  the  mortgage  on  this  property.  As  a  result  of  this  termination,  we  expensed  $190  in  fees.  See  “Note  5   –  Debt”  for  more  information  regarding  this  pay-­‐off.   ****     On  October  27,  2015,  we  refinanced  the  debt  associated  with  Courtyard,  LA  Westside.  As  a  result,  we  entered  into  an   interest  rate  cap  with  a  strike  rate  of  3.000%.  The  existing  interest  rate  swap  matured  on  September  29,  2015.  See  “Note  5   –  Debt”  for  more  information  regarding  this  refinance.       On  January  31,  2014,  we  entered  into  an  interest  rate  swap  that  effectively  fixes  interest  payments  at  5.433%  on  a  variable  rate   mortgage  on  the  Duane  Street  Hotel.  See  “Note  5  –  Debt”  for  more  information  on  the  interest  rate  swap.     On  April  30,  2014,  we  sold  Hotel  373,  New  York,  NY,  and  therefore,  terminated  the  interest  rate  cap  associated  with  the  mortgage   on  this  property.  As  a  result  of  this  termination,  we  expensed  $55  in  fees,  which  are  included  in  the  gain  on  disposition  of  hotel   properties.   On  May  27,  2014,  we  entered  into  an  interest  rate  cap  that  effectively  fixes  interest  payments  when  1  month-­‐U.S.  dollar  LIBOR   exceeds  1.10%  on  a  variable  rate  mortgage  on  the  Hilton  Garden  Inn  52nd  Street,  New  York,  NY.  The  notional  amount  of  the  interest   rate  cap  is  $45,000  and  equals  the  principal  of  the  variable  rate  mortgage  being  hedged.  This  interest  rate  cap  matures  on  June  1,   2015.  Upon  maturity  of  the  interest  rate  cap,  an  interest  rate  swap  will  go  into  effect  that  effectively  fixes  the  interest  payment  at   4.052%.   68                                                                                                                                                                                                                                                                                   hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  7  –  FAIR  VALUE  MEASUREMENTS  AND  DERIVATIVE  INSTRUMENTS  (CONTINUED)   The  fair  value  of  certain  swaps  and  our  interest  rate  caps  is  included  in  other  assets  at  December  31,  2015  and  December  31,  2014   and  the  fair  value  of  certain  of  our  interest  rate  swaps  is  included  in  accounts  payable,  accrued  expenses  and  other  liabilities  at   December  31,  2015  and  December  31,  2014.   The  net  change  in  fair  value  of  derivative  instruments  designated  as  cash  flow  hedges  was  a  loss  of  $108,  and  a  gain  of  $18  and   $1,410  for  the  years  ended  December  31,  2015,  2014  and  2013,  respectively.  These  unrealized  gains  and  losses  were  reflected  on   our  consolidated  balance  sheet  in  accumulated  other  comprehensive  income.   Amounts  reported  in  accumulated  other  comprehensive  income  related  to  derivatives  will  be  reclassified  to  interest  expense  as   interest  payments  are  made  on  the  Company’s  variable-­‐rate  derivative.  The  change  in  net  unrealized  gains/losses  on  cash  flow   hedges  reflects  a  reclassification  of  $1,567  of  net  unrealized  gains/losses  from  accumulated  other  comprehensive  income  as  an   increase  to  interest  expense  during  2015.  During  2016,  the  Company  estimates  that  an  additional  $177  will  be  reclassified  as  an   increase  to  interest  expense.   Fair  Value  of  Debt   The  Company  estimates  the  fair  value  of  its  fixed  rate  debt  and  the  credit  spreads  over  variable  market  rates  on  its  variable  rate  debt   by  discounting  the  future  cash  flows  of  each  instrument  at  estimated  market  rates  or  credit  spreads  consistent  with  the  maturity  of   the  debt  obligation  with  similar  credit  policies.  Credit  spreads  take  into  consideration  general  market  conditions  and  maturity.  The   inputs  utilized  in  estimating  the  fair  value  of  debt  are  classified  in  Level  2  of  the  fair  value  hierarchy.    As  of  December  31,  2015,  the   carrying  value  and  estimated  fair  value  of  the  Company’s  debt  were  $1,177,087  and  $1,170,901,  respectively.    As  of  December  31,   2014,  the  carrying  value  and  estimated  fair  value  of  the  Company’s  debt  were  $918,923  and  $916,877,  respectively.   Impaired  Hotel  Property   As  discussed  in  “Note  12-­‐Discontinued  Operations,”  the  Company  recorded  an  impairment  loss  for  the  year  ended  December  31,   2013  of  approximately  $3,723  for  the  Holiday  Inn  Express  Camp  Springs,  MD  for  which  the  anticipated  net  proceeds  from  the  sale  of   the  hotel  were  less  than  the  carrying  value.     The  fair  value  of  the  hotel  was  estimated  using  level  2  inputs.   As  discussed  in  “Note  12-­‐Discontinued  Operations,”  the  Company  recorded  an  impairment  loss  for  the  year  ended  December  31,   2013  of  approximately  $6,591  for  the  non-­‐core  hotel  portfolio  the  Company  was  under  contract  to  sell  for  which  the  anticipated  net   proceeds  were  less  than  the  carrying  value.     The  fair  value  of  the  non-­‐core  hotel  portfolio  was  estimated  using  level  2  inputs.   69                         hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  8  –  SHARE  BASED  PAYMENTS   In  May  2011,  the  Company  established  and  our  shareholders  approved  the  Hersha  Hospitality  Trust  2012  Equity  Incentive  Plan  (as   amended  through  the  date  hereof,  the  “2012  Plan”)  for  the  purpose  of  attracting  and  retaining  executive  officers,  employees,   trustees  and  other  persons  and  entities  that  provide  services  to  the  Company.   Executives  &  Employees   Annual  Long  Term  Equity  Incentive  Programs   To  further  align  the  interests  of  the  Company’s  executives  with  those  of  shareholders,  the  Compensation  Committee  grants  annual   long  term  equity  incentive  awards  that  are  both  “performance-­‐based”  and  “time-­‐based.”       On  March  18,  2015,  the  Compensation  Committee  approved  the  2015  Annual  Long  Term  Equity  Incentive  Program  (“2015  Annual   EIP”)  for  the  executive  officers,  pursuant  to  which  the  executive  officers  are  eligible  to  earn  equity  awards  in  the  form  of  stock   awards  or  performance  share  awards  issuable  pursuant  to  the  2012  Plan  (“LTIP  Units”).    LTIP  Units  are  earned  under  the  2015   Annual  EIP  based  on  achieving  a  threshold,  target  or  maximum  level  of  performance  in  the  performance  of  RevPAR  growth  in  certain   defined  areas.    The  Company  accounts  for  these  grants  as  performance  awards  for  which  the  Company  assesses  the  probable   achievement  of  the  performance  conditions  at  the  end  of  each  period.  As  of  December  31,  2015,  no  shares  or  LTIP  Units  have  been   issued  in  accordance  with  the  2012  Plan  to  the  executive  officers  in  settlement  of  2015  Annual  EIP  awards.   The  following  table  is  a  summary  of  all  unvested  LTIP  Units  issued  to  executives:   Issuance  Date   March  30,  2015   (2014  Annual  EIP)     December  23,  2014   (2013  Annual  EIP)  (3)   December  23,  2014   (2012  Annual  EIP)  (3)   December  23,  2014  (3)   LTIP  Units   Issued   Vesting   Period     Vesting  Schedule     December  31,   2015     December  31,   2014     December  31,   2015     December  31,   2014   Units  Vested     Unearned  Compensation     128,832       3  years   25%/year  (1)     64,415         -­‐     $     758       $     -­‐     83,993       3  years   25%/year  (1)     83,992         27,998         173           582       97,381       3  years     258,899       5  years   25%/year  (1)   33%  Year  3,  4,  5  (2)     569,105         194,761         86,299         429,467         48,690       -     76,688       $     -­‐       1,553         2,484       $     309       2,650       3,541     25%  of  the  issued  shares  vested  immediately  upon  issuance.     In  general,  the  remaining  shares  vest  25%  on  the  first   through  third  anniversaries  of  the  date  of  effective  issuance  (subject  to  continuous  employment  through  the  applicable   vesting  date).   On  April  18,  2012,  the  Company  entered  into  amended  and  restated  employment  agreements  with  the  Company’s   executive  officers.    To  induce  the  executives  to  agree  to  the  substantial  reduction  in  benefits  upon  certain  terminations   following  a  change  of  control  as  described  in  the  agreements,  the  Company  awarded  an  aggregate  of  258,899  restricted   common  shares  to  the  executives  pursuant  to  the  2012  Plan,  which  were  subsequently  forfeited  and  replaced  with  LTIP   Units.    None  of  these  LTIP  Units  will  vest  prior  to  the  third  anniversary  of  the  date  of  issuance.    Thereafter,  33.3%  of  each   award  of  LTIP  Units  will  vest  on  each  of  the  third,  fourth  and  fifth  anniversaries  of  the  date  of  issuance.    