Hersha Hospitality Trust Annual Report 2016

Plain-text annual report

85404_Layout 1 4/10/17 3:22 PM Page 2 HERSHA o u r c o m p a n y . o u r v i s i o n . 85404_Layout 1 4/10/17 3:22 PM Page 3 85404_Layout 1 4/10/17 3:22 PM Page 4 HERSHA Hersha’s position as one of the nation’s premiere hospitality companies can be traced to the keen entrepreneurial spirit of its founders and the commitment to deliver value to our shareholders whether supported by favorable economic currents or through challenging market environments. Best-in- class capital allocation and operational capabilities managed by a talented, cycle-tested team has been foundational to our success. We continue to enhance our thoughtfully assembled portfolio, focusing on hotels that generate current income and promise strong future growth in the country’s most valuable real estate markets. The characteristics that have distinguished Hersha since its inception are stronger today than at any time since we set out on this journey 17 years ago. Hersha’s meaningful total return performance over the years proves the inherent value to our business approach, and energizes our commitment to creating sustainable long-term value for our shareholders now and well into the future. As we move forward well-positioned for the future, we take this opportunity to acknowledge and thank the professionals and teams with whom we have the privilege to work, and we take equal pride in thanking our fellow shareholders for their support, clarity and continued confidence. jay h. shah chief executive officer neil h. shah president and chief operating officer 85404_Layout 1 4/10/17 3:22 PM Page 5 HERSHA Since its IPO in 1999, Hersha Hospitality Trust has evolved into one of the leading hotel REITs in America. In furtherance of its strategic vision, 2016 was a transformative year as Hersha completed several multi-year value creating initiatives positioning the Company for growth for decades to come. Across the last several years, Hersha completed over $1.3 billion in hotel transactions, expanding the Company’s presence in its strategic growth markets -- Boston, Washington, DC and the West Coast -- while reducing its exposure to the challenged Manhattan market and lower growth suburban markets. Today, Hersha’s refined portfolio is concentrated in the nation’s highest demand urban gateway and destination markets, with younger, high growth hotels that dominate the lifestyle and luxury segments. Hersha’s ability to successfully execute complex and large scale transactions, as both a buyer and seller, while delivering consistent shareholder returns is a distinguishing hallmark of the Company’s success. Hersha continually recycles investment capital and upgrades the quality of its portfolio by selling mature, lower growth hotels, and re-deploying the appreciated capital into newer, market leading hotels that are consistent with the Company’s emerging strategic vision. The result is a differentiated portfolio clustered in the most dynamic markets in the country with sturdy current income and tremendous growth potential. Hersha’s cycle-tested management team seeks to bridge the compromise between current yield and future growth in its portfolio strategy. The Company concentrates hotels in markets and locations 85404_Layout 1 4/10/17 3:22 PM Page 6 85404_Layout 1 4/10/17 3:22 PM Page 7 85404_Layout 1 4/10/17 3:22 PM Page 8 HERSHA that are expected to grow at a faster rate over the long-term fueled by diverse hotel demand generators and barriers to new competition, with the added benefit of real estate appreciation. The Company focuses on high margin transient-oriented hotels, both branded and independent, that cater to today’s business and leisure travelers and are designed and operated to create powerful customer loyalty. The Company's portfolio hotels consistently outperform the competition, delivering robust margins relative to their peers. The margin profile of select service hotels has been the foundation of Hersha’s success, and its independent lifestyle and luxury hotels offer the Company greater profit margin growth and real estate value appreciation. Hersha’s investment philosophy is underpinned by valuation, potential earnings growth and the dynamics of the real estate market where the hotel operates. The decision to acquire is made when all of the pieces come together and the Company believes it can bring its unique operational advantage to the investment. This opportunistic and nimble approach has enabled the Company to assemble a portfolio of hotels with durable income streams and attractive growth profiles. Though Hersha owns hotels across multiple rate segments -- from 3 star to 5 star -- the Company’s acquisition philosophy is keenly focused on urban gateway and destination markets and their demand fundamentals. The portfolio concentration in New York City, Boston, Washington, DC, Miami and the West Coast drives extraordinary value from the long-term real estate appreciation in these markets, 85404_Layout 1 4/10/17 3:22 PM Page 9 HERSHA in addition to the sturdy growth in operating income that the hotels deliver. While investing in growth through new hotel acquisitions in our strategic markets is a priority, there are times when buying back the Company’s stock is as productive, and allows a return of capital to shareholders, driving their returns. At Hersha, all major decisions are focused on long-term, sustainable value creation and commitment to total shareholder returns. When the Company’s shares are trading below their intrinsic value, or below the private market valuation of the portfolio hotels, management will use excess capital to buy back shares. Over the course of the past several years, Hersha has repurchased approximately 20% of its public float. Share buybacks, in addition to the Company’s strong dividend policy, are a demonstration of the Company’s total return philosophy, and sustained commitment to shareholder value. Hersha has positioned itself as one of the country’s premiere hospitality enterprises based on its proven thesis that ownership of high-quality real estate generating robust cash flow will outpace the market. The Company’s unique hotel portfolio, characterized by high absolute RevPAR and sector-leading margins, located in the most valuable markets in the country is further supported by a talented management team that thinks like long-term investors and manages like owner-operators -- valuable clarity and differentiation in today’s complex and crowded hospitality sector. 85404_Layout 1 4/10/17 3:22 PM Page 10 85404_Layout 1 4/10/17 3:22 PM Page 11 85404_Layout 1 4/10/17 3:22 PM Page 12 HERSHA ® The EarthView® sustainable hospitality program was born from Hersha’s value for the communities in which it does business. A cross-functional team from our hotels and corporate finance developed and manages an economically sustainable program in furtherance of our belief that environmental and community stewardship are integral in maintaining and building a successful and growing business. Our approach is thoughtful and pragmatic. Hersha applies a rigorous quantitative methodology to measure EarthView’s financial, environmental and social impact for the good of all stakeholders -- guests, team members, shareholders, communities, and the environment. Hersha breaks the compromise between strong economic returns and responsible stewardship of our communities and environment. Through EarthView, the Company studies and invests in capital projects that reduce energy and water consumption, positively impacting the portfolio’s operating margins and return on investment. The Company’s industry leadership in sustainability is recognized by numerous governmental agencies, cities, brands and trade organizations. Across multiple years, the National Association of Real Estate Investment Trusts (NAREIT) has rated Hersha as the top company in the Lodging & Resorts sector for best-in-class portfolio-wide energy use practices and sustainability initiatives. Hersha’s commitment to sustainable hospitality is enduring, and a testament to how we build and deploy unique capabilities. Please visit us at Hersha.com to discover more about EarthView’s innovative sustainability programs. 85404_Layout 1 4/10/17 4:31 PM Page 13 Noteworthy Noteworthy hersha returns since ipo in 1999 hersha returns since ipo in 1999 1 1 212% 212% 178% 178% 267% 267% 282% 282% A A H H S S R R E E H H 150% 150% 143% 150% 150% 143% 125% 121% 112% 125% 121% 112% -6% -6% -62% -62% RMZ RMZ P&G P&G SNL US REIT Hotel SNL US REIT Hotel S&P 500 S&P 500 NAREIT NAREIT IBM IBM Microsoft Microsoft Walmart Walmart Dow Jones Dow Jones GE GE Ford Ford hersha portfolio by market segment hersha portfolio by market segment 2 2 Upscale 43% Upscale 43% Luxury/Upper Upscale 40% Luxury/Upper Upscale 40% Upper Midscale 17% Upper Midscale 17% hersha portfolio by location hersha portfolio by location 2 2 hersha portfolio by hotel brand hersha portfolio by hotel brand 2 2 West Coast 26% West Coast 26% New York City 23% New York City 23% Washington, DC 17% Washington, DC 17% Miami & Key West 11% Miami & Key West 11% Boston 11% Boston 11% Philadelphia 7% Philadelphia 7% Other 5% Other 5% Marriott 37% Marriott 37% Independent 24% Independent 24% Hilton 22% Hilton 22% Hyatt 11% Hyatt 11% IHG 6% IHG 6% (1) Source: Bloomberg and SNL Financial. Total Returns from January 20, 1999 through December 31, 2016. (2) Reflects estimated 2017 Pro Forma Consolidated Portfolio EBITDA. 85404_Layout 1 4/10/17 3:22 PM Page 14 Financial Highlights HERSHA (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 $ $ $ Year Ended December 31, 2016 2015 2014 2013 2012 466,370 470,272 417,226 338,064 299,005 202.59 82.5% 167.13 197.29 84.1% 165.83 187.82 82.6% 155.19 179.70 79.7% 143.30 175.23 78.6% 137.78 Year Ended December 31, operating data: (Excluding Impairment Charges) 2016 2015 2014 2013 2012 Total Revenues (Including Discontinued Operations) $ Net Income applicable to Common Shareholders Adjusted EBITDA Adjusted Funds from Operations 466,629 95,579 171,564 109,804 470,385 27,440 177,288 118,093 419,346 54,638 162,506 102,832 396,458 44,467 145,064 86,487 per share data: (Excluding Impairment Charges) Diluted Earnings Per Common Share AFFO Distributions to Common Shareholders balance sheet data: (as of December 31st) Total Assets Total Debt Total Liabilities and Equity $ $ 2.18 2.40 1.32 0.56 2.35 1.12 1.08 1.96 1.04 0.88 1.64 0.96 2,155,536 1,103,327 2,155,536 1,962,649 1,169,964 1,962,649 1,855,539 918,923 1,855,539 1,748,097 819,336 1,748,097 1,707,679 792,708 1,707,679 364,690 8,376 143,291 76,046 0.16 1.52 0.96 85404_Layout 1 4/10/17 3:22 PM Page 15 Property Portfolio new york city washington, d.c. The Ritz-Carlton, Georgetown The St. Gregory Hotel The Capitol Hill Hotel Hilton Garden Inn, M-Street Hampton Inn, Convention Center Residence Inn by Marriott, Tysons Corner, VA Hyatt House, Gaithersburg, MD miami & key west The Ritz-Carlton, Coconut Grove1 The Cadillac Courtyard Miami Beach Oceanfront The Winter Haven Hotel, Miami Beach The Blue Moon Hotel, Miami Beach Residence Inn by Marriott, Coconut Grove The Parrot Key Hotel & Resort, Key West west coast The Pan Pacific, Seattle1 Courtyard by Marriott, Sunnyvale TownePlace Suites, Sunnyvale The Sanctuary Beach Resort, Monterey Bay The Hotel Milo, Santa Barbara The Ambrose Hotel, Santa Monica Courtyard by Marriott, Westside Los Angeles Courtyard by Marriott, Downtown San Diego Hyatt House, Pleasant Hill/Walnut Creek2 Hyatt House, Pleasanton/Dublin2 Hyatt House, Scottsdale, AZ2 Hyatt Union Square Duane Street Hotel, Tribeca NU Hotel, Brooklyn Hilton Garden Inn, Manhattan Midtown East Hilton Garden Inn, Tribeca Holiday Inn Express, Madison Square Garden Hampton Inn, Downtown Financial District Hampton Inn, Seaport Sheraton Hotel, JFK International Airport Hilton Garden Inn, JFK International Airport Holiday Inn Express, Times Square South3 Candlewood Suites, Times Square South3 Hampton Inn, Manhattan/Times Square3 Hampton Inn, Chelsea3 Hampton Inn, Madison Square Garden3 Holiday Inn, Wall Street3 Holiday Inn Express, Wall Street3 Hyatt House, White Plains Holiday Inn Express, Chester boston The Envoy, Seaport The Boxer, Boston Courtyard by Marriott, Boston/Brookline Holiday Inn Express, Cambridge Courtyard by Marriott, South Boston3 Holiday Inn Express, South Boston3 Mystic Marriott Hotel & Spa, Mystic philadelphia The Rittenhouse, Center City Hampton Inn, Center City/Convention Center Sheraton Wilmington South, Wilmington 1) Acquired February, 2017. 2) Under contract to sell. 3) Unconsolidated Joint-Venture. Toggle SGML Header (+) Section 1: 10K (10K) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10‐K (Mark One) ☒ ☐ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ﬁscal year ended December 31, 2016 OR For the transi갇on period from _______________ to _______________ Commission ﬁle number: 001‐14765 HERSHA HOSPITALITY TRUST (Exact Name of Registrant as Speciﬁed in Its Charter) Maryland (State or Other Jurisdic갇on of Incorpora갇on or Organiza갇on) 251811499 (I.R.S. Employer Iden갇ﬁca갇on No.) 44 Hersha Drive, Harrisburg, PA (Address of Registrant’s Principal Execu갇ve Oﬃces) 17102 (Zip Code) Title of each class Class A Common Shares of Beneﬁcial Interest, par value $.01 per share 6.875% Series C Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share 6.50% Series D Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share 6.50% Series E Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share Registrant’s telephone number, including area code: (717) 236‐4400 Securi갇es registered pursuant to Sec갇on 12(b) of the Act: Name of each exchange on which registered New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange Securi갇es registered pursuant to Sec갇on 12(g) of the Act: None (Title of class) 1 Indicate by check mark if the registrant is a well‐known seasoned issuer, as deﬁned in Rule 405 of the Securi갇es Act. Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Sec갇on 13 or Sec갇on 15(d) of the Act. ☒ Yes ☐ No ☐ Yes ☒ No Indicate by check mark whether the registrant (i) has ﬁled all reports required to be ﬁled by Sec갇on 13 or 15(d) of the Securi갇es Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to ﬁle such reports), and (ii) has been subject to such ﬁling requirements for the past 90 days. Indicate by check mark whether the registrant has submi姫ed electronically and posted on its corporate Web site, if any, every Interac갇ve Data File required to be submi姫ed and posted pursuant to Rule 405 of Regula갇on S‐T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such ﬁles). Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regula갇on S‐K (§ 229.405) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in deﬁni갇ve proxy or informa갇on statements incorporated by reference in Part III of this Form 10‐K or any amendment to this Form 10‐K. ☐ ☒ Yes ☐ No ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non‐accelerated ﬁler, or a smaller repor갇ng company. See deﬁni갇on of “large accelerated ﬁler,” “accelerated ﬁler” and “smaller repor갇ng company” in Rule 12b‐2 of the Exchange Act. (Check one): Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b‐2 of the Act). ☐Yes ☒ No Large accelerated ﬁler ☒ Non‐accelerated ﬁler ☐ Accelerated ﬁler☐ Smaller repor갇ng company☐ The aggregate market value of the outstanding Class A common shares held by nonaﬃliates of the registrant, computed by reference to the closing sale price at which Class A common shares were last sold on June 30, 2016, was approximately $727.6 million. As of February 22, 2017, the number of Class A common shares outstanding was 41,771,966 and there were no Class B common shares outstanding. DOCUMENTS INCORPORATED BY REFERENCE Por갇ons of the registrant’s deﬁni갇ve proxy statement, to be ﬁled with the Securi갇es and Exchange Commission not later than 120 days a耀er the end of the registrant’s last ﬁscal year pursuant to Regula갇on 14A, are incorporated herein by reference into Part II, Item 5 and Part III. 2 Item No. HERSHA HOSPITALITY TRUST Table of Contents Form 10‐K Page Business CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS PART I ITEM 1. ITEM 1A. Risk Factors ITEM 1B. Unresolved Staﬀ Comments ITEM 2. ITEM 3. ITEM 4. Mine Safety Disclosures PART II Proper갇es Legal Proceedings Market for Registrant's Common Equity, Related Stockholder Ma姫ers and Issuer Purchases of Equity Securi갇es Selected Financial Data ITEM 5. ITEM 6. ITEM 7. Management's Discussion and Analysis of Financial Condi갇on and Results of Opera갇ons ITEM 7A. Quan갇ta갇ve and Qualita갇ve Disclosures About Mark Risk Financial Statements and Supplementary Data ITEM 8. Changes in and Disagreements with Accountants on Accoun갇ng and Financial Disclosure ITEM 9. ITEM 9A. Controls and Procedures ITEM 9B. Other Informa갇on PART III ITEM 10. Trustees, Execu갇ve Oﬃcers and Corporate Governance ITEM 11. Execu갇ve Compensa갇on ITEM 12. ITEM 13. Certain Rela갇onships and Related Transac갇ons, and Trustee Independence ITEM 14. Principal Accountant Fees and Services PART IV ITEM 15. Exhibits and Financial Statement Schedules Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder Ma姫ers 6 13 28 29 32 32 33 36 39 39 57 117 117 119 120 120 120 120 120 121 3 CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS Unless the context otherwise requires, references in this report to: (1) “we,” “us,” “our,” the “Company” and “Hersha” mean Hersha Hospitality Trust and its consolidated subsidiaries, including Hersha Hospitality Limited Partnership, taken as a whole; (2) “HHLP” and “our opera갇ng partnership” mean Hersha Hospitality Limited Partnership; and (3) “common shares” mean our Class A common shares of beneﬁcial interest, $0.01 par value per share. This report contains forward‐looking statements within the meaning of Sec갇on 27A of the Securi갇es Act of 1933, as amended, and Sec갇on 21E of the Securi갇es Exchange Act of 1934 (“Exchange Act”), as amended, including, without limita갇on, statements containing the words, “believe,” “expect,” “an갇cipate,” “es갇mate,” “plan,” “con갇nue,” “intend,” “should,” “may” and words of similar import. Such forward‐ looking statements relate to future events, our plans, strategies, prospects and future ﬁnancial performance, and involve known and unknown risks that are diﬃcult to predict, uncertain갇es and other factors which may cause our actual results, performance or achievements or industry results to be materially diﬀerent from any future results, performance or achievements expressed or implied by such forward‐looking statements. Readers should speciﬁcally consider the various factors iden갇ﬁed in this report including, but not limited to those discussed in the sec갇ons en갇tled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condi갇ons and Results of Opera갇ons” that could cause actual results to diﬀer. Statements regarding the following subjects are forward‐looking by their nature: ● ● ● ● ● ● ● ● ● ● ● our business or investment strategy; our projected opera갇ng results; our distribu갇on policy; our liquidity; comple갇on of any pending transac갇ons; our ability to raise capital on a姫rac갇ve terms or at all; our ability to repurchase shares at a姫rac갇ve terms from 갇me to 갇me; our understanding of our compe갇갇on; market trends; and projected capital expenditures. our ability to obtain future ﬁnancing arrangements or reﬁnance or extend the maturity of exis갇ng ﬁnancing arrangements as they come due; Forward‐looking statements are based on our beliefs, assump갇ons and expecta갇ons, taking into account all informa갇on currently available to us. These beliefs, assump갇ons and expecta갇ons are subject to risks and uncertain갇es and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, ﬁnancial condi갇on, liquidity and results of opera갇ons may vary materially from those expressed in our forward‐looking statements. Readers should not place undue reliance on forward‐looking statements. The following factors could cause actual results to vary from our forward‐looking statements: ● general vola갇lity of the capital markets and the market price of our common shares; ● changes in our business or investment strategy; ● availability, terms and deployment of capital; ● availability of qualiﬁed personnel; ● changes in our industry and the market in which we operate, interest rates, or the general economy; ● decreased interna갇onal travel because of geopoli갇cal events, including terrorism and current U.S. government policies; ● the degree and nature of our compe갇갇on; ● ﬁnancing risks, including the risk of leverage and the corresponding risk of default on our mortgage loans and other debt and poten갇al inability to reﬁnance or extend the maturity of exis갇ng indebtedness; ● levels of spending in the business, travel and leisure industries, as well as consumer conﬁdence; ● declines in occupancy, average daily rate and RevPAR and other hotel opera갇ng metrics; ● hos갇li갇es, including future terrorist a姫acks, or fear of hos갇li갇es that aﬀect travel; ● ﬁnancial condi갇on of, and our rela갇onships with, our joint venture partners, third‐party property managers, franchisors and hospitality joint venture partners; ● the degree and nature of our compe갇갇on; ● increased interest rates and opera갇ng costs; ● ability to complete development and redevelopment projects; ● risks associated with poten갇al acquisi갇ons, including the ability to ramp up and stabilize newly acquired hotels with limited or no opera갇ng history, and disposi갇ons of hotel proper갇es; ● availability of and our ability to retain qualiﬁed personnel; ● our failure to maintain our qualiﬁca갇on as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code; ● environmental uncertain갇es and risks related to natural disasters; 4 ● changes in real estate and zoning laws and increases in real property tax rates; and ● changes in real estate and zoning laws and increases in real property tax rates; and ● the factors discussed in Item 1A of this Annual Report on Form 10‐K for the year ended December 31, 2016 under the heading “Risk Factors” and in other reports we ﬁle with the U.S. Securi갇es and Exchange Commission (“SEC”) from 갇me to 갇me. These factors are not necessarily all of the important factors that could cause our actual results, performance or achievements to diﬀer materially from those expressed in or implied by any of our forward‐looking statements. Other unknown or unpredictable factors, many of which are beyond our control, also could harm our results, performance or achievements. All forward‐looking statements contained in this report are expressly qualiﬁed in their en갇rety by the cau갇onary statements set forth above. Forward‐looking statements speak only as of the date they are made, and we do not undertake or assume any obliga갇on to update publicly any of these statements to reﬂect actual results, new informa갇on or future events, changes in assump갇ons or changes in other factors aﬀec갇ng forward‐looking statements, except to the extent required by applicable laws. If we update one or more forward‐looking statements, no inference should be drawn that we will make addi갇onal updates with respect to those or other forward‐looking statements. 5 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 ini갇al 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 ins갇tu갇onal 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 con갇nue to own and acquire high quality, upscale, mid‐scale and extended‐stay hotels in metropolitan markets with high barriers to entry and independent bou갇que hotels in markets with similar characteris갇cs. We have operated and intend to con갇nue 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 iden갇fy high growth acquisi갇on targets. We seek acquisi갇on candidates located in markets with economic, demographic and supply dynamics favorable to hotel owners and operators. Through our due diligence process, we select those acquisi갇on targets where we believe selec갇ve capital improvements and intensive management will increase the hotel’s ability to a姫ract key demand segments, enhance hotel opera갇ons and increase long‐term value. To drive sustainable shareholder value, we also seek to recycle capital from stabilized assets and our sales of non‐core hotels in secondary and ter갇ary markets. Capital from these types of transac갇ons is intended to be and has been redeployed into high growth acquisi갇ons, share buybacks and reduc갇on of debt. As of December 31, 2016, our por韃olio consisted of 43 wholly owned limited and full service proper갇es with a total of 6,344 rooms and interests in 12 limited and full service proper갇es owned through joint venture investments with a total of 2,456 rooms. These 55 proper갇es, with a total of 8,800 rooms, are located in Arizona, California, Connec갇cut, Delaware, District of Columbia, Florida, Maryland, Massachuse姫s, New York, Pennsylvania, and Virginia and operate under leading brands owned by Marrio姫 Interna갇onal, Inc. (“Marrio姫”), Hilton Worldwide, Inc. (“Hilton”), InterCon갇nental Hotels Group (“IHG”), and Hya姫 Corpora갇on (“Hya姫”). In addi갇on, some of our hotels operate as independent bou갇que hotels or with other brands. On January 3, 2017, we redeemed our joint venture interest in Mys갇c Partners, LLC by acquiring 100% ownership interest in the Mys갇c Marrio姫 Hotel & Spa and transferring our minority ownership interests in the Har韃ord Marrio姫 and Har韃ord Hilton to the joint venture partner. In July 2016, we entered into a purchase and sale agreement to sell the Residence Inn, Greenbelt, MD, Courtyard, Alexandria, VA, Hya姫 House, Sco姫sdale, AZ, Hya姫 House, Pleasant Hill, CA, and Hya姫 House, Pleasanton, CA to an unaﬃliated buyer. On January 5, 2017, we closed on the sale of two of the ﬁve assets, and the remaining three are expected to close in the third quarter of 2017, subject to customary closing condi갇ons. We are structured as an umbrella partnership REIT, or UPREIT, and we own our hotels and our investments in joint ventures through our opera갇ng partnership, Hersha Hospitality Limited Partnership, for which we serve as the sole general partner. As of December 31, 2016, we owned an approximate 93.6% partnership interest in our opera갇ng 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 execu갇ve oﬃcers and other unaﬃliated third party investors. Other 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”) or one of its wholly owned subsidiaries. Each of the hotels that we own through a joint venture investment is leased to another TRS that is owned by the respec갇ve joint venture or an en갇ty owned in part by 44 New England. Our principal execu갇ve 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 informa갇on 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 commi姫ees of our Board of Trustees (Acquisi갇on Commi姫ee, Audit Commi姫ee, Compensa갇on Commi姫ee, Nomina갇ng and Corporate Governance Commi姫ee and Risk Sub‐Commi姫ee of the Audit Commi姫ee). 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 Sec갇on 13(a) or 15(d) of the Exchange Act as soon as reasonably prac갇cable a耀er 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 addi갇on, all reports 6 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 informa갇on regarding the opera갇on of the public reference room may be 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 informa갇on regarding the opera갇on of the public reference room may be obtained by calling the SEC at 1‐800‐SEC‐0330. The informa갇on 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 opera갇ng strategy focuses on increasing hotel performance for our por韃olio. 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 ac갇ve property‐level management, including intensive marke갇ng eﬀorts to tour groups, corporate and government extended stay customers and other wholesale customers and expanded yield management programs, which are calculated to be姫er match room rates to room demand; and maximizing our hotel‐level earnings by managing hotel‐level costs and posi갇oning our hotels to capitalize on increased demand in the high quality, upper‐upscale, upscale and extended‐stay lodging segments, which we believe can be expected to follow from improving economic condi갇ons, and maximizing our opera갇ng margins. ACQUISITIONS We selec갇vely acquire high quality branded luxury upper‐upscale, upscale, upper‐midscale and extended‐stay hotels in metropolitan markets with high barriers‐to‐entry and independent bou갇que hotels in similar markets. Through our due diligence process, we select those acquisi갇on targets where we believe selec갇ve capital improvements and intensive management will increase the hotel’s ability to a姫ract key demand segments, enhance hotel opera갇ons and increase long‐term value. In execu갇ng our disciplined acquisi갇on program, we will consider acquiring hotels that meet the following addi갇onal criteria:     na갇onally‐franchised hotels opera갇ng under popular brands, such as Ritz‐Carlton, Marrio姫, Residence Inn by Marrio姫, Courtyard by Marrio姫, Hilton Hotels, Hilton Garden Inn, Hampton Inn, Holiday Inn, Holiday Inn Express, Holiday Inn Express and Suites, Candlewood Suites, Hya姫 House, Hya姫 Place, Hya姫 and Sheraton Hotels; hotels in loca갇ons with signiﬁcant barriers‐to‐entry, such as high development costs, limited availability of land and lengthy en갇tlement processes; hotels in our target markets where we can realize opera갇ng eﬃciencies and economies of scale; and independent bou갇que hotels in similar markets Since our ini갇al public oﬀering in January 1999 and through December 31, 2016, we have acquired, wholly or through joint ventures, a total of 115 hotels, including 28 hotels acquired from en갇갇es controlled by certain of our trustees and execu갇ve oﬃcers. Of the 28 acquisi갇ons from en갇갇es controlled by certain of our trustees and execu갇ve oﬃcers, 25 were newly constructed or substan갇ally renovated by these en갇갇es prior to our acquisi갇on. We u갇lize our rela갇onships with en갇갇es that are developing or substan갇ally renova갇ng hotels, including en갇갇es controlled by certain of our trustees and execu갇ve oﬃcers, to iden갇fy future hotel acquisi갇ons that we believe may be a姫rac갇ve to us. We intend to con갇nue to acquire hotels from en갇갇es controlled by certain of our trustees and execu갇ve oﬃcers if approved by a majority of our independent trustees in accordance with our related party transac갇on policy. DISPOSITIONS We evaluate our hotels and the markets in which they operate on a periodic basis to determine if these hotels con갇nue to sa갇sfy our investment criteria. We may sell hotels opportunis갇cally based upon management’s forecast and review of the cash ﬂow poten갇al of each hotel and re‐deploy the proceeds into debt reduc갇on, acquisi갇ons of hotels and share buybacks. We u갇lize several criteria to determine the long‐term poten갇al of our hotels. Hotels are iden갇ﬁed for sale based upon management’s forecast of the strength of each hotel’s cash ﬂows, its ability to remain accre갇ve to our por韃olio, and the expecta갇ons for the market in which the hotel operates. Our decision to sell a hotel is o耀en predicated upon the size of the hotel, strength of the franchise, property condi갇on and related costs to renovate the property, strength of market demand generators, projected supply of hotel rooms in the market, probability of increased valua갇on and geographic proﬁle of the hotel. All asset sales are comprehensively reviewed by the Acquisi갇on Commi姫ee of our Board of Trustees, which commi姫ee consists solely of independent trustees. Since our ini갇al public oﬀering in 1999 through December 31, 2016, we have sold a total of 66 hotels. 7 For addi갇onal informa갇on, see “Management’s Discussion and Analysis of Financial Condi갇on and Results of Opera갇on” and Note 2, “Investment in Hotel Proper갇es”. FINANCING We intend to ﬁnance our long‐term growth with common and preferred equity issuances and debt ﬁnancing having staggered maturi갇es. Our debt includes unsecured debt in the aggregate of $1 billion which is comprised of a $500 million senior unsecured credit facility (includes a $250 million unsecured term loan and $250 million unsecured revolving line of credit), and two unsecured term loans totaling $500 million. Our debt also includes secured mortgage debt on our hotel proper갇es. We intend to use our revolving line of credit capacity to pay down mortgage debt, repurchase common shares, fund future acquisi갇ons, as well as for capital improvements and working capital requirements. Subject to market condi갇ons, we intend to repay amounts outstanding under the revolving line of credit por갇on of our credit facility from 갇me to 갇me with proceeds from periodic common and preferred equity issuances, long‐term debt ﬁnancings and cash ﬂows from opera갇ons. When purchasing hotel proper갇es, we may issue common and preferred limited partnership interests in our opera갇ng partnership as full or par갇al considera갇on to sellers. FRANCHISE AGREEMENTS We believe that the public’s percep갇on of quality associated with a franchisor is an important feature in the opera갇on of a hotel. Franchisors provide a variety of beneﬁts for franchisees, which include na갇onal adver갇sing, publicity and other marke갇ng programs designed to increase brand awareness, training of personnel, con갇nuous review of quality standards and centralized reserva갇on systems. Most of our hotels operate under franchise licenses from na갇onal hotel franchisors, including: Franchisor Marrio姫 Interna갇onal Hilton Hotels Corpora갇on IHG Hya姫 Hotels Corpora갇on Franchises Ritz‐Carlton, Marrio姫, Residence Inn by Marrio姫, Courtyard by Marrio姫, TownePlace Suites, Sheraton Hotels Hilton Hotels, Hilton Garden Inn, Hampton Inn Holiday Inn, Holiday Inn Express, Holiday Inn Express & Suites, Candlewood Suites Hya姫 House, Hya姫 Place, Hya姫 We an갇cipate a majority of the hotels in which we invest will be operated pursuant to franchise licenses. The franchise licenses generally specify certain management, opera갇onal, record‐keeping, accoun갇ng, repor갇ng and marke갇ng 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 opera갇onal 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. PROPERTY MANAGEMENT We work closely with our hotel management companies to operate our hotels and increase same hotel performance for our por韃olio. Through our TRS and our investment in joint ventures, we have retained the following management companies to operate our hotels as of December 31, 2016: 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. Marrio姫 Management Total 42 ‐ ‐ 1 43 6,258 ‐ ‐ 86 6,344 8 2 2 12 1,372 802 282 2,456 50 2 2 1 55 7,630 802 282 86 8,800 *The Mys갇c Partners joint venture was liquidated in January 2017 and subsequently do not have management agreements with Waterford Hotel Group, Inc. Each management agreement provides for a set term and is subject to early termina갇on upon the occurrence of defaults and certain other events described therein. As required under the REIT qualiﬁca갇on rules, all managers, including HHMLP, must qualify as an “eligible independent contractor” during the term of the management agreements. 8 Under the management agreements, the manager generally pays the opera갇ng expenses of our hotels. All opera갇ng expenses or other expenses incurred by the manager in performing its authorized Under the management agreements, the manager generally pays the opera갇ng expenses of our hotels. All opera갇ng expenses or other expenses incurred by the manager in performing its authorized du갇es are reimbursed or borne by our applicable TRS to the extent the opera갇ng expenses or other expenses are incurred within the limits of the applicable approved hotel opera갇ng budget. Our managers are not obligated to advance any of their own funds for opera갇ng expenses of a hotel or to incur any liability in connec갇on with opera갇ng a hotel. For their services, the managers receive a base management fee, and if a hotel meets and exceeds certain thresholds, an addi갇onal incen갇ve management fee. For the year ended December 31, 2016, these thresholds were not met and incen갇ve 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. CAPITAL IMPROVEMENTS, RENOVATION AND REFURBISHMENT Under certain loan agreements, we have established capital reserves for our hotels to maintain the hotels in a condi갇on that complies with their respec갇ve requirements. These capital reserves typically range from 3% to 4% of each hotel’s gross revenues. In addi갇on, we may upgrade hotels in our por韃olio in order to capitalize on opportuni갇es to increase revenue, and, as deemed necessary by our management, to seek to meet compe갇갇ve condi갇ons and preserve asset quality. We will also renovate hotels when we believe the investment in renova갇ons will provide an a姫rac갇ve return to us through increased revenues and proﬁtability and is in the best interests of our shareholders. We maintain a capital expenditures policy by which replacements and renova갇ons are monitored to determine whether they qualify as capital improvements. All items that are deemed to be repairs and maintenance costs are expensed and recorded in Hotel Opera갇ng Expenses in the Consolidated Statements of Opera갇ons. OPERATING PRACTICES Our hotel managers u갇lize centralized accoun갇ng and data processing systems, which facilitate ﬁnancial statement and budget prepara갇on, payroll management, quality control and other support func갇ons for the on‐site hotel management team. Our hotel managers also provide centralized control over purchasing and project management (which can create economies of scale in purchasing) while emphasizing local discre갇on within speciﬁc guidelines. DISTRIBUTIONS We have made 72 consecu갇ve quarterly distribu갇ons to the holders of our common shares since our ini갇al public oﬀering in January 1999 and intend to con갇nue to make regular quarterly distribu갇ons to our shareholders as approved by our Board of Trustees. The following table sets forth distribu갇on informa갇on for the last two calendar years. Common Shares Quarter to which Distribu갇on Relates 2016 Fourth Quarter Third Quarter Second Quarter First Quarter 2015 Fourth Quarter Third Quarter Second Quarter First Quarter Record Date Payment Date Class A Common Shares and Common Units Per Share and Per Unit Distribu갇on Amount 1/5/2017 10/3/2016 6/30/2016 4/1/2016 1/4/2016 9/30/2015 6/30/2015 3/31/2015 $ $ 1/17/2017 10/17/2016 7/15/2016 4/15/2016 1/15/2016 10/15/2015 7/15/2015 4/15/2015 0.48 * 0.28 0.28 0.28 0.28 0.28 0.28 0.28 ** *Represents the aggregate of a quarterly dividend of $0.28 per common share and unit and an addi갇onal special dividend of $0.20 per common share and unit. **Per share and per unit amounts adjusted for reverse 4‐for‐1 share split eﬀec갇ve as of June 22, 2015. 9 Preferred Shares Quarter to which Distribu갇on Relates 2016 Record Date Payment Date Series B Preferred Per Share Distribu갇on Amount Series C Preferred Per Share Distribu갇on Amount Series D Preferred Per Share Distribu갇on Amount Series E Preferred Per Share Distribu갇on Amount Fourth Quarter 1/1/2017 1/17/2017 N/A* $ 0.4297 $ Third Quarter 10/1/2016 10/17/2016 Second Quarter 7/1/2016 7/15/2016 First Quarter 4/1/2016 4/15/2016 $ N/A* 0.3722 * 0.5000 0.4297 0.4297 0.4297 0.4063 $ 0.4063 0.2031 ** N/A 2015 Fourth Quarter 1/1/2016 1/15/2016 $ 0.5000 $ 0.4297 $ Third Quarter 10/1/2015 10/15/2015 Second Quarter 7/1/2015 7/15/2015 0.5000 0.5000 0.4297 0.4297 First Quarter *Series B Preferred Shares were redeemed in full on June 8, 2016. **Represents the ini갇al dividend prorated for the dura갇on of the quarter following issuance. 4/15/2015 4/1/2015 0.5000 0.4297 N/A N/A N/A N/A 0.3069 ** N/A N/A N/A N/A N/A N/A N/A Our Board of Trustees will determine the amount of our future distribu갇ons in its sole discre갇on and its decision will depend on a number of factors, including the amount of funds from opera갇ons, our partnership’s ﬁnancial condi갇on, debt service requirements, capital expenditure requirements for our hotels, the annual distribu갇on requirements under the REIT provisions of the Internal Revenue Code and such other factors as the trustees deem relevant. Our ability to make distribu갇ons will depend on the proﬁtability of and cash ﬂow available from our hotels. There can be no assurance we will con갇nue to pay distribu갇ons at the rates above or any other rate. Addi갇onally, we may, if necessary and allowable, pay taxable distribu갇ons of our shares or debt securi갇es to meet the distribu갇on requirements. There are no assurances we will be able to con갇nue to make quarterly distribu갇ons at the current rate. SEASONALITY Our hotels’ opera갇ons historically have been seasonal in nature, reﬂec갇ng higher revenues and occupancy rates during the second and third quarters. This seasonality causes ﬂuctua갇ons in our quarterly opera갇ng revenues, proﬁtability, and cash ﬂow. COMPETITION The U.S. hotel industry is highly compe갇갇ve. Our hotels compete with other hotels for guests in each of their markets on the basis of several factors, including, among others, loca갇on, quality of accommoda갇ons, convenience, brand aﬃlia갇on, room rates, service levels and ameni갇es, and level of customer service. In addi갇on to tradi갇onal hotels, our proper갇es also compete with non‐tradi갇onal accommoda갇ons for travelers such as online room sharing services. Compe갇갇on is o耀en speciﬁc to the individual markets in which our hotels are located and includes compe갇갇on from exis갇ng and new hotels operated under premium brands in the focused‐service and full‐service segments. We believe that hotels, such as our hotels, that are aﬃliated with leading na갇onal brands, such as the Marrio姫, Hilton, Hya姫, or IHG, will enjoy the compe갇갇ve advantages associated with opera갇ng under such brands. Increased compe갇갇on could harm our occupancy and revenues and may require us to provide addi갇onal ameni갇es or make capital improvements that we otherwise would not have to make, which may materially and adversely aﬀect our opera갇ng results and liquidity. The upper‐upscale and upscale limited service segments of the hotel business are highly compe갇갇ve. There are many compe갇tors in our market segments and new hotels are rou갇nely being constructed. Addi갇ons to supply create new compe갇tors, in some cases without corresponding increases in demand for hotel rooms. We also compete for hotel acquisi갇ons with en갇갇es that have investment objec갇ves similar to ours. We face compe갇갇on for the acquisi갇on of hotels from ins갇tu갇onal pension funds, private equity funds, REITs, hotel companies and others who are engaged in the acquisi갇on of hotels. Some of these compe갇tors have substan갇ally greater ﬁnancial and 10 opera갇onal resources and access to capital than we have and may have greater knowledge of the markets in which we seek to invest. This compe갇갇on may reduce the number of suitable investment opera갇onal resources and access to capital than we have and may have greater knowledge of the markets in which we seek to invest. This compe갇갇on may reduce the number of suitable investment opportuni갇es oﬀered to us, increase the bargaining power of property owners seeking to sell to us and decrease the a姫rac갇veness of the terms on which we may acquire our targeted hotel investments, including the cost thereof, making it more diﬃcult for us to acquire new proper갇es on a姫rac갇ve terms. EMPLOYEES As of December 31, 2016, we had 49 employees who were principally engaged in managing the aﬀairs of the Company unrelated to property opera갇ons. We believe that our rela갇ons with our employees are sa갇sfactory. TAX STATUS We elected to be taxed as a REIT under Sec갇ons 856 through 860 of the Code, commencing with our taxable year ended December 31, 1999. As long as we qualify for taxa갇on as a REIT, we generally will not be subject to federal income tax on the por갇on 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 alterna갇ve minimum tax) on our taxable income at regular corporate tax rates. Addi갇onally, we will generally be unable to qualify as a REIT for four years following the year in which qualiﬁca갇on is lost. Even if we qualify for taxa갇on 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 corpora갇on that may lease hotels from our opera갇ng partnership and its subsidiaries under certain circumstances. Overall, no more than 25% (or 20% for taxable years beginning a耀er December 31, 2017) of the value of our assets may consist of securi갇es of one or more TRSs. In addi갇on, 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. A TRS is permi姫ed 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 sa갇sfy the following requirements: 1. 2. 3. 4. such manager is, or is related to a person who is, ac갇vely engaged in the trade or business of opera갇ng “qualiﬁed lodging facili갇es” 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 deduc갇bility 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 taxa갇on. A 100% excise tax is imposed on transac갇ons between a TRS and us that are not on an arm’s‐length basis. REGULATION General Our hotels are subject to various U.S. federal, state and local laws, ordinances and regula갇ons, including regula갇ons rela갇ng to common areas and ﬁre and safety requirements. We believe that each of our hotels has the necessary permits and approvals to operate its business. Americans with Disabili⁛es Act Our hotels must comply with applicable provisions of the Americans with Disabili갇es Act of 1993, or ADA, to the extent that such hotels are "public accommoda갇ons" as deﬁned by the ADA. The ADA may require removal of structural barriers to access by persons with disabili갇es in certain public areas of our hotels where such removal is readily achievable. We believe that our hotels are in substan갇al compliance with the ADA and that we will not be required to make substan갇al capital expenditures to address the requirements of the ADA. However, non‐compliance with the ADA could result in imposi갇on of ﬁnes or an award of damages to private li갇gants. The obliga갇on to make readily achievable accommoda갇ons is an ongoing one, and we will con갇nue to assess our hotels and to make altera갇ons as appropriate in this respect. 11 Environmental Ma⁫ers Under various laws rela갇ng to the protec갇on of the environment, a current or previous owner or operator (including tenants) of real estate may be liable for contamina갇on resul갇ng from the presence or discharge of hazardous or toxic substances at that property and may be required to inves갇gate and clean up such contamina갇on at that property or emana갇ng from that property. These costs could be substan갇al and liability under these laws may a姫ach without regard to whether the owner or operator knew of, or was responsible for, the presence of the contaminants, and the liability may be joint and several. The presence of contamina갇on or the failure to remediate contamina갇on at our hotels may expose us to third‐party liability or materially and adversely aﬀect our ability to sell, lease or develop the real estate or to incur debt using the real estate as collateral. Our hotels are subject to various federal, state, and local environmental, health and safety laws and regula갇ons that address a wide variety of issues, including, but not limited to, storage tanks, air emissions from emergency generators, storm water and wastewater discharges, lead‐based paint, mold and mildew and waste management. Our hotels incur costs to comply with these laws and regula갇ons and could be subject to ﬁnes and penal갇es for non‐compliance. Environmental laws require that owners or operators of buildings with asbestos‐containing building materials properly manage and maintain these materials, adequately inform or train those who may come into contact with asbestos and undertake special precau갇ons, including removal or other abatement, in the event that asbestos is disturbed during building renova갇on or demoli갇on. These laws may impose ﬁnes and penal갇es on building owners or operators for failure to comply with these requirements. In addi갇on, third par갇es may seek recovery from owners or operators for personal injury associated with exposure to asbestos‐containing building materials. Some of our hotels may contain or develop harmful mold or suﬀer from other adverse condi갇ons, which could lead to liability for adverse health eﬀects and costs of remedia갇on. The presence of signiﬁcant mold or other airborne contaminants at any of our hotels could require us to undertake a costly remedia갇on program to contain or remove the mold or other airborne contaminants from the aﬀected hotel or increase indoor ven갇la갇on. In addi갇on, the presence of signiﬁcant mold or other airborne contaminants could expose us to liability from guests or employees at our hotels and others if property damage or health concerns arise. INSURANCE We require comprehensive insurance to be maintained by our hotel management companies, including HHMLP, on each of our hotels, including liability and ﬁre and extended coverage in amounts suﬃcient to permit the replacement of the hotel in the event of a total loss, subject to applicable deduc갇bles. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, ﬂoods, hurricanes and acts of terrorism that may be uninsurable or not economically insurable. Inﬂa갇on, changes in building codes and ordinances, environmental considera갇ons and other factors also might make it imprac갇cable to use insurance proceeds to replace the applicable hotel a耀er such applicable hotel has been damaged or destroyed. Under such circumstances, the insurance proceeds received by us might not be adequate to restore our economic posi갇on with respect to the applicable hotel. If any of these or similar events occur, it may reduce the return from the a姫ached property and the value of our investment. FINANCIAL INFORMATION ABOUT SEGMENTS We are in the business of acquiring equity interests in hotels, and we manage our hotels as individual opera갇ng segments that meet the aggrega갇on criteria and are therefore disclosed as one reportable segment. See “Note 1 ‐ Organiza갇on and Summary of Signiﬁcant Accoun갇ng Policies” in Item 8 of this Annual Report on Form 10‐K for segment ﬁnancial informa갇on. 12 Item 1A. Risk Factors You should carefully consider the following risks, together with the other informa갇on included in this Annual Report on Form 10‐K. If any of the following risks actually occur, our business, ﬁnancial condi갇on or results of opera갇ons may suﬀer. As a result, the trading price of our securi갇es could decline, and you may lose all or part of any investment you have in our securi갇es. Risks Related to the Economy and Credit Markets Diﬃcult economic condi⁛ons may adversely aﬀect the hotel industry. The performance of the hotel industry has historically been linked to key macroeconomic indicators, such as GDP growth, employment, corporate earnings and investment, and travel demand. If the U.S. economy should falter for any reason and there is an extended period of economic weakness, a recession or depression, our revenues and proﬁtability could be adversely aﬀected. Economic condi⁛ons may reduce demand for hotel proper⁛es and adversely aﬀect the Company’s proﬁtability. The performance of the lodging industry is highly cyclical and has tradi갇onally been closely linked with the performance of the general economy and, speciﬁcally, growth in the U.S. gross domes갇c product, employment, and investment and travel demand. The Company cannot predict the pace or dura갇on of the global economic cycle or the cycles of the lodging industry. In the event condi갇ons in the industry deteriorate or do not con갇nue to see sustained improvement, or there is an extended period of economic weakness, the Company’s occupancy rates, revenues and proﬁtability could be adversely aﬀected. In addi갇on, other macroeconomic factors, such as consumer conﬁdence and condi갇ons which nega갇vely shape public percep갇on of travel, may have a nega갇ve eﬀect on the lodging industry and may adversely aﬀect the Company’s business. Furthermore, some of the Company’s hotels are classiﬁed as upper upscale or upscale. In an economic downturn, these types of hotels may be more suscep갇ble to a decrease in revenue, as compared to hotels in other categories that have lower room rates. This characteris갇c may result from the fact that upper upscale hotels generally target business and high‐end leisure travelers. In periods of economic diﬃcul갇es, business and leisure travelers may seek to reduce travel costs by limi갇ng travel or seeking to reduce costs on their trips. In addi갇on, in periods of weak demand, as may occur during a general economic recession, proﬁtability is nega갇vely aﬀected by the rela갇vely high ﬁxed costs of opera갇ng upper upscale and upscale hotels. Consequently, any uncertainty in the general economic environment could adversely aﬀect the Company’s business. A recession could result in declines in our average daily room rates, occupancy and RevPAR, and thereby have a material adverse eﬀect on our results of opera⁛ons. The performance of the hotel industry has tradi갇onally been closely linked with the general economy. During the recession of 2008 and 2009, overall travel was reduced, which had a signiﬁcant eﬀect on our results of opera갇ons. While opera갇ng results have subsequently improved, there can be no assurance that any increases in hotel revenues or earnings at our proper갇es will con갇nue for any number of reasons, including, but not limited to, slower growth in the economy, changes in unemployment, underemployment, administra갇on policies and changes in travel pa姫erns. A stall in the economic recovery or a resurgent recession would have a material adverse eﬀect on our results of opera갇ons. While we believe the U.S. economy con갇nues on a trajectory of slow, steady growth, other economies around the world, including Europe, Canada, Japan and China, have demonstrated sluggish, stagnant or slowing growth in recent quarters. It remains to be seen what eﬀect, if any, the slowing in these economies will have on us. If a property’s occupancy or room rates drop to the point where its revenues are insuﬃcient to cover its opera갇ng expenses, then we would be required to spend addi갇onal funds for that property’s opera갇ng expenses. In addi갇on, if opera갇ng results decline at our hotels secured by mortgage debt, there may not be suﬃcient opera갇ng proﬁt from the hotel to cover the debt service on the mortgage. In such a case, we may be forced to choose from a number of unfavorable op갇ons, including using corporate cash, drawing on our revolving credit facility, selling the hotel on disadvantageous terms, including at an una姫rac갇ve price, or defaul갇ng on the mortgage debt and permi駫ng the lender to foreclose. Any one of these op갇ons could have a material adverse eﬀect on our business, results of opera갇ons, ﬁnancial condi갇on and ability to pay distribu갇ons to our shareholders. Disrup⁛ons in the ﬁnancial markets could adversely aﬀect our ability to obtain suﬃcient third‐party ﬁnancing for our capital needs, including expansion, acquisi⁛on and other ac⁛vi⁛es, on favorable terms or at all, which could materially and adversely aﬀect us. In the recession of 2008 and 2009 and some recent years, the U.S. stock and credit markets have experienced signiﬁcant price vola갇lity, disloca갇ons and liquidity disrup갇ons, which have caused market prices of many stocks to ﬂuctuate substan갇ally and the spreads on prospec갇ve debt ﬁnancings to widen considerably. These circumstances have materially 13 impacted liquidity in the ﬁnancial markets, making terms for certain ﬁnancings less a姫rac갇ve, and in some cases have resulted in the unavailability of ﬁnancing, even for companies which otherwise are qualiﬁed impacted liquidity in the ﬁnancial markets, making terms for certain ﬁnancings less a姫rac갇ve, and in some cases have resulted in the unavailability of ﬁnancing, even for companies which otherwise are qualiﬁed to obtain ﬁnancing. Con갇nued vola갇lity and uncertainty in the stock and credit markets in the U.S. and abroad may nega갇vely impact our ability to access addi갇onal ﬁnancing for our capital needs, including expansion, acquisi갇on ac갇vi갇es and other purposes, on favorable terms or at all, which may nega갇vely aﬀect our business. Addi갇onally, due to this uncertainty, we may in the future be unable to reﬁnance or extend our debt, or the terms of any reﬁnancing may not be as favorable as the terms of our exis갇ng debt. If we are not successful in reﬁnancing our debt when it becomes due, we may be forced to dispose of hotels on disadvantageous terms, which might adversely aﬀect our ability to service other debt and to meet our other obliga갇ons. A prolonged downturn in the ﬁnancial markets may cause us to seek alterna갇ve sources of poten갇ally less a姫rac갇ve ﬁnancing and may require us to further adjust our business plan accordingly. These events also may make it more diﬃcult or costly for us to raise capital through the issuance of new equity capital or the incurrence of addi갇onal secured or unsecured debt, which could materially and adversely aﬀect us. RISKS RELATED TO THE HOTEL INDUSTRY Our hotels are subject to general hotel industry opera⁛ng risks, which may impact our ability to make distribu⁛ons to shareholders. Our hotels are subject to all opera갇ng risks common to the hotel industry. The hotel industry has experienced vola갇lity in the past, as have our hotels, and there can be no assurance that such vola갇lity will not occur in the future. These risks include, among other things: compe갇갇on from other hotels; over‐building in the hotel industry that could adversely aﬀect hotel revenues and hotel values; increases in opera갇ng costs due to inﬂa갇on and other factors, which may not be oﬀset by increased room rates; reduc갇on in business and commercial travel and tourism, including as a result of legisla갇on or execu갇ve policies; strikes and other labor disturbances of hotel employees; increases in energy costs and other expenses of travel; civil unrest; adverse eﬀects of general and local economic condi갇ons; and adverse poli갇cal condi갇ons. These factors could reduce revenues of the hotels and adversely aﬀect our ability to make distribu갇ons to our shareholders. The value of our hotels depends on condi⁛ons beyond our control. Our hotels are subject to varying degrees of risk generally incident to the ownership of hotels. The underlying value of our hotels, our income and ability to make distribu갇ons to our shareholders are dependent upon the opera갇on of the hotels in a manner suﬃcient to maintain or increase revenues in excess of opera갇ng expenses. Hotel revenues may be adversely aﬀected by adverse changes in na갇onal economic condi갇ons, adverse changes in local market condi갇ons due to changes in general or local economic condi갇ons and neighborhood characteris갇cs, compe갇갇on from other hotels, changes in interest rates and in the availability, cost and terms of mortgage funds, the impact of present or future environmental legisla갇on and compliance with environmental laws, the ongoing need for capital improvements, par갇cularly in older structures, changes in real estate tax rates and other opera갇ng expenses, adverse changes in governmental rules and ﬁscal policies, civil unrest, acts of terrorism, acts of God, including earthquakes, hurricanes and other natural disasters, acts of war, adverse changes in zoning laws, and other factors that are beyond our control. In par갇cular, general and local economic condi갇ons may be adversely aﬀected by terrorist incidents, such as those in New York, Washington, D.C. and Boston; ci갇es where many of our hotels are located. Our management is unable to determine the long‐term impact, if any, of these incidents or of any acts of war or terrorism in the United States or worldwide, on the U.S. economy, on us or our hotels or on the market price of our securi갇es. Our investments are concentrated in a single segment of the hotel industry. Our primary business strategy is to con갇nue to acquire high quality, upper‐upscale, and upscale limited service and extended‐stay hotels in metropolitan markets with high barriers to entry including New York, Washington DC, Boston, Philadelphia, San Diego, Los Angeles, Miami, select markets on the West Coast and other markets with similar characteris갇cs. We are subject to risks inherent in concentra갇ng investments in a single industry and in a speciﬁc market segment within that industry. The adverse eﬀect on amounts available for distribu갇on to shareholders resul갇ng from a downturn in the hotel industry in general or the mid‐scale segment in par갇cular could be more pronounced than if we had diversiﬁed our investments outside of the hotel industry or in addi갇onal hotel market segments. Opera⁛ng costs and capital expenditures for hotel renova⁛on may be greater than an⁛cipated and may adversely impact distribu⁛ons to shareholders. Hotels generally have an ongoing need for renova갇ons and other capital improvements, par갇cularly in older structures, including periodic replacement of furniture, ﬁxtures and equipment. Under the terms of our management agreements, we generally are obligated to pay the cost of expenditures for items that are classiﬁed as capital items under GAAP that are necessary for the con갇nued opera갇on of our hotels. If these expenses exceed our expecta갇ons, the addi갇onal cost could have an adverse eﬀect on amounts available for distribu갇on to shareholders. In addi갇on, we may acquire hotels in the future that require signiﬁcant renova갇on. Renova갇on of 14 hotels involves certain risks, including the possibility of environmental problems, construc갇on cost overruns and delays, uncertain갇es as to market demand or deteriora갇on in market demand a耀er hotels involves certain risks, including the possibility of environmental problems, construc갇on cost overruns and delays, uncertain갇es as to market demand or deteriora갇on in market demand a耀er commencement of renova갇on and the emergence of unan갇cipated compe갇갇on from hotels. The hotel industry is highly compe⁛⁛ve. The hotel industry is highly compe갇갇ve. Our hotels compete with other exis갇ng and new hotels in their geographic markets. In addi갇on to tradi갇onal hotels, our proper갇es also compete with non‐ tradi갇onal accommoda갇ons for travelers such as online room sharing services. Many of our compe갇tors have substan갇ally greater marke갇ng and ﬁnancial resources than we do. Eﬀec갇ve marke갇ng by our compe갇tors may reduce our hotel revenue and adversely impact our ability to make distribu갇ons to our shareholders. Risks of opera⁛ng hotels under franchise licenses, which may be terminated or not renewed, may impact our ability to make distribu⁛ons to shareholders. The con갇nua갇on of our franchise licenses is subject to speciﬁed opera갇ng standards and other terms and condi갇ons. All of the franchisors of our hotels periodically inspect our hotels to conﬁrm adherence to their opera갇ng standards. The failure to maintain such standards or to adhere to such other terms and condi갇ons could result in the loss or cancella갇on of the applicable franchise license. It is possible that a franchisor could condi갇on the con갇nua갇on of a franchise license on the comple갇on of capital improvements that our trustees determine are too expensive or otherwise not economically feasible in light of general economic condi갇ons, the opera갇ng results or prospects of the aﬀected hotel. In that event, our trustees may elect to allow the franchise license to lapse or be terminated. There can be no assurance that a franchisor will renew a franchise license at each op갇on period. If a franchisor terminates a franchise license, we may be unable to obtain a suitable replacement franchise, or to successfully operate the hotel independent of a franchise license. The loss of a franchise license could have a material adverse eﬀect upon the opera갇ons or the underlying value of the related hotel because of the loss of associated name recogni갇on, marke갇ng support and centralized reserva갇on systems provided by the franchisor. Our loss of a franchise license for one or more of the hotels could have a material adverse eﬀect on our partnership’s revenues and our amounts available for distribu갇on to shareholders. The hotel industry is seasonal in nature. The hotel industry is seasonal in nature. Generally, in certain markets we operate, hotel revenues are greater in the second and third quarters than in the ﬁrst and fourth quarters. Revenues for hotels and resorts in tourist areas generally are substan갇ally greater during tourist season than other 갇mes of the year. Our hotels’ opera갇ons historically reﬂect this trend in these markets. As a result, our results of opera갇ons may vary on a quarterly basis, impairing comparability of opera갇ng data and ﬁnancial performance on a quarter to quarter basis. The cyclical nature of the hotel industry may cause ﬂuctua⁛ons in our opera⁛ng performance, which could have a material adverse eﬀect on us. The hotel industry historically has been highly cyclical in nature. Fluctua갇ons in lodging demand and, therefore, opera갇ng performance, are caused largely by general economic and local market condi갇ons, which subsequently aﬀect levels of business and leisure travel. In addi갇on to general economic condi갇ons, new hotel room supply is an important factor that can aﬀect the hotel industry's performance, and overbuilding has the poten갇al to further exacerbate the nega갇ve impact of an economic recession. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth. We can provide no assurances regarding whether, or the extent to which, lodging demand will rebound or whether any such rebound will be sustained. An adverse change in lodging fundamentals could result in returns that are substan갇ally below our expecta갇ons or result in losses, which could have a material adverse eﬀect on us. The increasing use of Internet travel intermediaries by consumers may materially and adversely aﬀect our proﬁtability. Although a majority of rooms sold on the Internet are sold through websites maintained by the hotel franchisors and managers, some of our hotel rooms will be booked through Internet travel intermediaries. These Internet travel intermediaries may purchase rooms at a nego갇ated discount from par갇cipa갇ng hotels, which could result in lower room rates than the franchisor or manager otherwise could have obtained. As these Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other signiﬁcant contract concessions from us and any hotel management companies that we engage. Moreover, some of these Internet travel intermediaries are a姫emp갇ng to oﬀer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality, such as "three‐star downtown hotel," at the expense of brand iden갇ﬁca갇on or quality of product or service. If consumers develop brand loyal갇es to Internet reserva갇ons systems rather than to the brands under which our hotels are franchised, the value of our hotels could deteriorate and our 15 business could be materially and adversely aﬀected. Although most of the business for our hotels is expected to be derived from tradi갇onal channels, if the amount of sales made through Internet intermediaries business could be materially and adversely aﬀected. Although most of the business for our hotels is expected to be derived from tradi갇onal channels, if the amount of sales made through Internet intermediaries increases signiﬁcantly, room revenues may ﬂa姫en or decrease and our proﬁtability may be materially and adversely aﬀected. The need for business‐related travel and, thus, demand for rooms in our hotels may be materially and adversely aﬀected by the increased use of business‐related technology. The increased use of teleconference and video‐conference technology by businesses could result in decreased business travel as companies increase the use of technologies that allow mul갇ple par갇es from diﬀerent loca갇ons to par갇cipate at mee갇ngs without traveling to a centralized mee갇ng loca갇on, such as our hotels. To the extent that such technologies play an increased role in day‐to‐day business and the necessity for business‐related travel decreases, demand for our hotel rooms may decrease and we could be materially and adversely aﬀected. Future terrorist a⁫acks or changes in terror alert levels could adversely aﬀect travel and hotel demand. Previous terrorist a姫acks and subsequent terrorist alerts have adversely aﬀected the U.S. travel and hospitality industries in prior years, o耀en dispropor갇onately to the eﬀect on the overall economy. The impact that terrorist a姫acks in the U.S. or elsewhere could have on domes갇c and interna갇onal travel and our business in par갇cular cannot be determined but any such a姫acks or the threat of such a姫acks could have a material adverse eﬀect on our business, our ability to ﬁnance our business, our ability to insure our proper갇es and our results of opera갇ons and ﬁnancial condi갇on. The outbreak of widespread contagious disease could reduce travel and adversely aﬀect hotel demand. The widespread outbreak of infec갇ous or contagious disease, such as inﬂuenza, mumps and Zika virus, in the U.S. could reduce travel and adversely aﬀect the hotel industry generally and our business in par갇cular. RISKS RELATED TO OUR BUSINESS AND OPERATIONS We face risks associated with the use of debt, including reﬁnancing risk. At December 31, 2016, we had outstanding long‐term debt of approximately $1.1 billion. We may borrow addi갇onal amounts from the same or other lenders in the future. Any future repurchases of our own shares may require addi갇onal borrowings. Some of these addi갇onal borrowings may be secured by our hotels. Our declara갇on of trust (as amended and restated, our “Declara갇on of Trust”) does not limit the amount of indebtedness we may incur. We cannot assure you that we will be able to meet our debt service obliga갇ons and, to the extent that we cannot, we risk the loss of some or all of our hotels to foreclosure. Our indebtedness contains various ﬁnancial and non‐ﬁnancial events of default covenants customarily found in ﬁnancing arrangements. Our mortgages payable typically require that speciﬁed debt service coverage ra갇os be maintained with respect to the ﬁnanced proper갇es before we can exercise certain rights under the loan agreements rela갇ng to such proper갇es. If the speciﬁed criteria are not sa갇sﬁed, the lender may be able to escrow cash ﬂow from the applicable hotels. We have a substan갇al amount of debt that will mature within the next three to ﬁve years. There is a risk that we may not be able to reﬁnance exis갇ng debt or that the terms of any reﬁnancing will not be as favorable as the terms of the exis갇ng debt. If principal payments due at maturity cannot be reﬁnanced, extended or repaid with proceeds from other sources, such as new equity capital or sales of proper갇es, we may be forced to use opera갇ng income to repay such indebtedness, which would have a material adverse eﬀect on our cash available for distribu갇on in years when signiﬁcant “balloon” payments come due. In some such cases, we may lose the applicable hotels to foreclosure. This risk is par갇cularly signiﬁcant. See Item 7A of this Annual Report on Form 10‐K for a detailed schedule of debt principal repayments. We face high levels of compe⁛⁛on for the acquisi⁛on of hotel proper⁛es and other assets, which may impede our ability to make future acquisi⁛ons or may increase the cost of these acquisi⁛ons. We face compe갇갇on for investment opportuni갇es in high quality, upper‐upscale, and upscale limited service and extended‐stay hotels from en갇갇es organized for purposes substan갇ally similar to our objec갇ves, as well as other purchasers of hotels. We compete for such investment opportuni갇es with en갇갇es that have substan갇ally greater ﬁnancial resources than we do, including access to capital or be姫er rela갇onships with franchisors, sellers or lenders. Our compe갇tors may generally be able to accept more risk than we can manage prudently and may be able to borrow the funds needed to acquire hotels on more favorable terms. Compe갇갇on may generally reduce the number of suitable investment opportuni갇es oﬀered to us and increase the bargaining power of property owners seeking to sell. 16 We do not operate our hotels and, as a result, we do not have complete control over implementa⁛on of our strategic decisions. We do not operate our hotels and, as a result, we do not have complete control over implementa⁛on of our strategic decisions. In order for us to sa갇sfy certain REIT qualiﬁca갇on rules, we cannot directly or indirectly operate or manage any of our hotels. Instead, we must engage an independent management company to operate our hotels. As of December 31, 2016, our TRSs and our joint venture partnerships have engaged independent management companies as the property managers for all of our wholly owned hotels leased to our TRSs and the respec갇ve hotels for the joint ventures, as required by the REIT qualiﬁca갇on rules. The management companies opera갇ng the hotels make and implement strategic business decisions with respect to these hotels, such as decisions with respect to the reposi갇oning of a franchise or food and beverage opera갇ons and other similar decisions. Decisions made by the management companies opera갇ng the hotels may not be in the best interests of a par갇cular hotel or of the Company. Accordingly, we cannot assure you that the management companies will operate our hotels in a manner that is in our best interests. In addi갇on, the ﬁnancial condi갇on of the management companies could impact their future ability to operate our hotels. Our acquisi⁛ons may not achieve expected performance, which may harm our ﬁnancial condi⁛on and opera⁛ng results. We an갇cipate that acquisi갇ons will largely be ﬁnanced with the net proceeds of securi갇es oﬀerings and through externally generated funds such as borrowings under our revolving credit facility and other secured and unsecured debt ﬁnancing. Acquisi갇ons entail risks that investments will fail to perform in accordance with expecta갇ons and that es갇mates of the cost of improvements necessary to acquire and market proper갇es will prove inaccurate, as well as general investment risks associated with any new real estate investment. As a result, we may not be able to generate enough cash from these hotels to make debt service payments or pay opera갇ng expenses. Acquisi⁛on of hotels with limited opera⁛ng history may not achieve desired results. Many of our recent acquisi갇ons are newly‐developed hotels. Newly‐developed or newly‐renovated hotels do not have the opera갇ng history that would allow our management to make pricing decisions in acquiring these hotels based on historical performance. The purchase prices of these hotels are based upon management’s expecta갇ons as to the opera갇ng results of such hotels, subjec갇ng us to risks that such hotels may not achieve an갇cipated opera갇ng results or may not achieve these results within an갇cipated 갇me frames. As a result, we may not be able to generate enough cash ﬂow from these hotels to make debt payments or pay opera갇ng expenses. In addi갇on, room revenues may be less than that required to provide us with our an갇cipated return on investment. In either case, the amounts available for distribu갇on to our shareholders could be reduced. We may be unable to integrate acquired hotels into our opera⁛ons or otherwise manage our planned growth, which may adversely aﬀect our opera⁛ng results. We cannot assure you that we or our management companies will be able to adapt our management, administra갇ve, accoun갇ng and opera갇onal systems and arrangements, or hire and retain suﬃcient opera갇onal staﬀ to successfully integrate these investments into our por韃olio and manage any future acquisi갇ons of addi갇onal assets without opera갇onal disrup갇ons or unan갇cipated costs. Acquisi갇on of hotels generates addi갇onal opera갇ng expenses that we will be required to pay. As we acquire addi갇onal hotels, we will be subject to the opera갇onal risks associated with owning new lodging proper갇es. Our failure to integrate successfully any future acquisi갇ons into our por韃olio could have a material adverse eﬀect on our results of opera갇ons and ﬁnancial condi갇on and our ability to pay dividends to shareholders or make other payments in respect of securi갇es issued by us. Most of our hotels are located in the Eastern United States and many are located in the area from Washington, DC to Boston, MA, which may increase the eﬀect of any regional or local economic condi⁛ons. Most of our hotels are located in the area from Washington, DC to Boston, MA. As a result, regional or localized adverse events or condi갇ons, such as an economic recession, could have a signiﬁcant adverse eﬀect on our opera갇ons, and ul갇mately on the amounts available for distribu갇on to shareholders. 