Vesting  will   accelerate  upon  a  change  of  control  or  if  the  relevant  executive’s  employment  with  the  Company  were  to  terminate  for  any   reason  other  than  for  cause  (as  defined  in  the  employment  agreements).   On  December  23,  2014,  the  2012  Plan  was  amended  and  restated  to  add  LTIP  Units  as  a  type  of  award  available  under  the   2012  Plan.  On  this  date,  the  Compensation  Committee  approved  an  aggregate  of  487,081  LTIP  Units  to  certain  executive   officers.     These  executive  officers  forfeited  an  aggregate  of  487,081  Class  A  Common  Shares,  all  of  which  were  unvested  as   of  the  grant  date  of  the  LTIP  Units  and  previously  awarded  to  the  executive  officers  under  the  2012  Plan  as  restricted  stock   awards.  These  LTIP  Units  are  subject  to  the  same  time-­‐based  vesting  conditions  that  applied  to  the  forfeited  restricted  stock   awards.   (1)   (2)   (3)   70                                                                                                                                                                                                                                                                       hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  8  –  SHARE  BASED  PAYMENTS  (CONTINUED)   Stock  based  compensation  expense  related  to  the  Annual  Long  Term  Equity  Incentive  Program  of  $4,490,  $4,083  and  $4,858  was   incurred  during  the  years  ended  December  31,  2015,  2014  and  2013,  respectively.  Unearned  compensation  related  to  the   Annual  Long  Term  Equity  Incentive  Program  as  of  December  31,  2015  and  December  31,  2014  was  $2,484  and  $3,541,  respectively.   Compensation  related  to  the  LTIP  Units  is  included  in  Noncontrolling  Interests  on  the  Company’s  Consolidated  Balance  Sheets  and   Consolidated  Statements  of  Equity.   Multi-­‐Year  Long  Term  Equity  Incentive  Programs   On  March  18,  2015,  the  Compensation  Committee  approved  the  2015  Multi-­‐Year  Long  Term  Equity  Incentive  Program  (“2015   Multi-­‐Year  EIP”).     The  shares  or  LTIP  Units  issuable  under  this  program  are  based  on  the  Company’s  achievement  of  a  certain  level   of  (1)  absolute  total  shareholder  return  (37.50%  of  the  award),  (2)  relative  total  shareholder  return  as  compared  to  the  Company’s   peer  group  (37.50%  of  the  award),  and  (3)  relative  growth  in  revenue  per  available  room  compared  to  the  Company’s  peer  group   (25%  of  the  award).     This  program  has  a  three-­‐year  performance  period  which  commenced  on  January  1,  2015  and  ends  December   31,  2017.  As  of  December  31,  2015,  no  shares  or  LTIP  Units  have  been  issued  to  the  executive  officers  in  settlement  of  2015   Multi-­‐Year  EIP  awards.   On  April  11,  2014,  the  Compensation  Committee  approved  the  2014  Multi-­‐Year  Long  Term  Equity  Incentive  Program  (“2014   Multi-­‐Year  EIP”).  The  common  shares  issuable  under  this  program  are  based  on  the  Company’s  achievement  of  a  certain  level  of  (1)   absolute  total  shareholder  return  (37.50%  of  the  award),  (2)  relative  total  shareholder  return  as  compared  to  the  Company’s  peer   group  (37.50%  of  the  award),  and  (3)  relative  growth  in  revenue  per  available  room  compared  to  the  Company’s  peer  group  (25%  of   the  award).  This  program  has  a  three-­‐year  performance  period  which  commenced  on  January  1,  2014  and  ends  December  31,  2016.   As  of  December  31,  2015  no  common  shares  have  been  issued  to  the  executive  officers  in  settlement  of  2014  Multi-­‐Year  EIP  awards.   On  April  15,  2013,  the  Compensation  Committee  approved  the  2013  Multi-­‐Year  Long  Term  Equity  Incentive  Program  (“2013   Multi-­‐Year  EIP”).  The  common  shares  issuable  under  this  program  are  based  on  the  Company’s  achievement  of  a  certain  level  of  (1)   absolute  total  shareholder  return  (50%  of  the  award),  (2)  relative  total  shareholder  return  as  compared  to  the  Company’s  peer   group  (25%  of  the  award),  and  (3)  relative  growth  in  revenue  per  available  room  compared  to  the  Company’s  peer  group  (25%  of  the   award).  This  program  has  a  three  year  performance  period  which  commenced  on  January  1,  2013  and  ends  December  31,  2015.  As   of  December  31,  2015  no  common  shares  have  been  issued  to  the  executive  officers  in  settlement  of  2013  Multi-­‐Year  EIP  awards.   The  Company  accounts  for  the  total  shareholder  return  components  of  these  grants  as  market-­‐based  awards  where  the  Company   estimates  unearned  compensation  at  the  grant  date  fair  value  which  is  then  amortized  into  compensation  cost  over  the  vesting   period  of  each  individual  plan.  The  Company  accounts  for  the  RevPAR  component  of  the  grants  as  performance-­‐based  awards  for   which  the  Company  assesses  the  probable  achievement  of  the  performance  conditions  at  the  end  of  the  reporting  period.   Stock  based  compensation  expense  of  $818,  $598  and  $3,481  was  recorded  for  the  years  ended  December  31,  2015,  2014  and  2013,   respectively,  for  the  Multi-­‐Year  Long  Term  Equity  Incentive  Programs.    Unearned  compensation  related  to  the  multi-­‐year  program  as   of  December  31,  2015  and  December  31,  2014,  respectively,  was  $1,548  and  $1,621.   71                             hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  8  –  SHARE  BASED  PAYMENTS  (CONTINUED)   Restricted  Share  Awards   In  addition  to  stock  based  compensation  expense  related  to  awards  under  the  Multi-­‐Year  and  Annual  Long  Term  Equity  Incentive   Programs,  stock  based  compensation  expense  related  to  restricted  common  shares  issued  to  employees  of  the  Company  of  $455,   $399  and  $522  was  incurred  during  the  years  ended  December  31,  2015,  2014  and  2013  respectively.    Unearned  compensation   related  to  the  restricted  share  awards  as  of  December  31,  2015  and  December  31,  2014  was  $491  and  $322,  respectively.    The   following  table  is  a  summary  of  all  unvested  share  awards  issued  to  executives  under  the  2012  Plan  and  prior  equity  incentive  plans:   Original  Issuance   Date   December  31,  2015   July  14,  2015   June  1,  2015   March  27,  2015   July  15,  2014   June  23,  2014   March  24,  2014   February  13,  2014     June  28,  2013   June  29,  2012   June  30,  2011   Total     Original   Shares  Issued       816       $     15,817         1,651         5,208         10,352         1,103         2,046         462         11,899         13,646         4,423         67,423       Share  Price   on  Date  of   Grant*     21.76       28.09       25.92       25.88       27.00       26.00       22.76       21.76       22.56       21.12       22.28     Vesting   Period   2  years     2-­‐4  years     2  years   2  years   2  years   2  years   2  years   2  years   2-­‐4  years     2-­‐4  years     2-­‐4  years     Vesting   Schedule   50%  /year   25-­‐50%  /year   50%  /year   50%  /year   50%  /year   50%  /year   50%  /year   50%  /year   25-­‐50%  /year   25-­‐50%  /year   25-­‐50%  /year   Shares  Vested   Unearned  Compensation     December  31,   2015     December  31,   2014     December  31,   2015     December  31,   2014     -­‐       -­‐       -­‐       600         6,069         550         2,046         462         11,199         12,445         4,423         37,794         -­‐     $     -­‐       -­‐       -­‐       1,532         -­‐       1,023         231         5,724         11,242         3,451         23,203       $     13       $     335         30         41         48         6         -­‐       -­‐       7         11         -­‐       491       $     -­‐     -­‐     -­‐     -­‐     177       20       10       2       69       36       8       322     *   Original  share  price  on  date  of  grant  was  multiplied  by  four  to  account  for  the  reverse  share  split  which  occurred  on  June  22,  2015.     See  “Note  1  –  Basis  of   Presentation”  for  more  information.   Trustees   Annual  Retainer   The  Compensation  Committee  approved  a  program  that  allows  the  Company’s  trustees  to  make  a  voluntary  election  to  receive  any   portion  of  the  annual  cash  retainer  in  the  form  of  common  equity  valued  at  a  25%  premium  to  the  cash  that  would  have  been   received.      Compensation  expense  incurred  for  the  years  ended  December  31,  2015,  2014  and  2013,  respectively,  was  $93,  $220  and   $160.   The  following  table  is  a  summary  of  all  unvested  share  awards  issued  to  trustees  in  lieu  of  annual  cash  retainer:   Original  Issuance  Date     Shares  Issued   Share  Price  on   Date  of  Grant*     Vesting  Period     Vesting  Schedule   Unearned  Compensation     December  31,   2015     December  31,   2014   December  30,  2014       3,215       $     29.00       1  year   100%     $     -­‐     $     93     *   Original  share  price  on  date  of  grant  was  multiplied  by  four  to  account  for  the  reverse  share  split  which  occurred  on  June  22,  2015.     See  “Note  1  –  Basis  of   Presentation”  for  more  information.   Multi-­‐Year  Long-­‐Term  Equity  Incentives   Compensation  expense  for  the  multi-­‐year  long  term  incentive  plans  for  the  Company’s  trustees  incurred  for  the  years  ended   December  31,  2015,  2014  and  2013,  respectively,  was  $59,  $71  and  $55.    Unearned  compensation  related  to  the  multi-­‐year  long   term  equity  incentives  was  $67  and  $127  as  of  December  31,  2015  and  December  31,  2014,  respectively.   72                                                                                                                                                                                                                                                                                                                                                                                   hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  8  –  SHARE  BASED  PAYMENTS  (CONTINUED)   The  following  table  is  a  summary  of  all  unvested  share  awards  issued  to  trustees  under  the  2012  Plan  and  prior  equity  incentive   plans:   Original  Issuance  Date   December  30,  2014   December  27,  2013   December  28,  2012     Shares  Issued     2,500         3,000         3,000       Vesting   Period   3  years   3  years   3  years     Vesting  Schedule     33%  /year   33%  /year   33%  /year   Shares  Vested   Unearned  Compensation     December  31,   2015     December  31,   2014     December  31,   2015     December  31,   2014     835         2,170         3,000         6,005         -­‐     $     1,334         2,168         3,502       $     48       $     19           -­‐       67       $     73       38       16       127     Share  Awards   Compensation  expense  related  to  share  awards  issued  to  the  Board  of  Trustees  of  $434,  $457  and  $496  was  incurred  during  the   years  ended  December  31,  2015,  2014  and  2013,  respectively  and  is  recorded  in  general  and  administrative  expense  on  the   statement  of  operations.  Share  awards  issued  to  the  Board  of  Trustees  are  immediately  vested.  On  June  1,  2015,  an  aggregate  of   10,442  shares  were  issued  to  the  Board  of  Trustees  at  a  price  per  share  on  the  date  of  grant  of  $25.92.     On  December  31,  2015,  an   aggregate  7,500  shares  were  issued  to  the  Board  of  Trustees  at  a  price  per  share  on  the  date  of  grant  of  $21.76.   Non-­‐employees   The  Company  issues  share  based  awards  as  compensation  to  non-­‐employees  for  services  provided  to  the  Company  consisting   primarily  of  restricted  common  shares.    The  Company  recorded  stock  based  compensation  expense  of  $174,  $200  and  $174  for  the   years  ended  December  31,  2015,  2014  and  2013,  respectively.    Unearned  compensation  related  to  the  restricted  share  awards  as  of   December  31,  2015  and  December  31,  2014  was  $90  and  $81,  respectively.  The  following  table  is  a  summary  of  all  unvested  share   awards  issued  to  non-­‐employees  under  the  Company’s  2012  Plan:   Original  Issuance  Date   March  27,  2015   March  24,  2014   Shares   Issued   Share  Price   on  Date  of   Grant*     7,438       $     7,219       $     25.88         22.76       Vesting   Period   2  years   2  years   Vesting   Schedule   50%  /year   50%  /year   Total     14,657     Shares  Vested   Unearned  Compensation     December  31,   2015     December  31,   2014     December  31,   2015     December  31,   2014     3,762         7,219       10,981     -­‐     $     3,750       3,750    $     90       $     -­‐       90    $     -­‐     81     81   *   Original  share  price  on  date  of  grant  was  multiplied  by  four  to  account  for  the  reverse  share  split  which  occurred  on  June  22,  2015.     See  “Note  1  –  Basis  of   Presentation”  for  more  information.   73                                                                                                                                                                                                                                                                                                                                                                 hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  9  –  EARNINGS  PER  SHARE   The  following  table  is  a  reconciliation  of  the  income  or  loss  (numerator)  and  the  weighted  average  shares  (denominator)  used  in  the   calculation  of  basic  and  diluted  earnings  per  common  share.  The  computation  of  basic  and  diluted  earnings  per  share  is  presented   below.   Year  Ended  December  31,     2015   2014   2013   NUMERATOR:   Basic  and  Diluted*   Income  from  Continuing  Operations     $     42,207       $     69,936       $     20,753       (Income)  Loss  from  Continuing  Operations  allocated  to  Noncontrolling  Interests     Distributions  to  Preferred  Shareholders   Dividends  Paid  on  Unvested  Restricted  Shares  and  LTIP  Units   Extinguishment  of  Issuance  Costs  Upon  Redemption  of  Series  A  Preferred  Stock     (411)     (14,356)     (453)     -­‐     (1,069)       (14,356)       (515)       -­‐     Income  from  Continuing  Operations  attributable  to  Common  Shareholders     26,987       53,996       Discontinued  Operations   (Loss)  Income  from  Discontinued  Operations   Loss  (Income)  from  Discontinued  Operations  allocated  to  Noncontrolling   Interests     (Loss)  Income  from  Discontinued  Operations  attributable  to  Common   Shareholders     -­‐     -­‐     -­‐     (1,665)       53         (1,612)       658         (14,611)       (804)       (2,250)       3,746         29,195         (993)       28,202       Net  Income  attributable  to  Common  Shareholders     $     26,987       $     52,384       $     31,948       DENOMINATOR:   Weighted  average  number  of  common  shares  -­‐  basic     47,786,811       49,777,302         49,597,613       Effect  of  dilutive  securities:   Restricted  Stock  Awards  and  LTIP  Units  (unvested)   Contingently  Issued  Shares     303,949       278,898       347,829         182,375         596,041    *     285,891    *   Weighted  average  number  of  common  shares  -­‐  diluted     48,369,658       50,307,506         50,479,545       * Income  (loss)  allocated  to  noncontrolling  interest  in  Hersha  Hospitality  Limited  Partnership  has  been  excluded  from  the   numerator  and  units  of  limited  partnership  interest  in  Hersha  Hospitality  Limited  Partnership  have  been  omitted  from  the   denominator  for  the  purpose  of  computing  diluted  earnings  per  share  since  the  effect  of  including  these  amounts  in  the   numerator  and  denominator  would  have  no  impact.    In  addition,  potentially  dilutive  common  shares,  if  any,  have  been  excluded   from  the  denominator  if  they  are  anti-­‐dilutive  to  income  (loss)  from  continuing  operations  applicable  to  common  shareholders. 74                                                                                                                                                                                                                                                                                                                                                                                       hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  10  –  CASH  FLOW  DISCLOSURES  AND  NON  CASH  INVESTING  AND  FINANCING  ACTIVITIES   Interest  paid  during  2015,  2014  and  2013  totaled  $40,240,  $40,760  and  $42,984  respectively.  The  following  non-­‐cash  investing  and   financing  activities  occurred  during  2015,  2014  and  2013:   Common  Shares  issued  as  part  of  the  Dividend  Reinvestment  Plan   Acquisition  of  hotel  properties:   Debt  assumed,  including  premium   Settlement  of  development  loan  receivable  principal  and  accrued  interest  revenue  receivable     Disposition  of  hotel  properties:   Debt  assumed  by  purchaser   Conversion  of  Common  Units  to  Common  Shares   Accrued  payables  for  fixed  assets  placed  into  service   2015   2014   2013     $     50     $     50     $     38     28,902       -­‐       24,924       22,494       -­‐     13,303     -­‐       132       992       45,710       72       1,312       -­‐     106     2,572   75                                                                                                                             hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  11  –  HOTEL  DISPOSITIONS   Effective  January  1,  2014,  we  early  adopted  ASU  Update  No.  2014-­‐08  concerning  the  classification  and  reporting  of  discontinued   operations.  