17 Our ownership of hotels in the New York City market exposes us to concentra⁛on risk, which may lead to increased vola⁛lity in our results of opera⁛ons. For the year ended December 31, 2016, our consolidated por韃olio of hotels in New York City have accounted for approximately 28% of our hotel opera갇ng revenues. The opera갇ons of our consolidated por韃olio of hotels in New York City will have a material impact on our overall results of opera갇ons. Concentra갇on risk with respect to our ownership of hotels in the New York City market may lead to increased vola갇lity in our overall results of opera갇ons. Our overall results of opera갇ons may be adversely aﬀected and our ability to pay distribu갇ons to our shareholders could be nega갇vely impacted in the event:      downturns in lodging fundamentals are more severe or prolonged in New York City compared to the United States as a whole; nega갇ve economic condi갇ons are more severe or prolonged in New York City compared to other areas, due to concentra갇on of the ﬁnancial industry in New York or otherwise; as new hotel supply enters the New York City market, this could impact our ability to grow ADR and RevPar as a result of the new supply; we adopt an unsuccessful strategy to ramp up and stabilize opera갇ons at our newly acquired New York hotels; or New York City is impacted by other unforeseen events beyond our control, including, among others, terrorist a姫acks and travel related health concerns including pandemics and epidemics. Acquired proper⁛es may be located in new markets where we may face risks associated with inves⁛ng in an unfamiliar market. We may acquire proper갇es in markets that are new to us. When we acquire proper갇es located in new markets, we may face risks associated with a lack of market knowledge or understanding of the local economy, forging new business rela갇onships in the area and unfamiliarity with local government and permi駫ng procedures. We work to mi갇gate such risks through extensive diligence and research and associa갇ons with experienced service providers. However, there can be no guarantee that all such risks will be eliminated. We own a limited number of hotels and signiﬁcant adverse changes at one hotel may impact our ability to make distribu⁛ons to shareholders. As of December 31, 2016, our por韃olio consisted of 43 wholly‐owned limited and full service proper갇es and joint venture investments in 12 hotels with a total of 8,800 rooms. However, certain larger hotels or hotels in certain loca갇ons dispropor갇onately impact our performance. Accordingly, signiﬁcant adverse changes in the opera갇ons of any one of these hotels could have a material adverse eﬀect on our ﬁnancial performance and on our ability to make expected distribu갇ons to our shareholders. We focus on acquiring hotels opera⁛ng under a limited number of franchise brands, which creates greater risk as the investments are more concentrated. We place par갇cular emphasis in our acquisi갇on strategy on hotels similar to our current hotels. We invest in hotels opera갇ng under a few select franchises and therefore will be subject to risks inherent in concentra갇ng investments in a par갇cular franchise brand, which could have an adverse eﬀect on amounts available for distribu갇on to shareholders. These risks include, among others, the risk of a reduc갇on in hotel revenues following any adverse publicity related to a speciﬁc franchise brand or the failure of the franchisor to maintain a certain brand. We depend on key personnel. We depend on the services of our exis갇ng senior management team, including Jay H. Shah, Neil H. Shah, Ashish R. Parikh and Michael R. Gillespie, to carry out our business and investment strategies. As we expand, we will con갇nue to need to a姫ract and retain qualiﬁed addi갇onal senior management. We have employment agreements with certain of our senior management; however, the employment agreements may be terminated under certain circumstances. The termina갇on of an employment agreement and the loss of the services of any of our key management personnel, or our inability to recruit and retain qualiﬁed personnel in the future, could have an adverse eﬀect on our business and ﬁnancial results. Joint venture investments could be adversely aﬀected by our lack of sole decision‐making authority, our reliance on co‐venturers’ ﬁnancial condi⁛ons and disputes between us and our co‐venturers. As of December 31, 2016, we had several joint ventures in which we shared ownership and decision‐making power with one or more par갇es. Joint venture investments involve risks that may not be present with other methods of ownership, including the possibility: that our partner might become insolvent, refuse to make capital contribu갇ons when due or otherwise fail to meet its obliga갇ons, which may result in certain liabili갇es to us for guarantees and other commitments; that our partner might at any 갇me have economic or other business interests or goals that are or become inconsistent with our interests or 18 goals; that we could become engaged in a dispute with our partner, which could require us to expend addi갇onal resources to resolve such disputes and could have an adverse impact on the opera갇ons and proﬁtability of the joint venture; and that our partner may be in a posi갇on to take ac갇on or withhold consent contrary to our instruc갇ons or requests. Our joint venture partners must agree in order for the applicable joint venture to take, or in some cases, may have control over whether the applicable joint venture will take, speciﬁc major ac갇ons, such as budget approvals, acquisi갇ons, sales of assets, debt ﬁnancing, execu갇ng lease agreements, and vendor approvals. Under these joint venture arrangements, any disagreements between us and our partners may result in delayed decisions. Our inability to take unilateral ac갇ons that we believe are in our best interests may result in missed opportuni갇es and an ineﬀec갇ve alloca갇on of resources and could have an adverse eﬀect on the ﬁnancial performance of the joint venture and our opera갇ng results. We engage in hedging transac⁛ons to limit our exposure to ﬂuctua⁛ons in interest rates, which can limit our gains and increase exposure to losses. We enter into hedging transac갇ons intended to protect us from the eﬀects of interest rate ﬂuctua갇ons on ﬂoa갇ng rate debt and also intended to protect our por韃olio of mortgage assets from interest rate and prepayment rate ﬂuctua갇ons. Our hedging transac갇ons may include entering into interest rate swaps, caps, and ﬂoors, op갇ons to purchase such items, and futures and forward contracts. Hedging ac갇vi갇es may not have the desired beneﬁcial impact on our results of opera갇ons or ﬁnancial condi갇on. No hedging ac갇vity can completely insulate us from the risks associated with changes in interest rates and prepayment rates. Moreover, interest rate hedging could fail to protect us or could adversely aﬀect our opera갇ng results because, among other things:      Available interest rate hedging may not correspond directly with the interest rate risk for which protec갇on is sought; The dura갇on of the hedge may not match the dura갇on of the related liability; The party at risk in the hedging transac갇on may default on its obliga갇on to pay; The credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transac갇on; and The value of deriva갇ves used for hedging may be adjusted from 갇me to 갇me in accordance with accoun갇ng rules to reﬂect changes in fair value. Hedging transac⁛ons may reduce our shareholders’ equity. Hedging involves risk and typically involves costs, including transac갇on costs, which may reduce returns on our investments. These costs increase as the period covered by the hedging increases and during periods of rising and vola갇le interest rates. These costs will also limit the amount of cash available for distribu갇on to shareholders. The REIT qualiﬁca갇on rules may also limit our ability to enter into hedging transac갇ons. We generally intend to hedge as much of our interest rate risk as our management determines is in our best interests given the cost of such hedging transac갇ons and the requirements applicable to REITs. If we are unable to hedge eﬀec갇vely because of the cost of such hedging transac갇ons or the limita갇ons imposed by the REIT rules, we will face greater interest risk exposure than may be commercially prudent. We and our hotel managers rely on informa⁛on technology in our opera⁛ons, and any material failure, inadequacy, interrup⁛on or security failure of that technology could harm our business. We and our hotel managers rely on informa갇on technology networks and systems, including the Internet, to process, transmit and store electronic informa갇on, and to manage or support a variety of business processes, including ﬁnancial transac갇ons and records, personal iden갇fying informa갇on, reserva갇ons, billing and opera갇ng data. We and our hotel managers purchase some of our informa갇on technology from vendors, on whom our systems depend. We and our hotel managers rely on commercially available systems, so耀ware, tools and monitoring to provide security for processing, transmission and storage of conﬁden갇al operator and other customer informa갇on, such as individually iden갇ﬁable informa갇on, including informa갇on rela갇ng to ﬁnancial accounts. Although we and our hotel managers have taken steps we believe are necessary to protect the security of our informa갇on systems and the data maintained in those systems, it is possible that the safety and security measures taken will not be able to prevent the systems’ improper func갇oning or damage, or the improper access or disclosure of personally iden갇ﬁable informa갇on such as in the event of cyber‐a姫acks. Security breaches, including physical or electronic break‐ ins, computer viruses, a姫acks by hackers and similar breaches, can create system disrup갇ons, shutdowns or unauthorized disclosure of conﬁden갇al informa갇on. Any failure to maintain proper func갇on, security and availability of our informa갇on systems could interrupt our opera갇ons, damage our reputa갇on, subject us to liability claims or regulatory penal갇es and could have a material adverse eﬀect on our business, ﬁnancial condi갇on and results of opera갇ons. 19 RISKS RELATED TO REAL ESTATE INVESTMENT GENERALLY RISKS RELATED TO REAL ESTATE INVESTMENT GENERALLY Illiquidity of real estate investments could signiﬁcantly impede our ability to respond to adverse changes in the performance of our proper⁛es and harm our ﬁnancial condi⁛on. Real estate investments are rela갇vely illiquid. Our ability to vary our por韃olio in response to changes in opera갇ng, economic and other condi갇ons will be limited. No assurances can be given that the fair market value of any of our hotels will not decrease in the future. If we suﬀer losses that are not covered by insurance or that are in excess of our insurance coverage limits, we could lose investment capital and an⁛cipated proﬁts. We require comprehensive insurance to be maintained on each of the our hotels, including liability and ﬁre and extended coverage in amounts suﬃcient to permit the replacement of the hotel in the event of a total loss, subject to applicable deduc갇bles. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, ﬂoods, hurricanes and acts of terrorism that may be uninsurable or not economically insurable. Inﬂa갇on, changes in building codes and ordinances, environmental considera갇ons and other factors also might make it imprac갇cable to use insurance proceeds to replace the applicable hotel a耀er such applicable hotel has been damaged or destroyed. Under such circumstances, the insurance proceeds received by us might not be adequate to restore our economic posi갇on with respect to the applicable hotel. If any of these or similar events occur, it may reduce the return from the a姫ached property and the value of our investment. Real estate is subject to property taxes. Each hotel is subject to real and personal property taxes. The real and personal property taxes on hotel proper갇es in which we invest may increase as property tax rates change and as the proper갇es are assessed or reassessed by taxing authori갇es. Many state and local governments are facing budget deﬁcits that have led many of them, and may in the future lead others to, increase assessments and/or taxes. If property taxes increase, our opera갇ng results may be nega갇vely aﬀected. Environmental ma⁫ers could adversely aﬀect our results. Opera갇ng costs may be aﬀected by the obliga갇on to pay for the cost of complying with exis갇ng environmental laws, ordinances and regula갇ons, as well as the cost of future legisla갇on. Under various federal, state and local environmental laws, ordinances and regula갇ons, a current or previous owner or operator of real property may be liable for the costs of removal or remedia갇on of hazardous or toxic substances on, under or in such property. Such laws o耀en impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The cost of complying with environmental laws could materially adversely aﬀect amounts available for distribu갇on to shareholders. Phase I environmental assessments have been obtained on all of our hotels. Nevertheless, it is possible that these reports do not reveal all environmental liabili갇es or that there are material environmental liabili갇es of which we are unaware. Our hotel proper⁛es may contain or develop harmful mold, which could lead to liability for adverse health eﬀects and costs of remedia⁛ng the problem. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, par갇cularly if the moisture problem remains undiscovered or is not addressed over a period of 갇me. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health eﬀects and symptoms, including allergic or other reac갇ons. As a result, the presence of mold to which hotel guests or employees could be exposed at any of our proper갇es could require us to undertake a remedia갇on program to contain or remove the mold from the aﬀected property, which could be costly. In addi갇on, exposure to mold by guests or employees, management company employees or others could expose us to liability if property damage or health concerns arise. Costs associated with complying with the ADA may adversely aﬀect our ﬁnancial condi⁛on and opera⁛ng results. Under the ADA, all public accommoda갇ons are required to meet certain federal requirements related to access and use by disabled persons. While we believe that our hotels are substan갇ally in compliance with these requirements, a determina갇on that we are not in compliance with the ADA could result in imposi갇on of ﬁnes or an award of damages to private li갇gants. In addi갇on, changes in governmental rules and regula갇ons or enforcement policies aﬀec갇ng the use and opera갇on of the hotels, including changes to building codes and ﬁre and life‐safety codes, may occur. If we were required to make substan갇al modiﬁca갇ons at the hotels to comply with the ADA or other changes in governmental rules and regula갇ons, our ability to make expected distribu갇ons to our shareholders could be adversely aﬀected. 20 RISKS RELATED TO CONFLICTS OF INTEREST Due to conﬂicts of interest, many of our exis⁛ng agreements may not have been nego⁛ated on an arm’s‐length basis and may not be in our best interest. Some of our oﬃcers and trustees have ownership interests in HHMLP and in en갇갇es with which we have entered into transac갇ons, including hotel acquisi갇ons and disposi갇ons and certain ﬁnancings. Consequently, the terms of our agreements with those en갇갇es, including hotel contribu갇on or purchase agreements, the Op갇on Agreement (as deﬁned below) between our opera갇ng partnership and some of the trustees and oﬃcers and our property management agreements with HHMLP, while intended to be nego갇ated on an arm’s‐length basis, may not have been and may not be in the best interest of all our shareholders. We have policies in place to encourage agreements to be nego갇ated on an arm’s‐length basis. Transac갇ons with related persons must be approved by a majority of the Company’s independent trustees. The Board of Trustees’ policy requires any independent trustee with a direct or indirect interest in the transac갇on to excuse himself or herself from any considera갇on of the related person transac갇on in which he or she has an interest. Conﬂicts of interest with HHMLP may result in decisions that do not reﬂect our best interests. We have entered into an option agreement (as amended, the “Op갇on 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 enti갇es controlled by them at fair market value. This right of ﬁrst refusal would apply to each party until one year a耀er such party ceases to be an oﬃcer or trustee of the Company. Our Acquisition Commi姫ee 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 par갇es are approved by the Acquisi갇on Commi姫ee. The following oﬃcers and trustees own collec갇vely approximately 27% of HHMLP: Hasu P. Shah, Jay H. Shah, and Neil H. Shah. Conﬂicts of interest may arise with respect to the ongoing opera갇on of our hotels including, but not limited to, the enforcement of the contribu갇on and purchase agreements, the Op갇on Agreement and our property management agreements with HHMLP. These oﬃcers and trustees also make decisions for our company with respect to property management. Consequently, these oﬃcers and trustees may not act solely in the best interests of our shareholders rela갇ng to property management by HHMLP. Conﬂicts of interest rela⁛ng to sales or reﬁnancing of hotels acquired from some of our trustees and oﬃcers may lead to decisions that are not in our best interest. Some of our non‐independent trustees and oﬃcers have unrealized gains associated with their interests in the hotels we have acquired from them and, as a result, any sale of these hotels or reﬁnancing or prepayment of principal on the indebtedness assumed by us in purchasing these hotels may cause adverse tax consequences to such trustees and oﬃcers. Therefore, our interests and the interests of these individuals may be diﬀerent in connec갇on with the disposi갇on or reﬁnancing of these hotels. Hotels owned or acquired by some of our trustees and oﬃcers may hinder these individuals from spending adequate ⁛me on our business. Some of our trustees and oﬃcers own hotels and may develop or acquire new hotels, subject to certain limita갇ons. Such ownership, development or acquisi갇on ac갇vi갇es may materially aﬀect the amount of 갇me these oﬃcers and trustees devote to our aﬀairs. Some of our trustees and oﬃcers operate hotels that are not owned by us, which may materially aﬀect the amount of 갇me that they devote to managing our hotels. Pursuant to the Op갇on Agreement we have an op갇on to acquire any hotels developed by our oﬃcers and trustees. RISKS RELATING TO OUR STRUCTURE There are no assurances of our ability to make distribu⁛ons in the future. We intend to pay quarterly dividends and to make distribu갇ons to our shareholders in amounts such that all or substan갇ally all of our taxable income in each year, subject to certain adjustments, is distributed. However, our ability to pay dividends may be adversely aﬀected by the risk factors described in this annual report. All distribu갇ons will be made at the discre갇on of our Board of Trustees and will depend upon our earnings, our ﬁnancial condi갇on, maintenance of our REIT status and such other factors as our Board of Trustees may deem relevant from 갇me to 갇me. There are no assurances of our ability to pay dividends in the future. 21 An increase in market interest rates may have an adverse eﬀect on the market price of our securi⁛es. One of the factors that investors may consider in deciding whether to buy or sell our securi갇es is our dividend rate as a percentage of our share or unit price, rela갇ve to market interest rates. If market interest rates increase, prospec갇ve investors may desire a higher dividend or interest rate on our securi갇es or seek securi갇es paying higher dividends or interest. The market price of our common shares likely will be based primarily on the earnings and return that we derive from our investments and income with respect to our proper갇es and our related distribu갇ons to shareholders, and not from the market value or underlying appraised value of the proper갇es or investments themselves. The market price of our preferred shares is based in large part on prevailing interest rates. As a result, interest rate ﬂuctua갇ons and capital market condi갇ons can aﬀect the market price of our common shares. For instance, if interest rates rise without an increase in our dividend rate, the market price of our common shares could decrease because poten갇al investors may require a higher dividend yield on our common shares as market rates on interest‐bearing securi갇es, such as bonds, rise. In addi갇on, rising interest rates would result in increased interest expense on our variable rate debt, thereby adversely aﬀec갇ng cash ﬂow and our ability to service our indebtedness and pay dividends. Holders of our outstanding preferred shares have dividend, liquida⁛on and other rights that are senior to the rights of the holders of our common shares. Our Board of Trustees has the authority to designate and issue preferred shares with liquida갇on, dividend and other rights that are senior to those of our common shares. As of December 31, 2016, 3,000,000 Series C Preferred Shares, 7,700,000 Series D Preferred Shares and 4,000,000 Series E Preferred Shares were issued and outstanding. Holders of our outstanding preferred shares are en갇tled to cumula갇ve dividends before any dividends may be declared or set aside on our common shares. Upon our voluntary or involuntary liquida갇on, dissolu갇on or winding up, before any payment is made to holders of our common shares, holders of our preferred shares are en갇tled to receive a liquida갇on preference of $25.00 per share plus any accrued and unpaid distribu갇ons. This will reduce the remaining amount of our assets, if any, available to distribute to holders of our common shares. In addi갇on, holders of our preferred shares have the right to elect two addi갇onal trustees to our Board of Trustees whenever dividends are in arrears in an aggregate amount equivalent to six or more quarterly dividends, whether or not consecu갇ve. Future oﬀerings of equity securi⁛es, which would dilute our exis⁛ng shareholders and may be senior to our common shares for the purposes of dividend distribu⁛ons, may adversely aﬀect the market price of our common shares. In the future, we may a姫empt to increase our capital resources by making addi갇onal oﬀerings of equity securi갇es, including classes of preferred or common shares. Upon liquida갇on, holders of our preferred shares and lenders with respect to other borrowings will receive a distribu갇on of our available assets prior to the holders of our common shares. Addi갇onal equity oﬀerings may dilute the holdings of our exis갇ng shareholders or reduce the market price of our common shares, or both. Our preferred shares, if issued, could have a preference on liquida갇ng distribu갇ons or a preference on dividend payments that could limit our ability to make a dividend distribu갇on to the holders of our common shares. Because our decision to issue securi갇es in any future oﬀering will depend on market condi갇ons and other factors beyond our control, we cannot predict or es갇mate the amount, 갇ming or nature of our future oﬀerings. Thus, our shareholders bear the risk of our future oﬀerings reducing the market price of our common shares and dilu갇ng their share holdings in us. We may change our distribu⁛on policy in the future. In the past we have reduced the quarterly distribu갇ons paid to our shareholders, and we may reduce or eliminate the quarterly distribu갇on paid to our shareholders in the future. The decision to declare and pay distribu갇ons on our common shares in the future, as well as the 갇ming, amount and composi갇on of any such future distribu갇ons, will be at the sole discre갇on of our board of trustees and will depend on our earnings, funds from opera갇ons, liquidity, ﬁnancial condi갇on, capital requirements, contractual prohibi갇ons or other limita갇ons under our indebtedness and preferred shares, the annual distribu갇on requirements under the REIT provisions of the Code, state law and such other factors as our board of trustees deems relevant. Any change in our distribu갇on policy could have a material adverse eﬀect on the market price of our common shares. 22 The market price of our securi⁛es could be vola⁛le and could decline, resul⁛ng in a substan⁛al or complete loss of your investment in our securi⁛es. The stock markets have experienced signiﬁcant price and volume ﬂuctua갇ons in the recent past. As a result, the market price of our securi갇es has been and could be similarly vola갇le in the future, and investors in our securi갇es may experience a decrease in the value of their investments, including decreases unrelated to our opera갇ng performance or prospects. The market price of our securi갇es could be subject to wide ﬂuctua갇ons in response to a number of factors, including:           our opera갇ng performance and the performance of other similar companies; actual or an갇cipated diﬀerences in our opera갇ng results; changes in our revenues or earnings es갇mates or recommenda갇ons by securi갇es analysts; publica갇on of research reports about us or our industry by securi갇es analysts; addi갇ons and departures of key personnel; strategic decisions by us or our compe갇tors, such as acquisi갇ons, divestments, spin‐oﬀs, joint ventures, strategic investments or changes in business strategy; the passage of legisla갇on or other regulatory developments or execu갇ve policies that adversely aﬀect us or our industry; specula갇on in the press or investment community; ac갇ons by ins갇tu갇onal shareholders; changes in accoun갇ng principles; terrorist acts; and general market condi갇ons, including factors unrelated to our performance. In the past, securi갇es class ac갇on li갇ga갇on has o耀en been ins갇tuted against companies following periods of vola갇lity in their stock price. This type of li갇ga갇on could result in substan갇al costs and divert our management’s a姫en갇on and resources. Future sales of our common shares or securi⁛es conver⁛ble into or exchangeable or exercisable for our common shares could depress the market price of our common shares. We cannot predict whether future sales of our common shares or securi갇es conver갇ble into or exchangeable or exercisable for our commons shares or the availability of these securi갇es for resale in the open market will decrease the market price of our common shares. Sales of a substan갇al number of these securi갇es in the public market, including sales upon the redemp갇on of Common Units held by the limited partners of our opera갇ng partnership, (other than us and our subsidiaries) or the percep갇on that these sales might occur, may cause the market price of our common shares to decline and you could lose all or a por갇on of your investment. Future issuances of our common shares or other securi갇es conver갇ble into or exchangeable or exercisable for our common shares, including, without limita갇on, common units of beneﬁcial interest in our Opera갇ng Partnership (“Common Units”), in connec갇on with property, por韃olio or business acquisi갇ons and issuances of equity‐based awards to par갇cipants in our equity incen갇ve plans, could have an adverse eﬀect on the market price of our common shares. Future issuances of these securi갇es also could adversely aﬀect the terms upon which we obtain addi갇onal capital through the sale of equity securi갇es. In addi갇on, future sales or issuances of our common shares may be dilu갇ve to exis갇ng shareholders. Our Board of Trustees may authorize the issuance of addi⁛onal shares that may cause dilu⁛on or prevent a transac⁛on that is in the best interests of our shareholders. Our Declara갇on of Trust authorizes the Board of Trustees, without shareholder approval, to:    amend the Declara갇on of Trust to increase or decrease the aggregate number of shares of beneﬁcial interest or the number of shares of beneﬁcial interest of any class or series that we have the authority to issue; cause us to issue addi갇onal authorized but unissued common shares or preferred shares; or classify or reclassify any unissued common or preferred shares and to set the preferences, rights and other terms of such classiﬁed or reclassiﬁed shares, including the issuance of addi갇onal common shares or preferred shares that have preference rights over the common shares with respect to dividends, liquida갇on, vo갇ng and other ma姫ers. Any one of these events could cause dilu갇on to our common shareholders, delay, deter or prevent a transac갇on or a change in control that might involve a premium price for the common shares or otherwise not be viewed in the best interest of holders of common shares. 23 Our Declara⁛on of Trust contains a provision that creates staggered terms for our Board of Trustees. Our Board of Trustees is divided into two classes, the terms of which expire every two years. Trustees of each class are elected for two‐year terms upon the expira갇on of their current terms and each year one class of trustees will be elected by the shareholders. The staggered terms of trustees may delay, deter or prevent a tender oﬀer, a change in control of us or other transac갇on, even though such a transac갇on might be viewed in the best interest of the shareholders. Certain provisions of Maryland law may discourage a third party from acquiring us. Under the Maryland General Corpora갇on Law, as amended (MGCL), as applicable to REITs, certain “business combina갇ons” (including certain issuances of equity securi갇es) between a Maryland REIT and any person who beneﬁcially owns ten percent or more of the vo갇ng power of the trust’s shares, or an aﬃliate thereof, are prohibited for ﬁve years a耀er the most recent date on which such shareholder acquired at least ten percent of the vo갇ng power of the trust’s shares. Therea耀er, any such business combina갇on must be approved by two super‐majority shareholder votes unless, among other condi갇ons, the trust’s common shareholders receive a minimum price (as deﬁned in the MGCL) for their shares and the considera갇on is received in cash or in the same form as previously paid by the interested shareholder for its common shares. These provisions could delay, deter or prevent a change of control or other transac갇on in which holders of our equity securi갇es might receive a premium for their shares above then‐current market prices or which such shareholders otherwise might believe to be in their best interests. Although our bylaws contain a provision exemp갇ng acquisi갇ons of our shares from the control share acquisi갇on legisla갇on referenced above, there can be no assurance that this provision will not be amended or eliminated at any 갇me in the future. Our Board of Trustees may change our investment and opera⁛onal policies without a vote of the common shareholders. Our major policies, including our policies with respect to acquisi갇ons, ﬁnancing, growth, opera갇ons, debt limita갇on and distribu갇ons, are determined by our Board of Trustees. The Trustees may amend or revise these and other policies from 갇me to 갇me without a vote of the holders of the common shares. Our Board of Trustees and management make decisions on our behalf, and shareholders have limited management rights. Our shareholders have no right or power to take part in our management except through the exercise of vo갇ng rights on certain speciﬁed ma姫ers. The Board of Trustees is responsible for our management and strategic business direc갇on, and our management is responsible for our day‐to‐day opera갇ons. Certain policies of our Board of Trustees may not be consistent with the immediate best interests of our shareholders. RISKS RELATED TO OUR TAX STATUS If we fail to qualify as a REIT, our dividends will not be deduc⁛ble to us, and our income will be subject to taxa⁛on, which would reduce the cash available for distribu⁛on to our shareholders. We have operated and intend to con갇nue to operate so as to qualify as a REIT for federal income tax purposes. However, the federal income tax laws governing REITs are extremely complex, and interpreta갇ons of the federal income tax laws governing REITs are limited. Our con갇nued qualiﬁca갇on as a REIT will depend on our con갇nuing ability to meet various requirements concerning, among other things, the ownership of our outstanding shares of beneﬁcial interest, the nature of our assets, the sources of our income, and the amount of our distribu갇ons to our shareholders. Moreover, new tax legisla갇on, administra갇ve guidance or court decisions, in each instance poten갇ally with retroac갇ve eﬀect, could make it more diﬃcult or impossible for us to qualify as a REIT. If we were to fail to qualify as a REIT in any taxable year and did not qualify for certain statutory relief provisions, we would not be allowed a deduc갇on for distribu갇ons to our shareholders in compu갇ng our taxable income and would be subject to federal income tax (including any applicable alterna갇ve minimum tax) on our taxable income at regular corporate rates. Any such corporate tax liability could be substan갇al and would reduce the amount of cash available for distribu갇on to our shareholders, which in turn could have an adverse impact on the value of, and trading prices for, our shares. Unless en갇tled to relief under certain Code provisions, we also would be disqualiﬁed from treatment as a REIT for the four taxable years following the year during which qualiﬁca갇on was lost. As a result, amounts available for distribu갇on to shareholders would be reduced for each of the years involved. Although we currently intend to con갇nue to operate in a manner so as to qualify as a REIT, it is possible that future economic, market, legal, tax or other considera갇ons may cause our Board of Trustees, with the consent of holders of two‐thirds of the outstanding shares, to revoke our REIT elec갇on. 24 Failure to make required distribu⁛ons would subject us to tax, which would reduce the cash available for distribu⁛on to our shareholders. Failure to make required distribu⁛ons would subject us to tax, which would reduce the cash available for distribu⁛on to our shareholders. In order to maintain our qualiﬁca갇on as a REIT, each year we must distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the deduc갇on for dividends paid and excluding net capital gain. To the extent that we sa갇sfy the 90% distribu갇on requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addi갇on, we will incur a 4% nondeduc갇ble excise tax on the amount, if any, by which our actual distribu갇ons in any year are less than the sum of:    85% of our REIT ordinary income for that year; 95% of our REIT capital gain net income for that year; and 100% of our undistributed taxable income required to be distributed from prior years. We have distributed, and intend to con갇nue to distribute, our taxable income to our shareholders in a manner intended to sa갇sfy the 90% distribu갇on requirement and to avoid corporate income tax and the 4% nondeduc갇ble excise tax. Diﬀerences in 갇ming between the recogni갇on of income and the related cash receipts or the eﬀect of required debt amor갇za갇on payments could require us to borrow money or sell assets to pay out enough of our taxable income to sa갇sfy the distribu갇on requirement and to avoid corporate income tax and the 4% nondeduc갇ble excise tax in a par갇cular year. In the past we have borrowed, and in the future we may borrow, to pay distribu갇ons to our shareholders and the limited partners of our opera갇ng partnership. Such borrowings subject us to risks from borrowing as described herein. Addi갇onally, we may, if necessary and allowable, pay taxable dividends of our shares or debt securi갇es to meet the distribu갇on requirements. If the leases of our hotels to our TRSs are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT. To maintain our qualiﬁca갇on as a REIT, we must sa갇sfy two gross income tests, under which speciﬁed percentages of our gross income must be derived from certain sources, such as “rents from real property.” Rents paid to our opera갇ng partnership by our TRSs pursuant to the lease of our hotels cons갇tute substan갇ally all of our gross income. In order for such rent to qualify as “rents from real property” for purposes of the gross income tests, the leases must be respected as true leases for federal income tax purposes and not be treated as service contracts, joint ventures or some other type of arrangement. If our leases are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT. Our ownership of our TRSs is limited and our transac갇ons with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deduc갇ons if those transac갇ons are not conducted on arm's‐ length terms. A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT, including gross opera갇ng income from hotel opera갇ons pursuant to hotel management contracts. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corpora갇on of which a TRS directly or indirectly owns more than 35% of the vo갇ng power or value of the stock will automa갇cally be treated as a TRS. Overall, no more than 25% (or 20% for taxable years beginning a耀er December 31, 2017) of the value of a REIT's assets may consist of stock or securi갇es of one or more TRSs. In addi갇on, the TRS rules limit the deduc갇bility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxa갇on. The rules also impose a 100% excise tax on certain transac갇ons between a TRS and its parent REIT that are not conducted on an arm's‐length basis. Our TRSs are subject to applicable federal, foreign, state and local income tax on their taxable income, and their a耀er‐tax net income will be available for distribu갇on to us but is not required to be distributed to us. We believe that the aggregate value of the stock and securi갇es of our TRSs is and will con갇nue to be less than 25% (or 20% beginning a耀er December 31, 2017) of the value of our total assets (including our TRS stock and securi갇es). Furthermore, we will monitor the value of our respec갇ve investments in our TRSs for the purpose of ensuring compliance with TRS ownership limita갇ons. In addi갇on, we will scru갇nize all of our transac갇ons with our TRSs to ensure that they are entered into on arm's‐length terms to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 25% (or 20%) limita갇on discussed above or to avoid applica갇on of the 100% excise tax discussed above. 25 If our hotel managers do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT. Rent paid by a lessee that is a “related party tenant” of ours will not be qualifying income for purposes of the two gross income tests applicable to REITs. We lease our hotels to our TRSs. A TRS will not be treated as a “related party tenant,” and will not be treated as directly opera갇ng a lodging facility, which is prohibited, to the extent the TRS leases proper갇es from us that are managed by an “eligible independent contractor.” We believe that the rent paid by our TRSs is qualifying income for purposes of the REIT gross income tests and that our TRSs qualify to be treated as taxable REIT subsidiaries for federal income tax purposes, but there can be no assurance that the Internal Revenue Service, or the IRS, will not challenge this treatment or that a court would not sustain such a challenge. If the IRS successfully challenged this treatment, we would likely fail to sa갇sfy the asset tests applicable to REITs and substan갇ally all of our income would fail to qualify for the gross income tests. If we failed to sa갇sfy either the asset or gross income tests, we would likely lose our REIT qualiﬁca갇on for federal income tax purposes, unless certain relief provisions applied. If our hotel managers do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT. Each of the hotel management companies that enters into a management contract with our TRSs must qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by our TRSs to be qualifying income for our REIT income test requirements. Among other requirements, in order to qualify as an eligible independent contractor a manager must not own more than 35% of our outstanding shares (by value) and no person or group of persons can own more than 35% of our outstanding shares and the ownership interests of the manager, taking into account only owners of more than 5% of our shares and, with respect to ownership interests in such managers that are publicly traded, only holders of more than 5% of such ownership interests. Complex ownership a姫ribu갇on rules apply for purposes of these 35% thresholds. Although we intend to con갇nue to monitor ownership of our shares by our hotel managers and their owners, there can be no assurance that these ownership levels will not be exceeded. The federal income tax laws governing REITs are complex. We intend to con갇nue to operate in a manner that will qualify us as a REIT under the federal income tax laws. The REIT qualiﬁca갇on requirements are extremely complex, however, and interpreta갇ons of the federal income tax laws governing qualiﬁca갇on as a REIT are limited. Accordingly, we cannot be certain that we will be successful in opera갇ng so we can con갇nue to qualify as a REIT. At any 갇me, new laws, interpreta갇ons, or court decisions may change the federal tax laws or the federal income tax consequences of our qualiﬁca갇on as a REIT. Complying with REIT requirements may force us to sell otherwise a⁫rac⁛ve investments. To maintain our qualiﬁca갇on as a REIT, we must sa갇sfy certain requirements with respect to the character of our assets. If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days a耀er the end of the calendar quarter (by, possibly, selling assets notwithstanding their prospects as an investment) to avoid losing our REIT status. If we fail to comply with these requirements at the end of any calendar quarter, and the failure exceeds a de minimis threshold, we may be able to preserve our REIT status if (a) the failure was due to reasonable cause and not to willful neglect, (b) we dispose of the assets causing the failure within six months a耀er the last day of the quarter in which we iden갇ﬁed the failure, (c) we ﬁle a schedule with the IRS, describing each asset that caused the failure, and (d) we pay an addi갇onal tax of the greater of $50,000 or the product of the highest applicable tax rate mul갇plied by the net income generated on those assets. As a result, we may be required to liquidate otherwise a姫rac갇ve investments. The prohibited transac⁛ons tax may limit our ability to engage in transac⁛ons, including disposi⁛ons of assets that would be treated as sales for federal income tax purposes. A REIT's net income from prohibited transac갇ons is subject to a 100% tax. In general, prohibited transac갇ons are sales or other disposi갇ons of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transac갇on tax upon a disposi갇on of real property. Although a safe harbor to the characteriza갇on of the sale of real property by a REIT as a prohibited transac갇on is available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of real property or may conduct such sales through a TRS. 26 We may pay taxable dividends partly in shares and partly in cash, in which case shareholders may sell our shares to pay tax on such dividends, placing downward pressure on the market price of our shares. We may make taxable dividends that are payable partly in cash and partly in shares. The IRS has issued private le姫er rulings to other REITs trea갇ng certain distribu갇ons that are paid partly in cash and partly in shares as dividends that would sa갇sfy the REIT annual distribu갇on requirement and qualify for the dividends paid deduc갇on for federal income tax purposes. Those rulings may be relied upon only by the taxpayers to whom they were issued, but we could request a similar ruling from the IRS. In addi갇on, the IRS issued a revenue procedure crea갇ng a temporary safe harbor that authorized publicly traded REITs to make elec갇ve cash/stock dividends, but that temporary safe harbor has expired. Accordingly, it is unclear whether and to what extent we will be able to make taxable dividends payable in cash and shares. If in the future we choose to pay dividends in our own shares, our shareholders may be required to pay tax in excess of the cash that they receive. If a U.S. shareholder sells the shares that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our shares at the 갇me of the sale. Furthermore, with respect to certain non‐U.S. shareholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a por갇on of such dividend that is payable in shares. If we pay dividends in our own shares and a signiﬁcant number of our shareholders determine to sell our shares in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our shares. Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. The tax rate applicable to “qualiﬁed dividend income” payable to domes갇c stockholders taxed at individual rates may be 20% or lower. Dividends payable by REITs, however, generally are not eligible for the reduced rates for qualiﬁed dividend income. Although this legisla갇on does not adversely aﬀect the taxa갇on of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualiﬁed dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be rela갇vely less a姫rac갇ve than investments in the stocks of non‐REIT corpora갇ons that pay dividends, which could adversely aﬀect the value of the stock of REITs, including our shares. Our share ownership limita⁛on may prevent certain transfers of our shares. In order to maintain our qualiﬁca갇on as a REIT, not more than 50% in value of our outstanding shares of beneﬁcial interest may be owned, directly or indirectly, by ﬁve or fewer individuals (as deﬁned in the Code to include certain en갇갇es). Our Declara갇on of Trust prohibits direct or indirect ownership (taking into account applicable ownership provisions of the Code) of more than (a) 9.9% of the aggregate number of outstanding common shares of any class or series or (b) 9.9% of the aggregate number of outstanding preferred shares of any class or series of outstanding preferred shares by any shareholder or group, or the Ownership Limita갇on. Generally, the shares of beneﬁcial interest owned by related owners will be aggregated for purposes of the Ownership Limita갇on. The Board of Trustees, upon receipt of advice of counsel or other evidence sa갇sfactory to the Board of Trustees, in its sole and absolute discre갇on, may exempt a shareholder from the Ownership Limita갇on. The Ownership Limita갇on could have the eﬀect of delaying, deterring or preven갇ng a change in control or other transac갇on in which holders of shares might receive a premium for their shares over the then prevailing market price or which such holders might believe to be otherwise in their best interests. Any transfer of shares of beneﬁcial interest that would violate the Ownership Limita갇on, cause us to have fewer than 100 shareholders, cause us to be “closely held” within the meaning of Sec갇on 856(h) of the Code or cause us to own, directly or indirectly, 10% or more of the ownership interest in any tenant (other than a TRS) will be void, the intended transferee of such shares will be deemed never to have had an interest in such shares, and such shares will be designated “shares‐in‐trust.” Further, we will be deemed to have been oﬀered shares‐in‐trust for purchase at the lesser of the market price (as deﬁned in the Declara갇on of Trust) on the date we accept the oﬀer and the price per share in the transac갇on that created such shares‐in‐trust (or, in the case of a gi耀, devise or non‐ transfer event (as deﬁned in the Declara갇on of Trust), the market price on the date of such gi耀, devise or non‐transfer event). Therefore, the holder of shares of beneﬁcial interest in excess of the Ownership Limita갇on will experience a ﬁnancial loss when such shares are purchased by us, if the market price falls between the date of purchase and the date of redemp갇on. We may be subject to adverse legisla⁛ve or regulatory tax changes that could reduce the market price of our shares. At any 갇me, the federal income tax laws governing REITs or the administra갇ve interpreta갇ons of those laws may be amended. We cannot predict when or if any new federal income tax law, regula갇on, or administra갇ve interpreta갇on, or any amendment to any exis갇ng federal income tax law, regula갇on or administra갇ve interpreta갇on, will be adopted, promulgated or become eﬀec갇ve and any such law, regula갇on, or interpreta갇on may take eﬀect retroac갇vely. In addi갇on, according to publicly released statements, a top legisla갇ve priority of the Trump administra갇on and Congress may be signiﬁcant reform of the Code, including signiﬁcant changes to taxa갇on of business en갇갇es. There is a substan갇al lack of clarity around both the 갇ming and the details of any such tax reform and the impact of any poten갇al tax reform on an investment in us. We and our shareholders could be adversely aﬀected by any such change in, or any new, federal income tax law, regula갇on or administra갇ve interpreta갇on. 27 Item 1B. Unresolved Staﬀ Comments Item 1B. Unresolved Staﬀ Comments None. 28 Item 2. Proper갇es The following table sets forth certain informa갇on with respect to the 43 hotels we wholly owned as of December 31, 2016, all of which are consolidated on the Company’s ﬁnancial statements. Market Name Loca갇on Year Opened Number of Rooms Boston Urban and Metro Courtyard Brookline/Boston, MA (1) California ‐ Arizona South Florida NYC Urban The Boxer Holiday Inn Express The Envoy Courtyard Courtyard Hya姫 House Hya姫 House Hya姫 House Hotel Milo TownePlace Suites Sanctuary Resort Courtyard Ambrose Hotel Blue Moon Courtyard Residence Inn Winter Haven Boston, MA Cambridge, MA Boston, MA San Diego, CA Los Angeles, CA Pleasant Hill, CA Pleasanton, CA Sco姫sdale, AZ Santa Barbara, CA (1) Sunnyvale, CA (1) Monterey Bay, CA Sunnyvale, CA Santa Monica, CA Miami, FL Miami, FL Coconut Grove, FL Miami, FL Parrot Key Hotel & Resort Key West, FL Duane Street Hampton Inn Hampton Inn Hilton Garden Inn Hilton Garden Inn Holiday Inn Express Hya姫 Nu Hotel Sheraton Hotel Hilton Garden Inn TriBeCa, NY Seaport, NY Pearl Street, Manha姫an, NY JFK Airport, NY (1) TriBeCa, NY Madison Square Garden, Manha姫an, NY Union Square, NY Brooklyn, NY JFK Airport, NY (1) Midtown East, Manha姫an, NY NY‐NJ Metro Holiday Inn Express Hya姫 House Chester, NY White Plains, NY 29 2003 2004 1997 2015 1999 2008 2003 1998 1999 2001 2003 2014 2014 2015 2013 2004 2000 2013 2013 2008 2006 2012 2005 2009 2006 2013 2008 2008 2014 2006 2000 188 80 112 136 245 260 142 128 164 122 94 60 145 77 75 357 140 70 148 43 65 81 192 151 228 178 93 150 205 80 159 Market Name Loca갇on Year Opened Number of Rooms Philadelphia Washington D.C. Hampton Inn Sheraton Hotel The Ri姫enhouse Hotel Ritz Carlton Courtyard Hampton Inn Hya姫 House Residence Inn Residence Inn The Capitol Hill Hotel St. Gregory Hotel Hilton Garden Inn Philadelphia, PA New Castle, DE Philadelphia, PA Georgetown, DC Alexandria, VA (2) Washington, DC Gaithersburg, MD Tysons Corner, VA Greenbelt, MD (2) Washington, DC Washington, DC Washington, DC 2001 2011 2004 2014 2006 2005 1998 1984 2002 2007 2014 2014 250 192 116 86 203 228 140 96 120 152 155 238 TOTAL ROOMS 6,344 (1) 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 ini갇al terms of 99 years and all have a remaining term of at least 85 years. (2) These proper갇es were sold on January 5, 2017. 30 The following table sets forth certain informa갇on with respect to the 12 hotels we owned through unconsolidated joint ventures with third par갇es as of December 31, 2016. Market Name Loca갇on Year Opened Number of Rooms HHLP Ownership in Asset HHLP Preferred Return Boston Courtyard South Boston, MA (1) Holiday Inn Express South Boston, MA (1) Connec갇cut Hilton Marrio姫 Marrio姫 Har韃ord, CT (2) Mys갇c, CT (2) Har韃ord, CT (2) NYC Urban Candlewood Suites Times Square, NY Hampton Inn Holiday Inn Times Square, NY Wall Street, NY Holiday Inn Express Times Square, NY Holiday Inn Express Water Street, Manha姫an, NY Hampton Inn Hampton Inn Chelsea/Manha姫an, NY Herald Square, Manha姫an, NY N/A N/A 8.5% 8.5% 8.5% 2005 1998 2005 2001 2005 2009 2009 2010 2009 2010 2003 2005 164 118 393 285 409 188 184 113 210 112 144 136 50.0% 50.0% 8.8% 66.7% 15.0% 30.0% (3) 30.0% (3) 30.0% (3) 30.0% (3) 30.0% (3) 30.0% (3) 30.0% (3) TOTAL ROOMS 2,456 (1) 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 44 years. (2) On January 3, 2017, we redeemed our joint venture interest in Mys갇c Partners, LLC by acquiring 100% ownership interest in the Mys갇c Marrio姫 Hotel & Spa and transferring our minority ownership interests in the Har韃ord Marrio姫 and Har韃ord Hilton to the joint venture partner. (3) The percentages shown for these proper갇es represent our common ownership interest in the CINDAT JV. As of December 31, 2016, we owned a $43,194 preferred equity interest in the joint venture, which earns a 9% cumula갇ve preferred return. See Note 3 – Investment in Unconsolidated Joint Ventures for a more detailed explana갇on of our ownership interest and the related distribu갇on of earnings within the venture. 31 Item 3. Legal Proceedings We are not presently subject to any material li갇ga갇on nor, to our knowledge, is any other li갇ga갇on threatened against us, other than rou갇ne ac갇ons for negligence or other claims and administra갇ve proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collec갇vely are not expected to have a material adverse eﬀect on our liquidity, results of opera갇ons or business or ﬁnancial condi갇on. Item 4. Mine Safety Disclosures Not applicable. 32 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Ma姫ers and Issuer Purchases of Equity Securi갇es MARKET INFORMATION PART II Our common shares trade on the New York Stock Exchange under the symbol “HT.” As of February 22, 2017, the last reported closing price per common share on the New York Stock Exchange was $21.17. 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 declared on the common shares for each of the quarters indicated. Year Ended December 31, 2016 High Low Dividend Per Common Share Fourth Quarter Third Quarter Second Quarter First Quarter $ $ $ $ 23.04 20.19 21.31 22.15 $ $ $ $ 16.80 17.22 15.36 16.13 $ $ $ $ 0.48 * 0.28 0.28 0.28 Year Ended December 31, 2015 High Low Dividend Per Common Share Fourth Quarter Third Quarter Second Quarter First Quarter *Represents the aggregate of a quarterly dividend of $0.28 per common share and an addi갇onal special dividend of $0.20 per common share. **Adjusted for 4‐for‐1 reverse share split eﬀec갇ve as of June 22, 2015. 25.63 $ 28.60 $ 26.92 $ 28.84 $ 0.28 0.28 0.28 0.28 ** 21.47 22.20 25.04 25.12 $ $ $ $ $ $ $ $ SHAREHOLDER INFORMATION At December 31, 2016 we had approximately 122 shareholders of record of our common shares. Common Units (which are redeemable by holders for cash or, at our op갇on, for common shares on a one for one basis, subject to certain limita갇ons) were held by approximately 38 en갇갇es and persons, including our company. Our Declara갇on of Trust, subject to certain excep갇ons, provides that no person may own, or be deemed to own by virtue of the a姫ribu갇on provisions of the Code, more than 9.9% of the number of outstanding common shares of any class or series of common shares or the number of outstanding preferred shares of any class or series of preferred shares. For this purpose, a person includes a “group” and a “beneﬁcial owner” as those terms are used for purposes of Sec갇on 13(d)(3) of the Exchange Act. Any transfer of common or preferred shares that would result in any person owning, directly or indirectly, common or preferred shares in excess of the ownership limita갇on, result in the common and preferred shares being owned by fewer than 100 persons (determined without reference to any rules of a姫ribu갇on), result in our being “closely held” within the meaning of Sec갇on 856(h) of the Code, or cause us to own, actually or construc갇vely, 10% or more of the ownership interests in a tenant (other than a TRS) of our or our opera갇ng partnership’s real property, within the meaning of Sec갇on 856(d)(2)(B) of the Code, will be null and void, and the intended transferee will acquire no rights in such common or preferred shares. Any person who acquires or a姫empts to acquire common or preferred shares in viola갇on of the foregoing restric갇ons, or any person who owned common or preferred shares that were transferred to a trust, will be required to give wri姫en no갇ce immediately to us of such event and provide us with such other informa갇on as we may request in order to determine the eﬀect, if any, of such transfer on our status as a REIT. In addi갇on, our trustees, upon receipt of advice of counsel or other evidence sa갇sfactory to the trustees, in their sole and absolute discre갇on, may, in their sole and absolute discre갇on, exempt a person from the ownership limita갇on under certain circumstances. The foregoing restric갇ons con갇nue to apply un갇l the trustees determine that it is no longer in our best interests to a姫empt to qualify, or to con갇nue to qualify, as a REIT and there is an aﬃrma갇ve vote of two‐thirds of the number of common and preferred shares en갇tled to vote on such ma姫er at a regular or special mee갇ng of our shareholders. 33 All cer갇ﬁcates represen갇ng common or preferred shares bear a legend referring to the restric갇ons described above. The restric갇ons on ownership and transfer described above could have the eﬀect of delaying, deterring or preven갇ng a change in control or other transac갇on in which holders of some, or a majority, of our common shares might receive a premium for their shares over the then‐prevailing market price or which such holders might believe to be otherwise in their best interest. EQUITY COMPENSATION PLAN See Part III, Item 12, for a descrip갇on of securi갇es authorized for issuance under our Amended and Restated 2012 Equity Incen갇ve Plan. DISTRIBUTION INFORMATION Future distribu갇ons, if any, will be at the discre갇on of our Board of Trustees and will depend on our actual cash ﬂow, ﬁnancial condi갇on, capital requirements, the annual distribu갇on requirements under the REIT provisions of the Internal Revenue Code and such other factors as we may deem relevant. Our ability to make distribu갇ons will depend on our receipt of distribu갇ons from our opera갇ng partnership and lease payments from our lessees with respect to the hotels. We rely on the proﬁtability and cashﬂows of our hotels to generate suﬃcient cash ﬂow for distribu갇ons. Addi갇onally, we may, if necessary and allowable, pay taxable dividends of our shares or debt securi갇es to meet the distribu갇on requirements. SHARE PERFORMANCE GRAPH The following graph compares the yearly change in our cumula갇ve total shareholder return on our common shares for the period beginning December 31, 2011 and ending December 31, 2016, 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 compara갇ve purposes. The Hotel REIT Index is comprised of publicly traded REITs which focus on investments in hotel proper갇es. Total shareholder return equals apprecia갇on in stock price plus dividends paid and assumes that all dividends are reinvested. The performance graph is not indica갇ve of future investment performance. We do not make or endorse any predic갇ons as to future share price performance. Hersha Hospitality Trust S&P 500 Russell 2000 SNL Hotel REIT Index $ 2011 2012 2013 2014 2015 2016 100.00 $ 100.00 100.00 100.00 107.32 $ 116.00 116.35 112.80 124.71 $ 153.57 161.52 142.50 163.90 $ 174.60 169.42 188.09 132.86 $ 177.01 161.94 145.50 137.42 198.18 196.45 180.34 34 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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, 2016 under the $100 million repurchase program authorized by our Board of Trustees in December 2012 and reauthorized in February 2015, October 2015 and October 2016 is set forth in the table below. All such common shares were repurchased pursuant to open market transac갇ons. In October 2015, our Board of Trustees authorized us to repurchase from 갇me to 갇me up to an aggregate of $100 million of our outstanding common shares. This new program was in addi갇on to the exis갇ng $100 million program authorized in February 2015 and commenced upon comple갇on of the exis갇ng $100 million common share repurchase program, and expired on December 31, 2016. In October 2016, our Board of Trustees authorized us to repurchase from 갇me to 갇me up to an aggregate of $100 million of our outstanding common shares. This new program is in addi갇on to the exis갇ng $100 million program authorized in October 2015 and will commence upon comple갇on of the exis갇ng $100 million common share repurchase program, and will expire on December 31, 2017. We may seek Board of Trustee approval to increase the 2016 authoriza갇on. In May 2015, our Board of Trustees approved a reverse share split of our issued and outstanding common shares at a ra갇o 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 eﬀec갇ve as of 5:00 PM Eastern 갇me 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. Period January 1 to January 31, 2016 February 1 to February 29, 2016 March 1 to March 31, 2016 April 1 to April 30, 2016 May 1 to May 31, 2016 June 1 to June 30, 2016 July 1 to July 31, 2016 August 1 to August 31, 2016 September 1 to September 30, 2016 October 1 to October 31, 2016 November 1 to November 30, 2016 December 1 to December 31, 2016 Issuer Purchases of Common Shares Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) ‐ $ 116,157 100 490,464 811,511 653,775 ‐ ‐ 533,642 167,061 ‐ ‐ ‐ 19.87 20.00 19.78 19.46 17.25 ‐ ‐ 18.58 17.98 ‐ ‐ 35 ‐ $ 116,157 116,257 606,721 1,418,232 2,072,007 2,072,007 2,072,007 2,605,649 2,772,710 2,772,710 2,772,710 72,053 69,745 69,743 60,042 44,246 32,969 32,969 32,969 23,056 120,053 120,053 120,053 Item 6. Selected Financial Data The following sets forth selected ﬁnancial and opera갇ng data on a historical consolidated basis. The following data should be read in conjunc갇on with the ﬁnancial statements and notes thereto and Management’s Discussion and Analysis of Financial Condi갇on and Results of Opera갇ons included elsewhere in this Form 10‐K. As a result of the early adop갇on on January 1, 2014 of ASU Update No. 2014‐08, we do not expect to classify most of our hotel disposi갇ons as discon갇nued opera갇ons. For purposes of this table below, the opera갇ng results of certain real estate assets which have been sold prior to the adop갇on of ASU Update No. 2014‐08 are included in discon갇nued opera갇ons for all periods presented. 36 Revenue: Hotel Opera갇ng Revenues Interest Income From Development Loans Other Revenues Total Revenue Opera갇ng Expenses: Hotel Opera갇ng Expenses Gain on Insurance Se姫lements Hotel Ground Rent Real Estate and Personal Property Taxes and Property Insurance General and Administra갇ve (including Share Based Payments of $8,048, $6,523, $6,028, $9,746, $9,678) Acquisi갇on and Terminated Transac갇on Costs Deprecia갇on and Amor갇za갇on Con갇ngent Considera갇on Total Opera갇ng Expenses Opera갇ng Income Interest Income Interest Expense Other Expense Gain on Disposi갇on of Hotel Proper갇es Gain on Hotel Acquisi갇ons, net Development Loan Recovery Lease Buyout Loss on Debt Ex갇nguishment HERSHA HOSPITALITY TRUST SELECTED FINANCIAL DATA (In thousands, except per share data) 2016 2015 2014 2013 2012 466,370 470,272 417,226 338,064 299,005 ‐ 259 ‐ 113 ‐ 180 158 191 1,998 212 466,629 470,385 417,406 338,413 301,215 262,956 254,313 227,324 188,431 161,982 ‐ 3,600 32,157 24,444 2,560 75,390 ‐ ‐ 3,137 34,518 20,515 1,119 74,390 (4,604) 2,433 30,342 (403) 985 ‐ 835 24,083 19,341 20,363 23,869 2,472 974 69,167 55,784 ‐ 2,000 ‐ 23,377 1,179 48,243 ‐ 401,107 387,992 349,497 293,723 254,957 65,522 82,393 67,909 44,690 362 193 805 1,784 46,258 1,311 (44,352) (43,557) (43,357) (40,935) (38,070) (961) (367) 115,839 ‐ ‐ (16,831) (1,187) ‐ ‐ ‐ ‐ (561) (485) 7,195 12,667 22,494 ‐ (670) (102) ‐ 12,096 ‐ ‐ (43) ‐ ‐ ‐ ‐ (545) (3,189) Income before (Loss) Income from Unconsolidated Joint Venture Investments and Discon갇nued Opera갇ons 118,392 38,101 66,558 16,988 6,267 (Loss) Income from Unconsolidated Joint Ventures (1,823) 965 693 (22) (232) Impairment of Investment in Unconsolidated Joint Ventures Loss from Remeasurement of Investment in Unconsolidated Joint Ventures ‐ ‐ ‐ ‐ ‐ ‐ (1,813) ‐ ‐ (1,892) 37 HERSHA HOSPITALITY TRUST Loss (Income) from Unconsolidated Joint Venture Investments Income Before Income Taxes Income Tax Beneﬁt Income from Con갇nuing Opera갇ons Discon갇nued Opera갇ons: (Loss) Gain on Disposi갇on of Hotel Proper갇es Impairment of Assets Held for Sale Income from Discon갇nued Opera갇ons (Loss) Income from Discon갇nued Opera갇ons Net Income (Income) Loss Allocated to Noncontrolling Interests HERSHA HOSPITALITY TRUST SELECTED FINANCIAL DATA (In thousands, except per share data) 2016 2015 2014 2013 2012 (1,823) 116,569 4,888 121,457 ‐ ‐ ‐ ‐ 965 39,066 3,141 42,207 ‐ ‐ ‐ ‐ 121,457 42,207 (4,477) (411) 693 67,251 2,685 (1,835) 15,153 5,600 69,936 20,753 (2,124) 4,143 3,355 7,498 (128) 32,121 11,231 (1,800) (10,314) 263 (1,665) 68,271 (1,016) 7,388 29,195 49,948 (335) ‐ 3,489 14,720 22,218 158 Preferred Distribu갇ons (17,380) (14,356) (14,356) (14,611) (14,000) Ex갇nguishment of Issuance Costs Upon Redemp갇on of Preferred Shares (4,021) ‐ ‐ (2,250) Net Income applicable to Common Shareholders 95,579 $ 27,440 $ 52,899 $ 32,752 $ ‐ 8,376 Basic Income (Loss) from Con갇nuing Opera갇ons applicable to Common Shareholders Diluted Income (Loss) from Con갇nuing Opera갇ons applicable to Common Shareholders (1) Dividends declared per Common Share $ 2.21 $ 0.56 $ 1.08 $ 0.07 $ (0.12) 2.18 1.32 0.56 1.12 1.07 1.04 0.07 0.96 (0.12) 0.96 Balance Sheet Data Net investment in hotel proper갇es Assets Held for Sale Noncontrolling Interests Common Units Redeemable Noncontrolling Interest Noncontrolling Interests Consolidated Variable Interest En갇ty Shareholder's equity Total assets Total debt $ 1,767,570 $ 1,831,119 $ 1,745,483 $ 1,535,835 $ 1,466,713 98,473 44,321 ‐ ‐ ‐ ‐ 31,876 29,082 ‐ ‐ (1,760) (1,075) 56,583 29,523 ‐ (342) ‐ 15,484 15,321 476 835,418 678,039 829,381 837,958 829,828 2,155,536 1,962,649 1,855,539 1,748,097 1,707,679 1,051,899 1,169,964 918,923 773,501 792,708 Liabili갇es related to Assets Held for Sale 51,428 ‐ ‐ 45,835 ‐ Other Data Net cash provided by opera갇ng ac갇vi갇es Net cash used in inves갇ng ac갇vi갇es Net cash provided by ﬁnancing ac갇vi갇es Weighted average shares outstanding Basic Diluted (1) $ $ $ 86,558 $ 121,817 $ 112,894 $ 90,261 $ 71,756 149,924 $ (143,909) $ (180,504) $ (125,474) $ (55,817) (78,793) $ 28,372 $ 53,072 $ 2,367 $ 28,552 42,957,199 47,786,811 49,777,302 49,597,613 46,853,818 43,530,731 48,369,658 50,307,506 50,479,545 46,853,818 (1) Income allocated to noncontrolling interest in HHLP has been excluded from the numerator and Common Units have been omi姫ed from the denominator for the purpose of compu갇ng diluted earnings per share because the eﬀect of including these amounts in the numerator and denominator would have no impact. 38 Item 7. Management’s Discussion and Analysis of Financial Condi갇on and Results of Opera갇ons Certain statements appearing in this Item 7 are forward‐looking statements within the meaning of the federal securi갇es laws. Our actual results may diﬀer materially. We cau갇on you not to place undue reliance on any such forward‐looking statements. See “Cau갇onary Factors That May Aﬀect Future Results” for addi갇onal informa갇on regarding our forward‐looking statements. BACKGROUND As of December 31, 2016, we owned interests in 55 hotels in major urban gateway markets including New York, Washington DC, Boston, Philadelphia, San Diego, Los Angeles, Miami and select markets on the West Coast including 43 wholly‐owned hotels and interests in 12 hotels 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 qualiﬁca갇on 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, 2016, we have leased all of our hotels to a wholly‐owned TRS, a joint venture owned TRS, or an en갇ty owned by our wholly‐owned TRS. Each of these TRS en갇갇es will pay qualifying rent, and the TRS en갇갇es 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 par갇cipate more directly in the opera갇ng performance of our hotels. Each TRS directly receives all revenue from, and funds all expenses rela갇ng to, hotel opera갇ons of the hotels that it leases. Each TRS is also subject to income tax on its earnings. OVERVIEW We believe the changes in our equity and debt capitaliza갇on and reposi갇oning of our por韃olio be姫er enables us to capitalize on further improvement in lodging fundamentals. During 2016, we con갇nued to see improvements in ADR and RevPAR, led by hotels in most of our major loca갇ons, while opera갇ng margins remain rela갇vely ﬂat. We con갇nue to seek acquisi갇on opportuni갇es in urban centers and central business districts. In addi갇on, we will con갇nue to look for a姫rac갇ve opportuni갇es to divest certain of our proper갇es at favorable prices, poten갇ally redeploying that capital in our focus markets or opportunis갇cally repurchasing our common shares. We may seek to buy out or sell our joint venture interests to select exis갇ng joint venture partners. We expect con갇nued stability and improvement in consumer and commercial spending and lodging demand in many of our markets during 2017. However some markets, such as New York City and South Florida, are encountering less favorable supply and demand dynamics. Industry wide occupancy has surpassed peak occupancy from the previous cycle which should allow hotel operators to increase ADR across the United States (“U.S.”). However, the manner in which the economy will con갇nue to grow, if at all, is not predictable and we have no way of predic갇ng how any policies pursued by the new U.S. administra갇on will aﬀect the markets in which we operate or the tourism industry in general. In addi갇on, the availability of hotel‐level ﬁnancing for the acquisi갇on 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 proper갇es as we hope. Factors that might contribute to less than an갇cipated 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 con갇nue to cau갇ously monitor recovery in lodging demand and rates, our third party hotel managers and our performance generally. 39 SUMMARY OF OPERATING RESULTS The following table outlines opera갇ng results for the Company’s por韃olio of wholly owned hotels and those owned through joint venture interests that are consolidated in our ﬁnancial statements for the three years ended December 31, 2016, 2015 and 2014. We deﬁne a comparable consolidated hotel as one that is currently consolidated, that we have owned in whole or in part for the en갇rety of the periods being presented, and is deemed fully opera갇onal. Based on this deﬁni갇on, for the years ended December 31, 2016 and 2015, there are 41 and 46 comparable consolidated hotels, respec갇vely. The comparable key hotel opera갇ng sta갇s갇cs presented in the table below have been computed using pro forma methodology to compute the opera갇ng results for the por갇on of 갇me prior to our ownership of hotels purchased during the comparable period for the year ended December 31, 2016 compared to the year ended December 31, 2015, and the year ended December 31, 2015 compared to the year ended December 31, 2014 for our comparable hotels. For the comparison of December 31, 2016 to December 31, 2015, comparable hotel opera갇ng results contain results from our consolidated hotels owned as of December 31, 2016, excluding: (1) The Envoy because the hotel was not opera갇onal for the full year ended December 31, 2015; (2) The Ambrose Hotel due to the fact that we owned the hotel for less than a month over the comparable period and determined its inclusion not meaningful to the analysis; and (3) the results of all hotels sold during the years ended December 31, 2016 and 2015. The comparison of December 31, 2016 to December 31, 2015 includes results as reported by the prior owners for the following hotels acquired during 2016 and 2015:  St. Gregory Hotel – Washington, DC (acquired 6/16/2015)  TownePlace Suites – Sunnyvale, CA (acquired 8/25/2015)  Ritz Carlton Georgetown – Washington, DC (acquired 12/29/2015)  Sanctuary Resort – Monterey, CA (acquired 1/28/2016)  Hilton Garden Inn M Street – Washington, DC (acquired 3/9/2016)  Courtyard – Sunnyvale, CA (acquired 10/20/2016) For the comparison of December 31, 2015 to December 31, 2014, comparable hotel opera갇ng results contain results from our consolidated hotels owned as of December 31, 2015, excluding: (1) Hilton Garden Inn Midtown East and Hampton Inn Pearl Street because the hotels were newly constructed and not open for business for the full year ended December 31, 2014; (2) The Ritz Carlton Georgetown due to the fact that we owned the hotel for less than a month over the comparable period and determined its inclusion not meaningful to the analysis; and (3) the results of all hotels sold during the years ended December 31, 2015 and 2014. The comparison of December 31, 2015 to December 31, 2014 includes results as reported by the prior owners for the following hotels acquired during 2015 and 2014:  Hotel Milo – Santa Barbara, CA (acquired 2/28/2014)  Parrot Key Resort – Key West, FL (acquired 5/7/2014)  St. Gregory Hotel – Washington, DC (acquired 6/16/2015)  TownePlace Suites – Sunnyvale, CA (acquired 8/25/2015) COMPARABLE CONSOLIDATED HOTELS: (includes 41 hotels in both years) (includes 46 hotels in both years) Year Ended 2016 Year Ended 2015 2016 vs. 2015 % Variance Year Ended 2015 Year Ended 2014 2015 vs. 2014 % Variance Occupancy Average Daily Rate (ADR) Revenue Per Available Room (RevPAR) Room Revenues Total Revenues 82.8% 206.96 $ 171.27 $ 82.8% 202.62 167.68 384,448 $ 375,304 437,496 $ 425,736 $ $ $ $ 0.0% 2.1% 2.1% 2.4% 2.8% 83.7% 195.55 $ 163.65 $ 82.6% 187.21 154.71 409,364 $ 454,054 $ 386,828 426,049 $ $ $ $ 1.1% 4.5% 5.8% 5.8% 6.6% RevPAR for the year ended December 31, 2016 increased 2.1% for our comparable consolidated hotels when compared to 2015. The 2.1% increase in 2016 is oﬀ from the 5.8% comparable hotel growth experienced in 2015, which can be par갇ally explained by the so耀ening of the New York and South Florida markets during 2016 which nega갇vely impacted RevPAR growth on a comparable basis by ‐140 basis points and ‐80 basis points, respec갇vely. The Company experienced stronger RevPAR 40 growth from comparable consolidated hotels in our West Coast, Philadelphia, and Washington D.C. markets which all experienced greater than 6% growth for 2016 when compared to 2015. Current year results growth from comparable consolidated hotels in our West Coast, Philadelphia, and Washington D.C. markets which all experienced greater than 6% growth for 2016 when compared to 2015. Current year results compared to 2015 were also hindered by ongoing renova갇ons at seven of our hotels, and new supply which inhibited rate growth in some of our proper갇es in the New York City and South Florida markets. COMPARABLE UNCONSOLIDATED JOINT VENTURES: (includes 12 hotels in both years) (includes 5 hotels in both years) Year Ended 2016 Year Ended 2015 2016 vs. 2015 % Variance Year Ended 2015 Year Ended 2014 2015 vs. 2014 % Variance Occupancy Average Daily Rate (ADR) Revenue Per Available Room (RevPAR) Room Revenues Total Revenues 78.7% 192.74 $ 151.60 $ 79.5% 193.95 154.27 136,248 $ 138,290 161,174 $ 162,670 $ $ $ $ ‐0.8% ‐0.6% ‐1.7% ‐1.5% ‐0.9% 68.1% 170.20 $ 115.93 $ 57,927 $ 80,703 $ $ $ $ $ 67.2% 164.10 110.33 59,135 80,860 0.9% 3.7% 5.1% ‐2.1% ‐0.2% The decreases in occupancy, ADR, RevPAR, room revenues and total revenues for the twelve months ended December 31, 2016 over the same periods in 2015 are primarily driven by the results of opera갇ons of seven hotel proper갇es located in New York City that were contributed to the CINDAT JV (as deﬁned in “Note 2 – Investment in Hotel Proper갇es” to the consolidated ﬁnancial statements) which was established on April 29, 2016 as part of the CINDAT JV. The addi갇on of these seven hotels to the comparable set resulted in the nega갇ve trends presented in the table above. As we also experienced in our consolidated results, the New York City market has proven challenging from a growth perspec갇ve due to increasing supply in the market which is placing downward pressure on both occupancy and rate. COMPARISON OF THE YEAR ENDED DECEMBER 31, 2016 TO DECEMBER 31, 2015 (dollars in thousands, except ADR and per share data) Revenue Our total revenues for the years ended December 31, 2016 and 2015 consisted en갇rely of hotel opera갇ng revenues, including room, food and beverage and other opera갇ng department revenues, and other revenue. Hotel opera갇ng revenues are recorded for wholly‐owned hotels that are leased to our wholly owned TRS and hotels owned through joint venture or other interests that are consolidated in our ﬁnancial statements. Hotel opera갇ng revenues decreased $3,902, or 0.8%, from $470,272 for the year ended December 31, 2015 to $466,370 for the same period in 2016. This decrease in hotel opera갇ng revenues was primarily a姫ributable to the impact of the hotels contributed to the Cindat joint venture, oﬀset by the acquisi갇on of hotel proper갇es, con갇nued growth and stabiliza갇on of our exis갇ng assets. Revenue generated from current year acquisi갇ons and incremental revenue increases from 2015 acquisi갇ons contributed $57,445 in incremental revenue during the twelve months ended December 31, 2016 when compared to the same period in 2015. The contribu갇on of seven hotels to our joint venture with Cindat and disposi갇on of four assets to unrelated third par갇es caused a decrease in revenue of $69,641 during the same period. Since December 31, 2015, we have acquired interests in ﬁve consolidated hotels. These ﬁve hotels contributed the following opera갇ng revenues for the twelve months ended December 31, 2016. Brand Sanctuary Beach Resort Hilton Garden Inn M Street Envoy Hotel Courtyard by Marrio姫 The Ambrose Loca갇on Acquisi갇on Date Rooms 2016 Hotel Opera갇ng Revenues Monterey Bay, CA Washington, DC Boston, MA Sunnyvale, CA Santa Monica, CA January 27, 2016 March 8, 2016 July 21, 2016 October 20, 2016 December 1, 2016 60 238 136 145 77 656 $ 6,367 13,565 8,862 1,768 429 30,991 Revenues for all hotels were recorded from the date of acquisi갇on as hotel opera갇ng revenues. Further, hotel opera갇ng revenues for the year ended December 31, 2016 included revenues for the following hotels that were purchased 41 during the year ended December 31, 2015. Hotels acquired during the year ended December 31, 2015 would have a full year of results included in the year ended December 31, 2016 but not necessarily a full during the year ended December 31, 2015. Hotels acquired during the year ended December 31, 2015 would have a full year of results included in the year ended December 31, 2016 but not necessarily a full year of results during the same period in 2015. We acquired interests in the following consolidated hotels during the year ended December 31, 2015: Brand Loca갇on Acquisi갇on Date Rooms St. Gregory Hotel TownePlace Suites Ritz Carlton Georgetown Washington, DC Sunnyvale, CA Washington, DC June 16, 2015 August 25, 2015 December 29, 2015 155 $ 94 86 335 $ 9,854 $ 5,593 18,157 33,604 $ 5,257 1,744 149 7,150 2016 Hotel Opera갇ng Revenues 2015 Hotel Opera갇ng Revenues Oﬀse駫ng these acquisi갇ons is our contribu갇on of the seven proper갇es to the joint venture with Cindat during the second quarter of 2016, and the sale of four proper갇es during 2016. These 11 hotels contributed $30,123 in opera갇ng revenues to our consolidated hotel por韃olio for the period of ownership during the year ended December 31, 2016 compared to the revenues they generated during the year ended December 31, 2015 when we recorded $99,764 related to these hotels. Brand Loca갇on New York, NY Hampton Inn Herald Square New York, NY Hampton Inn Chelsea Hampton Inn Times Square New York, NY Holiday Inn Express Times Square New York, NY Candlewood Suites Times Square New York, NY Holiday Inn Express Water Street New York, NY New York, NY Holiday Inn Wall Street King of Prussia, PA May 3, 2016 Hya姫 Place Franklin, MA Hawthorn Suites Norwood, MA Residence Inn Framingham, MA Residence Inn Disposi갇on Date (Contribu갇on to JV) April 29, 2016 April 29, 2016 April 29, 2016 April 29, 2016 April 29, 2016 April 29, 2016 April 29, 2016 September 7, 2016 November 4, 2016 November 4, 2016 Rooms 2016 Hotel Opera갇ng Revenues 136 $ 144 184 210 188 112 113 129 100 96 125 2,175 $ 2,625 3,029 3,720 3,028 1,772 1,758 1,460 2,118 3,668 4,770 2015 Hotel Opera갇ng Revenues 10,614 11,683 14,189 16,559 13,357 7,639 7,924 4,404 3,024 4,407 5,964 1,537 $ 30,123 $ 99,764 In addi갇on, our comparable consolidated por韃olio experienced improvements in ADR and RevPAR during the year ended December 31, 2016 when compared to the same period in 2015. ADR improved 2.1%, increasing from $202.62 for the year ended December 31, 2015 to $206.96 during the same period in 2016. RevPAR in our same comparable consolidated hotels increased 2.1% from $167.68 during the year ended December 31, 2015 to $171.27 for the same period in 2016. These improvements were due to improvements in lodging trends in the markets in which our hotels are located. In par갇cular, the Company experienced stronger RevPAR growth from comparable consolidated hotels in our West Coast, Philadelphia, and Washington D.C. markets which all experienced greater than 6% growth for 2016 when compared to 2015. Current year results compared to 2015 were also hindered by ongoing renova갇ons at seven of our hotels, and new supply which inhibited rate growth in some of our proper갇es in the New York City and South Florida markets. Expenses Total hotel opera갇ng expenses, including room, food and beverage and other opera갇ng department expenses increased 3.4% to approximately $262,956 for the year ended December 31, 2016 from $254,313 for the year ended December 31, 2015. This increase in opera갇ng expenses is primarily a姫ributable to hotel proper갇es acquired in our exis갇ng por韃olio, oﬀset by a $29,214 decrease in hotel opera갇ng expenses recorded during the year ended December 31, 2015 compared to 2016 due to the contribu갇on of seven hotel proper갇es to the joint venture with Cindat as well as the other hotel disposi갇ons. Deprecia갇on and amor갇za갇on increased by 1.3%, or $1,000, to $75,390 for the year ended December 31, 2016 from $74,390 for the year ended December 31, 2015. The increase was a result of deprecia갇on and amor갇za갇on recorded on the hotels recently acquired, oﬀset by a decrease of approximately $5,685 in deprecia갇on and amor갇za갇on recorded during the year ended December 31, 2015 compared to 2016 for proper갇es part of the joint venture with Cindat. Real estate and personal property tax and property insurance decreased $2,361, or 6.8%, for the year ended December 31, 2016 when compared to the same period in 2015. This was primarily a姫ributable to a decrease of $6,000 in real estate and property insurance during the current year related to the seven hotel proper갇es contributed to the joint venture with Cindat in April of 2016. We otherwise 42 typically experience increases in tax assessments and tax rates as the economy improves which are oﬀset by reduc갇ons resul갇ng from our management of this expense. typically experience increases in tax assessments and tax rates as the economy improves which are oﬀset by reduc갇ons resul갇ng from our management of this expense. General and administra갇ve expense increased by approximately $3,929 to $24,444 for the year ended December 31, 2016 from $20,515 for the year ended December 31, 2015. General and administra갇ve expense includes expense related to non‐cash share based payments issued as incen갇ve compensa갇on to the Company’s trustees, execu갇ves, and employees. Expense related to share based compensa갇on increased $1,525 when comparing the year ended December 31, 2016 to the same period in 2015. This increase in share based compensa갇on expense is primarily related to the issuance of share awards under the 2013 Mul갇‐Year LTIP during the year ended December 31,2016 as the performance period ended December 31, 2015. Please refer to “Note 8 – Share Based Payments” of the notes to the consolidated ﬁnancial statements for more informa갇on about our stock based compensa갇on. Amounts recorded on our consolidated statement of opera갇ons for acquisi갇on and terminated transac갇on costs will ﬂuctuate from period to period based on our acquisi갇on ac갇vi갇es. Acquisi갇on and terminated transac갇on costs typically consist of transfer taxes, legal fees and other costs associated with acquiring a hotel property and transac갇ons that were terminated during the year. Acquisi갇on and terminated transac갇on costs increased $1,441 from $1,119 for the year ended December 31, 2015 to $2,560 for the same period in 2016. The costs incurred in 2016 were primarily related to our acquisi갇on of the Sanctuary Beach Resort, Marina, CA, the Hilton Garden Inn M Street, Washington, DC, the Envoy Hotel, Boston, MA, the Courtyard by Marrio姫, Sunnyvale, CA and The Ambrose, Santa Monica, CA while the costs incurred in 2015 primarily related to our acquisi갇ons of St. Gregory Hotel in Washington, DC, TownePlace Suites, Sunnyvale, CA and Ritz Carlton Georgetown, Washington, DC. Also included in acquisi갇on and terminated transac갇on costs are charges related to transac갇ons that were terminated during the period. Opera⁛ng Income Opera갇ng income for the year ended December 31, 2016 was $65,522 compared to opera갇ng income of $82,393 during the same period in 2015. Opera갇ng income was nega갇vely impacted by the disposi갇ons of the hotel proper갇es noted above. Interest Expense Interest expense increased $795 from $43,557 for the year ended December 31, 2015 to $44,352 for the year ended December 31, 2016. The increase in interest expense is primarily due to increased borrowings drawn on the Second Term Loan during the third and fourth quarters of 2015, and the Third Term Loan during the third and fourth quarter of 2016. These borrowings were used to acquire hotel proper갇es and to pay down consolidated mortgage debt. Gain on Disposi⁛on of Hotel Proper⁛es During the year ended December 31, 2016, the Company recorded a net gain of $115,839 related to the Cindat joint venture transac갇on and the sales of the Hya姫 Place, King of Prussia, PA, Hawthorn Suites, Franklin, MA, Residence Inn, Norwood, MA and Residence Inn, Framingham, MA. Please refer to “Note 3 – Investment in Unconsolidated Joint Ventures” of the notes to the consolidated ﬁnancial statements for more informa갇on about the Cindat joint venture. Unconsolidated Joint Venture Investments The income from unconsolidated joint ventures consists of our interest in the opera갇ng results of the proper갇es we own in joint ventures. Income from our unconsolidated joint ventures decreased by $2,788 to a loss of $1,823 for the year ended December 31, 2016 compared to income of $965 during the same period in 2015, due to the loss we recognized on our equity interest in the Cindat joint venture, oﬀset by improvements in the markets of the hotels owned by our unconsolidated joint venture investments, par갇cularly the Boston market where two of these hotels are located. Income Tax Beneﬁt During the year ended December 31, 2016, the Company recorded an income tax beneﬁt of $4,888 compared to an income tax beneﬁt of $3,141 for the year ended December 31, 2015. Net Income Applicable to Common Shareholders Net income applicable to common shareholders for the year ended December 31, 2016 was $95,579 compared to income of $27,440 during the same period in 2015. This increase in net income was primarily caused by the net gain of $115,839 realized on the Cindat joint venture transac갇on and the sales of the Hya姫 Place, King of Prussia, PA, the Hawthorn Suites, Franklin, MA, Residence Inn Norwood, MA and Residence Inn, Framingham, MA. Please refer to “Note 3 – Investment in Unconsolidated Joint Ventures” of the notes to the consolidated ﬁnancial statements for more informa갇on about the Cindat 43 joint venture. Oﬀse駫ng this increase in net income was an increase of approximately $3,024 in preferred distribu갇ons and $4,021 in ex갇nguishment of issuance costs related to our redemp갇on of the Series B joint venture. Oﬀse駫ng this increase in net income was an increase of approximately $3,024 in preferred distribu갇ons and $4,021 in ex갇nguishment of issuance costs related to our redemp갇on of the Series B preferred shares in 2016 and a $16,831 expense incurred as result of a lease buyout of a restaurant at our Courtyard by Marrio姫, Miami, FL property made in conjunc갇on with an overall property improvement and up‐branding strategy. Comprehensive Income A⁫ributable to Common Shareholders Comprehensive income a姫ributable to common shareholders for the year ended December 31, 2016 was $97,328 compared to comprehensive income of $27,332 for the same period in 2015. This amount was primarily a姫ributable to gains on disposi갇on of hotel proper갇es as more fully described above. For the year ended December 31, 2016, we recorded comprehensive income of $123,296 compared to $42,099 of comprehensive income for the year ended December 31, 2015. The increase in comprehensive income was primarily due to the $79,250 increase in net income. COMPARISON OF THE YEAR ENDED DECEMBER 31, 2015 TO DECEMBER 31, 2014 (dollars in thousands, except per share data) Revenue Our total revenues for the years ended December 31, 2015 and 2014 consisted en갇rely of hotel opera갇ng revenues and other revenue. Hotel opera갇ng 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 opera갇ng 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 opera갇ng revenues was primarily a姫ributable to the acquisi갇on of hotel proper갇es consummated in 2015 and 2014 as well as the con갇nued growth and stabiliza갇on of our exis갇ng assets. Since December 31, 2014, we have acquired interests in three consolidated hotels. These three hotels contributed the following opera갇ng revenues for the twelve months ended December 31, 2015. Brand Loca갇on Acquisi갇on Date Rooms St. Gregory Hotel TownePlace Suites Ritz Carlton Georgetown Washington, DC Sunnyvale, CA Washington, DC June 16, 2015 August 25, 2015 December 29, 2015 155 $ 94 86 335 $ 2015 Hotel Opera갇ng Revenues 5,257 1,744 149 7,150 Revenues for all hotels were recorded from the date of acquisi갇on as hotel opera갇ng revenues. Further, hotel opera갇ng 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. We acquired interests in the following consolidated hotels during the year ended December 31, 2014: Brand Loca갇on Acquisi갇on Date Rooms 2015 Hotel Opera갇ng Revenues 2014 Hotel Opera갇ng Revenues Santa Barbara, CA Hotel Milo Key West, FL Parrot Key Resort Hilton Garden Inn 52nd New York, NY Hampton Inn Pearl Street New York, NY February 28, 2014 May 7, 2014 May 30, 2014* June 23, 2014* *Date the hotel began opera갇ons. 