This  amendment  defines  discontinued  operations  as  a  component  of  an  entity  that  represents  a  strategic  shift  that  has   (or  will  have)  a  major  effect  on  an  entity’s  operations  and  financial  results.  As  a  result  of  the  early  adoption  of  ASU  Update  No.   2014-­‐08,  we  anticipate  that  most  of  our  hotel  dispositions  will  not  be  classified  as  discontinued  operations  as  most  will  not  fit  this   definition.   For  transactions  that  have  been  classified  as  held  for  sale  or  as  discontinued  operations  for  periods  prior  to  our  adoption  of  ASU   Update  No.  2014-­‐08,  we  will  continue  to  present  the  operating  results  as  discontinued  operations  in  the  statements  of  operations   for  all  applicable  periods  presented.   Disposed  Assets   Hotel   Acquisition   Date   Disposition   Date     Consideration       Gain  on   Disposition   Hotel  373   2014  Total   June  2007     April  2014     $     37,000      $    $   Non-­‐Core  Portfolio  II  (12)   January  1999  -­‐  July  2010     December  2013     $     158,600       $   Holiday  Inn  Express,  Camp  Springs,  MD   Comfort  Inn,  Harrisburg,  PA   2013  Total   June  2008     January  1999     September  2013     June  2013       8,500         3,700         7,195         7,195    (1)     31,559    (2)     120    (3)     442         32,121       (1) The  operations  from  this  property  included  (loss)  income  of  ($137)  and  $858  for  the  years  ended  December  31,  2014,  and   2013,  respectively.   (2) In  September  2013,  our  Board  of  Trustees  authorized  management  of  the  Company  to  sell  this  portfolio.  On  September  20,   2013,  the  Company  entered  into  a  purchase  and  sale  agreement  to  dispose  of  a  portfolio  of  16  non-­‐core  hotel  properties,   for  an  aggregate  purchase  price  of  approximately  $217,000.    The  16  non-­‐core  hotel  properties  in  the  portfolio  were   acquired  by  the  Company  between  1999  and  2010.  We  recorded  an  impairment  loss  of  approximately  $6,591  for  those   assets  for  which  the  anticipated  net  proceeds  do  not  exceed  the  carrying  value.     On  December  20,  2013,  the  Company  closed  on  the  sale  of  12  of  these  non-­‐core  hotel  properties.  As  a  result  of  entering   into  these  purchase  and  sale  agreements  for  the  16  non-­‐core  assets  mentioned  above,  the  operating  results  for  the   consolidated  assets  were  reclassified  to  discontinued  operations  in  the  statement  of  operations  for  the  years  ended   December  31,  2014  and  2013.  The  12  assets  were  sold  for  a  total  sales  price  of  $158,600,  reduced  the  Company’s   consolidated  mortgage  debt  by  $33,044  and  generated  a  gain  on  sale  of  approximately  $31,559.      In  February  2014,  the   remaining  4  assets  were  sold  for  a  total  sales  price  of  $58,400  and  reduced  the  Company’s  consolidated  mortgage  debt  by   $45,710.  We  recorded  an  impairment  loss  of  approximately  $1,800  for  those  assets  for  which  the  anticipated  net  proceeds   did  not  exceed  the  carrying  value.   (3) We  recorded  an  impairment  loss  for  this  property  of  approximately  $3,723  as  the  net  proceeds  did  not  exceed  the  carrying   value.   76                                                                                                                                                                                   hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  11  –  HOTEL  DISPOSITIONS  (CONTINUED)   Assets  Held  for  Sale   As  of  December  31,  2015  and  2014,  we  had  no  assets  or  liabilities  related  to  assets  held  for  sale.   The  following  table  sets  forth  the  components  of  discontinued  operations  for  the  years  ended  December  31,  2014  and  2013.   Discontinued  operations  include  the  results  of  operations  for  hotels  sold  in  2013  and  the  first  quarter  of  2014.   Revenue:   Hotel  Operating  Revenues   Total  Revenues   Expenses:   Hotel  Operating  Expenses   Gain  on  Insurance  Settlements   Real  Estate  and  Personal  Property  Taxes  and  Property  Insurance   General  and  Administrative   Depreciation  and  Amortization   Interest  Expense   Other  Expense   Income  Tax  Expense   Total  Expenses   2014   2013     $     1,940       $     1,940         1,151         74         91         4         1         354         -­‐       2         1,677       Income  from  Discontinued  Operations     $     263       $   We  allocate  to  income  or  loss  from  discontinued  operations  interest  expense  related  to  debt  that  is  to  be  assumed  or  that  is   required  to  be  repaid  as  a  result  of  the  disposal  transaction.     58,045       58,045       35,158       -­‐     3,316       36       7,050       4,863       44       190       50,657       7,388     77                                                                                                                                                           hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  12  –  SHAREHOLDERS’  EQUITY  AND  NONCONTROLLING  INTERESTS  IN  PARTNERSHIP   Common  Shares   The  Company’s  outstanding  common  shares  have  been  duly  authorized,  and  are  fully  paid  and  non-­‐assessable.  Common   shareholders  are  entitled  to  receive  dividends  if  and  when  authorized  and  declared  by  the  Board  of  Trustees  of  the  Company  out  of   assets  legally  available  and  to  share  ratably  in  the  assets  of  the  Company  legally  available  for  distribution  to  its  shareholders  in  the   event  of  its  liquidation,  dissolution  or  winding  up  after  payment  of,  or  adequate  provision  for,  all  known  debts  and  liabilities  of  the   Company.   Preferred  Shares   The  Declaration  of  Trust  authorizes  our  Board  of  Trustees  to  classify  any  unissued  preferred  shares  and  to  reclassify  any  previously   classified  but  unissued  preferred  shares  of  any  series  from  time  to  time  in  one  or  more  series,  as  authorized  by  the  Board  of  Trustees.   Prior  to  issuance  of  shares  of  each  series,  the  Board  of  Trustees  is  required  by  Maryland  REIT  Law  and  our  Declaration  of  Trust  to  set   for  each  such  series,  subject  to  the  provisions  of  our  Declaration  of  Trust  regarding  the  restriction  on  transfer  of  shares  of  beneficial   interest,  the  terms,  the  preferences,  conversion  or  other  rights,  voting  powers,  restrictions,  limitations  as  to  dividends  or  other   distributions,  qualifications  and  terms  or  conditions  of  redemption  for  each  such  series.  Thus,  our  Board  of  Trustees  could  authorize   the  issuance  of  additional  preferred  shares  with  terms  and  conditions  which  could  have  the  effect  of  delaying,  deferring  or   preventing  a  transaction  or  a  change  in  control  in  us  that  might  involve  a  premium  price  for  holders  of  common  shares  or  otherwise   be  in  their  best  interest.   Common  Units   Common  Units  are  issued  in  connection  with  the  acquisition  of  wholly  owned  hotels  and  joint  venture  interests  in  hotel  properties.   The  total  number  of  Common  Units  outstanding  as  of  December  31,  2015,  2014  and  2013  was  1,703,386,  1,712,353  and  1,728,679,   respectively.  These  units  can  be  redeemed  for  cash  or  converted  to  common  shares,  at  the  Company’s  option,  on  a  one-­‐for-­‐one   basis.  The  number  of  common  shares  issuable  upon  exercise  of  the  redemption  rights  will  be  adjusted  upon  the  occurrence  of  stock   splits,  mergers,  consolidation  or  similar  pro  rata  share  transactions,  that  otherwise  would  have  the  effect  of  diluting  the  ownership   interest  of  the  limited  partners  or  our  shareholders.  During  2015,  2014  and  2013,  8,965,  4,725  and  6,948  Common  Units  were   converted  to  common  shares,  respectively.  In  addition,  as  noted  in  “Note  8  –  Share  Based  Payments,”  during  2015,  the  Company   issued  128,832  LTIP  Units.   78                       hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  13  –  INCOME  TAXES   The  Company  elected  to  be  taxed  as  a  REIT  under  Sections  856  through  860  of  the  Internal  Revenue  Code  commencing  with  its   taxable  year  ended  December  31,  1999.  To  qualify  as  a  REIT,  the  Company  must  meet  a  number  of  organizational  and  operational   requirements,  including  a  requirement  that  it  currently  distribute  at  least  90%  of  its  REIT  taxable  income  to  its  shareholders.  It  is  the   Company’s  current  intention  to  adhere  to  these  requirements  and  maintain  the  Company’s  qualification  for  taxation  as  a  REIT.  As  a   REIT,  the  Company  generally  will  not  be  subject  to  federal  corporate  income  tax  on  that  portion  of  its  net  income  that  is  currently   distributed  to  shareholders.  If  the  Company  fails  to  qualify  for  taxation  as  a  REIT  in  any  taxable  year,  it  will  be  subject  to  federal   income  taxes  at  regular  corporate  rates  (including  any  applicable  alternative  minimum  tax)  and  may  not  be  able  to  qualify  as  a  REIT   for  four  subsequent  taxable  years.  Even  if  the  Company  qualifies  for  taxation  as  a  REIT,  the  Company  may  be  subject  to  certain  state   and  local  taxes  on  its  income  and  property,  and  to  federal  income  and  excise  taxes  on  its  undistributed  taxable  income.   Taxable  income  from  non-­‐REIT  activities  managed  through  taxable  REIT  subsidiaries  is  subject  to  federal,  state  and  local  income   taxes.  44  New  England  is  subject  to  income  taxes  at  the  applicable  federal,  state  and  local  tax  rates.     The  provision  for  income  taxes  differs  from  the  amount  of  income  tax  determined  by  applying  the  applicable  U.S.  statutory  federal   income  tax  rate  to  pretax  income  from  continuing  operations  as  a  result  of  the  following  differences:   For  the  year  ended  December  31,   2014   2013   2015   Statutory  federal  income  tax  provision     Adjustment  for  nontaxable  income  for  Hersha  Hospitality  Trust       State  income  taxes,  net  of  federal  income  tax  effect   Recognition  of  deferred  tax  assets   Changes  in  valuation  allowance   $   $     13,282       (15,853)       (581)       11       -­‐     $     22,865       (25,274)       (367)       91       -­‐       5,152     (7,472)     (1,317)     (1,963)     -­‐   Total  income  tax  benefit   $     (3,141)     $     (2,685)     $     (5,600)   The  components  of  the  Company’s  income  tax  expense  (benefit)  from  continuing  operations  for  the  years  ended  December  31,   2015,  2014  and  2013  were  as  follows:   For  the  year  ended  December  31,   2014   2013   2015   Income  tax  expense  (benefit):   Current:                 Federal                 State   Deferred:                 Federal                 State   Total   Income  tax  expense  (benefit):                 From  continuing  operations                 From  discontinued  operations   Total   $   $   $   $     -­‐       -­‐     $     -­‐       -­‐       -­‐     -­‐     (2,261)       (880)       (3,141)       (3,141)       -­‐       (3,141)     $   $     (2,130)       (555)       (2,685)       (2,685)       2       (2,683)     $   $     (3,604)     (1,996)     (5,600)     (5,600)     190     (5,410)   79                                                                                                                                                                                                                                                                                                                           hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  13  –  INCOME  TAXES  (CONTINUED)   The  components  of  consolidated  TRS’s  net  deferred  tax  asset  as  of  December  31,  2015  and  2014  were  as  follows:   Deferred  tax  assets:   Net  operating  loss  carryforwards   Accrued  expenses  and  other   Tax  credit  carryforwards   Total  gross  deferred  tax  assets   Valuation  allowance   Total  net  deferred  tax  assets   Deferred  tax  liabilities:   Depreciation  and  amortization   Total  Net  deferred  tax  assets  (liabilities)   As  of  December  31,   2015   2014   $   $   $     14,168       1,292       558       16,018       (804)       15,214       624       14,590     $   $   $     11,387     616     481     12,484     (804)     11,680     232     11,448   In  assessing  the  realizability  of  deferred  tax  assets,  management  considers  whether  it  is  more  likely  than  not  that  some  portion  or  all   of  the  deferred  tax  assets  will  not  be  realized.  Based  on  limitations  related  to  the  utilization  of  certain  tax  attribute  carryforwards,   the  Company  recorded  a  valuation  allowance  of  approximately  $804  as  these  attributes  are  not  more  likely  than  not  to  be  realized   prior  to  their  expiration.  Based  on  the  level  of  historical  taxable  income,  tax  planning  strategies  and  projections  for  future  taxable   income  over  the  periods  in  which  the  remaining  deferred  tax  assets  are  deductible,  Management  believes  it  is  more  likely  than  not   that  the  remaining  deferred  tax  assets  will  be  realized.   As  of  December  31,  2015,  we  have  gross  federal  net  operating  loss  carryforwards  of  $35,353  which  expire  over  various  periods  from   2023  through  2035.     As  of  December  31,  2015,  we  have  gross  state  net  operating  loss  carryforwards  of  $40,546  which  expire  over   various  periods  from  2015  to  2035.     The  Company  has  tax  credits  of  $558  available  which  begin  to  expire  in  2028.   Earnings  and  profits,  which  will  determine  the  taxability  of  distributions  to  shareholders,  will  differ  from  net  income  reported  for   financial  reporting  purposes  due  to  the  differences  for  federal  tax  purposes  in  the  estimated  useful  lives  and  methods  used  to   compute  depreciation.  The  following  table  sets  forth  certain  per  share  information  regarding  the  Company’s  common  and  preferred   share  distributions  for  the  years  ended  December  31,  2015,  2014  and  2013.   2015   2014   2013   Preferred  Shares  -­‐  8%  Series  A   Ordinary  income     Return  of  Capital     Capital  Gain  Distribution     Preferred  Shares  -­‐  8%  Series  B   Ordinary  income     Return  of  Capital     Capital  Gain  Distribution     Preferred  Shares  -­‐  6.875%  Series  C   Ordinary  income     Return  of  Capital     Capital  Gain  Distribution     Common  Shares  -­‐  Class  A   Ordinary  income     Return  of  Capital     Capital  Gain  Distribution     80 N/A     N/A     N/A     100.00%     0.00%     0.00%     100.00%     0.00%     0.00%     79.49%     20.51%     0.00%     N/A     N/A     N/A     100.00%     0.00%     0.00%     100.00%     0.00%     0.00%     76.34%     23.66%     0.00%     100.00%   0.00%   0.00%   100.00%   0.00%   0.00%   100.00%   0.00%   0.00%   45.15%   54.85%   0.00%                                                                                                                                                                                                                                           hersha hospitality trust and subsidiaries notes to the consolidated financial statements for the years ended december 31, 2015, 2014 and 2013 [in thousands, except share/unit and per share amounts] NOTE  14  –  SELECTED  QUARTERLY  FINANCIAL  DATA  (UNAUDITED)   Total  Revenues   Total  Expenses   (Loss)  Income  from  Unconsolidated  Joint  Ventures   (Loss)  Income  from  Continuing  Operations   Income  Tax  Benefit   Net  (Loss)  Income   (Loss)  Income  Allocated  to  Noncontrolling  Interests  in  Continuing  Operations   Preferred  Distributions   Year  Ended  December  31,  2015   First  Quarter     Second  Quarter   Third  Quarter     Fourth  Quarter     $     95,760       $     127,081       $     124,560       $     123,177       99,875         (274)       (4,389)       108,090         111,396         113,116       526         608         105       19,517         13,772         10,166       -­‐       109         631         (4,389)       19,626         14,403         (443)       3,589         405         3,589         244         3,589         2,401       12,567       205       3,589       8,773     Net  (Loss)  Income  applicable  to  Common  Shareholders     $     (7,535)     $     15,632       $     10,570       $   Basic  and  diluted  earnings  per  share:   Net  (Loss)  Income  applicable  to  Common  Shareholders     $     (0.16)     $     0.32       $     0.22       $     0.19     Weighted  Average  Common  Shares  Outstanding   Basic   Diluted   Total  Revenues   Total  Expenses   (Loss)  Income  from  Unconsolidated  Joint  Ventures   (Loss)  Income  from  Continuing  Operations   Income  Tax  Benefit   (Loss)  Income  from  Discontinued  Operations  (including  Gain  on  Disposition  of   Discontinued  Assets)*   Net  (Loss)  Income   (Loss)  Income  Allocated  to  Noncontrolling  Interests  in  Continuing  Operations   Preferred  Distributions     49,582,790         48,530,716         47,417,452         45,663,416       49,582,790         49,043,914         47,909,549         46,211,104     Year  Ended  December  31,  2014   First  Quarter     Second  Quarter   Third  Quarter     Fourth  Quarter     $     80,348       $     111,830       $     113,048       $     112,985       85,216         (420)       (5,288)       108         (1,333)       (6,513)       (507)       3,589         53,662         106,767         106,340       419         58,587         607         6,888         87       6,732       (1)       -­‐       699         1,879       -­‐       -­‐     58,586         7,587         8,611       1,655         3,589         (49)       3,589         (83)     3,589       5,105     Net  (Loss)  Income  applicable  to  Common  Shareholders     $     (9,595)     $     53,342       $     4,047       $   Basic  and  diluted  earnings  per  share:   (Loss)  Income  from  continuing  operations  applicable  to  common  shareholders     $     (0.16)     $     1.08       $     0.08       $     0.12     Discontinued  Operations     (0.04)       -­‐       -­‐       -­‐   Net  Loss  (Income)  applicable  to  Common  Shareholders     $     (0.20)     $     1.08       $     0.08       $     0.12     Weighted  Average  Common  Shares  Outstanding   Basic   Diluted   *   Effective  January  1,  2014,  we  early  adopted  ASU  Update  No.  2014-­‐08  concerning  the  classification  and  reporting  of   discontinued  operations.  