122 $ 148 205 81 556 $ 9,141 $ 15,089 17,935 5,563 47,728 $ 8,655 9,145 10,439 2,867 31,106 In addi갇on, our comparable consolidated por韃olio experienced improvements in ADR and occupancy during the year ended December 31, 2015 when compared to the same period in 2014. Occupancy in our comparable consolidated hotels increased 110 basis points from 82.6% during the year ended December 31, 2014 to 83.7% for the same period in 2015. ADR improved 4.5%, increasing from $187.21 for the year ended December 31, 2014 to $195.55 during the same period in 2015. These improvements were due to improvements in lodging trends in the markets in which our hotels are located. 44 Expenses Expenses Total hotel opera갇ng 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 opera갇ng revenues, hotel opera갇ng expenses increased primarily due to the acquisi갇ons consummated since the comparable period in 2014, as men갇oned above. The acquisi갇ons also resulted in an increase in deprecia갇on and amor갇za갇on 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 acquisi갇ons along with a general overall increase in tax assessments and tax rates as the economy improves, but was par갇ally oﬀset by reduc갇ons resul갇ng from our rigorous management of this expense. General and administra갇ve 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 administra갇ve expense includes expense related to non‐cash share based payments issued as incen갇ve compensa갇on to the Company’s trustees, execu갇ves, and employees. Expense related to share based compensa갇on increased $495 when comparing the year ended December 31, 2015 to the same period in 2014. The increase in share based compensa갇on expense is due primarily to the issuance of the shares a姫ributable 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 informa갇on about our stock based compensa갇on. Amounts recorded on our consolidated statement of opera갇ons for acquisi갇on and terminated transac갇ons costs will ﬂuctuate from period to period based on our acquisi갇on ac갇vi갇es. Acquisi갇on costs typically consist of transfer taxes, legal fees and other costs associated with acquiring a hotel property and transac갇ons that were terminated during the year. Acquisi갇on and terminated transac갇on 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 proper갇es in 2014, the manners in which acquisi갇on targets are found can and do dictate the costs necessary to complete the acquisi갇on. The costs incurred in 2015 were related to the following hotels: $76 related to our St. Gregory acquisi갇on, $84 related to our TownePlace Suites acquisi갇on, and $548 related to our Ritz Carlton Georgetown acquisi갇on. The costs incurred in 2014 were related to the following hotels: $1,836 related to our Hilton Garden Inn 52nd Street acquisi갇on; $173 related to our Hotel Milo acquisi갇on; and $169 related to our Parrot Key Resort acquisi갇on. Also included in these costs are charges related to transac갇ons that were terminated during the year. Opera⁛ng Income Opera갇ng income for the year ended December 31, 2015 was $82,393 compared to opera갇ng income of $67,909 during the same period in 2014. Opera갇ng income was posi갇vely impacted by the improved opera갇ng results of our hotels discussed above. Oﬀse駫ng this increase was insurance recoveries of approximately $4,604 recognized during the year ended December 31, 2014 related to the se姫lement 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 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 obliga갇ons 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 addi갇onal $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 Ci갇group Global Markets Inc. and various other lenders, which was fully drawn down by December 31, 2015. Gain on Disposi⁛on of Hotel Proper⁛es During the year ended December 31, 2014, the Company recorded a gain of $7,195 related to its sale of Hotel 373 in Manha姫an. Gain on Hotel Acquisi⁛ons, 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 Manha姫an 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. 45 Development Loan Recovery Development Loan Recovery Considera갇on given in exchange for the Hilton Garden Inn 52nd Street included cash to the seller and our reinstatement and cancella갇on 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 acquisi갇on. 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 opera갇ng results of the proper갇es we own in joint ventures. The opera갇ng 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 proper갇es 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. 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 posi갇vely impacted by the improved opera갇ng results of our hotels and one‐갇me gains discussed above which occurred for the year ended December 31, 2014 only. Comprehensive Income Applicable 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 a姫ributable 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 a姫ributed to changes in the forecasted LIBOR rates from period to period, as interest rates con갇nued 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 a姫ributed to changes in the forecasted LIBOR rates from period to period, as interest rates con갇nue to be forecasted at historic lows. LIQUIDITY, CAPITAL RESOURCES, AND EQUITY OFFERINGS (dollars in thousands, except per share data) Poten⁛al Sources of Capital Our organiza갇onal documents do not limit the amount of indebtedness that we may incur. Our ability to incur addi갇onal debt is dependent upon a number of factors, including the current state of the overall credit markets, our degree of leverage and borrowing restric갇ons imposed by exis갇ng lenders. Our ability to raise funds through the issuance of debt and equity securi갇es is dependent upon, among other things, capital market vola갇lity, risk tolerance of investors, general market condi갇ons for REITs and market percep갇ons related to the Company’s ability to generate cash ﬂow and posi갇ve returns on its investments. In addi갇on, our mortgage indebtedness contains various ﬁnancial and non‐ﬁnancial covenants customarily found in secured, nonrecourse ﬁnancing arrangements. If the speciﬁed criteria are not sa갇sﬁed, 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 ra갇o covenants contained in the loan agreements securing one of our hotel proper갇es was not met as of December 31, 2016. Pursuant to this loan agreement, the lender has the op갇on to escrow the opera갇ng cash ﬂow. However, these covenants do not cons갇tute an event of default for these loans. Future deteriora갇on in market condi갇ons could cause restric갇ons in our access to the cash ﬂow of addi갇onal proper갇es. We have unsecured debt facili갇es in the aggregate of $1,000,000 which is comprised of a $500,000 senior unsecured credit facility and two unsecured term loans totaling $500,000. The unsecured credit facility (“Credit Facility”) contains a 46 $250,000 unsecured term loan (“First Term Loan”) and a $250,000 unsecured revolving line of credit (“Line of Credit”). This Credit Facility expires on February 28, 2018 and, provided no event of default has $250,000 unsecured term loan (“First Term Loan”) and a $250,000 unsecured revolving line of credit (“Line of Credit”). This 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 addi갇onal one‐year period. The Credit Facility is also expandable to $850,000 at our request, subject to the sa갇sfac갇on of certain condi갇ons. Our two addi갇onal unsecured term loans are $300,000 (“Second Term Loan”) and $200,000 (“Third Term Loan”), which mature on August 10, 2020 and August 2, 2021, respec갇vely. As of December 31, 2016, the outstanding balance under the First Term Loan was $210,520, under the Second Term Loan was $300,000, under the Third Term Loan was $156,100 and we had no outstanding borrowings under the Line of Credit. As of December 31, 2016, our remaining borrowing capacity under the Credit Facility, Second Term Loan and Third Term Loan was $99,822 which is based on certain opera갇ng metrics of unencumbered hotel proper갇es designated as borrowing base assets. We intend to repay indebtedness incurred under the Credit Facility, Second Term Loan and Third Term Loan out of cash ﬂow and from the proceeds of issuances of addi갇onal common and preferred shares and poten갇ally other securi갇es and from proceeds from disposi갇ons. As of February 21, 2017, our borrowing capacity under the Credit Facility and Term Loans was approximately $197,998 as we added seven and removed two borrowing base assets subsequent to December 31, 2016. We will con갇nue to monitor our debt maturi갇es to manage our liquidity needs. However, no assurances can be given that we will be successful in reﬁnancing all or a por갇on of our future debt obliga갇ons due to factors beyond our control or that, if reﬁnanced, the terms of such debt will not vary from the exis갇ng terms. As of December 31, 2016, we have $160,908 of indebtedness due on or before December 31, 2017. We currently expect that cash requirements for all debt that is not reﬁnanced by our exis갇ng lenders for which the maturity date is not extended will be met through a combina갇on of cash on hand, reﬁnancing the exis갇ng debt with new lenders, draws on the Line of Credit and the issuance of our securi갇es. In addi갇on to the incurrence of debt and the oﬀering of equity securi갇es, disposi갇ons of property or investment from a joint venture partner may serve as addi갇onal capital resources and sources of liquidity. We may recycle capital from stabilized assets or from sales of non‐core hotels in secondary and ter갇ary markets. Capital from these types of transac갇ons is intended to be redeployed into high growth acquisi갇ons, share buybacks, or to pay down exis갇ng debt. Common Share Repurchase Plan In October 2015, our Board of Trustees authorized our current share repurchase program for up to $100,000 of common shares. For the twelve months ended December 31, 2016, the Company repurchased 2,772,710 common shares for an aggregate purchase price of $52,055. Upon repurchase by the Company, these common shares ceased to be outstanding and became authorized but unissued common shares. In October 2016, our Board of Trustees authorized a new share repurchase program for up to $100,000 of common shares which will commence upon the comple갇on of the exis갇ng repurchase program. The new program will expire on December 31, 2017, unless extended by our Board of Trustees. 47 Acquisi⁛ons During the year ended December 31, 2016, we acquired the following wholly‐owned hotel proper갇es: Hotel Acquisi갇on Date Land Buildings and Improvements Furniture, Fixtures and Equipment Other Intangibles Loan Costs Total Purchase Price Assump갇on of Debt Sanctuary Beach Resort, Marina, CA 1/28/2016 $ 20,014 $ 17,093 $ 2,369 $ ‐ $ 198 $ 39,674 $ 14,750 * Hilton Garden Inn M Street, Washington, DC 3/9/2016 30,131 65,971 9,621 Envoy Hotel, Boston, MA 7/21/2016 25,264 75,979 11,251 Courtyard, Sunnyvale, CA 10/20/2016 17,694 53,272 4,034 874 ** 131 *** 150 **** ‐ ‐ 106,597 112,625 537 75,687 40,600 The Ambrose, Santa Monica, CA 12/1/2016 18,750 26,839 1,911 ‐ ‐ 47,500 TOTAL *Assump갇on of debt includes a $50 premium resul갇ng from the determina갇on that the stated rate of interest is above market rates on the date of acquisi갇on. **Includes an intangible asset for a lease‐in‐place of $648, advance bookings of $76 and franchise fees of $150. ***Includes a lease‐in‐place intangible asset of $126, below market lease liability of $319, advance bookings asset of $199, and franchise fees asset of $125. ****Includes a franchise fees asset of $150. 239,154 $ 29,186 $ 1,155 735 $ 382,083 $ $ 111,853 $ 55,350 $ We intend to invest in addi갇onal hotels only as suitable opportuni갇es arise and adequate sources of ﬁnancing are available. We expect that future investments in hotels will depend upon and will be ﬁnanced by, in whole or in part, our exis갇ng cash, the proceeds from addi갇onal issuances of common or preferred shares, proceeds from the sale of assets, issuances of Common Units, issuances of preferred units or other securi갇es or borrowings secured by hotel assets and under our Line of Credit. Opera⁛ng Liquidity and Capital Expenditures We expect to meet our short‐term liquidity requirements generally through net cash provided by opera갇ons, exis갇ng cash balances and, if necessary, short‐term borrowings under the Line of Credit. We believe that the net cash provided by opera갇ons in the coming year and borrowings drawn on the Line of Credit will be adequate to fund the Company’s opera갇ng 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 distribu갇on requirement limits our ability to retain earnings and requires us to raise addi갇onal capital in order to grow our business and acquire addi갇onal hotel proper갇es. However, there is no assurance that we will be able to borrow funds or raise addi갇onal equity capital on terms acceptable to us, if at all. In addi갇on, we cannot guarantee that we will con갇nue to make distribu갇ons to our shareholders at the current rate or at all. Due to the seasonality of our business, cash provided by opera갇ng ac갇vi갇es ﬂuctuates signiﬁcantly from quarter to quarter. However, we believe that, based on our current es갇mates, which include the addi갇on of cash from opera갇ons provided by hotels acquired during 2016, our cash provided by opera갇ng ac갇vi갇es will be suﬃcient over the next 12 months to fund the payment of our dividend at its current level. However, our Board of Trustees con갇nues to evaluate the dividend policy in the context of our overall liquidity and market condi갇ons and may elect to reduce or suspend these distribu갇ons. Net cash provided by opera갇ng ac갇vi갇es for the year ended December 31, 2016 was $86,558 and cash used for the payment of distribu갇ons and dividends for the year ended December 31, 2016 was $67,856. We also project that our opera갇ng cash ﬂow and available borrowings under the Line of Credit will be suﬃcient to sa갇sfy 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 addi갇onal hotel proper갇es, renova갇on and other non‐recurring capital expenditures that need to be made periodically with respect to hotel proper갇es and scheduled debt repayments. We will seek to sa갇sfy these long‐term liquidity requirements through various sources of capital, including borrowings under the Line of Credit and through secured, non‐recourse mortgage ﬁnancings with respect to our unencumbered hotel proper갇es. In addi갇on, we may seek to raise capital through public or private oﬀerings of our securi갇es. Certain factors 48 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 proper갇es and borrowing restric갇ons imposed by lenders 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 proper갇es and borrowing restric갇ons imposed by lenders or franchisors. We will con갇nue to analyze which source of capital is most advantageous to us at any par갇cular point in 갇me, but ﬁnancing may not be consistently available to us on terms that are a姫rac갇ve, or at all. Spending on capital improvements during the year ended December 31, 2016 increased when compared to spending on capital improvements during the year ended December 31, 2015. During the year ended December 31, 2016, we spent $33,267 on capital expenditures to renovate, improve or replace assets at our hotels. This compares to $27,366 during the same period in 2015. These capital expenditures were undertaken to comply with brand mandated improvements and to ini갇ate projects that we believe will generate a return on investment. In addi갇on to capital reserves required under certain loan agreements and capital expenditures to renovate, improve or replace assets at our hotels, we have opportunis갇cally engaged in hotel development projects. During the year ended December 31, 2016, we spent $952 on hotel development projects compared to $950 during the same period of 2015. We may spend addi갇onal amounts, if necessary, to comply with the requirements of any franchise license under which any of our hotels operate and otherwise to the extent we deem such expenditures to be prudent. We are also obligated to fund the cost of certain capital improvements to our hotels. We expect to use opera갇ng cash ﬂow, borrowings under the Line of Credit, and proceeds from issuances of our securi갇es 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, 2016 and December 31, 2015 Net cash provided by opera갇ng ac갇vi갇es decreased $35,259 from $121,817 for the year ended December 31, 2015 to $86,558 for the comparable period in 2016. Net income, adjusted for non‐cash items reﬂected in the statement of cash ﬂows for the year ended December 31, 2016 decreased by $20,077 when compared to 2015, par갇ally driven by the disposi갇on and subsequent contribu갇on of seven hotel proper갇es located in New York City to an unconsolidated joint venture with Cindat. Further, a net increase in working capital assets u갇lized addi갇onal cash from opera갇ng ac갇vi갇es. Net cash provided by inves갇ng ac갇vi갇es for the year ended December 31, 2016 was $149,924 compared to net cash used in inves갇ng ac갇vi갇es of $143,909 for the year ended December 31, 2015. During 2016, we received $429,221 in net proceeds from contribu갇ons of seven hotel proper갇es to the Cindat joint venture and disposed of four addi갇onal hotel proper갇es for $67,430. We did not have similar transac갇ons during 2015. Oﬀse駫ng these sources of funds were $321,995 for the purchase of ﬁve hotel proper갇es during the year ended December 31, 2016 compared to $110,176 for the purchase of three hotel proper갇es during 2015. Net cash used in ﬁnancing ac갇vi갇es for the year ended December 31, 2016 was $78,793 compared to net cash provided by ﬁnancing ac갇vi갇es for the year ended December 31, 2015 of $28,372. This is primarily due to $276,859 in repayments in borrowings under the Line of Credit, Term Loans and mortgages payable from proceeds from the hotel disposi갇ons and preferred stock oﬀering proceeds during the year ended December 31, 2016. Addi갇onally, we received proceeds from unsecured term loans of $156,100 for the year ended December 31, 2016. During the year ended December 31, 2015, we received proceeds from borrowings under the Line of Credit and Term Loans of $327,000 and repayments of mortgages payable of $184,356 during the same period in 2015. In addi갇on, we redeemed our Series B Preferred Shares in June 2016 for $115,000. Oﬀse駫ng this was approximately $282,686 in net proceeds from our Series D & E Preferred Shares oﬀerings. In addi갇on, dividends and distribu갇ons decreased $3,115 during the year ended December 31, 2016, compared to 2015, due to the reduc갇on of dividends paid on common shares due to our common share repurchases, but oﬀset by the increase in dividends paid on preferred shares as a result of our Series D & E Preferred Shares oﬀerings. Comparison of the Years Ended December 31, 2015 and December 31, 2014 Net cash provided by opera갇ng ac갇vi갇es 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 proper갇es acquired over the past twelve months and improving opera갇ng results within our exis갇ng por韃olio. Further, a net decrease in working capital assets provided addi갇onal cash from opera갇ng ac갇vi갇es. Net cash used in inves갇ng ac갇vi갇es 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 proper갇es and deposits on hotel acquisi갇ons was $60,060 higher during the year ended December 31, 2014, compared to same period in 2015, 49 proceeds from the disposi갇on of hotel proper갇es was $30,056 less during the year ended December 31, 2015 when compared to the year ended December 31, 2014. Oﬀse駫ng this was spending on hotel proceeds from the disposi갇on of hotel proper갇es was $30,056 less during the year ended December 31, 2015 when compared to the year ended December 31, 2014. Oﬀse駫ng 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 disposi갇on of Hotel 373 in the second quarter and the remaining 4 non‐core proper갇es during the ﬁrst quarter. Net cash provided by ﬁnancing ac갇vi갇es for the year ended December 31, 2015 was $28,372 compared to net cash provided by ﬁnancing ac갇vi갇es 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 distribu갇ons 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 par갇ally oﬀset by the reduc갇on of dividends paid on common shares due to our common share repurchases. 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 condi갇on, revenues or expenses, results of opera갇ons, liquidity, capital expenditures or capital resources. FUNDS FROM OPERATIONS (in thousands, except share data) The Na갇onal Associa갇on of Real Estate Investment Trusts (“NAREIT”) developed Funds from Opera갇ons (“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 Na갇onal Policy Bulle갇n of NAREIT, which we refer to as the White Paper. The White Paper deﬁnes 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, plus certain non‐cash items, such as loss from impairment of assets and deprecia갇on and amor갇za갇on, and a耀er adjustments for unconsolidated partnerships and joint ventures. Our interpreta갇on of the NAREIT deﬁni갇on 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 computa갇on may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT deﬁni갇on, or that interpret the NAREIT deﬁni갇on 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, deprecia갇on and amor갇za갇on expenses, gains or losses on property sales, noncontrolling interest and preferred dividends. In compu갇ng FFO, we eliminate these items because, in our view, they are not indica갇ve of the results from our property opera갇ons. FFO does not represent cash ﬂows from opera갇ng ac갇vi갇es in accordance with GAAP and should not be considered an alterna갇ve to net income as an indica갇on of the Company’s performance or to cash ﬂow as a measure of liquidity or ability to make distribu갇ons. We consider FFO to be a meaningful, addi갇onal measure of opera갇ng performance because it excludes the eﬀects of the assump갇on that the value of real estate assets diminishes predictably over 갇me, and because it is widely used by industry analysts as a performance measure. We show both FFO from consolidated hotel opera갇ons and FFO from unconsolidated joint ventures because we believe it is meaningful for the investor to understand the rela갇ve contribu갇ons 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 opera갇ng performance of our hotel por韃olio 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. 50 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): Net income applicable to common shareholders Income allocated to noncontrolling interests (Income) loss from unconsolidated joint ventures Gain on hotel acquisi갇on Development Loan Recovery Gain on disposi갇on of hotel proper갇es Loss from impairment of depreciable assets Deprecia갇on and amor갇za갇on Funds from consolidated hotel opera갇ons applicable to common shareholders and Partnership units Income (loss) from Unconsolidated Joint Ventures Deprecia갇on and amor갇za갇on of purchase price in excess of historical cost (1) Interest in deprecia갇on and amor갇za갇on of unconsolidated joint ventures (2) Funds from unconsolidated joint ventures opera갇ons applicable to common shareholders and Partnership units December 31, 2016 December 31, 2015 December 31, 2014 Year Ended $ 95,579 $ 4,477 1,823 ‐ ‐ (115,839) ‐ 75,390 61,430 (1,823) (418) 14,820 12,579 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 Funds from Opera갇ons applicable to common shareholders and Partnership units $ 74,009 $ 107,749 $ 89,139 Weighted Average Common Shares and Units Outstanding Basic Diluted (1) (2) Adjustment made to add deprecia갇on of purchase price in excess of historical cost of the assets in the unconsolidated joint venture at the 갇me of our investment. Adjustment made to add our interest in real estate related deprecia갇on and amor갇za갇on of our unconsolidated joint ventures. Alloca갇on of deprecia갇on and amor갇za갇on is consistent with alloca갇on of income and loss. 42,957,199 45,740,227 47,786,811 50,276,867 49,777,302 52,035,256 Certain amounts related to deprecia갇on and amor갇za갇on and deprecia갇on and amor갇za갇on from discon갇nued opera갇ons in the prior year FFO reconcilia갇on have been recast to conform to the current year presenta갇on. In addi갇on, 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. 51 INFLATION INFLATION Operators of hotel proper갇es, in general, possess the ability to adjust room rates daily to reﬂect the eﬀects of inﬂa갇on. However, compe갇갇ve pressures may limit the ability of our management companies to raise room rates. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The es갇mates and assump갇ons made by management in applying cri갇cal accoun갇ng policies have not changed materially during 2016 and 2015 and none of the es갇mates or assump갇ons have proven to be materially incorrect or resulted in our recording any signiﬁcant adjustments rela갇ng to prior periods. See Item 7 of our Annual Report on Form 10‐K for the year ended December 31, 2016 for a summary of the accoun갇ng policies that management believes are cri갇cal to the prepara갇on of the consolidated ﬁnancial statements. Revenue Recogni⁛on Approximately 100% of our revenues are derived from hotel room revenues and revenue from other hotel opera갇ng departments. We directly recognize revenue and expense for all consolidated hotels as hotel opera갇ng revenue and hotel opera갇ng 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 par갇cipate in frequent guest programs sponsored by the brand owners of our hotels and we expense the charges associated with those programs, as incurred. 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. Investment in Hotel Proper⁛es Investments in hotel proper갇es 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. Deprecia갇on is computed using the straight‐line method over the es갇mated 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 subjec갇ve assessments as to the useful lives of our proper갇es for purposes of determining the amount of deprecia갇on to record on an annual basis with respect to our investments in hotel proper갇es. 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 proper갇es we would depreciate these investments over fewer years, resul갇ng in more deprecia갇on expense and lower net income on an annual basis. Iden갇ﬁable assets, liabili갇es, and noncontrolling interests related to hotel proper갇es acquired in a business combina갇on are recorded at full fair value. Es갇ma갇ng techniques and assump갇ons used in determining fair values involve signiﬁcant es갇mates and judgments. These es갇mates and judgments have a direct impact on the carrying value of our assets and liabili갇es which can directly impact the amount of deprecia갇on expense recorded on an annual basis and could have an impact on our assessment of poten갇al impairment of our investment in hotel proper갇es. Proper갇es intended to be sold are designated as “held for sale” on the balance sheet. In accordance with ASU Update No. 2014‐08 concerning the classiﬁca갇on and repor갇ng of discon갇nued opera갇ons, we evaluate each disposi갇on to determine whether we need to classify the disposi갇on as discon갇nued opera갇ons. This amendment deﬁnes discon갇nued opera갇ons as a component of an en갇ty that represents a strategic shi耀 that has (or will have) a major eﬀect on an en갇ty’s opera갇ons and ﬁnancial results. We an갇cipate that most of our hotel disposi갇ons will not be classiﬁed as discon갇nued opera갇ons as most will not ﬁt this deﬁni갇on. 52 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 condi갇on;  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 ac갇on or assessment by a regulator;  an accumula갇on of costs signiﬁcantly in excess of the amount originally expected for the acquisi갇on or construc갇on of a long‐lived asset;  a current‐period opera갇ng or cash ﬂow loss combined with a history of opera갇ng or cash ﬂow losses or a projec갇on or forecast that demonstrates con갇nuing losses associated with the use of a long‐lived asset; and  a current expecta갇on 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 es갇mated useful life. We review our por韃olio on an on‐going basis to evaluate the existence of any of the aforemen갇oned events or changes in circumstances that would require us to test for recoverability. In general, our review of recoverability is based on an es갇mate of the future undiscounted cash ﬂows, excluding interest charges, expected to result from the property’s use and eventual disposi갇on. These es갇mates consider factors such as expected future opera갇ng income, market and other applicable trends and residual value expected, as well as the eﬀects of hotel demand, compe갇갇on 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 es갇mated fair value of the property. We are required to make subjec갇ve assessments as to whether there are impairments in the values of our investments in hotel proper갇es. As of December 31, 2016, based on our analysis, we have determined that the es갇mated future cash ﬂow of each of the proper갇es in our por韃olio is suﬃcient to recover its carrying value. Investment in Joint Ventures Proper갇es owned in joint ventures are consolidated if the determina갇on is made that we are the primary beneﬁciary in a variable interest en갇ty (VIE) or we maintain control of the asset through our vo갇ng interest or other rights in the opera갇on of the en갇ty. 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 ac갇vi갇es of a VIE that most signiﬁcantly impact the en갇ty’s economic performance, and ii) the obliga갇on 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 opera갇ons, 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 evalua갇on 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 vo갇ng interest in a vo갇ng interest en갇ty, the equity method of accoun갇ng 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 distribu갇ons are received, limited to the extent of our investment in, advances to and commitments for the investee. Pursuant to our joint venture agreements, alloca갇ons of proﬁts and losses of some of our investments in unconsolidated joint ventures may be allocated dispropor갇onately 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 indica갇ng impairment to the carrying value of the investment that is other than temporary. When an impairment indicator is present, we will es갇mate the fair value of the investment. Our es갇mate of fair value takes into considera갇on factors such as expected future opera갇ng income, trends and prospects, as well as the eﬀects of demand, compe갇갇on and other factors. This determina갇on requires signiﬁcant es갇mates by management, including the expected cash ﬂows to be generated by the assets owned and operated by the joint venture. Subsequent changes in es갇mates could impact the determina갇on 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. 53 Accoun⁛ng for Deriva⁛ve Financial Investments and Hedging Ac⁛vi⁛es We use deriva갇ves to hedge, ﬁx and cap interest rate risk and we account for our deriva갇ve and hedging ac갇vi갇es by recording all deriva갇ve instruments at fair value on the balance sheet. Deriva갇ve instruments designated in a hedge rela갇onship to mi갇gate exposure to variability in expected future cash ﬂows, or other types of forecasted transac갇ons, are considered cash ﬂow hedges. We formally document all rela갇onships between hedging instruments and hedged items, as well as our risk‐management objec갇ve and strategy for undertaking each hedge transac갇on. Cash ﬂow hedges that are considered highly eﬀec갇ve are accounted for by recording the fair value of the deriva갇ve 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 transac갇on aﬀects earnings. Under cash ﬂow hedges, deriva갇ve gains and losses not considered highly eﬀec갇ve in hedging the change in expected cash ﬂows of the hedged item are recognized immediately in the income statement. For hedge transac갇ons that do not qualify for the short‐cut method, at the hedge’s incep갇on and on a regular basis therea耀er, a formal assessment is performed to determine whether changes in the cash ﬂows of the deriva갇ve instruments have been highly eﬀec갇ve in oﬀse駫ng changes in cash ﬂows of the hedged items and whether they are expected to be highly eﬀec갇ve in the future. New Accoun갇ng Pronouncements In January 2017, the FASB issued ASU 2017‐01, Business Combina⁛ons (Topic 805): Clarifying the Deﬁni갇on of a Business, which clariﬁes the deﬁni갇on of a business as it relates to acquisi갇ons and business combina갇ons. The update adds further guidance that assists preparers in evalua갇ng whether a transac갇on will be accounted for as an acquisi갇on of an asset or a business. We expect most of our hotel property acquisi갇ons to qualify as asset acquisi갇ons under the standard which permits the capitaliza갇on of acquisi갇on costs to the underlying assets. This standard is eﬀec갇ve for periods beginning a耀er December 31, 2017, however early adop갇on is permi姫ed. The Company is evalua갇ng the ul갇mate eﬀect that ASU No. 2017‐01 will have on its consolidated ﬁnancial statements and related disclosures. In March 2016, the FASB issued ASU No. 2016‐09, Improvements to Employee Share‐Based Award Payment Accoun⁛ng, which simpliﬁes various aspects of how share‐based payments are accounted for and presented in the ﬁnancial statements. This standard requires companies to record all of the tax eﬀects related to share‐based payments through the income statement, allows companies to elect an accoun갇ng policy to either es갇mate the share based award forfeitures (and expense) or account for forfeitures (and expense) as they occur, and allows companies to withhold a percentage of the shares issuable upon se姫lement of an award up to the maximum individual statutory tax rate without causing the award to be classiﬁed as a liability. The new standard is eﬀec갇ve for the Company on January 1, 2017. The Company has determined that ASU No. 2016‐09 will have no material impact on the consolidated ﬁnancial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016‐02, Leases (Topic 842), which provides the principles for the recogni갇on, measurement, presenta갇on and disclosure of leases. The accoun갇ng for lessors will remain largely unchanged from current GAAP; however, the standard requires the certain ini갇al direct costs be expensed rather than capitalized. Under the standard, lessees apply a dual approach, classifying leases as either ﬁnance or opera갇ng leases. A lessee is required to record a right‐of‐use asset and a lease liability for all leases with a term of greater than 12 months, regardless of their lease classiﬁca갇on. Based on our real estate leases, we are a lessee on ground leases in certain markets and oﬃce space leases. This standard will be eﬀec갇ve for the ﬁrst annual repor갇ng period beginning a耀er December 15, 2018. The Company is evalua갇ng the eﬀect that ASU No. 2016‐02 will have on its consolidated ﬁnancial statements and related disclosures. We adopted ASU No. 2015‐03, Simplifying the Presenta⁛on of Debt Issuance Costs, on January 1, 2016. This standard requires debt issuance costs to be presented in the balance sheet as a direct deduc갇on from the associated debt liability. Previously, debt issuance costs were recorded as an asset. The issuance costs will con갇nue to be amor갇zed over the life of the debt instrument and recorded in interest expense, as they were prior to the new standard. As part of this adop갇on, debt issuance costs are now included as an oﬀset to the mortgages, unsecured term loan and unsecured notes payable line items on the consolidated balance sheets for all periods presented. For full reclassiﬁca갇on amounts, see “Note 5 – Debt”. On January 1, 2016, we adopted ASU No. 2015‐02, Consolida⁛on – Amendments to the Consolida⁛on Analysis. We evaluated the applica갇on of ASU No. 2015‐02 and concluded that no change was required to our accoun갇ng for our interests in less than wholly owned joint ventures. However, HHLP, our opera갇ng partnership, now meets the criteria as a variable interest en갇ty. The Company’s most signiﬁcant asset is its investment in HHLP, and consequently, substan갇ally all of the Company’s assets and liabili갇es represent those assets and liabili갇es of HHLP. In August 2014, the FASB issued ASU No. 2014‐15, Disclosure of Uncertain⁛es about an En⁛ty’s Ability to Con⁛nue as a Going Concern, which provides guidance about management’s responsibility to evaluate whether there is substan갇al doubt about an en갇ty’s ability to con갇nue as a going concern and to provide related footnote disclosures. This update is eﬀec갇ve for 54 the Company as of December 31, 2016. The adop갇on of this update had no material impact to our ﬁnancial statements and related disclosures. the Company as of December 31, 2016. The adop갇on of this update had no material impact to our ﬁnancial statements and related disclosures. On May 28, 2014, the FASB issued ASU No. 2014‐09, Revenue from Contracts with Customers, which requires an en갇ty to recognize the amount of revenue to which it expects to be en갇tled for the transfer of promised goods or services to customers. The ASU will replace most exis갇ng revenue recogni갇on guidance in U.S. GAAP when it becomes eﬀec갇ve. We are evalua갇ng each of our revenue streams and related accoun갇ng policy under the standard. The new standard is eﬀec갇ve for the Company on January 1, 2018. Early adop갇on is permi姫ed, but not prior to the original eﬀec갇ve date of January 1, 2017. The standard permits the use of either the retrospec갇ve or cumula갇ve eﬀect transi갇on method. Based on our analysis to date, we do not expect the new revenue recogni갇on model to have a material impact on our hotel opera갇ng revenue, including room revenue, food and beverage, and other revenue, however, our ﬁnal evalua갇on has not been concluded. Our evalua갇on under the standard also includes sales to third par갇es, primarily a result of disposi갇ons of real estate. Our evalua갇on over sales of real estate will be par갇ally dependent on how the FASB deﬁnes a business with regard to sales of assets, which is currently under delibera갇on. The Company con갇nues to evaluate the ul갇mate eﬀect that ASU No. 2014‐09 will have on its consolidated ﬁnancial statements and related disclosures. RELATED PARTY TRANSACTIONS We have entered into a number of transac갇ons and arrangements that involve related par갇es. For a descrip갇on of the transac갇ons and arrangements, please see Note 6, “Commitments and Con갇ngencies and Related Party Transac갇ons,” to the consolidated ﬁnancial statements. CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS The following table summarizes our contractual obliga갇ons and commitments to make future payments under contracts, such as debt and lease agreements, as of December 31, 2016. Contractual Obliga갇ons Total 2017 2018 2019 2020 2021 Therea耀er Long Term Debt $ 441,505 $ 160,908 $ 27,236 $ 101,564 $ 1,694 $ 23,604 $ 126,499 Interest Expense on Long Term Debt Unsecured Term Loan Unsecured Line of Credit Interest Expense on Credit Facility Lease Buyout Hotel Ground Rent Total 57,501 666,620 ‐ 69,924 9,400 260,243 13,020 10,086 9,056 6,897 6,830 11,612 ‐ ‐ ‐ ‐ 210,520 300,000 156,100 ‐ ‐ 20,349 20,349 14,969 10,927 9,400 2,706 ‐ 2,714 ‐ 2,719 ‐ 2,744 ‐ 3,330 ‐ 2,782 ‐ ‐ ‐ ‐ 246,578 384,689 $ 1,505,193 $ 206,383 $ 60,385 $ 338,828 $ 322,262 $ 192,646 $ 55 Item 7A . Quan갇ta갇ve and Qualita갇ve 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 eﬀec갇vely hedged with interest swaps or interest rate caps. As of December 31, 2016, we are exposed to interest rate risk with respect to variable rate borrowings under our Credit Facility, Second Term and Third Term Loans and certain variable rate mortgages and notes payable. As of December 31, 2016, we had total variable rate debt outstanding of $730,418 with a weighted average interest rate of 2.97%. The eﬀect of a 100 basis point increase or decrease in the interest rate on our variable rate debt outstanding as of December 31, 2016 would be an increase or decrease in our interest expense for the twelve months ended December 31, 2016 of $6,488. Our interest rate risk objec갇ves are to limit the impact of interest rate ﬂuctua갇ons on earnings and cash ﬂows and to lower our overall borrowing costs. To achieve these objec갇ves, we manage our exposure to ﬂuctua갇ons in market interest rates for a por갇on 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 deriva갇ve ﬁnancial instruments such as interest rate swaps or caps, and in the future may enter into treasury op갇ons or locks, to mi갇gate our interest rate risk on a related ﬁnancial instrument or to eﬀec갇vely lock the interest rate on a por갇on of our variable rate debt. As of December 31, 2016, we have an interest rate cap related to debt on the Hya姫 Union Square, New York, NY and Courtyard by Marrio姫, 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 deriva갇ve or interest rate transac갇ons for specula갇ve purposes. As of December 31, 2016 approximately 42% of our outstanding consolidated long‐term indebtedness is subject to ﬁxed rates or eﬀec갇vely capped, while 58% of our outstanding long term indebtedness is subject to ﬂoa갇ng 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 sensi갇vity analysis related to our ﬁxed‐rate debt assumes an immediate 100 basis point move in interest rates from their December 31, 2016 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, 2016 to be approximately $1,084,490 and a 100 basis point decrease in market interest rates would cause the fair value of our ﬁxed‐rate debt outstanding at December 31, 2016 to be approximately $1,112,862. 