As  such,  this  line  item  for  quarterly  results  presented  for  2014  will  not  be  comparable.     50,185,938         49,623,618         49,649,379         49,657,486       50,185,938         50,053,389         50,155,497         50,228,966     81                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 hersha hospitality trust and subsidiaries schedule iii – real estate and accumulated depreciation as of december 31, 2015 (continued) [in thousands] Initial  Costs   Costs  Capitalized   Subsequent  to   Acquisition   Gross  Amounts  at   which  Carried  at  Close   of  Period   Accumulated   Depreciation   Net  Book   Value   Description    Encumbrances   Land   Improvements   Land   Improvements   Land   Buildings  &           Buildings  &       Buildings  &       Improvements   Total   Buildings  &   Improvements*   Land,  Buildings   &   Improvements   Date  of   Acquisition   Residence  Inn,   Framingham,  MA       1,325   12,737   Hampton  Inn,   New  York,  NY   Residence  Inn,   Greenbelt,  MD   Courtyard,   Brookline,  MA   Residence  Inn,   Tyson's  Corner,   VA   Hilton  Garden   Inn,     JFK  Airport,  NY   Hawthorne   Suites,   Franklin,  MA   Holiday  Inn  Exp,   Cambridge,  MA   Residence  Inn,   Norwood,  MA   Hampton  Inn,   Chelsea,  NY   Hyatt  House,   Gaithersburg,   MD   Hyatt  House,   Pleasant  Hills,  CA     Hyatt  House,   Pleasanton,  CA   Hyatt  House,   Scottsdale,  AZ   (22,363)   5,472   23,280   2,615   14,815   -­‐   47,414   4,283   14,475   (19,379)   -­‐   25,018   (7,330)   1,872   8,968   1,956   9,793   1,970   11,761   (33,155)   8,905   33,500   (13,720)   2,912   16,001   (20,160)   6,216   17,229   (14,490)   3,941   12,560   (16,778)   3,060   19,968   Hyatt  House,   White  Plains,  NY    (33,030)   8,823   30,273   Holiday  Inn  Exp   &  Suites,   Chester,  NY    (6,156)   1,500   6,671   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   4,915   1,325   17,652   18,977   ($5,774)   13,203   03/26/04   1,885   5,472   25,165   30,637   (7,489)   23,148   04/01/05   2,252   2,615   17,067   19,682   (5,688)   13,994   07/16/04   2,852   -­‐   50,266   50,266   (13,877)   36,389   06/16/05   1,927   4,283   16,402   20,685   (4,714)   15,971   02/02/06   2,775   -­‐   27,793   27,793   (7,736)   20,056   02/16/06   565   1,872   9,533   11,405   (2,501)   8,904   04/25/06   2,378   1,956   12,171   14,127   (3,978)   10,149   05/03/06   1,505   1,970   13,266   15,236   (3,392)   11,844   07/27/06   2,423   8,905   35,923   44,828   (9,286)   35,542   09/29/06   4,022   2,912   20,023   22,935   (5,528)   17,407   12/28/06   3,017   6,216   20,246   26,462   (5,046)   21,416   12/28/06   3,530   3,941   16,090   20,031   (4,609)   15,422   12/28/06   3,489   3,060   23,457   26,517   (6,549)   19,968   12/28/06   2,726   8,823   32,999   41,822   (8,631)   33,191   12/28/06   301   1,500   6,972   8,472   (1,603)   6,869   01/25/07   (1)     Costs  capitalized  subsequent  to  acquisition  include  reductions  of  asset  value  due  to  impairment.   82                                                                                                                                                                                                                                                                                             hersha hospitality trust and subsidiaries schedule iii – real estate and accumulated depreciation as of december 31, 2015 (continued) [in thousands] Initial  Costs   Costs  Capitalized   Subsequent  to   Acquisition   Gross  Amounts  at   which  Carried  at  Close   of  Period   Accumulated   Depreciation   Net  Book   Value   Description    Encumbrances   Land   Improvements   Land   Improvements   Land   Buildings  &           Buildings  &       Buildings  &       Improvements   Total   Buildings  &   Improvements*   Land,  Buildings   &   Improvements   Date  of   Acquisition   Capitol  Hill  Suites   Washington,  DC     Courtyard,   LA  Westside,  CA     Hampton  Inn,   Pearl  Street,  NY   Courtyard,   Miami,  FL   The  Rittenhouse   Hotel,  PA   Bulfinch,   Boston,  MA   Holiday  Inn   Express,   Manhattan,  NY   Hyatt,   Union  Square,  NY     Courtyard,     San  Diego,  CA   Residence  Inn,     Coconut  Grove,   FL   Hotel  Milo,     Santa  Barbara,   CA   Hilton  Garden   Inn,     Midtown  East,   NY     (25,000)     8,095       35,141       -­‐     3,993       8,095       39,134       47,229       (5,763)     41,466     04/15/11     (35,000)     13,489       27,025       -­‐     4,755     13,489       31,780       45,269       (4,477)     40,792     05/19/11       11,384       23,432       -­‐     556     11,384       23,988       35,372       (958)     34,414     07/22/11       35,699       55,805       -­‐     21,917     35,699       77,722       113,421       (7,241)     106,180     11/16/11     7,108       29,556       -­‐     14,127       7,108       43,683       50,791       (7,555)     43,237     03/01/12     1,456       14,954       -­‐     1,481       1,456       16,435       17,891       (1,921)     15,969     05/07/12     (51,862)     30,329       57,016       -­‐     801     30,329       57,817       88,146       (5,341)     82,805     06/18/12     (55,750)     32,940       79,300       -­‐     882     32,940       80,182       113,122       (5,599)     107,523     04/09/13       15,656       51,674       -­‐     1,656     15,656       53,330       68,986       (3,504)     65,482     05/30/13     4,146       17,456       -­‐     7,025       4,146       24,481       28,627       (2,317)     26,310     06/12/13     (24,147)     -­‐     55,080       -­‐     1,696       -­‐     56,776       56,776       (2,696)     54,080     02/28/14     (45,000)     45,480       60,762       -­‐     137     45,480       60,899       106,379       (2,440)     103,939     05/27/14   (1)     Costs  capitalized  subsequent  to  acquisition  include  reductions  of  asset  value  due  to  impairment.   83                                                                                                                                                                           hersha hospitality trust and subsidiaries schedule iii – real estate and accumulated depreciation as of december 31, 2015 (continued) [in thousands] Initial  Costs   Costs  Capitalized   Subsequent  to   Acquisition   Gross  Amounts  at   which  Carried  at  Close   of  Period   Accumulated   Depreciation   Net  Book   Value   Description     Encumbrances   Land   Improvements   Land   Improvements   Land   Buildings  &           Buildings  &       Buildings  &       Improvements   Total   Buildings  &   Improvements*   Land,  Buildings   &   Improvements   Date  of   Acquisition   Parrot  Key  Hotel,   Key  West,  FL   Winter  Haven   Hotel,   Miami  Beach,  FL     Blue  Moon   Hotel,   Miami  Beach,  FL     St.  Gregory   Hotel,   Washington  D.C.     TownePlace   Suites,   Sunnyvale,  CA   Ritz  Carlton   Georgetown,   Washington  D.C.     Total  Investment   in  Real  Estate   $       57,889       33,959       -­‐     523       57,889       34,482       92,371       (1,443)     90,928     05/07/14       5,400       18,147       -­‐     523       5,400       18,670       24,070       (974)     23,096     12/20/13       4,874       20,354       -­‐     705       4,874       21,059       25,933       (1,072)     24,861     12/20/13     (25,559)     23,764       33,005       -­‐     52       23,764       33,057       56,821       (448)     56,374     06/16/15     -­‐     18,999       -­‐     1       -­‐     19,000       19,000       (167)     18,832     08/25/15       17,570       29,160       -­‐     -­‐     17,570       29,160       46,730       (6)     46,724     12/29/15   ($545,036)   480,874       1,393,353    $     -­‐     125,213     480,874       1,518,565     1,999,438     $   ($237,129)     1,762,309       *   Assets  are  depreciated  over  a  7  to  40  year  life,  upon  which  the  latest  income  statement  is  computed   The  aggregate  cost  of  land,  buildings  and  improvements  for  Federal  income  tax  purposes  for  the  years  ended  December  31,  2015,   2014  and  2013  is  approximately  $1,848,773,  $1,836,861  and  $1,575,555,  respectively.   Depreciation  is  computed  for  buildings  and  improvements  using  a  useful  life  for  these  assets  of  7  to  40  years.   See  Accompanying  Report  of  Independent  Registered  Public  Accounting  Firm   84                                                                                                                                         hersha hospitality trust and subsidiaries schedule iii – real estate and accumulated depreciation as of december 31, 2015 (continued) [in thousands] 2015   2014   2013   Reconciliation  of  Real  Estate   Balance  at  beginning  of  year   Additions  during  the  year   Dispositions/Deconsolidation  of  consolidated  joint  venture  during  the  year   Changes/Impairments  in  Assets  Held  for  Sale     Total  Real  Estate   $   $     1,864,382       135,056       -­‐     $     1,999,438     $     1,629,312       333,889       (98,819)       -­‐       1,864,382     Reconciliation  of  Accumulated  Depreciation   Balance  at  beginning  of  year   Depreciation  for  year   Changes/Impairments  in  Assets  Held  for  Sale     Accumulated  depreciation  on  assets  sold   Balance  at  the  end  of  year   $   $     189,889       47,240       -­‐       -­‐       237,129     $   $     162,189       43,218       -­‐       (15,518)       189,889     $   $   $   $     1,520,151     275,032     (156,504)     (9,367)     1,629,312     150,353     39,771     51     (27,986)     162,189   85                                                                                                                                                                             Annual Report Item  9.   2015 Changes  in  and  Disagreements  with  Accountants  on  Accounting  and  Financial  Disclosure   None.   Item  9A.   Controls  and  Procedures   EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES   Under  the  supervision  and  with  the  participation  of  our  management,  including  our  Chief  Executive  Officer  and  Chief   Financial  Officer,  we  conducted  an  evaluation  of  our  disclosure  controls  and  procedures,  as  such  term  is  defined  under  Rule   13a-­‐15(e)  promulgated  under  the  Securities  Exchange  Act  of  1934,  as  amended  (the  Exchange  Act),  as  of  the  end  of  the  period   covered  by  this  report.  Based  on  that  evaluation,  the  Chief  Executive  Officer  and  Chief  Financial  Officer  concluded  that  our  disclosure   controls  and  procedures  as  of  the  end  of  the  period  covered  by  this  report  are  functioning  effectively  to  provide  reasonable   assurance  that  the  information  required  to  be  disclosed  by  us  in  reports  filed  under  the  Securities  Exchange  Act  of  1934  is  (i)   recorded,  processed,  summarized  and  reported  within  the  time  periods  specified  in  the  SEC’s  rules  and  forms  and  (ii)  accumulated   and  communicated  to  our  management,  including  the  Chief  Executive  Officer  and  Chief  Financial  Officer,  as  appropriate  to  allow   timely  decisions  regarding  disclosure.  A  control  system  cannot  provide  absolute  assurance,  however,  that  the  objectives  of  the   controls  system  are  met,  and  no  evaluation  of  controls  can  provide  absolute  assurance  that  all  control  issues  and  instances  of  fraud,   if  any,  within  a  company  have  been  detected.   MANAGEMENT’S  ANNUAL  REPORT  ON  INTERNAL  CONTROL  OVER  FINANCIAL  REPORTING   The  Company’s  management  is  responsible  for  establishing  and  maintaining  adequate  internal  control  over  financial   reporting,  as  defined  within  Exchange  Act  Rules  13a-­‐15(f)  and  15d-­‐15(f).  Internal  control  over  financial  reporting  refers  to  the   processes  designed  to  provide  reasonable  assurance  regarding  the  reliability  of  financial  reporting  and  the  preparation  of  financial   statements  for  external  purposes  in  accordance  with  generally  accepted  accounting  principles,  and  includes  policies  and  procedures   that:   •   •   •   pertain  to  the  maintenance  of  records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the  transactions  and  dispositions   of  the  assets  of  the  Company;   provide   reasonable   assurance   that   transactions   are   recorded   as   necessary   to   permit   preparation   of   financial   statements   in   accordance  with  generally  accepted  accounting  principles,  and  that  receipts  and  expenditures  of  the  Company  are  being  made   only  in  accordance  with  authorizations  of  management  and  directors  of  the  Company;  and   provide  reasonable  assurance  regarding  prevention  or  timely  detection  of  unauthorized  acquisition,  use,  or  disposition  of  the   Company’s  assets  that  could  have  a  material  effect  on  the  financial  statements.   Because  of  its  inherent  limitations,  internal  control  over  financial  reporting  may  not  prevent  or  detect  misstatements.  Also,   projections  of  any  evaluation  of  effectiveness  to  future  periods  are  subject  to  the  risk  that  controls  may  become  inadequate  because   of  changes  in  conditions,  or  that  the  degree  of  compliance  with  the  policies  or  procedures  may  deteriorate.   Management  conducted  an  evaluation  of  the  effectiveness  of  the  Company’s  internal  control  over  financial  reporting  based   on  the  criteria  contained  in  Internal  Control  —  Integrated  Framework  (2013)  issued  by  the  Committee  of  Sponsoring  Organizations   (COSO)  of  the  Treadway  Commission  as  of  December  31,  2015.  Based  on  that  evaluation,  management  has  concluded  that,  as  of   December  31,  2015,  the  Company’s  internal  control  over  financial  reporting  was  effective  based  on  those  criteria.  The  effectiveness   of  our  internal  control  over  financial  reporting  as  of  December  31,  2015  has  been  audited  by  KPMG  LLP,  an  independent  registered   public  accounting  firm,  as  stated  in  their  attestation  report  which  is  included  herein.   86                                 Report  of  Independent  Registered  Public  Accounting  Firm   hersha hospitality trust The  Board  of  Trustees  and  Stockholders   Hersha  Hospitality  Trust:   We   have   audited   Hersha   Hospitality   Trust’s   internal   control   over   financial   reporting   as   of   December   31,   2015,   based   on   criteria   established  in  Internal  Control  -­‐  Integrated  Framework  (2013)  issued  by  the  Committee  of  Sponsoring  Organizations  of  the  Treadway   Commission  (COSO).  Hersha  Hospitality  Trust’s  management  is  responsible  for  maintaining  effective  internal  control  over  financial   reporting   and   for   its   assessment   of   the   effectiveness   of   internal   control   over   financial   reporting,   included   in   the   accompanying   Management’s   Annual   Report   on   Internal   Control   over   Financial   Reporting.   Our   responsibility   is   to   express   an   opinion   on   the   Company’s  internal  control  over  financial  reporting  based  on  our  audit.   We  conducted  our  audit  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United  States).  Those   standards  require  that  we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  effective  internal  control  over   financial  reporting  was  maintained  in  all  material  respects.  Our  audit  included  obtaining  an  understanding  of  internal  control  over   financial   reporting,   assessing   the   risk   that   a   material   weakness   exists,   and   testing   and   evaluating   the   design   and   operating   effectiveness   of   internal   control   based   on   the   assessed   risk.   Our   audit   also   included   performing   such   other   procedures   as   we   considered  necessary  in  the  circumstances.  We  believe  that  our  audit  provides  a  reasonable  basis  for  our  opinion.   A  company’s  internal  control  over  financial  reporting  is  a  process  designed  to  provide  reasonable  assurance  regarding  the  reliability   of   financial   reporting   and   the   preparation   of   financial   statements   for   external   purposes   in   accordance   with   generally   accepted   accounting  principles.  A  company’s  internal  control  over  financial  reporting  includes  those  policies  and  procedures  that  (1)  pertain  to   the  maintenance  of  records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the  transactions  and  dispositions  of  the  assets  of   the   company;   (2)   provide   reasonable   assurance   that   transactions   are   recorded   as   necessary   to   permit   preparation   of   financial   statements   in   accordance   with   generally   accepted   accounting   principles,   and   that   receipts   and   expenditures   of   the   company   are   being   made   only   in   accordance   with   authorizations   of   management   and   directors   of   the   company;   and   (3)   provide   reasonable   assurance   regarding   prevention   or   timely   detection   of   unauthorized   acquisition,   use,   or   disposition   of   the   company’s   assets   that   could  have  a  material  effect  on  the  financial  statements.   