2017 2018 2019 2020 2021 Therea耀er Total Fixed Rate Debt $ 124,861 $ 1,163 $ 1,434 $ 1,694 $ 173,604 $ 74,951 $ Weighted Average Interest Rate 3.97% 3.96% 3.95% 3.94% 4.69% 4.69% Floa갇ng Rate Debt $ 36,047 $ 26,073 $ 310,650 $ 300,000 $ 6,100 $ 51,548 $ Weighted Average Interest Rate 3.06% 3.06% 3.07% 3.63% 3.72% 3.72% Line of Credit Weighted Average Interest Rate $ $ $ 160,908 ‐ 160,908 $ $ $ 27,236 ‐ 27,236 $ $ $ 312,084 $ 301,694 ‐ $ 3.17% ‐ 312,084 $ 301,694 $ $ $ 179,704 ‐ ‐ 179,704 $ $ $ 126,499 ‐ ‐ 126,499 $ $ $ 377,707 4.33% 730,418 2.97% 1,108,125 ‐ 3.17% 1,108,125 The table incorporates only those exposures that existed as of December 31, 2016, and does not consider exposure or posi갇ons that could arise a耀er that date. As a result, our ul갇mate realized gain or loss with respect to interest rate ﬂuctua갇ons will depend on the exposures that arise during the future period, prevailing interest rates, and our hedging strategies at that 갇me. 56 Item 8. Financial Statements and Supplementary Data Hersha Hospitality Trust Report of Independent Registered Public Accoun갇ng Firm Consolidated Balance Sheets as of December 31, 2016 and 2015 Consolidated Statement of Opera갇ons for the years ended December 31, 2016, 2015 and 2014 Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014 Consolidated Statements of Equity for the years ended December 31, 2016, 2015 and 2014 Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 Notes to Consolidated Financial Statements Schedule III ‐ Real Estate and Accumulated Deprecia갇on for the year ended December 31, 2016 Page 57 59 60 62 63 66 68 109 57 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] The Board of Trustees and Stockholders Hersha Hospitality Trust: Report of Independent Registered Public Accoun갇ng Firm We have audited the accompanying consolidated balance sheets of Hersha Hospitality Trust and subsidiaries (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of opera갇ons, comprehensive income, equity, and cash ﬂows for each of the years in the three‐year period ended December 31, 2016. In connec갇on 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 Company’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 Accoun갇ng 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 suppor갇ng the amounts and disclosures in the ﬁnancial statements. An audit also includes assessing the accoun갇ng principles used and signiﬁcant es갇mates made by management, as well as evalua갇ng the overall ﬁnancial statement presenta갇on. 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 posi갇on of Hersha Hospitality Trust and subsidiaries as of December 31, 2016 and 2015, and the results of their opera갇ons and their cash ﬂows for each of the years in the three‐year period ended December 31, 2016, in conformity with U.S. generally accepted accoun갇ng principles. Also in our opinion, the related ﬁnancial statement schedule, when considered in rela갇on to the basic consolidated ﬁnancial statements taken as a whole, presents fairly, in all material respects, the informa갇on set forth therein. We also have audited, in accordance with the standards of the Public Company Accoun갇ng Oversight Board (United States), Hersha Hospitality Trust’s internal control over ﬁnancial repor갇ng as of December 31, 2016, based on criteria established in Internal Control ‐ Integrated Framework (2013) issued by the Commi姫ee of Sponsoring Organiza갇ons of the Treadway Commission (COSO), and our report dated February 23, 2017, expressed an unqualiﬁed opinion on the eﬀec갇veness of Hersha Hospitality Trust’s internal control over ﬁnancial repor갇ng. Philadelphia, Pennsylvania February 23, 2017 /s/ KPMG LLP 58 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] Assets: Investment in Hotel Proper갇es, Net of Accumulated Deprecia갇on, Including Consolida갇on of Variable Interest En갇ty Assets of $0 and $82,787 (Note 1) Investment in Unconsolidated Joint Ventures Cash and Cash Equivalents Escrow Deposits Hotel Accounts Receivable, Net of Allowance for Doub韃ul Accounts of $91 and $12 Due from Related Par갇es Intangible Assets, Net of Accumulated Amor갇za갇on of $4,532 and $3,951 Deposits on Hotel Acquisi갇ons Other Assets Hotel Assets Held for Sale Total Assets Liabili갇es and Equity: Line of Credit Unsecured Term Loans, Net of Unamor갇zed Deferred Financing Costs (Note 5) Unsecured Notes Payable, Net of Unamor갇zed Deferred Financing Costs (Note 5) Mortgages Payable, including Net Unamor갇zed Premium and Unamor갇zed Deferred Financing Costs, and Consolida갇on of Variable Interest En갇ty Debt of $0 and $52,509 (Note 1, Note 5) Accounts Payable, Accrued Expenses and Other Liabili갇es Dividends and Distribu갇ons Payable Due to Related Par갇es Liabili갇es Related to Hotel Assets Held for Sale Deferred Gain on Disposi갇on of Hotel Assets Total Liabili갇es Equity: Shareholders' Equity: Preferred Shares: $.01 Par Value, 29,000,000 Shares Authorized, 3,000,000 Series C, 7,700,000 Series D and 4,000,000 Series E Shares Issued and Outstanding at December 31, 2016 and 4,600,000 Series B and 3,000,000 Series C Shares Issued and Outstanding at December 31, 2015, with Liquida갇on Preferences of $25 Per Share (Note 1) Common Shares: Class A, $.01 Par Value, 75,000,000 and 300,000,000 Shares Authorized at December 31, 2016 and December 31, 2015 respec갇vely; 41,770,514 and 44,457,368 Shares Issued and Outstanding at December 31, 2016 and December 31, 2015, respec갇vely Common Shares: Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at December 31, 2016 and December 31, 2015 Accumulated Other Comprehensive Income (Loss) Addi갇onal Paid‐in Capital Distribu갇ons in Excess of Net Income Total Shareholders' Equity December 31, 2016 December 31, 2015 $ $ $ $ $ 1,767,570 11,441 185,644 8,993 8,769 18,332 16,944 ‐ 39,370 98,473 2,155,536 ‐ 663,500 50,578 337,821 65,106 26,050 ‐ 51,428 81,314 1,275,797 $ $ $ $ 147 $ 418 ‐ 1,373 1,198,311 (364,831) 835,418 44,321 ‐ 44,321 879,739 1,831,119 10,316 27,955 19,204 9,465 6,243 13,389 5,000 39,958 ‐ 1,962,649 27,000 547,780 50,525 544,659 59,226 16,515 8,789 ‐ ‐ 1,254,494 76 444 ‐ (466) 1,086,259 (408,274) 678,039 31,876 (1,760) 30,116 708,155 $ 2,155,536 $ 1,962,649 The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements. 59 Noncontrolling Interests (Note 1): Noncontrolling Interests ‐ Common Units and LTIP Units Noncontrolling Interests ‐ Consolidated Variable Interest En갇ty Total Noncontrolling Interests Total Equity Total Liabili갇es and Equity HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] Revenue: Hotel Opera갇ng Revenues Other Revenues Total Revenues Opera갇ng Expenses: Hotel Opera갇ng Expenses Insurance Recoveries Hotel Ground Rent Real Estate and Personal Property Taxes and Property Insurance General and Administra갇ve (including Share Based Payments of $8,048, $6,523, and $6,028 for the years ended December 31, 2016, 2015, and 2014, respec갇vely) Acquisi갇on and Terminated Transac갇on Costs Deprecia갇on and Amor갇za갇on Con갇ngent Considera갇on Related to Acquisi갇on of Hotel Property Total Opera갇ng Expenses Opera갇ng Income Interest Income Interest Expense Other Expense Gain on Disposi갇on of Hotel Proper갇es Gain on Hotel Acquisi갇ons, net Development Loan Recovery Lease Buyout Loss on Debt Ex갇nguishment Income Before Income from Unconsolidated Joint Venture Investments and Income Taxes (Loss) Income from Unconsolidated Joint Venture Investments Income Before Income Taxes Income Tax Beneﬁt Income from Con갇nuing Opera갇ons Discon갇nued Opera갇ons: Loss on Disposi갇on of Discon갇nued Assets Impairment of Discon갇nued Assets Income from Discon갇nued Opera갇ons, Net of Income Taxes Loss from Discon갇nued Opera갇ons Net Income Income Allocated to Noncontrolling Interests Preferred Distribu갇ons Ex갇nguishment of Issuance Costs Upon Redemp갇on of Series B Preferred Shares Year Ended December 31, 2016 2015 2014 $ $ 466,370 259 466,629 $ 470,272 113 470,385 262,956 ‐ 3,600 32,157 24,444 2,560 75,390 ‐ 401,107 65,522 362 (44,352) (961) 115,839 ‐ ‐ (16,831) (1,187) 118,392 (1,823) 116,569 4,888 121,457 ‐ ‐ ‐ ‐ 121,457 (4,477) (17,380) (4,021) 254,313 ‐ 3,137 34,518 20,515 1,119 74,390 ‐ 387,992 82,393 193 (43,557) (367) ‐ ‐ ‐ ‐ (561) 38,101 965 39,066 3,141 42,207 ‐ ‐ ‐ ‐ 42,207 (411) (14,356) ‐ 417,226 180 417,406 227,324 (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 67,251 2,685 69,936 (128) (1,800) 263 (1,665) 68,271 (1,016) (14,356) ‐ 52,899 Net Income Applicable to Common Shareholders $ 95,579 $ 27,440 $ The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements. 60 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016, 2015, AND 2014 [IN THOUSANDS] Year Ended December 31, 2016 2015 2014 Earnings Per Share: BASIC Income from Con갇nuing Opera갇ons Applicable to Common Shareholders (Loss) Income from Discon갇nued Opera갇ons Applicable to Common Shareholders Net Income Applicable to Common Shareholders DILUTED Income from Con갇nuing Opera갇ons Applicable to Common Shareholders (Loss) Income from Discon갇nued Opera갇ons Applicable to Common Shareholders Net Income Applicable to Common Shareholders $ $ $ $ 2.21 0.00 2.21 2.18 0.00 2.18 $ $ $ 0.56 0.00 0.56 0.56 0.00 0.56 $ $ $ $ 1.08 (0.03) 1.05 1.07 (0.03) 1.04 Weighted Average Common Shares Outstanding: Basic Diluted* 42,957,199 43,530,731 47,786,811 48,369,658 49,777,302 50,307,506 * Income allocated to noncontrolling interest in Hersha Hospitality Limited Partnership (the “Opera갇ng Partnership” or “HHLP”) has been excluded from the numerator and the Class A common shares issuable upon any redemp갇on of the Opera갇ng Partnership’s common units of limited partnership interest (“Common Units”) and the Opera갇ng Partnership’s vested LTIP units (“Vested LTIP Units”) have been omi姫ed from the denominator for the purpose of compu갇ng diluted earnings per share because the eﬀect of including these shares and units in the numerator and denominator would have no impact. In addi갇on, poten갇ally dilu갇ve common shares, if any, have been excluded from the denominator if they are an갇‐dilu갇ve to income applicable to common shareholders. The following table summarizes poten갇ally dilu갇ve securi갇es that have been excluded from the denominator for the purpose of compu갇ng diluted earnings per share: Common Units and Vested LTIP Units Year Ended December 31, 2016 2015 2,209,496 1,722,750 1,907,209 2014 1,727,750 The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements. 61 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS] Net Income Other Comprehensive Income (Loss) Change in Fair Value of Deriva갇ve Instruments Less: Reclassiﬁca갇on Adjustment for Change in Fair Value of Deriva갇ve Instruments Included in Net Income Comprehensive Income Less: Comprehensive Income A姫ributable to Noncontrolling Interests Less: Preferred Distribu갇ons Less: Ex갇nguishment of Issuance Costs Upon Redemp갇on of Series B Preferred Shares Comprehensive Income A姫ributable to Common Shareholders Year Ended December 31, 2016 2015 2014 121,457 $ 42,207 $ 68,271 2,449 (610) 1,839 123,296 (4,567) (17,380) (4,021) 97,328 $ $ $ 1,459 (1,567) (108) 42,099 (411) (14,356) ‐ 27,332 $ 1,527 (1,509) 18 68,289 (1,016) (14,356) ‐ 52,917 $ $ $ The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. 62 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS] Shareholders' Equity Noncontrolling Interests Class A Common Shares ($) Class B Common Shares ($) Common Shares Preferred Shares Preferred Shares ($) Addi갇onal Paid‐In Capital ($) Accumulated Other Comprehensive Income ($) Distribu갇ons in Excess of Net Income ($) Total Shareholders' Equity ($) Common Units and LTIP Units Common Units and LTIP Units ($) Consolidated Variable Interest En갇ty ($) Total Noncontrolling Interests ($) Total Equity ($) Balance at December 31, 2015 Repurchase of Common Shares Common Units Issued Preferred Shares Preferred Shares Oﬀering, Net of Costs Preferred Shares Redemp갇on Dividends and Distribu갇ons declared: Common Shares ($1.32 per share) Preferred Shares Common Units ($1.32 per share) LTIP Units ($1.32 per share) Dividend Reinvestment Plan Share Based Compensa갇on: Grants Amor갇za갇on Change in Fair Value of Deriva갇ve Instruments Exercise of Op갇on to Acquire Noncontrolling Interest Net Income (Loss) 44,457,368 (2,772,710) 444 (27) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3,518 82,338 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1 ‐ ‐ ‐ ‐ ‐ 7,600,000 76 1,086,259 (466) (408,274) 678,039 2,319,301 31,876 (1,760) 30,116 708,155 (52,055) ‐ ‐ 225,000 ‐ 4,430 ‐ ‐ ‐ ‐ ‐ ‐ (52,028) ‐ ‐ 11,700,000 ‐ (4,600,000) 117 (46) 282,467 (114,954) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 63 (398) 1,417 ‐ (4,515) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1,839 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 282,584 (115,000) (56,157) (17,380) (56,157) (17,380) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 63 1,417 1,839 (4,515) (397) 294,245 116,980 116,980 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2,197 (437) ‐ 4,430 (52,055) 4,430 ‐ ‐ ‐ ‐ (2,356) (1,574) ‐ 1,060 5,971 ‐ 2,197 4,477 282,584 (115,000) (56,157) (17,380) (2,356) (1,574) 63 663 7,388 1,839 (2,318) 121,457 ‐ ‐ ‐ ‐ (2,356) (1,574) ‐ 1,060 5,971 ‐ ‐ 4,914 Balance at December 31, 2016 41,770,514 418 ‐ 14,700,000 147 1,198,311 1,373 (364,831) 835,418 2,838,546 44,321 ‐ 44,321 879,739 The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. 63 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS] Shareholders' Equity Noncontrolling Interests Balance at December 31, 2014 Unit Conversion Repurchase of Common Shares Dividends and Distribu갇ons declared: Common Shares ($1.12 per share) Preferred Shares Common Units ($1.12 per share) LTIP Units ($1.12 per share) Dividend Reinvestment Plan Share Based Compensa갇on: Grants Amor갇za갇on Change in Fair Value of Deriva갇ve Instruments Net Income (Loss) Common Shares 49,708,771 8,965 (5,310,371) ‐ ‐ ‐ ‐ 2,018 47,985 ‐ ‐ ‐ Class A Common Shares ($) Class B Common Shares ($) Preferred Shares Preferred Shares ($) Addi갇onal Paid‐In Capital ($) Accumulated Other Comprehensive Loss ($) Distribu갇ons in Excess of Net Income ($) Total Shareholders' Equity ($) Common Units and LTIP Units Common Units and LTIP Units ($) Consolidated Variable Interest En갇ty ($) Total Noncontrolling Interests ($) Total Equity ($) 497 ‐ (53) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 7,600,000 76 1,194,547 (358) (365,381) 829,381 2,199,434 29,082 (1,075) 28,007 857,388 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 132 (110,517) ‐ ‐ ‐ ‐ 50 620 1,427 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (17,669) (52,664) (14,356) ‐ ‐ ‐ ‐ ‐ (108) ‐ ‐ 41,796 132 (8,965) (132) (128,239) (52,664) (14,356) 50 ‐ ‐ ‐ ‐ ‐ ‐ 620 128,832 1,427 (108) 41,796 ‐ ‐ ‐ ‐ ‐ ‐ (1,913) (694) ‐ ‐ 4,437 ‐ 1,096 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (685) (132) ‐ ‐ ‐ (1,913) (694) ‐ ‐ 4,437 ‐ 411 ‐ (128,239) (52,664) (14,356) (1,913) (694) 50 620 5,864 (108) 42,207 Balance at December 31, 2015 44,457,368 444 ‐ 7,600,000 76 1,086,259 (466) (408,274) 678,039 2,319,301 31,876 (1,760) 30,116 708,155 The Accompanying Notes are an Integral Part of These Consolidated Financial Statement 64 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS] Shareholders' Equity Noncontrolling Interests Class A Common Shares ($) Class B Common Shares ($) Common Shares Preferred Shares Preferred Shares ($) Addi갇onal Paid‐In Capital ($) Accumulated Other Comprehensive Loss ($) Distribu갇ons in Excess of Net Income ($) Total Shareholders' Equity ($) Common Units and LTIP Units Common Units and LTIP Units ($) Consolidated Variable Interest En갇ty ($) Total Noncontrolling Interests ($) Total Equity ($) Balance at December 31, 2013 Unit Conversion/Redemp갇on Restricted Shares Forfeiture/LTIP Unit Issuance Repurchase of Common Shares Dividends and Distribu갇ons declared: Common Stock ($1.04 per share) Preferred Shares Common Units ($1.04 per share) LTIP Units ($0.28 per share) Dividend Reinvestment Plan Share Based Compensa갇on: Grants Amor갇za갇on Change in Fair Value of Deriva갇ve Instruments Net Income (Loss) 50,689,868 507 4,725 (487,081) (656,714) ‐ ‐ ‐ ‐ 2,162 155,811 ‐ ‐ ‐ ‐ (5) (7) ‐ ‐ ‐ ‐ ‐ 2 ‐ ‐ ‐ Balance at December 31, 2014 49,708,771 497 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 7,600,000 76 1,202,316 (376) (364,568) 837,955 1,728,679 29,523 (342) 29,181 867,136 (77) (16,326) (261) (261) (338) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (77) 5 (13,791) ‐ ‐ ‐ ‐ 50 647 5,397 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 487,081 (1,621) (15,419) (52,091) (14,356) (52,091) (14,356) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 50 649 5,397 18 67,255 ‐ ‐ ‐ ‐ (1,793) (136) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ (1,793) (136) ‐ ‐ ‐ ‐ (15,419) (52,091) (14,356) (1,793) (136) 50 649 5,397 18 68,271 18 ‐ ‐ 67,255 ‐ 1,749 (733) ‐ 1,016 7,600,000 76 1,194,547 (358) (365,381) 829,381 2,199,434 29,082 (1,075) 28,007 857,388 The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. 65 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] Opera갇ng Ac갇vi갇es: Net Income Adjustments to Reconcile Net Income to Net Cash Provided by Opera갇ng Ac갇vi갇es: Gain on Disposi갇on of Hotel Proper갇es, Net Gain on Hotel Acquisi갇ons, Net Con갇ngent Considera갇on Development Loan Recovery Impairment of Hotel Assets Lease Buyout Deferred Taxes Deprecia갇on Amor갇za갇on Loss on Debt Ex갇nguishment Equity in Loss (Income) of Unconsolidated Joint Ventures Distribu갇ons from Unconsolidated Joint Ventures Loss Recognized on Change in Fair Value of Deriva갇ve Instrument Share Based Compensa갇on Expense Change in Assets and Liabili갇es: (Increase) Decrease in: Hotel Accounts Receivable Escrows Other Assets Due from Related Par갇es (Decrease) Increase in: Due to Related Par갇es Accounts Payable, Accrued Expenses and Other Liabili갇es Net Cash Provided by Opera갇ng Ac갇vi갇es Inves갇ng Ac갇vi갇es: Purchase of Hotel Property Assets Deposits on Hotel Acquisi갇ons Capital Expenditures Cash Paid for Hotel Development Projects Proceeds from Disposi갇on of Hotel Proper갇es Net Changes in Capital Expenditure Escrows Proceeds from Contribu갇on of Hotel Property Assets to Unconsolidated Joint Venture Year Ended December 31, 2016 2015 2014 $ 121,457 $ 42,207 $ 68,271 (115,839) ‐ ‐ ‐ ‐ 11,845 (4,888) 74,644 2,022 1,187 1,823 1,574 50 8,048 1,024 4,991 1,286 (12,089) (8,789) (1,788) ‐ ‐ ‐ ‐ ‐ ‐ (3,141) 74,007 1,492 324 (965) 1,446 107 6,523 993 (14) (6,973) 337 1,586 3,888 $ $ $ $ 86,558 $ 121,817 (321,995) $ ‐ (33,267) (952) 67,430 6,476 429,221 ‐ 3,011 (110,176) (5,000) (27,366) (950) ‐ (779) ‐ ‐ 362 (7,067) (12,667) 2,000 (22,494) 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 $ 149,924 $ (143,909) $ (180,504) The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. 66 Proceeds from Insurance Claims Distribu갇ons from Unconsolidated Joint Ventures Net Cash Provided by (Used in) Inves갇ng Ac갇vi갇es HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] Financing Ac갇vi갇es: Repayment of Borrowings Under Line of Credit, Net Proceeds of Unsecured Term Loan Borrowing Repayment of Borrowings Under Unsecured Term Loan Borrowing Principal Repayment of Mortgages and Notes Payable Proceeds from Mortgages and Notes Payable Cash Paid for Deferred Financing Costs Cash Paid for Debt Ex갇nguishment Proceeds from Issuance of Preferred Shares, Net Redemp갇on of Series B Preferred Shares Repurchase of Common Shares Redemp갇on of Common Partnership Units Se姫lement of Interest Rate Cap Exercise of Op갇on to Acquire Noncontrolling Interest Dividends Paid on Common Shares Dividends Paid on Preferred Shares Distribu갇ons Paid on Common Units and LTIP Units Net Cash (Used in) Provided by Financing Ac갇vi갇es Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents ‐ Beginning of Period Cash and Cash Equivalents ‐ End of Period Year Ended December 31, 2016 2015 2014 $ (27,000) $ 27,000 $ 156,100 (39,480) (210,379) ‐ (2,467) (1,024) 282,686 (115,000) (52,055) ‐ ‐ (2,318) (48,523) (16,116) (3,217) (78,793) 157,689 27,955 185,644 $ $ $ 300,000 ‐ (184,356) 87,750 (2,362) ‐ ‐ ‐ (128,239) ‐ (450) ‐ (54,041) (14,356) (2,574) 28,372 6,280 21,675 27,955 $ $ $ $ $ $ ‐ 100,000 ‐ (61,348) 101,000 (4,450) ‐ ‐ ‐ (15,418) (338) (8) ‐ (50,286) (14,356) (1,724) 53,072 (14,538) 36,213 21,675 The Accompanying Notes are an Integral Part of These Consolidated Financial Statements. 67 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [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 con갇nue 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 갇cker symbol "HT", its 6.875% Series C Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest trade on the NYSE under the 갇cker symbol “HT PRC”, its 6.500% Series D Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest trade on the NYSE under the 갇cker symbol “HT PRD”, and it’s 6.500% Series E Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest trade on the NYSE under the 갇cker symbol “HT PRE.” As of December 31, 2016, the Company, through the Partnership and subsidiary partnerships, wholly owned 43 limited and full service hotels. All of the wholly owned hotel facili갇es are leased to the Company’s TRS, 44 New England. In addi갇on to the wholly owned hotel proper갇es, as of December 31, 2016, the Company owned joint venture interests in another twelve proper갇es. The proper갇es owned by the joint ventures are leased to a TRS owned by the joint venture or to an en갇ty owned by the joint venture partners and 44 New England. The following table lists the proper갇es owned by these joint ventures: Joint Venture Ownership Property Loca갇on Lessee/Sublessee Unconsolidated Joint Ventures Mys갇c Partners, LLC 66.7% Marrio姫 Cindat Hersha Owner JV, LLC (1) SB Partners, LLC Hiren Boston, LLC 8.8% 15.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 50.0% 50.0% Hilton Marrio姫 Hampton Inn Hampton Inn Hampton Inn Mys갇c, CT Har韃ord, CT Har韃ord, CT Mys갇c Partners Leaseco, LLC Mys갇c Partners Leaseco, LLC Mys갇c Partners Leaseco, LLC Herald Square, NY Cindat Hersha Lessee JV, LLC Chelsea, NY Cindat Hersha Lessee JV, LLC Times Square, NY Cindat Hersha Lessee JV, LLC Holiday Inn Express Times Square, NY Cindat Hersha Lessee JV, LLC Candlewood Suites Times Square, NY Cindat Hersha Lessee JV, LLC Holiday Inn Wall Street, NY Cindat Hersha Lessee JV, LLC Holiday Inn Express Water Street, NY Cindat Hersha Lessee JV, LLC Holiday Inn Express South Boston, MA South Bay Sandeep, LLC Courtyard South Boston, MA South Bay Boston, LLC (1) The percentages shown for the CINDAT JV represent our common ownership interest. As of December 31, 2016, we owned a $43,194 preferred equity interest in the joint venture. See Note 3 – Investment in Unconsolidated Joint Ventures for a more detailed explana갇on of our ownership interest and the related distribu갇on of earnings within the venture. 68 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) At December 31, 2016, Mys갇c Partners, LLC owned an interest in three hotel proper갇es. Our interest in Mys갇c Partners, LLC is rela갇ve to our interest in each of the three proper갇es owned by the joint venture as deﬁned in the joint venture’s governing documents. Each of the three proper갇es owned by Mys갇c Partners, LLC is leased to a separate en갇ty that is consolidated in Mys갇c Partners Leaseco, LLC which is owned by 44 New England and our joint venture partner in Mys갇c Partners, LLC. On January 3, 2017, we transferred to our joint venture partner all of our partnership interests in the Har韃ord Marrio姫 and the Har韃ord Hilton for $8.5 million, which represents a 100% recovery of our equity investment in these assets. We also simultaneously assumed full ownership of the Mys갇c Marrio姫 Hotel & Spa without any addi갇onal cash payment to the joint venture partner. The proper갇es are managed by eligible independent management companies, including Hersha Hospitality Management, LP (“HHMLP”). HHMLP is owned in part by certain of our trustees and execu갇ve oﬃcers and other unaﬃliated third party investors. Principles of Consolida갇on and Presenta갇on The accompanying consolidated ﬁnancial statements have been prepared in accordance with U.S. generally accepted accoun갇ng 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. Consolidated proper갇es are either wholly owned or owned less than 100% by the Partnership and are controlled by the Company as general partner of the Partnership. Proper갇es owned in joint ventures are also consolidated if the determina갇on is made that we are the primary beneﬁciary in a variable interest en갇ty (VIE) or we maintain control of the asset through our vo갇ng interest in the en갇ty. 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 opera갇ons, 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 par갇cipate in the signiﬁcant decisions made in the ordinary course of the partnership’s business. We evaluate each of our investments and contractual rela갇onships to determine whether they meet the guidelines of consolida갇on. En갇갇es are consolidated if the determina갇on is made that we are the primary beneﬁciary in a VIE or we maintain control of the asset through our vo갇ng interest or other rights in the opera갇on of the en갇ty. 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 ac갇vi갇es of a variable interest en갇ty that most signiﬁcantly impact the en갇ty’s economic performance, and ii) the obliga갇on 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 opera갇ons, 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 examina갇on, the following en갇갇es were determined to be VIE’s: Mys갇c Partners, LLC; Mys갇c Partners Leaseco, LLC; Cindat Hersha Owner JV, LLC; Cindat Hersha Lessee JV, LLC; South Bay Boston, LLC; Hersha Statutory Trust I; and Hersha Statutory Trust II. Mys갇c Partners, LLC is a VIE en갇ty, 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 Mys갇c Partners, LLC is limited to our investment in the joint venture which is $4,699 as of December 31, 2016. Cindat Hersha Owner JV, LLC is a VIE en갇ty, 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 Cindat Hersha Owner JV, LLC is limited to our investment in the joint venture which is $3,717 as of December 31, 2016. Also, Mys갇c Partners Leaseco, LLC; and South Bay Boston, LLC lease hotel proper갇es are VIEs. These en갇갇es are consolidated by the lessors, the primary beneﬁciaries of each en갇ty. Hersha Statutory Trust I and Hersha Statutory Trust II are VIEs but HHLP is not the primary beneﬁciary in these en갇갇es. Accordingly, the accounts of Hersha Statutory Trust I and Hersha Statutory Trust II are not consolidated. On September 2, 2016, we exercised our op갇on to acquire the non‐controlling equity interests in Brisam Management DE, LLC (“Brisam”), the en갇ty which owns the real estate assets of the Holiday Inn Express, New York, NY. We paid approximately $2,318 to exercise this op갇on. Prior to the exercise of this op갇on, we had consolidated Brisam, a variable interest en갇ty, in our ﬁnancial statements as we determined we were the primary beneﬁciary. We allocate resources and assess opera갇ng performance based on individual hotels and consider each one of our hotels to be an opera갇ng segment. All of our individual opera갇ng segments meet the aggrega갇on criteria. All of our other real estate investment ac갇vi갇es are immaterial and meet the aggrega갇on criteria, and thus, we report one segment: investment in hotel 69 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) proper갇es. Use of Es갇mates The prepara갇on of ﬁnancial statements in conformity with accoun갇ng principles generally accepted in the United States (US GAAP) requires management to make es갇mates and assump갇ons that aﬀect the reported amount of assets and liabili갇es and disclosure of con갇ngent assets and liabili갇es at the date of the ﬁnancial statements and the reported amounts of revenue and expenses during the repor갇ng period. Actual results could diﬀer from those es갇mates. Although we believe the assump갇ons and es갇mates we made are reasonable and appropriate, as discussed in the applicable sec갇ons throughout these Consolidated Financial Statements, diﬀerent assump갇ons and es갇mates could materially impact our reported results. The current economic environment has increased the degree of uncertainty inherent in these es갇mates and assump갇ons and changes in market condi갇ons could impact our future opera갇ng results. Investment in Hotel Proper갇es The Company records the value of hotel proper갇es acquired based on the fair value of the acquired real estate, furniture, ﬁxtures and equipment, and intangible assets and the fair value of liabili갇es assumed, including debt. The fair value alloca갇ons were determined using Level 3 inputs, which are typically unobservable and are based on our own assump갇ons, as there is li姫le, if any, related market ac갇vity. The Company’s investments in hotel proper갇es are carried at cost and are depreciated using the straight‐line method over the following es갇mated 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 deprecia갇on periods should be modified. If facts or circumstances indicate the possibility of impairment, the Company will prepare an es갇mate of the undiscounted future cash ﬂows, without interest charges, of the speciﬁc hotel. Based on the proper갇es 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 its 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 ac갇ve program to locate a buyer for the property and it is probable the sale will be completed within a year of the ini갇a갇on of the plan to sell. Acquisi갇on‐related cost, such as due diligence, legal and accoun갇ng 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 vo갇ng interest in a vo갇ng interest en갇ty, the equity method of accoun갇ng 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 distribu갇ons are received, limited to the extent of our investment in, advances to and commitments for the investee. Pursuant to our joint venture agreements, alloca갇ons of proﬁts and losses of some of our investments in unconsolidated joint ventures may be allocated dispropor갇onately as compared to nominal ownership percentages due to speciﬁed preferred return rate thresholds. See Note 3 – Investment in Unconsolidated Joint Ventures for a more detailed explana갇on of the methodology used in determining the alloca갇on of proﬁts and losses within our joint ventures. 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 es갇mate the fair value of the investment. Our es갇mate of fair value takes into considera갇on factors such as expected future opera갇ng income, trends and prospects, as well as the eﬀects of demand, compe갇갇on and other factors. This determina갇on requires signiﬁcant es갇mates 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 70 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 ini갇al 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 restric갇ons and provisions. Hotel Accounts Receivable Hotel accounts receivable consists primarily of mee갇ng and banquet room rental and hotel guest receivables. The Company generally does not require collateral. Ongoing credit evalua갇ons are performed and an allowance for poten갇al losses from uncollec갇ble accounts is provided against the por갇on of accounts receivable that is es갇mated to be uncollec갇ble. Deferred Financing Costs Deferred ﬁnancing costs are recorded at cost and amor갇zed over the terms of the related indebtedness using the eﬀec갇ve interest method. Due from/to Related Par갇es Due from/to Related Par갇es represents current receivables and payables resul갇ng from transac갇ons related to hotel management and project management with aﬃliated en갇갇es. Due from related par갇es 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 par갇es are generally se姫led within a period not to exceed one year. Intangible Assets and Liabili갇es Intangible assets consist of leasehold intangibles for above‐market value of in‐place leases and deferred franchise fees. The leasehold intangibles are amor갇zed over the remaining lease term. Deferred franchise fees are amor갇zed using the straight‐line method over the life of the franchise agreement. Intangible liabili갇es consist of leasehold intangibles for below‐market value of in‐place leases. The leasehold intangibles are amor갇zed over the remaining lease term. Intangible liabili갇es are included in the accounts payable, accrued expenses and other liabili갇es on the Company’s consolidated balance sheets. Development Project Capitaliza갇on We have opportunis갇cally engaged in the development and re‐development of hotel assets. We capitalize expenditures related to hotel development projects and renova갇ons, including indirect costs such as interest expense, real estate taxes and u갇li갇es related to hotel development projects and renova갇ons. Noncontrolling Interest Noncontrolling interest in the Partnership represents the limited partner’s propor갇onate 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 repor갇ng 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, 2016, 2015 and 2014 was 93.6%, 95.0%, and 95.8%, respec갇vely. We deﬁne a noncontrolling interest as the por갇on of equity in a subsidiary not a姫ributable, directly or indirectly, to a parent. 71 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 a姫ributable to both the Company and noncontrolling interests are reported on the consolidated statements of opera갇ons. In accordance with US GAAP, we classify securi갇es that are redeemable for cash or other assets at the op갇on 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 determina갇on based on terms in applicable agreements, speciﬁcally in rela갇on to redemp갇on provisions. Addi갇onally, with respect to noncontrolling interests for which the Company has a choice to se姫le the contract by delivery of its own shares, the Company considers the guidance in US GAAP to evaluate whether the Company controls the ac갇ons or events necessary to issue the maximum number of common shares that could be required to be delivered at the 갇me of se姫lement of the contract. We classify the noncontrolling interests of our consolidated joint ventures, consolidated variable interest en갇ty, and certain Common Units (“Nonredeemable Common Units”) as equity. The noncontrolling interests of Nonredeemable Common Units totaled $44,321 as of December 31, 2016 and $31,876 as of December 31, 2015. As of December 31, 2016, there were 2,838,546 Nonredeemable Common Units outstanding with a fair market value of $61,029, 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 discre갇on, elect to issue common shares on a one‐for‐one basis in lieu of paying cash. Net income or loss a姫ributed to Nonredeemable Common Units and Redeemable Common Units (collec갇vely, “Common Units”), as well as the net income or loss related to the noncontrolling interests of our consolidated joint venture and consolidated variable interest en갇ty, is included in net income or loss in the consolidated statements of opera갇ons. Net income or loss a姫ributed to the Common Units and the noncontrolling interests of our consolidated joint ventures and consolidated variable interest en갇ty is excluded from net income or loss applicable to common shareholders in the consolidated statements of opera갇ons. Shareholders’ Equity On May 31, 2016, we completed a public oﬀering of 7,700,000 (including 700,000 overallotment shares sold on June 14, 2016) 6.50% Series D Cumula갇ve Redeemable Preferred Shares. These shares have a par value of $0.01 per share with a $25.00 liquida갇on preference per share. Net proceeds of the oﬀering, a耀er deduc갇ng the underwri갇ng discount and the oﬀering expenses payable by us, were approximately $185,999. We u갇lized the net proceeds of the oﬀering to redeem all outstanding 8.00% Series B Cumula갇ve Redeemable Preferred Shares on June 8, 2016, and for general corporate purposes. Shares of our 8.00% Series B Cumula갇ve Redeemable Preferred Shares were redeemed at a per share redemp갇on price of $25.00 together with accrued and unpaid dividends to the redemp갇on date for an aggregate per share redemp갇on price of $25.3722. Dividends ceased accruing on the Series B Preferred Shares on June 8, 2016. On November 7, 2016, we completed a public oﬀering of 4,000,000 6.50% Series E Cumula갇ve Redeemable Preferred Shares. These shares have a par value of $0.01 per share with a $25.00 liquida갇on preference per share. Net proceeds of the oﬀering, a耀er deduc갇ng the underwri갇ng discount and the oﬀering expenses payable by us, were approximately $96,585. We u갇lized the net proceeds of the oﬀering for general corporate purposes. Terms of the Series B, Series C, Series D and Series E Preferred Shares outstanding at December 31, 2016 and 2015 are summarized as follows: 72 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Shares Outstanding December 31, 2016 December 31, 2015 Aggregate Liquida갇on Preference Distribu갇on Rate Dividend Per Share Year Ended December 31, 2016 2015 ‐ 3,000,000 7,700,000 4,000,000 14,700,000 4,600,000 3,000,000 ‐ ‐ 7,600,000 $ $ $ $ 115,000 75,000 192,500 100,000 8.000% 6.875% 6.500% 6.500% $ $ $ $ $ $ 0.8722 1.7188 1.0157 0.3069 2.0000 1.7188 ‐ ‐ Series Series B Series C Series D Series E Total 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 February 2015, our Board of Trustees authorized us to repurchase from 갇me to 갇me 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 comple갇on of the previous program. For the year ended December 31, 2016, the Company repurchased 2,772,710 common shares for an aggregate purchase price of $52,055 under the October 2015 repurchase programs. Upon repurchase by the Company, these common shares ceased to be outstanding and became authorized but unissued common shares. 