Because   of   its   inherent   limitations,   internal   control   over   financial   reporting   may   not   prevent   or   detect   misstatements.   Also,   projections  of  any  evaluation  of  effectiveness  to  future  periods  are  subject  to  the  risk  that  controls  may  become  inadequate  because   of  changes  in  conditions,  or  that  the  degree  of  compliance  with  the  policies  or  procedures  may  deteriorate.   In  our  opinion,  Hersha  Hospitality  Trust  maintained,  in  all  material  respects,  effective  internal  control  over  financial  reporting  as  of   December   31,   2015,   based   on   based   on   criteria   established   in   Internal   Control   -­‐   Integrated   Framework   (2013)   issued   by   the   Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission  (COSO).     We  also  have  audited,  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United  States),  the   consolidated  balance  sheets  of  Hersha  Hospitality  Trust  and  subsidiaries  as  of  December  31,  2015  and  2014,  and  the  related   consolidated  statements  of  operations,  comprehensive  income,  equity,  and  cash  flows  for  each  of  the  years  in  the  three-­‐year  period   ended  December  31,  2015,  and  our  report  dated  February  17,  2016  expressed  an  unqualified  opinion  on  those  consolidated  financial   statements.   /s/  KPMG  LLP   Philadelphia,  Pennsylvania   February  17,  2016   87             Annual Report 2015 CHANGES  IN  INTERNAL  CONTROL  OVER  FINANCIAL  REPORTING   There  were  no  changes  in  our  internal  control  over  financial  reporting  during  the  quarter  ended  December  31,  2015,  that   have  materially  affected,  or  are  reasonably  likely  to  materially  affect,  our  internal  control  over  financial  reporting.   88       2015 Financial Highlights (In thousands, except per share data) Consolidated Hotel Operating Results Hotel Operating Revenues Average Daily Rate Occupancy Revenue per Available Room (In thousands, except per share data) Hersha Hospitality Trust Operating Data: (Excluding Impairment Charges) (1) Total Revenues (Including Discontinued Operations) Net Income applicable to Common Shareholders Adjusted EBITDA(2) (4) Adjusted Funds from Operations (3) (4) Per Share Data: (Excluding Impairment Charges) (1) Basic/Diluted Earnings Per Common Share AFFO Distributions to Common Shareholders Year Ended December 31, 2015 2014 2013 2012 2011 470,272 417,226 338,064 299,005 229,156 197.34 84.1% 165.88 187.82 82.6% 155.19 179.70 79.7% 143.30 175.23 78.6% 137.78 166.58 76.6% 127.64 Year Ended December 31, 2015 2014 2013 2012 2011 470,385 27,440 177,289 118,093 419,346 54,638 162,506 102,832 396,458 44,467 145,064 86,487 364,690 8,376 143,291 76,046 329,868 (5,133 ) 132,969 68,710 0.56 2.35 1.12 1.08 1.96 1.04 0.88 1.64 0.96 0.16 1.52 0.96 (0.12 ) 1.52 0.92 $ $ $ $ $ Balance Sheet Data: (as of December 31st) Total Assets Total Debt Noncontrolling Interest in Partnership Total Liabilities and Equity $ 1,969,772 1,177,087 30,116 1,855,539 1,748,097 1,707,679 1,630,909 918,923 28,007 819,336 29,181 792,708 31,281 820,132 32,124 1,969,772 1,855,539 1,748,097 1,707,679 1,630,909 (1) Operating and Per Share Data exclude charges recorded during 2011-2014 relating to impairment losses on investment in unconsolidated joint ventures and and assets held for sale. (2) Adjusted Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA) is a non-GAAP financial measure within the meaning of the Securities and Exchange Commission rules. Our interpretation of Adjusted EBITDA is that EBITDA derived from our investment in unconsolidated joint ventures should be added back to net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. Our Adjusted EBITDA computation may not be comparable to EBITDA or Adjusted EBITDA reported by other companies that interpret the definition of EBITDA differently than we do. Management believes Adjusted EBITDA to be a meaningful measure of a REIT's performance because it is widely followed by industry analysts, lenders and investors and that it should be considered along with, but not as an alternative to, net income, cash flow, FFO and AFFO, as a measure of the Company's operating performance. (3) Funds from Operations (FFO) as defined by NAREIT represents net income (loss) (computed in accordance with generally accepted accounting principles), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated assets, plus certain non-cash items, such as loss from impairment of assets and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. We present Adjusted Funds From Operations (AFFO), which reflects FFO in accordance with the NAREIT definition plus the following additional adjustments: adding back write-offs of deferred financing costs on debt extinguishment, both for consolidated and unconsolidated properties, adding back amortization of deferred financing costs, adding back non-cash stock expense, adding back acquisition and terminated transaction expenses, adding back preferred share extinguishment costs, adding back prior period tax assessment expenses, adding back FFO attributed to our partners in consolidated joint ventures, and making adjustments to ground lease payments, which are required by GAAP to be amortized on a straight-line basis over the term of the lease, to reflect the actual lease payment. (4) In these financial highlights and in the Letter to our Shareholders from our Chief Executive Officer and our President and Chief Operating Officer that follows, we present non-GAAP financial measures, including EBITDA, Adjusted EBITDA, hotel EBITDA, FFO and AFFO. We have provided reconciliations of these non-GAAP financial measures to the applicable GAAP measures in the appendix section that follows the letter to our shareholders, in portions of our Annual Report on Form 10-K for the year ended December 31, 2015, which accompanies this letter or can be viewed at www.hersha.com, under “Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Because hotel EBITDA is specific to individual hotels or groups of hotels and not to our Company as a whole, it is not directly comparable to any GAAP measure and should not be relied on as a measure of performance for our portfolio of hotels taken as a whole. HERSHA hersha hospitality trust Corporate Headquarters 44 Hersha Drive Harrisburg, PA 17102 Telephone: (717) 236-4400 Fax: (717) 774-7383 Executive Offices One Washington Square 510 Walnut Street, 9th Floor Philadelphia, PA 19106 Telephone: (215) 238-1046 Fax: (215) 238-0157 Corporate/Securities Counsel Hunton & Williams LLP Independent Auditors KPMG LLP Registrar & Stock Transfer Agent American Stock Transfer & Trust Company CommonStock Information The Common Stock of Hersha Hospitality Trust is traded on the New York Stock Exchange under the Symbol “HT”. Management Certifications The Company’s Chief Executive Officer and Chief Financial Officer provided certifications to the Securities and Exchange Commission as required by Section 302 of the Sarbanes-Oxley Act of 2002 and these certifications are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. In addition, as required by Section 303A.12(a) of the New York Stock Exchange (NYSE) Listed Company Manual, on June 22, 2015 the Company’s Chief Executive Officer submitted to the NYSE the annual CEO certification regarding the Company’s compliance with the NYSE’s corporate governance listing standards. Annual Report on Form 10-K Shareholders may obtain a copy of the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission free of charge (except for exhibits), by writing to the Company’s Chief Financial Officer, Hersha Hospitality Trust, 44 Hersha Drive, Harrisburg, PA; or, visit the Company’s website at www.hersha.com and refer to the Company’s SEC Filings. Annual Meeting The annual meeting of shareholders of Hersha Hospitality Trust will be held at 9:00 A.M. (EDT) on Friday, May 27, 2016 at The Ritz-Carlton Georgetown, 3100 South Street, N.W., Washington, DC. 20007. Board of Trustees Hasu P. Shah Chairman, Hersha Hospitality Trust Jay H. Shah Chief Executive Officer, Hersha Hospitality Trust Donald J. Landry Lead Director, Hersha Hospitality Trust Former President & CEO, Sunburst Hospitality Inc. Michael A. Leven Former President and Chief Operating Officer, Las Vegas Sands Corp. Thomas J. Hutchison III Former CEO, CNL Hotels & Resorts and CNL Retirement Properties, Inc. Dianna F. Morgan Former Senior Vice President, Walt Disney World Co. John M. Sabin Executive Vice President and CFO, Revolution LLC. and Case Foundation Management Team Jay H. Shah Chief Executive Officer Neil H. Shah President and Chief Operating Officer Ashish R. Parikh Chief Financial Officer Michael R. Gillespie Chief Accounting Officer David L. Desfor Treasurer and Corporate Secretary William J. Walsh Senior Vice President of Asset Management Robert C. Hazard III Senior Vice President of Acquisitions and Development Bennett Thomas Senior Vice President of Finance and Sustainability HERSHA h e r s h a h o s p i t a l i t y t r u s t HT2015 HERSHA hersha hospitality trust www.hersha.com 

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