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 ra갇o 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 eﬀec갇ve as of 5:00 PM Eastern 갇me 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 addi갇on, 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. In October 2016, our Board of Trustees authorized a new share repurchase program for up to $100,000 of common shares which will commence upon the comple갇on of the exis갇ng repurchase program. We expect to complete the new repurchase program prior to December 31, 2017, unless extended by our Board of Trustees. Stock Based Compensa갇on 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 compensa갇on cost is amor갇zed on a straight line basis over the period during which an employee is required to provide service in exchange for the award. The compensa갇on cost related to performance awards that are con갇ngent upon market‐based criteria being met is recorded at the fair value of the award on the date of the grant and amor갇zed over the performance period. Deriva갇ves and Hedging The Company’s objec갇ve in using deriva갇ves is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objec갇ve, 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. 73 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue Recogni갇on We recognize revenue and expense for all consolidated hotels as hotel opera갇ng revenue and hotel opera갇ng expense when earned and incurred. These revenues are recorded net of any sales or occupancy taxes collected from our guests. We par갇cipate in frequent guest programs sponsored by the brand owners of our hotels and we expense the charges associated with those programs, as incurred. 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 has elected to be taxed as a REIT under applicable provisions of the Internal Revenue Code of 1986, as amended, or the Code, and intends to con갇nue to qualify as a REIT. In general, under such provisions, a trust which has made the required elec갇on and, in the taxable year, meets certain requirements and distributes to its shareholders at least 90% of its REIT taxable income, determined without regard to the deduc갇on for dividends paid and excluding net capital gains, 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 repor갇ng purposes due primarily to diﬀerences in deprecia갇on of hotel proper갇es 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 repor갇ng bases of assets and liabili갇es of the TRS Lessee and their respec갇ve tax bases and for their opera갇ng loss and tax credit carry forwards based on enacted tax rates expected to be in eﬀect when such amounts are realized or se姫led. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on considera갇on of available evidence, including tax planning strategies and other factors. The Company may recognize a tax beneﬁt from an uncertain tax posi갇on when it is more‐likely‐than‐not (deﬁned as a likelihood of more than 50%) that the posi갇on will be sustained upon examina갇on, including resolu갇ons of any related appeals or li갇ga갇on processes, based on the technical merits. If a tax posi갇on does not meet the more‐likely‐than‐not recogni갇on threshold, despite the Company’s belief that its ﬁling posi갇on is supportable, the beneﬁt of that tax posi갇on is not recognized in the statements of opera갇ons. The Company recognizes interest and penal갇es, 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 aﬃrma갇ve agreement of the uncertain tax posi갇on by the applicable taxing authority, or by expira갇on of the applicable statute of limita갇on. For the years ended December 31, 2016, 2015 and 2014, the Company did not record any uncertain tax posi갇ons. As of December 31, 2016, with few excep갇ons, the Company is subject to tax examina갇ons by federal, state, and local income tax authori갇es for years 2003 through 2016. Reclassiﬁca갇on Certain amounts in the prior year ﬁnancial statements have been reclassiﬁed to conform to the current year presenta갇on. In accordance with the adop갇on of the FASB issued ASU No. 2015‐03, Simplifying the Presenta⁛on of Debt Issuance Costs, on January 1, 2016, the Company recorded certain reclassiﬁca갇ons of deferred ﬁnancing costs. The Company reclassiﬁed deferred ﬁnancing costs historically presented within Assets to now present them as a direct deduc갇on from the associated debt liability. The table below summarizes the balances as of December 31, 2015, that were aﬀected by this reclassiﬁca갇on. 74 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Balance Sheet Cap갇on Assets: Deferred Financing Costs, Net $ Other Assets Total Assets Liabili갇es: Unsecured Term Loan Unsecured Notes Payable Mortgages Payable Total Liabili갇es New Accoun갇ng Pronouncements As Reported in the Reclassiﬁca갇on As Reported in the 2015 Form 10‐K Amount 2016 Form 10‐K 8,971 $ 38,110 1,969,772 550,000 51,548 548,539 1,261,617 (8,971) $ 1,848 (7,123) (2,220) (1,023) (3,880) (7,123) ‐ 39,958 1,962,649 547,780 50,525 544,659 1,254,494 In January 2017, the FASB issued ASU 2017‐01, Business Combina⁛ons (Topic 805): Clarifying the Deﬁni⁛on of a Business, which clariﬁes the deﬁni갇on of a business as it relates to acquisi갇ons and business combina갇ons. The update adds further guidance that assists preparers in evalua갇ng whether a transac갇on will be accounted for as an acquisi갇on of an asset or a business. We expect most of our hotel property acquisi갇ons to qualify as asset acquisi갇ons under the standard which permits the capitaliza갇on of acquisi갇on costs to the underlying assets. This standard is eﬀec갇ve for periods beginning a耀er December 31, 2017, however early adop갇on is permi姫ed. The Company is evalua갇ng the ul갇mate eﬀect that ASU No. 2017‐01 will have on its consolidated ﬁnancial statements and related disclosures. In March 2016, the FASB issued ASU No. 2016‐09, Improvements to Employee Share‐Based Award Payment Accoun⁛ng, which simpliﬁes various aspects of how share‐based payments are accounted for and presented in the ﬁnancial statements. This standard requires companies to record all of the tax eﬀects related to share‐based payments through the income statement, allows companies to elect an accoun갇ng policy to either es갇mate the share based award forfeitures (and expense) or account for forfeitures (and expense) as they occur, and allows companies to withhold a percentage of the shares issuable upon se姫lement of an award up to the maximum individual statutory tax rate without causing the award to be classiﬁed as a liability. The new standard is eﬀec갇ve for the Company on January 1, 2017. The Company has determined that ASU No. 2016‐09 will have no material impact on the consolidated ﬁnancial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016‐02, Leases (Topic 842), which provides the principles for the recogni갇on, measurement, presenta갇on and disclosure of leases. The accoun갇ng for lessors will remain largely unchanged from current GAAP; however, the standard requires the certain ini갇al direct costs be expensed rather than capitalized. Under the standard, lessees apply a dual approach, classifying leases as either ﬁnance or opera갇ng leases. A lessee is required to record a right‐of‐use asset and a lease liability for all leases with a term of greater than 12 months, regardless of their lease classiﬁca갇on. Based on our real estate leases, we are a lessee on ground leases in certain markets and oﬃce space leases. This standard will be eﬀec갇ve for the ﬁrst annual repor갇ng period beginning a耀er December 15, 2018. The Company is evalua갇ng the eﬀect that ASU No. 2016‐02 will have on its consolidated ﬁnancial statements and related disclosures. We adopted ASU No. 2015‐03, Simplifying the Presenta⁛on of Debt Issuance Costs, on January 1, 2016. This standard requires debt issuance costs to be presented in the balance sheet as a direct deduc갇on from the associated debt liability. Previously, debt issuance costs were recorded as an asset. The issuance costs will con갇nue to be amor갇zed over the life of the debt instrument and recorded in interest expense, as they were prior to the new standard. As part of this adop갇on, debt issuance costs are now included as an oﬀset to the mortgages, unsecured term loan and unsecured notes payable line items on the consolidated balance sheets for all periods presented. For full reclassiﬁca갇on amounts, see “Note 5 – Debt”. On January 1, 2016, we adopted ASU No. 2015‐02, Consolida⁛on – Amendments to the Consolida⁛on Analysis. We evaluated the applica갇on of ASU No. 2015‐02 and concluded that no change was required to our accoun갇ng of our interests in less than wholly owned joint ventures. However, HHLP, our opera갇ng partnership, now meets the criteria as a variable 75 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) interest en갇ty. The Company’s most signiﬁcant asset is its investment in HHLP, and consequently, substan갇ally all for the Company’s assets and liabili갇es represent those assets and liabili갇es of HHLP. In August 2014, the FASB issued ASU No. 2014‐15, Disclosure of Uncertain⁛es about an En⁛ty’s Ability to Con⁛nue as a Going Concern, which provides guidance about management’s responsibility to evaluate whether there is substan갇al doubt about an en갇ty’s ability to con갇nue as a going concern and to provide related footnote disclosures. This update is eﬀec갇ve for the Company as of December 31, 2016. The adop갇on of this update had no material impact to our ﬁnancial statements and related disclosures. On May 28, 2014, the FASB issued ASU No. 2014‐09, Revenue from Contracts with Customers, which requires an en갇ty to recognize the amount of revenue to which it expects to be en갇tled for the transfer of promised goods or services to customers. The ASU will replace most exis갇ng revenue recogni갇on guidance in U.S. GAAP when it becomes eﬀec갇ve. We are evalua갇ng each of our revenue streams and related accoun갇ng policy under the standard. The new standard is eﬀec갇ve for the Company on January 1, 2018. Early adop갇on is permi姫ed, but not prior to the original eﬀec갇ve date of January 1, 2017. The standard permits the use of either the retrospec갇ve or cumula갇ve eﬀect transi갇on method. Based on our analysis to date, we do not expect the new revenue recogni갇on model to have a material impact on our hotel opera갇ng revenue, including room revenue, food and beverage, and other revenue, however, our ﬁnal evalua갇on has not been concluded. Our evalua갇on under the standard also includes sales to third par갇es, primarily a result of disposi갇ons of real estate. Our evalua갇on over sales of real estate will be par갇ally dependent on how the FASB deﬁnes a business with regard to sales of assets, which is currently under delibera갇on. The Company con갇nues to evaluate the ul갇mate eﬀect that ASU No. 2014‐09 will have on its consolidated ﬁnancial statements and related disclosures. 76 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 2 – INVESTMENT IN HOTEL PROPERTIES Investment in hotel proper갇es consists of the following at December 31, 2016 and December 31, 2015: December 31, 2016 December 31, 2015 Land Buildings and Improvements Furniture, Fixtures and Equipment Less Accumulated Deprecia갇on Total Investment in Hotel Proper갇es $ $ $ 499,484 1,383,266 205,162 2,087,912 (320,342) 1,767,570 $ 480,874 1,518,565 227,527 2,226,966 (395,847) 1,831,119 Deprecia갇on expense on hotel proper갇es was $74,288, $73,672 and $68,418 (including deprecia갇on on assets held for sale) for the years ended December 31, 2016, 2015 and 2014, respec갇vely. During the year ended December 31, 2016, we acquired the following wholly‐owned hotel proper갇es: Hotel Acquisi갇on Date Land Buildings and Improvements Furniture, Fixtures and Equipment Other Intangibles Loan Costs Total Purchase Price Assump갇on of Debt Sanctuary Beach Resort, Marina, CA 1/28/2016 $ 20,278 $ 17,319 $ 2,369 $ ‐ $ 198 $ 40,164 $ 14,750 * Hilton Garden Inn M Street, Washington, DC 3/9/2016 30,793 67,420 9,621 874 ** Envoy Hotel, Boston, MA 7/21/2016 25,264 75,979 11,251 131 *** ‐ ‐ 108,708 112,625 Courtyard, Sunnyvale, CA 10/20/2016 17,694 53,272 4,034 150 **** 537 75,687 40,600 The Ambrose, Santa Monica, CA 12/1/2016 18,750 26,839 1,911 ‐ ‐ 47,500 TOTAL $ 112,779 $ 240,829 $ 29,186 $ 1,155 $ 735 $ 384,684 $ 55,350 *Assump갇on of debt includes a $50 premium resul갇ng from the determina갇on that the stated rate of interest is above market rates on the date of acquisi갇on. **Includes an intangible asset for a lease‐in‐place of $648, advance bookings of $76 and franchise fees of $150. ***Includes a lease‐in‐place intangible asset of $126, below market lease liability of $319, advance bookings asset of $199, and franchise fees asset of $125. ****Includes a franchise fees asset of $150. Acquisi갇on‐related costs, such as due diligence, legal and accoun갇ng fees, are not capitalized or applied in determining the fair value of the above acquired assets. During the year ended December 31, 2016, we incurred $2,560 in acquisi갇on costs related to acquired assets and costs related to terminated transac갇ons. 77 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED) Included in the consolidated statements of opera갇ons for the year ended December 31, 2016 are total revenues of $30,991 and a total net income of $5,638 for hotels we have acquired and consolidated since the date of acquisi갇on. These amounts represent the results of opera갇ons for these hotels since the date of acquisi갇on as presented in the table below: Hotel Sanctuary Beach Resort, Marina, CA Hilton Garden Inn M Street, Washington, DC Envoy Hotel, Boston, MA Courtyard, Sunnyvale, CA The Ambrose, Santa Monica, CA Total Purchase and Sale Agreements Year Ended December 31, 2016 Revenue Net Income $ $ $ 6,367 13,565 8,862 1,768 429 30,991 $ 933 3,283 1,277 22 123 5,638 On February 2, 2017, we purchased the Ritz‐Carlton, Coconut Grove, FL from an unaﬃliated seller for a total purchase price of $36,000 and received seller ﬁnancing in the amount of $3,200. Accoun갇ng for this acquisi갇on requires an alloca갇on of the purchase price to the assets acquired and the liabili갇es assumed in the transac갇on at their respec갇ve es갇mated fair values. The purchase price alloca갇ons are es갇mated based on current available informa갇on; however, we s갇ll are in the process of obtaining appraisals and ﬁnalizing the accoun갇ng for the acquisi갇on, which was acquired subsequent to year‐end. On February 21, 2017, we purchased the Pan Paciﬁc, Sea姫le, WA from an unaﬃliated seller for a total purchase price of $79,000. Accoun갇ng for this acquisi갇on requires an alloca갇on of the purchase price to the assets acquired and the liabili갇es assumed in the transac갇on at their respec갇ve es갇mated fair values. The purchase price alloca갇ons are es갇mated based on current available informa갇on; however, we s갇ll are in the process of obtaining appraisals and ﬁnalizing the accoun갇ng for the acquisi갇on, which was acquired subsequent to year‐end. Lease Buyout During November 2016, we signed an agreement with our restaurant lessee at the Courtyard Miami Beach to buyout the remainder of their current lease. The agreement was made in conjunc갇on with our overall property improvement plan, which will also include room and common area upgrades, with the inten갇on to rebrand the hotel to a more upscale Marrio姫 brand. As deﬁned by terms of the agreement, we will pay total considera갇on to complete the buyout of $10,000 and issue 450,000 opera갇ng partnership units. During the fourth quarter of 2016, we paid $5,000 and issued 225,000 units valued at $4,400 with the remainder of the considera갇on due upon comple갇on of the buyout. The lease buyout is expected to be completed by the second quarter of 2017. We accounted for this transac갇on in accordance with ASU 420 “Exit or Disposal Cost Obliga갇ons,” recording the en갇re amount of considera갇on as an expense at the 갇me of agreement execu갇on, resul갇ng in a total expense of $18,831. This recorded expense was par갇ally oﬀset by the write‐oﬀ of an intangible liability related to the lease of $2,000. Hotel Disposi갇ons Eﬀec갇ve January 1, 2014, we early adopted ASU Update No. 2014‐08 concerning the classiﬁca갇on and repor갇ng of discon갇nued opera갇ons. This amendment deﬁnes discon갇nued opera갇ons as a component of an en갇ty that represents a strategic shi耀 that has (or will have) a major eﬀect on an en갇ty’s opera갇ons and ﬁnancial results. As a result of the early adop갇on of ASU Update No. 2014‐08, we an갇cipate that most of our hotel disposi갇ons will not be classiﬁed as discon갇nued opera갇ons as most will not ﬁt this deﬁni갇on. For transac갇ons that had been classiﬁed as held for sale or as discon갇nued opera갇ons for periods prior to our adop갇on of ASU Update No. 2014‐08, we have con갇nued to present the opera갇ng results as discon갇nued opera갇ons in the statements of opera갇ons for all applicable periods presented. 78 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED) During the years ended December 31, 2016, 2015 and 2014, we had the following hotel disposi갇ons: Hotel Acquisi갇on Date Disposi갇on Date Considera갇on Gain (Loss) on Disposi갇on Cindat Hotel Por韃olio (7) Hya姫 Place, King of Prussia, PA Hawthorn Suites, Franklin, MA Residence Inn, Framingham, MA Residence Inn, Norwood, MA 2016 Total Hotel 373 2014 Total April 2005 ‐ March 2011 August 2010 April 2006 March 2004 July 2006 $ April 2016 May 2016 September 2016 November 2016 November 2016 543,500 $ 13,000 8,900 25,000 22,000 89,892 5,375 (438) 11,467 9,543 $ 115,839 June 2007 April 2014 $ 37,000 $ $ 7,195 7,195 On November 4, 2016, the Company closed on the sale of the Residence Inn Framingham, MA and Residence Inn, Norwood, MA to an unaﬃliated buyer for a total sales price of $47,000 with a gain on sale of approximately $21,023. These hotels were acquired by the Company in March 2004 and July 2006, respec갇vely. The opera갇ng results for these hotels are included in opera갇ng income un갇l the date of sale as shown in the consolidated statements of opera갇ons for the years ended December 31, 2016 and 2015 as disposi갇on of these hotels does not represent a strategic shi耀 in our business. On September 7, 2016, the Company closed on the sale of Hawthorn Suites, Franklin, MA to an unaﬃliated buyer for a total sales price of $8,900 with a loss on sale of approximately $437. This hotel was acquired by the Company in April 2006. The opera갇ng results for this hotel are included in opera갇ng income un갇l the date of sale as shown in the consolidated statements of operaa갇ons for the years ended December 31, 2016 and 2015 as disposi갇on of this hotel does not represent a strategic shi耀 in our business. On May 3, 2016, the Company closed on the sale of Hya姫 Place, King of Prussia, PA to an unaﬃliated buyer for a total sales price of $13,000 with a gain on sale of approximately $5,402. This hotel was acquired by the Company in August 2010. The opera갇ng results for this hotel are included in opera갇ng income un갇l the date of sale as shown in the consolidated statements of opera갇ons for the years ended December 31, 2016 and 2015 as disposi갇on of this hotel does not represent a strategic shi耀 in our business. On February 4, 2016, we announced the signing of asset purchase and contribu갇on agreements (the “Contribu갇on Agreements”) with Cindat Manha姫an Hotel Por韃olio (US) LLC (“Cindat”) to form a joint venture, Cindat Hersha Owner JV, LLC (the “Owner JV”), which ini갇ally invested in seven of our limited service hotels in Manha姫an (the “JV Proper갇es”). This transac갇on was consummated on April 29, 2016. The Contribu갇on Agreements valued the JV Proper갇es at $543,500. Cindat contributed $354,550 and received a 70% senior common equity interest in Owner JV. We contributed the JV Proper갇es to Owner JV and received $354,550 in cash and a preferred equity interest ini갇ally valued at $37,000. In addi갇on, we retained a 30% junior common equity interest in Owner JV. We contributed $12,239 and Cindat contributed an aggregate of $14,105 in working capital and closing costs for the forma갇on of Owner JV, and ﬁnance costs related to debt originated on the JV Proper갇es by Owner JV. In addi갇on, we incurred addi갇onal closing costs associated with the contribu갇on of the JV Proper갇es to Owner JV of $10,653. Prior to the contribu갇on to Owner JV, our basis in the JV Proper갇es was $264,658. Our preferred equity and junior common equity interest in Owner JV was ini갇ally recorded at $104,248 which represents our retained interest in the JV Proper갇es at our basis prior to contribu갇on and addi갇onal contribu갇ons made for the forma갇on of Owner JV. Please refer to “Note 3 –Investment in Unconsolidated Joint Ventures” more informa갇on about the joint venture with Cindat. 79 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED) Due to our con갇nuing interest in the JV Proper갇es, gain recognized on the proper갇es is limited to cash received less the basis of the proper갇es contributed. As a result, we recognized a gain on the disposi갇on of hotel proper갇es of $89,892 and recorded a deferred gain of $81,314, which is recorded as a liability in the consolidated balance sheets. The deferred gain will be recognized as income in a future period if an event occurs that changes our retained interest in the JV Proper갇es. Proceeds received from the contribu갇on of the JV Proper갇es were used to reduce our consolidated mortgage debt by $55,103, our line of credit balance by $194,550 and our unsecured term loan balance by $39,480. Any remaining proceeds are to be used for general corporate purposes, including, but not limited to, the acquisi갇on of hotel proper갇es, the repurchase of our common shares and future distribu갇ons to shareholders. Assets Held For Sale In July 2016, we entered into a purchase and sale agreement to sell the Residence Inn, Greenbelt, MD, Courtyard, Alexandria, VA, Hya姫 House, Sco姫sdale, AZ, Hya姫 House, Pleasant Hill, CA, and Hya姫 House, Pleasanton, CA to an unaﬃliated buyer for a sales price of $185,000. The Residence Inn, Greenbelt, MD and Courtyard, Alexandria, VA were sold in January 2017 for a combined sale price of $62,000. The purchase and sale agreement was amended, increasing the sales price by $7,500. The remainder of the transac갇on is expected to close in the third quarter of 2017 with an adjusted purchase price of $130,500, subject to customary closing condi갇ons. We have classiﬁed the assets and mortgage indebtedness related to these hotels as held for sale as of December 31, 2016: Land Buildings and Improvements Furniture, Fixtures and Equipment Less: Accumulated Deprecia갇on & Amor갇za갇on Assets Held for Sale Liabili갇es Related to Assets Held for Sale We did not have any assets or liabili갇es related to assets held for sale as of December 31, 2015. 80 December 31, 2016 22,208 105,663 24,187 152,058 (53,585) 98,473 51,428 $ $ $ HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED) During the year ended December 31, 2015, we acquired the following wholly‐owned hotel proper갇es: Hotel Acquisi갇on Date Land Buildings and Improvements Furniture Fixtures and Equipment Other Intangibles Loan Costs Total Purchase Price Assump갇on 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 ** Ritz‐Carlton Georgetown, DC 12/29/2015 17,825 29,584 3,270 ‐ ‐ ‐ 27,800 50,679 ‐ ‐ Total $ 41,589 $ 81,588 $ 8,858 $ 6,498 $ 978 $ 139,511 $ 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. Acquisi갇on‐related costs, such as due diligence, legal and accoun갇ng fees, are not capitalized or applied in determining the fair value of the above acquired assets. During the year ended December 31, 2015, we incurred $1,119 in acquisi갇on costs related to the above acquired assets and costs related to terminated transac갇ons. Included in the consolidated statement of opera갇ons 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 acquisi갇on. These amounts represent the results of opera갇ons for these hotels since the date of acquisi갇on as presented in the table below: Hotel St. Gregory Hotel, Washington, DC TownePlace Suites, Sunnyvale, CA Ritz‐Carlton Georgetown, DC Total 81 Year Ended December 31, 2015 Revenue Net Income $ $ $ 5,257 1,744 149 7,150 $ 164 364 20 548 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED) Pro Forma Results (Unaudited) The following condensed pro forma ﬁnancial data are presented as if all acquisi갇ons completed since January 1, 2016 and 2015 had been completed on January 1, 2015 and 2014, respec갇vely. Proper갇es acquired without any opera갇ng history are excluded from the condensed pro forma opera갇ng results. The condensed pro forma ﬁnancial data is not necessarily indica갇ve of what actual results of opera갇ons of the Company would have been assuming the acquisi갇ons had been consummated on January 1, 2016 and 2015 at the beginning of the year presented, nor do they purport to represent the results of opera갇ons for future periods. Pro Forma Total Revenues Pro Forma Income from Con갇nuing Opera갇ons Loss from Discon갇nued Opera갇ons Pro Forma Net Income Income Allocated to Noncontrolling Interest Preferred Distribu갇ons Ex갇nguishment of Issuance Costs Upon Redemp갇on of Series B Preferred Shares Pro Forma Income Applicable to Common Shareholders Pro Forma Income Applicable to Common Shareholders per Common Share Basic Diluted Weighted Average Common Shares Outstanding Basic Diluted 82 $ $ $ $ Years Ended December 31, 2016 2015 493,791 $ 551,584 127,328 ‐ 127,328 (4,764) (17,380) (4,021) 101,163 $ 2.35 2.32 $ $ 44,419 ‐ 44,419 (496) (14,356) ‐ 29,567 0.62 0.61 42,957,199 43,530,731 47,786,811 48,369,658 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES As of December 31, 2016 and December 31, 2015 our investment in unconsolidated joint ventures consisted of the following: Joint Venture Hotel Proper갇es SB Partners, LLC Hiren Boston, LLC Holiday Inn Express, South Boston, MA Courtyard by Marrio姫, South Boston, MA Mys갇c Partners, LLC Hilton and Marrio姫 branded hotels in CT Cindat Hersha Owner JV, LLC Hilton and IHG branded hotels in NYC Percent Owned Preferred Return 50.0% 50.0% 8.8%‐66.7% 30.0% N/A N/A 8.5% non‐ cumula갇ve * $ $ December 31, 2016 December 31, 2015 913 $ 2,112 4,699 3,717 11,441 $ 795 4,499 5,022 ‐ 10,316 *See explana갇on below of the Cindat Hersha Owner JV, LLC (“Owner JV”) for more informa갇on on the preferred return provisions of this joint venture. Cindat Hersha Owner JV, LLC On April 29, 2016, we entered into two limited liability company agreements with Cindat, which formed Owner JV and Cindat Hersha Lessee JV, LLC (“Lessee JV”), for the purpose of owning and opera갇ng hotel proper갇es ini갇ally consis갇ng of the JV Proper갇es. All hotel proper갇es owned by Owner JV are leased to Lessee JV. Our interest in Owner JV is held by our opera갇ng partnership, HHLP, while our interest in Lessee JV is held by our wholly owned taxable REIT subsidiary (“TRS”), 44 New England Management Company (“44 New England”). As described in “Note 2 – Investment in Hotel Proper갇es” the Contribu갇on Agreements valued the JV Proper갇es at $543,500. In accordance with the Contribu갇on Agreements, Cindat contributed $354,550 in cash, in exchange for a 70.0% senior common equity interest in Owner JV. We contributed the JV Proper갇es to Owner JV and received $354,550 in cash, a preferred equity interest ini갇ally valued at $37,000, and a 30.0% junior common equity interest in Owner JV. In addi갇on, Cindat contributed $14,105 and we contributed $12,239 for working capital and closing costs for the forma갇on of Owner JV and for ﬁnance costs related to debt originated on the JV Proper갇es by Owner JV. Of the $12,239 in addi갇onal funds contributed by us, $6,045 was a姫ributed to our junior common equity interest and $6,194 was a姫ributed to our preferred equity interest. We also incurred $361 of costs related to our contribu갇on which is included in our investment in unconsolidated joint ventures as outside basis and will be amor갇zed over the life of the venture. Prior to the contribu갇on to Owner JV, our basis in the JV Proper갇es was $264,658. Our preferred equity and junior common equity interest in Owner JV was ini갇ally recorded at $104,248 which represents our retained interest in the JV Proper갇es at our basis prior to contribu갇on and addi갇onal contribu갇ons made for the forma갇on of Owner JV. The diﬀerence between our interest in the fair value of the assets contributed to Owner JV and our basis prior to contribu갇on is $96,941, which will be amor갇zed over the life of the underlying assets. At closing, mortgage debt of $285,000 and mezzanine debt of $50,000 (collec갇vely, the “Cindat JV Financings)” was placed on the JV Proper갇es. Owner JV distributed proceeds of $323,793 from the debt originated, of which $226,655 was distributed to Cindat and $97,138 was distributed to us, reducing our investment in Owner JV accordingly. Subject to the terms of the Cindat JV Financings, cash available for distribu갇on will be distributed (1) to us un갇l we receive a 9% annual rate of return on our $43,194 preferred equity interest, (2) then to Cindat un갇l they receive a 10% return on their remaining $142,000 senior common equity interest and (3) then to us un갇l we receive an 8% return on our $60,857 junior common equity interest. Any cash available for distribu갇on remaining will be split 30% to us and 70% to Cindat. Cindat’s senior common equity return is reduced by 0.5% annually for 4 years following the closing un갇l it is set at a rate of 8% for the remainder of the life of the joint venture. Pursuant to the terms of agreements governing the Cindat JV Financings, a lender determined that certain debt coverage ra갇o covenants contained therein were not met as of June 30, 2016. Pursuant to these agreements, the lender has elected to escrow the opera갇ng cash ﬂow for the Owner JV. However, the failure to meet these covenants does not cons갇tute an event of default under the Cindat JV Financings. 83 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED) The Owner JV is under an Asset Management Agreement with us and Cindat whereby it is provided asset management services. Fees for these services are calculated as 1.0% of opera갇ng revenues, of which we are en갇tled to 30% which we recognize as income in other revenues on the consolidated statement of opera갇ons. Mys갇c Partners, LLC On January 3, 2017, we redeemed our joint venture interest in Mys갇c Partners, LLC by acquiring 100% ownership interest in the Mys갇c Marrio姫 Hotel & Spa and transferring our minority ownership interests in the Har韃ord Marrio姫 and Har韃ord Hilton to the joint venture partner. We received $8,500 as part of this redemp갇on and transfer of minority interest. Prior to the 2017 transac갇on, the Mys갇c Partners, LLC joint venture agreement provides for an 8.5% non‐cumula갇ve preferred return based on our contributed equity interest in the venture. Cash distribu갇ons will be made from cash available for distribu갇on, ﬁrst, to us to provide an 8.5% annual non‐compounded return on our unreturned capital contribu갇ons and then to our joint venture partner to provide an 8.5% annual non‐compounded return of their unreturned contribu갇ons. Any remaining cash available for distribu갇on will be distributed to us 10.5% with respect to the net cash ﬂow from the Har韃ord Marrio姫, 7.0% with respect to the Har韃ord Hilton and 56.7%, with respect to the remaining property. Mys갇c Partners, LLC allocates income to us and our joint venture partner consistent with the alloca갇on of cash distribu갇ons in accordance with the joint venture agreements. The Har韃ord Marrio姫, part of the Mys갇c 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 opera갇ng revenues. Income/Loss Alloca갇on For SB Partners, LLC and Hiren Boston, LLC, income or loss is allocated to us and our joint venture partners consistent with the alloca갇on of cash distribu갇ons in accordance with the joint venture agreements. This results in an income alloca갇on consistent with our percentage of ownership interests. For Mys갇c Partners, LLC and Owner JV, LLC, income or loss is allocated using Hypothe갇cal Liquida갇on at Book Value (“HLBV method”) as the liquida갇on rights and priori갇es, as deﬁned by each venture’s governing agreements, diﬀer from the underlying percentage ownership interests in the ventures. The Company applies the HLBV method using a balance sheet approach. A calcula갇on is prepared at each balance sheet date to determine the amount that we would receive if the venture en갇ty were to liquidate all of its assets at carrying value and distribute that cash to the joint venture partners based on the contractually deﬁned liquida갇on priori갇es. The diﬀerence between the calculated liquida갇on distribu갇on amounts at the beginning and the end of the repor갇ng period, a耀er adjus갇ng for capital contribu갇ons and distribu갇ons, is our share of the earnings or losses from the unconsolidated joint venture investment for the period. Any diﬀerence between the carrying amount of any of our investments noted above and the underlying equity in net assets is amor갇zed over the expected useful lives of the proper갇es and other intangible assets. Income recognized during the years ended December 31, 2016, 2015 and 2014, for our investments in unconsolidated joint ventures is as follows: SB Partners, LLC Hiren Boston, LLC Mys갇c Partners, LLC Cindat Hersha Owner JV, LLC (Loss) Income from Unconsolidated Joint Venture Investments $ $ 84 Twelve Months Ended December 31, 2016 2015 2014 618 $ 839 (137) (3,143) (1,823) $ 582 $ 694 (311) ‐ 965 $ 407 603 (317) ‐ 693 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [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, liabili갇es, 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, 2016 and December 31, 2015 and for the years ended December 31, 2016, 2015 and 2014. Balance Sheets Assets Investment in Hotel Proper갇es, Net Other Assets Total Assets Liabili갇es and Equity Mortgages and Notes Payable Other Liabili갇es Equity: Hersha Hospitality Trust Joint Venture Partner(s) Total Equity Total Liabili갇es and Equity Statements of Opera갇ons Room Revenue Other Revenue Opera갇ng Expenses Lease Expense Property Taxes and Insurance General and Administra갇ve Deprecia갇on and Amor갇za갇on Interest Expense Acquisi갇on Costs Other Income Debt Ex갇nguishment and Gain on Debt Forgiveness (Loss) Gain allocated to Noncontrolling Interests Net Income December 31, 2016 December 31, 2015 647,548 $ 45,576 693,124 $ 432,173 $ 36,275 119,892 104,784 224,676 693,124 $ 105,354 15,558 120,912 113,532 30,575 22,698 (45,893) (23,195) 120,912 $ $ $ $ Twelve Months Ended December 31, 2016 2015 2014 118,645 $ 24,424 (80,091) (1,143) (9,512) (8,976) (13,286) (18,568) (1,468) 2,466 ‐ (46) 12,445 $ 57,927 $ 22,776 (55,178) (1,115) (2,948) (5,609) (6,549) (6,677) ‐ ‐ ‐ (341) 2,286 $ 59,135 21,725 (54,831) (1,063) (2,934) (5,783) (6,376) (11,995) ‐ 3,016 115 1,009 $ $ 85 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED) The following table is a reconcilia갇on 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, 2016 and December 31, 2015. Our share of equity recorded on the joint ventures' ﬁnancial statements Adjustment to reconcile our 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, 2016 December 31, 2015 119,892 $ 22,698 (108,451) 11,441 $ (12,382) 10,316 (1) Adjustment to reconcile our share of equity recorded on the joint ventures' ﬁnancial statements to our investment in unconsolidated joint ventures consists of the following:  cumula갇ve impairment of our investment in joint ventures not reﬂected on the joint ventures' ﬁnancial statements;  the diﬀerence between our basis in the investment in joint ventures and the equity recorded on the joint ventures' ﬁnancial statements; and  accumulated amor갇za갇on of our equity in joint ventures that reﬂects the diﬀerence in our por갇on of the fair value of joint ventures' assets on the date of our investment when compared to the carrying value of the assets recorded on the joint ventures’ ﬁnancial statements (this excess or deﬁcit investment is amor갇zed over the life of the proper갇es, and the amor갇za갇on is included in Income (Loss) from Unconsolidated Joint Venture Investments on our consolidated statement of opera갇ons). 86 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [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, 2016 and December 31, 2015: Investment in Statutory Trusts Prepaid Expenses Deferred Tax Asset, Net of Valua갇on Allowance of $804 Other December 31, 2016 December 31, 2015 1,548 9,217 16,197 12,408 39,370 $ 1,548 14,434 14,590 9,386 39,958 $ 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 $16,197 of net deferred tax assets as of December 31, 2016. We have considered various factors, including future reversals of exis갇ng taxable temporary diﬀerences, future projected taxable income and tax planning strategies in determining a valua갇on allowance for our deferred tax assets, and we believe that it is more likely than not that we will be able to realize the $16,197 of net deferred tax assets in the future. Deposits on Hotel Acquisi갇ons As of December 31, 2015, we had $5,000 in interest bearing deposits related to the future acquisi갇on of the Sanctuary Beach Resort, located in Marina, California. We completed the acquisi갇on of this property on January 28, 2016 (See “Note 2 – Investment in Hotel Proper갇es” for more informa갇on). As of December 31, 2016, we had no deposits on hotel acquisi갇ons. 87 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 5 – DEBT Mortgages Mortgages payable at December 31, 2016 and December 31, 2015 consisted of the following: Mortgage Indebtedness Net Unamor갇zed Premium Net Unamor갇zed Deferred Financing Costs Liabili갇es Related to Hotel Assets Held for Sale $ $ $ December 31, 2016 338,529 2,313 (3,021) 337,821 51,428 $ $ $ December 31, 2015 545,036 3,503 (3,880) 544,659 ‐ Net Unamor갇zed Deferred Financing Costs associated with entering into mortgage indebtedness are deferred and amor갇zed over the life of the mortgages. Net Unamor갇zed Premiums are also amor갇zed over the remaining life of the loans. Mortgage indebtedness balances are subject to ﬁxed and variable interest rates, which ranged from 2.97% to 6.30% as of December 31, 2016. Aggregate interest expense incurred under the mortgage loans payable totaled $20,916, $26,581 and $31,046 during the years ended December 31, 2016, 2015, and 2014 respec갇vely. 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 ra갇os be maintained with respect to the ﬁnanced proper갇es before we can exercise certain rights under the loan agreements rela갇ng to such proper갇es. If the speciﬁed criteria are not sa갇sﬁed, 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 ra갇o covenants contained in the loan agreements securing one of our hotel proper갇es was not met as of December 31, 2016. Pursuant to this loan agreement, the lender has the op갇on to escrow the opera갇ng cash ﬂow. However, these covenants do not cons갇tute an event of default for these loans. As of December 31, 2016, the maturity dates for the outstanding mortgage loans ranged from January 2017 to September 2025. 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 op갇on, 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 face value of the notes payable is oﬀset by $970 and $1,023 as of December 31, 2016 and 2015, respec갇vely, in net deferred ﬁnancing costs incurred as a result of entering into these indentures. The deferred ﬁnancing costs are amor갇zed over the life of the notes payable. The weighted average interest rate on our two junior subordinated notes payable during the years ended December 31, 2016, 2015 and 2014 was 3.75%, 3.33% and 3.28%, respec갇vely. Interest expense in the amount of $1,931, $1,715 and $1,690 was recorded for the years ended December 31, 2016, 2015 and 2014, respec갇vely. Credit Facili갇es We maintain three unsecured credit agreements which aggregate $1,000,000 with Ci갇group Global Markets Inc., Wells Fargo Bank, Inc. and various other lenders. The ﬁrst credit agreement provides for a $500,000 senior unsecured credit facility (“Credit Facility”) consis갇ng of a $250,000 senior unsecured revolving line of credit (“Line of Credit”), and a $250,000 senior unsecured term loan (“First Term Loan”). The 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 addi갇onal one‐year period. The Credit Facility is also expandable to $850,000 at our request, subject to the sa갇sfac갇on of certain condi갇ons. Our second credit agreement provides for a $300,000 senior unsecured term loan agreement (“Second Term Loan”) and expires on August 10, 2020. On August 2, 2016, we entered into our third credit agreement which provides for a $200,000 senior unsecured term loan agreement (“Third Term Loan”) and expires on August 2, 2021. 88 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 5 – DEBT (CONTINUED) The amount that we can borrow at any given 갇me under our Line of Credit, and the First, Second and Third Term Loan (each a “Term Loan” and together the “Term Loans”) is governed by certain opera갇ng metrics of designated unencumbered hotel proper갇es known as borrowing base assets. As of December 31, 2016, the following hotel proper갇es were borrowing base assets: ‐ Holiday Inn Express, Cambridge, MA ‐ Hya姫 House White Plains, NY ‐ Hya姫 House Gaithersburg, MD ‐ Sheraton, Wilmington South, DE ‐ Sheraton Hotel, JFK Airport, New York, NY ‐ Winter Haven, Miami, FL ‐ Hampton Inn, Pearl Street, NY ‐ Residence Inn, Greenbelt, MD ‐ Courtyard, Miami, FL ‐ Residence Inn, Tyson's Corner, VA ‐ Ritz Carlton, Washington, DC ‐ Hampton Inn, Philadelphia, PA ‐ Hampton Inn, Seaport, NY ‐ Envoy Hotel, Boston, MA ‐ Hampton Inn, Washington, DC ‐ Nu Hotel, Brooklyn, NY ‐ The Ri姫enhouse Hotel, Philadelphia, PA ‐ The Boxer, Boston, MA ‐ 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 ‐ Hilton Garden Inn, M Street, Washington, DC ‐ Courtyard, Alexandria, VA ‐ Holiday Inn Express, 29th Street, NY ‐ Holiday Inn Express Chester, NY The interest rate for borrowings under the Line of Credit and Term Loans are based on a pricing grid with a range of one month U.S. LIBOR plus a spread. The following table summarizes the balances outstanding and interest rate spread for each borrowing: Borrowing Line of Credit First Term Loan Second Term Loan Third Term Loan Spread 1.70% to 2.45% 1.60% to 2.35% 1.50% to 2.25% 1.45% to 2.20% $ Outstanding Balance December 31, 2016 December 31, 2015 $ ‐ 210,520 300,000 156,100 27,000 250,000 300,000 From December 2012 to November 5, 2016, we maintained an interest rate swap, with a $150,000 no갇onal amount, which eﬀec갇vely ﬁxes the interest rate on $150,000 of the First Term Loan at a blended rate of 2.914%. This interest rate swap agreement matured on November 5, 2016. On October 7, 2016 we entered into an interest rate swap associated with $150,000 of our $200,000 Third Term Loan. This swap eﬀec갇vely ﬁxes the interest rate of the Third Term Loan at 3.211% and matures on October 3, 2019. See “Note 7 – Fair Value Measurements and Deriva갇ve Instruments” for more informa갇on regarding interest rate hedging strategies we employ. The balance of the Term Loans is oﬀset by $3,120 and $2,220 in net deferred ﬁnancing costs as of December 31, 2016 and December 31, 2015, respec갇vely. These costs were incurred as a result of origina갇ng the term loan borrowings and are amor갇zed over the life of these loans. The Credit Facility and the Term Loans include certain ﬁnancial covenants and require that we maintain: (1) a minimum tangible net worth (calculated as total assets, plus accumulated deprecia갇on, less total liabili갇es, intangibles and other deﬁned adjustments) 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 distribu갇ons not to exceed 95% of adjusted funds from opera갇ons; and (3) certain ﬁnancial ra갇os, including the following: ∙ ∙ ∙ a ﬁxed charge coverage ra갇o of not less than 1.50 to 1.00, a maximum leverage ra갇o of not more than 60%; and a maximum secured debt leverage ra갇o of 45% 89 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 5 – DEBT (CONTINUED) The Company is in compliance with each of the covenants listed above as of December 31, 2016. As of December 31, 2016, our remaining borrowing capacity under the Credit Facility and Term Loans was approximately $99,822 based on the borrowing base assets at December 31, 2016. As of February 21, 2017, our borrowing capacity under the Credit Facility and Term Loans was approximately $197,998 as we added seven and removed two borrowing base assets subsequent to December 31, 2016. The Company recorded interest expense of $17,332, $10,147 and $6,218 related to borrowings drawn on each of the aforemen갇oned credit facili갇es, for the years ended December 31, 2016, 2015 and 2014, respec갇vely. The weighted average interest rate on our credit facili갇es was 2.82%, 2.69% and 2.82% for the years ended December 31, 2016, 2015 and 2014, respec갇vely. 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, 2017 and therea耀er are as follows: Year Ending December 31, Amount 2017 2018 2019 2020 2021 Therea耀er Net Unamor갇zed Premium Capitalized Interest $ $ 160,908 27,237 312,084 301,694 179,704 126,498 2,313 1,110,438 We u갇lize 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, 2016, 2015 and 2014, we capitalized $0, $0 and $458 respec갇vely, of interest expense related to these projects. Deferred Financing Costs As noted above, costs associated with entering into mortgages, notes payable, unsecured term loan and our credit facili갇es are deferred and amor갇zed over the life of the debt instruments. The deferred costs related to mortgages, term loans and unsecured notes payable are presented as reduc갇on in the respec갇ve debt balances. Amor갇za갇on of deferred costs for the years ended December 31, 2016, 2015 and 2014 was $2,632, $2,650 and $2,768 respec갇vely. New Debt/Reﬁnance On November 30, 2016, we repaid in full outstanding mortgage debt with an original principal balance of $6,700 secured by the Holiday Inn Express, Chester, NY. The loan was due to mature on March 1, 2017, and we incurred approximately $94 in expense related to unamor갇zed deferred ﬁnancing costs and fees. On October 6, 2016, we repaid in full outstanding mortgage debt with an original principal balance of $13,720 secured by the Hya姫 House, Gaithersburg, MD. The loan was due to mature on January 6, 2017, and we incurred approximately $5 in expense related to unamor갇zed deferred ﬁnancing costs and fees. On October 6, 2016, we repaid in full outstanding mortgage debt with an original principal balance of $33,030 secured by the Hya姫 House, White Plains, NY. The loan was due to mature on January 6, 2017, and we incurred approximately $12 in expense related to unamor갇zed deferred ﬁnancing costs and fees. On September 5, 2016, we repaid outstanding mortgage debt with an original principal balance of $55,000 secured by the Holiday Inn Express 29th Street, NY. The loan was due to mature on November 5, 2016, and we incurred approximately $42 in expense related to unamor갇zed deferred ﬁnancing costs and fees. We also recognized $133 of gain in unamor갇zed original issue premiums related to the property. 90 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] 91 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 5 – DEBT (CONTINUED) On August 2, 2016, we repaid in full outstanding mortgage debt with an original principal balance of $19,250 secured by the Hampton Inn Seaport, NY. The loan was due to mature on October 8, 2016, and we incurred approximately $67 in expense related to unamor갇zed deferred ﬁnancing costs and fees. On August 2, 2016, we repaid in full outstanding mortgage debt with an original principal balance of $25,000 secured by the Courtyard Alexandria, VA. The loan was due to mature on October 5, 2016, and we incurred approximately $9 in expense related to unamor갇zed deferred ﬁnancing costs and fees. As previously men갇oned in “Note 3 – Investment in Unconsolidated Joint Ventures,” we repaid in full the two mortgages related to the Hampton Inn Herald Square, NY and Hampton Inn Chelsea, NY, two proper갇es contributed to the joint venture with Cindat. The mortgage debt secured by Hampton Inn Herald Square had an original balance of $26,500 and was due to mature on May 1, 2016. The mortgage debt secured by Hampton Inn Chelsea had an original balance of $36,000 and was due to mature on October 1, 2016. In addi갇on, due to our contribu갇on of certain of the borrowing base proper갇es to the Cindat joint venture we were required to pay down $39,480 of the First Term Loan. We incurred a total of $1,049 in expense related to the payment of fees to ex갇nguish debt and related to unamor갇zed deferred ﬁnancing costs associated with the mortgage debt and term loan repayments. On February 29, 2016, we repaid in full outstanding mortgage debt with an original principal balance of $8,500 secured by the Hawthorn Suites, Franklin, MA. The loan was due to mature on May 1, 2016, and we incurred approximately $42 in expense related to unamor갇zed deferred ﬁnancing costs and fees. On October 27, 2015, we reﬁnanced the outstanding mortgage debt with an original balance of $30,000 secured by the Courtyard by Marrio姫, Los Angeles, California and simultaneously entered into a new mortgage obliga갇on of $35,000, incurring a loss on debt ex갇nguishment 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 eﬀec갇vely limits the interest at 3.00% per annum. See “Note 7 – Fair Value Measurements and Deriva갇ve Instruments” for more informa갇on on the interest rate cap. On August 10, 2015, we repaid in full outstanding mortgage debt with an original principal balance of $60,000 secured by the Courtyard by Marrio姫, Miami, FL. In connec갇on with this transac갇on, we terminated the interest rate swap associated with the mortgage on this property. See “Note 7 – Fair Value Measurements and Deriva갇ve Instruments” for more informa갇on on this transac갇on. The loan was due to mature on July 1, 2016, and we incurred approximately $329 in expense in unamor갇zed deferred ﬁnancing costs and fees. On June 10, 2015, we reﬁnanced the outstanding mortgage debt with an original principal balance of $55,000 secured by the Hya姫 Union Square, New York, NY and simultaneously entered into a new mortgage obliga갇on of $55,750, incurring a loss on debt ex갇nguishment 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 eﬀec갇vely limits the interest at 3.00% per annum. See “Note 7 – Fair Value Measurements and Deriva갇ve Instruments” for more informa갇on 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 Marrio姫, Brookline, MA. The loan was due to mature in July 2015, and we incurred approximately $10 in expense in unamor갇zed 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 obliga갇on 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 ex갇nguishment 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 connec갇on with this transac갇on, we did not enter into a new deriva갇ve instrument to ﬁx or cap the rate of interest payable on the $25,000 mortgage loan. See “Note 7 – Fair Value Measurements and Deriva갇ve Instruments” for more informa갇on on this transac갇on. 92 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 5 – DEBT (CONTINUED) 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 obliga갇on 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 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 ex갇nguishment in paying oﬀ the loan. On February 28, 2014, we reﬁnanced our previous $400,000 unsecured credit facility with a $500,000 unsecured credit facility with Ci갇group Global Markets Inc. and various other lenders. As a result of this reﬁnance, we expensed $579 in unamor갇zed deferred ﬁnancing costs and fees, which are included in the Loss on Debt Ex갇nguishment cap갇on of the consolidated statements of opera갇ons 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 modiﬁca갇on also includes an interest rate swap, which eﬀec갇vely ﬁxes the interest rate at 5.433%. As a result of this modiﬁca갇on, we expensed $91 in unamor갇zed deferred ﬁnancial costs and fees during the year ended December 31, 2014. 93 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [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 and our joint venture partnerships, engage eligible independent contractors in accordance with the requirements for qualiﬁca갇on as a REIT under the Code, including HHMLP, as the property managers for hotels leased from us pursuant to management agreements. HHMLP is owned, in part, by certain execu갇ves and trustees of the Company. Our management agreements with HHMLP provide for ﬁve‐year terms and are subject to early termina갇on upon the occurrence of defaults and certain other events described therein. As required under the REIT qualiﬁca갇on rules, HHMLP must qualify as an “eligible independent contractor” during the term of the management agreements. Under the management agreements, HHMLP generally pays the opera갇ng expenses of our hotels. All opera갇ng expenses or other expenses incurred by HHMLP in performing its authorized du갇es are reimbursed or borne by our TRS to the extent the opera갇ng expenses or other expenses are incurred within the limits of the applicable approved hotel opera갇ng budget. HHMLP is not obligated to advance any of its own funds for opera갇ng expenses of a hotel or to incur any liability in connec갇on with opera갇ng 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 incen갇ve 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 incen갇ve management fee, if any, for a hotel is due annually in arrears on the nine갇eth day following the end of each ﬁscal year and is based upon the ﬁnancial performance of the hotels. For the years ended December 31, 2016, 2015 and 2014, base management fees incurred totaled $13,048, $13,675 and $12,263 respec갇vely, and are recorded as Hotel Opera갇ng Expenses. For the years ended December 31, 2016, 2015 and 2014, we did not incur incen갇ve management fees. Franchise Agreements Our branded hotel proper갇es 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 royal갇es, reserva갇on, and adver갇sing 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, 2016, 2015 and 2014 were $24,477, $27,998 and $26,015 respec갇vely, and are recorded in Hotel Opera갇ng Expenses. The ini갇al fees incurred to enter into the franchise agreements are amor갇zed over the life of the franchise agreements. Accoun갇ng and Informa갇on Technology Fees Each of the wholly‐owned hotels and consolidated joint venture hotel proper갇es managed by HHMLP incurs a monthly accoun갇ng and informa갇on technology fee. Monthly fees for accoun갇ng services are between $2 and $3 per property and monthly informa갇on technology fees range from $1 to $2 per property. For the years ended December 31, 2016, 2015 and 2014, the Company incurred accoun갇ng fees of $1,423, $1,484 and $1,410 respec갇vely. For the years ended December 31, 2016, 2015 and 2014, the Company incurred informa갇on technology fees of $458, $441 and $416 respec갇vely. Accoun갇ng fees and informa갇on technology fees are included in Hotel Opera갇ng Expenses. Capital Expenditure Fees HHMLP charges a 5% fee on all capital expenditures and pending renova갇on projects at the proper갇es as compensa갇on for procurement services related to capital expenditures and for project management of renova갇on projects. For the years ended December 31, 2016, 2015 and 2014, we incurred fees of $1,255, $996 and $742 respec갇vely, which were capitalized with the cost of ﬁxed asset addi갇ons. 94 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 6 – COMMITMENTS AND CONTINGENCIES AND RELATED PARTY TRANSACTIONS (CONTINUED) Acquisi갇ons from Aﬃliates We have entered into an op갇on 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 en갇갇es controlled by them at fair market value. This right of ﬁrst refusal would apply to each party un갇l one year a耀er such party ceases to be an oﬃcer or trustee of the Company. Our Acquisi갇on Commi姫ee 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 par갇es are approved by the Acquisi갇on Commi姫ee. Hotel Supplies For the years ended December 31, 2016, 2015 and 2014, we incurred charges for hotel supplies of $144, $189 and $163 respec갇vely. For the years ended December 31, 2016, 2015 and 2014, we incurred charges for capital expenditure purchases of $2,166, $4,542 and $10,610 respec갇vely. These purchases were made from Hersha Purchasing and Design, a hotel supply company owned, in part, by certain execu갇ves and trustees of the Company. Hotel supplies are expensed and included in Hotel Opera갇ng Expenses on our consolidated statements of opera갇ons, and capital expenditure purchases are included in investment in hotel proper갇es on our consolidated balance sheets. Approximately $1 is included in accounts payable at both December 31, 2016 and December 31, 2015. Due From Related Par갇es The due from related par갇es balance as of December 31, 2016 and December 31, 2015 was approximately $18,332 and $6,243, respec갇vely. The balances primarily consisted of working capital deposits made to HHMLP and other en갇갇es owned, in part, by certain execu갇ves and trustees of the Company. Due to Related Par갇es The balance due to related par갇es as of December 31, 2016 and December 31, 2015 was approximately $0 and $8,789, respec갇vely. The balances consisted of amounts payable to HHMLP for administra갇ve, management, and beneﬁt related fees. Hotel Ground Rent For the years ended December 31, 2016, 2015 and 2014 we incurred $3,600, $3,137 and $2,433 respec갇vely, of rent expense payable pursuant to ground leases related to certain hotel proper갇es. Future minimum lease payments (without reﬂec갇ng future applicable Consumer Price Index increases) under these agreements are as follows: Year Ending December 31, Amount 2017 2018 2019 2020 2021 Therea耀er Con갇ngent Considera갇on $ $ 2,706 2,714 2,719 2,744 2,782 246,578 260,243 The purchase agreement for the acquisi갇on of the Parrot Key Resort in Key West, FL, which we acquired in the second quarter of 2014, contained a provision that en갇tled the seller to addi갇onal considera갇on of $2,000 con갇ngent upon the hotel achieving certain net opera갇ng income thresholds within twelve months of acquisi갇on. At the 갇me of acquisi갇on, no liability was recorded as the fair market value of the con갇ngent considera갇on was determined to be $0. Upon remeasurement at the twelve months a耀er acquisi갇on, it was determined that the hotel achieved a net opera갇ng income within the agreed upon threshold and the liability of the con갇ngent considera갇on was determined to be $2,000; and thus was paid to the seller in June 2015. 95 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 6 – COMMITMENTS AND CONTINGENCIES AND RELATED PARTY TRANSACTIONS (CONTINUED) Li갇ga갇on We are not presently subject to any material li갇ga갇on nor, to our knowledge, is any other li갇ga갇on threatened against us, other than rou갇ne ac갇ons for negligence or other claims and administra갇ve proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance and all of which collec갇vely are not expected to have a material adverse eﬀect on our liquidity, results of opera갇ons or business or ﬁnancial condi갇on. 96 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 7 – FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS Fair Value Measurements Our determina갇on of fair value measurements are based on the assump갇ons that market par갇cipants would use in pricing the asset or liability. As a basis for considering market par갇cipant assump갇ons in fair value measurements, we u갇lize a fair value hierarchy that dis갇nguishes between market par갇cipant assump갇ons based on market data obtained from sources independent of the repor갇ng en갇ty (observable inputs that are classiﬁed within Levels 1 and 2 of the hierarchy) and the repor갇ng en갇ty’s own assump갇ons about market par갇cipant assump갇ons (unobservable inputs classiﬁed within Level 3 of the hierarchy). Level 1 inputs u갇lize quoted prices (unadjusted) in ac갇ve markets for iden갇cal assets or liabili갇es 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 liabili갇es in ac갇ve 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 liabili갇es, which are typically based on an en갇ty’s own assump갇ons, as there is li姫le, if any, related market ac갇vity. In instances where the determina갇on 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 en갇re fair value measurement falls is based on the lowest level input that is signiﬁcant to the fair value measurement in its en갇rety. The Company’s assessment of the signiﬁcance of a par갇cular input to the fair value measurement in its en갇rety requires judgment, and considers factors speciﬁc to the asset or liability. As of December 31, 2016, the Company’s deriva갇ve instruments represented the only ﬁnancial instruments measured at fair value. Currently, the Company uses deriva갇ve instruments, such as interest rate swaps and caps, to manage its interest rate risk. The valua갇on of these instruments is determined using widely accepted valua갇on techniques, including discounted cash ﬂow analysis on the expected cash ﬂows of each deriva갇ve. This analysis reﬂects the contractual terms of the deriva갇ves, including the period to maturity, and uses observable market‐based inputs. We incorporate credit valua갇on adjustments to appropriately reﬂect both our own nonperformance risk and the respec갇ve counterparty’s nonperformance risk in the fair value measurements. In adjus갇ng the fair value of its deriva갇ve contracts for the eﬀect of nonperformance risk, we have considered the impact of ne駫ng and any applicable credit enhancements, such as collateral pos갇ngs, thresholds, mutual puts and guarantees. Although we have determined that the majority of the inputs used to value our deriva갇ves fall within Level 2 of the fair value hierarchy, the credit valua갇on adjustments associated with our deriva갇ves u갇lize Level 3 inputs, such as es갇mates of current credit spreads, to evaluate the likelihood of default by us and the counterpar갇es. However, as of December 31, 2016 we have assessed the signiﬁcance of the eﬀect of the credit valua갇on adjustments on the overall valua갇on of our deriva갇ve posi갇ons and have determined that the credit valua갇on adjustments are not signiﬁcant to the overall valua갇on of our deriva갇ves. As a result, we have determined that our deriva갇ve valua갇ons in their en갇rety are classiﬁed in Level 2 of the fair value hierarchy. 97 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 7 – FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS (CONTINUED) Deriva갇ve Instruments Es갇mated Fair Value Asset / (Liability) Balance Hedged Debt Type Strike Rate Index Eﬀec갇ve Date Deriva갇ve Contract Maturity Date No갇onal Amount December 31, 2016 December 31, 2015 Term Loan Instruments: First Term Loan Second Term Loan Swap 0.545% 1‐Month LIBOR + 2.35% November 5, 2012 November 5, 2016 100,000 Swap 0.600% 1‐Month LIBOR + 2.35% December 18, 2012 November 5, 2016 50,000 ‐ ‐ Third Term Loan *** Swap 1.011% 1‐Month LIBOR + 2.20% November 3, 2016 October 3, 2019 150,000 1,773 Mortgages: Duane Street Hotel, New York, NY Swap 0.933% 1‐Month LIBOR + 4.50% February 1, 2014 February 1, 2017 8,973 Hilton Garden Inn 52nd Street, New York, NY Swap 1.152% 1‐Month LIBOR + 2.90% June 1, 2015 February 21, 2017 44,325 Courtyard, LA Westside, Culver City, CA ** Cap 3.000% 1‐Month LIBOR + 3.00% October 27, 2015 September 29, 2017 35,000 Hya姫, Union Square, New York, NY * Cap 3.000% 1‐Month LIBOR + 2.30% June 10, 2015 June 10, 2019 55,750 (1) (26) 8 54 $ 1,808 $ 84 18 ‐ (21) (215) 19 136 21 * On June 10, 2015, we reﬁnanced the debt associated with Hya姫 Union Square. As a result, we entered into an interest rate cap with a strike rate of 3.000%. The original interest rate cap matured on April 9, 2016. See “Note 5 – Debt” for more informa갇on regarding this reﬁnance. ** 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 original interest rate swap matured on September 29, 2015. See “Note 5 – Debt” for more informa갇on regarding this reﬁnance. *** On October 7, 2016, we entered into an interest rate swap associated with $150,000 of our $200,000 Third Term Loan. This swap eﬀec갇vely ﬁxes the interest rate of the Third Term Loan at 3.211%. This swap matures on October 3, 2019. 98 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [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, 2016 and December 31, 2015 and the fair value of certain of our interest rate swaps is included in accounts payable, accrued expenses and other liabili갇es at December 31, 2016 and December 31, 2015. The net change in fair value of deriva갇ve instruments designated as cash ﬂow hedges was a gain of $1,839, a loss of $108, and a gain of $18 for the years ended December 31, 2016, 2015 and 2014, respec갇vely. 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 deriva갇ves will be reclassiﬁed to interest expense as interest payments are made on the Company’s variable‐rate deriva갇ve. The change in net unrealized gains/losses on cash ﬂow hedges reﬂects a reclassiﬁca갇on of $610 of net unrealized gains/losses from accumulated other comprehensive income as an increase to interest expense during 2016. During 2017, the Company es갇mates that an addi갇onal $161 will be reclassiﬁed as an increase to interest expense. Fair Value of Debt The Company es갇mates the fair value of its ﬁxed rate debt and the credit spreads over variable market rates on its variable rate debt by discoun갇ng the future cash ﬂows of each instrument at es갇mated market rates or credit spreads consistent with the maturity of the debt obliga갇on with similar credit policies. Credit spreads take into considera갇on general market condi갇ons and maturity. The inputs u갇lized in es갇ma갇ng the fair value of debt are classiﬁed in Level 2 of the fair value hierarchy. As of December 31, 2016, the carrying value and es갇mated fair value of the Company’s debt were $1,103,327 and $1,098,248, respec갇vely. As of December 31, 2015, the carrying value and es갇mated fair value of the Company’s debt were $1,169,964 and $1,170,901, respec갇vely. 99 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [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 Amended and Restated Hersha Hospitality Trust 2012 Equity Incen갇ve Plan (the “2012 Plan”) for the purpose of a姫rac갇ng and retaining execu갇ve oﬃcers, employees, trustees and other persons and en갇갇es that provide services to the Company. Execu갇ves & Employees Annual Long Term Equity Incen⁛ve Programs To further align the interests of the Company’s execu갇ves with those of shareholders, the Compensa갇on Commi姫ee grants annual long term equity incen갇ve awards that are both “performance based” and “갇me based.” On March 17, 2016, the Compensa갇on Commi姫ee approved the 2016 Annual Long Term Equity Incen갇ve Program (“2016 Annual EIP”)for the execu갇ve oﬃcers, pursuant to which the execu갇ve oﬃcers are eligible to earn equity awards in the form of stock awards, LTIP Units, or performance share awards issuable pursuant to the 2012 Plan. These awards are earned under the 2016 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 probability of achievement of the performance condi갇ons at the end of each period. As of December 31, 2016, no shares or LTIP Units have been issued in accordance with the 2012 Plan to the execu갇ve oﬃcers in se姫lement of 2016 Annual EIP awards. The following table is a summary of all unvested LTIP Units issued to execu갇ves: Issuance Date March 30, 2016 (2015 Annual EIP) March 30, 2015 (2014 Annual EIP) December 23, 2014 (2013 Annual EIP) (3) December 23, 2014 (3) LTIP Units Issued Ves갇ng Period Ves갇ng Schedule December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Units Vested Unearned Compensa갇on 183,396 3 years 25%/year (1) 91,696 ‐ $ 868 $ 128,832 3 years 25%/year (1) 96,623 64,415 83,993 258,899 655,120 3 years 5 years 25%/year (1) 33% Year 3, 4, 5 (2) 83,993 172,599 444,911 55,994 86,299 206,708 $ 1,550 $ 225 ‐ 457 ‐ 758 173 1,553 2,484 (1)25% of the issued shares or LTIP Units vested immediately upon issuance. In general, the remaining shares or LTIP Units vest 25% on the ﬁrst through third anniversaries of the end of the performance period (subject to con갇nuous employment through the applicable ves갇ng date). (2)On April 18, 2012, the Company entered into amended and restated employment agreements with the Company’s execu갇ve oﬃcers. To induce the execu갇ves to agree to the substan갇al reduc갇on in beneﬁts upon certain termina갇ons following a change of control as described in the agreements, the Company awarded an aggregate of 258,899 restricted common shares to the execu갇ves pursuant to the 2012 Plan, which were subsequently forfeited and replaced with LTIP Units. One‐third of each award of LTIP Units vested or will vest on each of the third, fourth and ﬁ耀h anniversaries of the original date of issuance. Ves갇ng will accelerate upon a change of control or if the relevant execu갇ve’s employment with the Company were to terminate for any reason other than for cause (as deﬁned in the employment agreements). (3)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 Compensa갇on Commi姫ee approved an aggregate of 487,081 LTIP Units to certain execu갇ve oﬃcers. These execu갇ve 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 execu갇ve oﬃcers under the 2012 Plan as restricted stock awards. These LTIP Units are subject to the same 갇me‐based ves갇ng condi갇ons that applied to the forfeited restricted stock awards. 100 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 8 – SHARE BASED PAYMENTS (CONTINUED) Stock based compensa갇on expense related to the Annual Long Term Equity Incen갇ve Program of $4,800, $4,490 and $4,083 was incurred during the years ended December 31, 2016, 2015 and 2014, respec갇vely. Unearned compensa갇on related to the Annual Long Term Equity Incen갇ve Program as of December 31, 2016 and December 31, 2015 was $1,550 and $2,484, respec갇vely. Unearned compensa갇on related to the grants and amor갇za갇on of LTIP Units is included in Noncontrolling Interests on the Company’s Consolidated Balance Sheets and Consolidated Statements of Equity. Mul⁛‐Year Long Term Equity Incen⁛ve Programs On March 17, 2016, the Compensa갇on Commi姫ee approved the 2016 Mul갇‐Year Long Term Equity Incen갇ve Program (“2016 Mul갇‐Year EIP”). This program has a three‐year performance period which commenced on January 1, 2016 and ends December 31, 2018. As of December 31, 2016 , no shares or LTIP Units have been issued to the execu갇ve oﬃcers in se姫lement of 2016 Mul갇‐Year EIP awards. The following table is a summary of the approved Mul갇‐Year Long Term Equity Incen갇ve Programs: Compensa갇on Commi姫ee Approval Date March 17, 2016 (2016 Mul갇‐Year EIP) March 18, 2015 (2015 Mul갇‐Year EIP) April 11, 2014 (2014 Mul갇‐Year EIP) April 15, 2013 (2013 Mul갇‐Year EIP) LTIP Units Issued LTIP Issuance Date Performance Period December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Units Vested Unearned Compensa갇on ‐ ‐ ‐ N/A N/A N/A 1/1/2016 to 12/31/2018 1/1/2015 to 12/31/2017 1/1/2014 to 12/31/2016 110,849 110,849 3/30/2016 1/1/2013 to 12/31/2015 ‐ ‐ ‐ 110,849 110,849 ‐ $ 888 $ ‐ ‐ ‐ ‐ $ 397 283 ‐ 1,568 $ ‐ 596 567 385 1,548 The shares or LTIP Units issuable under the Mul갇‐Year Long Term Incen갇ve Programs, including the 2016 Mul갇‐Year EIP, are based on the Company’s achievement of a certain level of (1) absolute total shareholder return (37.50% of the award), (2) rela갇ve total shareholder return as compared to the Company’s peer group (37.50% of the award), and (3) rela갇ve growth in revenue per available room (RevPar) compared to the Company’s peer group (25% of the award). The Company accounts for the total shareholder return components of these grants as market based awards where the Company es갇mates unearned compensa갇on at the grant date fair value which is then amor갇zed into compensa갇on cost over the ves갇ng 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 condi갇ons at the end of the repor갇ng period. Stock based compensa갇on expense of $1,869, $818 and $598 was recorded for the years ended December 31, 2016, 2015 and 2014, respec갇vely, for the Mul갇‐Year Long Term Equity Incen갇ve Programs. Unearned compensa갇on related to the mul갇‐year program as of December 31, 2016 and December 31, 2015, respec갇vely, was $1,568 and $1,548. 101 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 8 – SHARE BASED PAYMENTS (CONTINUED) Restricted Share Awards In addi갇on to share based compensa갇on expense related to awards to execu갇ves under the Mul갇‐Year and Annual Long Term Equity Incen갇ve Programs, share based compensa갇on expense related to restricted common shares issued to employees of the Company of $541, $455 and $399 was incurred during the years ended December 31, 2016, 2015 and 2014 respec갇vely. Unearned compensa갇on related to the restricted share awards as of December 31, 2016 and December 31, 2015 was $505 and $491, respec갇vely. The following table is a summary of all unvested share awards issued to employees under the 2012 Plan and prior equity incen갇ve plans: Shares Vested Unearned Compensa갇on Original Year of Issuance Date 2016 2015 2014 2013 2012 Total Original Shares Issued Range of Share Price on Date of Grant* 30,070 $ 18.02‐21.11 23,492 21.76‐28.09 11,455 26.00‐27.00 11,899 22.56 13,646 21.12 90,562 Ves갇ng Period 2 years 2‐4 years 2 years 2‐4 years 2‐4 years Ves갇ng Schedule 50% /year 25‐50% /year 50% /year 25‐50% /year 25‐50% /year December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 497 13,733 11,455 11,899 13,646 51,230 ‐ $ 600 6,619 11,199 12,445 30,863 $ 348 $ 157 ‐ ‐ ‐ 505 $ ‐ 419 54 7 11 491 *Original share price on date of grants prior to June 22, 2015 were mul갇plied by four to account for the reverse share split which occurred on June 22, 2015. See “Note 1 – Basis of Presenta갇on” for more informa갇on. Trustees Annual Retainer The Compensa갇on Commi姫ee approved a program that allows the Company’s trustees to make a voluntary elec갇on to receive any por갇on of the annual cash retainer in the form of common equity valued at a 25% premium to the cash that would have been received. On December 30, 2016, we issued 4,395 shares which do not fully vest un갇l December 31, 2017. Compensa갇on expense incurred for the years ended December 31, 2016, 2015 and 2014, respec갇vely, was $112, $93 and $220. 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 December 30, 2016 March 30, 2016 $ 4,395 5,289 Share Price on Date of Grant 21.50 21.11 Ves갇ng Period 12 months 9 months Ves갇ng Schedule 100% 100% Total 9,684 Mul⁛‐Year Long‐Term Equity Incen⁛ves Unearned Compensa갇on December 31, 2016 $ 94 ‐ 94 $ $ $ December 31, 2015 ‐ ‐ ‐ Compensa갇on expense for the mul갇‐year long term incen갇ve plans for the Company’s trustees incurred for the years ended December 31, 2016, 2015 and 2014, respec갇vely, was $61, $59 and $71. Unearned compensa갇on related to the mul갇‐year long term equity incen갇ves was $167 and $67 as of December 31, 2016 and December 31, 2015, respec갇vely. 102 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [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 incen갇ve plans: Original Issuance Date Shares Issued December 30, 2016 March 30, 2016 December 30, 2014 December 27, 2013 5,000 2,500 2,500 3,000 Ves갇ng Period 3 years 3 years 3 years 3 years Shares Vested Unearned Compensa갇on Ves갇ng Schedule December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 33% /year 33% /year 33% /year 33% /year 835 1,670 3,000 5,505 835 2,170 3,005 $ $ 108 $ 35 24 ‐ 167 $ ‐ ‐ 48 19 67 Share Awards Compensa갇on expense related to share awards issued to the Board of Trustees of $535, $434 and $457 was incurred during the years ended December 31, 2016, 2015 and 2014, respec갇vely and is recorded in general and administra갇ve expense on the statement of opera갇ons. Share awards issued to the Board of Trustees are immediately vested. On June 6, 2016, an aggregate of 17,795 shares were issued to the Board of Trustees at a price per share on the date of grant of $17.96. On December 30, 2016, an aggregate of 10,000 shares were issued to the Board of Trustees at a price per share on the date of grant of $21.50. Non‐employees The Company issues share based awards as compensa갇on to non‐employees for services provided to the Company consis갇ng primarily of restricted common shares. The Company recorded stock based compensa갇on expense of $130, $174 and $200 for the years ended December 31, 2016, 2015 and 2014, respec갇vely. Unearned compensa갇on related to the restricted share awards as of December 31, 2016 and December 31, 2015 was $79 and $90, respec갇vely. 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 30, 2016 March 27, 2015 Shares Issued Share Price on Date of Grant* 7,500 $ 7,238 $ 21.11 25.88 Ves갇ng Period 2 years 2 years Ves갇ng Schedule 50% /year 50% /year Total 14,738 December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 3,750 7,238 10,988 ‐ $ 3,762 3,762 $ 79 $ ‐ 79 $ ‐ 90 90 Shares Vested Unearned Compensa갇on *Original share price on date of grant prior to June 22, 2015 was mul갇plied by four to account for the reverse share split which occurred on June 22, 2015. See “Note 1 – Basis of Presenta갇on” for more informa갇on. 103 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 9 – EARNINGS PER SHARE The following table is a reconcilia갇on of the income or loss (numerator) and the weighted average shares (denominator) used in the calcula갇on of basic and diluted earnings per common share. The computa갇on of basic and diluted earnings per share is presented below. NUMERATOR: Basic and Diluted* Net Income from Con갇nuing Opera갇ons Income allocated to Noncontrolling Interests Distribu갇ons to Preferred Shareholders Dividends Paid on Unvested Restricted Shares and LTIP Units Ex갇nguishment of Issuance Costs Upon Redemp갇on of Series B Preferred Shares Net Income from Con갇nuing Opera갇ons a姫ributable to Common Shareholders Discon갇nued Opera갇ons Loss from Discon갇nued Opera갇ons Loss from Discon갇nued Opera갇ons allocated to Noncontrolling Interests Loss from Discon갇nued Opera갇ons a姫ributable to Common Shareholders Net Income a姫ributable to Common Shareholders DENOMINATOR: Weighted average number of common shares ‐ basic Eﬀect of dilu갇ve securi갇es: Restricted Stock Awards and LTIP Units (unvested) Con갇ngently Issued Shares Weighted average number of common shares ‐ diluted For the Year Ended December 31, 2016 2015 2014 $ $ $ 121,457 $ (4,477) (17,380) (503) (4,021) 42,207 $ (411) (14,356) (453) ‐ 69,936 (1,069) (14,356) (515) ‐ 95,076 $ 26,987 $ 53,996 ‐ ‐ ‐ 95,076 $ ‐ ‐ ‐ 26,987 $ (1,665) 53 (1,612) 52,384 42,957,199 47,786,811 49,777,302 278,588 294,944 303,949 278,898 347,829 182,375 43,530,731 48,369,658 50,307,506 * Income (loss) allocated to noncontrolling interest in HHLP has been excluded from the numerator and Common Units and Vested LTIP Units have been omi姫ed from the denominator for the purpose of compu갇ng diluted earnings per share since including these amounts in the numerator and denominator would have no impact. In addi갇on, poten갇ally dilu갇ve common shares, if any, have been excluded from the denominator if they are an갇‐dilu갇ve to income (loss) applicable to common shareholders. 104 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 10 – CASH FLOW DISCLOSURES AND NON CASH INVESTING AND FINANCING ACTIVITIES Interest paid during 2016, 2015 and 2014 totaled $42,449, $40,240 and $40,760 respec갇vely. Cash paid for income taxes during 2016, 2015 and 2014 were $772, $0 and $0, respec갇vely. The following non‐cash inves갇ng and ﬁnancing ac갇vi갇es occurred during 2016, 2015 and 2014: Common Shares issued as part of the Dividend Reinvestment Plan Acquisi갇on of hotel proper갇es: Debt assumed, including premium Deposit paid in prior period towards acquisi갇on which closed in current period Deferred Tax Liability Se姫lement of development loan receivable principal and accrued interest revenue receivable Disposi갇on of hotel proper갇es: Debt assumed by purchaser Conversion of Common Units to Common Shares Issuance of Common Units Accrued payables for ﬁxed assets placed into service Contribu갇on of ﬁxed assets to joint venture 2016 2015 2014 $ 63 $ 50 $ 50 55,350 5,000 3,281 ‐ ‐ ‐ 4,430 1,689 264,658 28,902 24,924 ‐ ‐ ‐ ‐ 132 ‐ 992 ‐ ‐ ‐ 22,494 45,710 ‐ ‐ 1,312 ‐ 105 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 11 – 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 en갇tled 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 distribu갇on to its shareholders in the event of its liquida갇on, dissolu갇on or winding up a耀er payment of, or adequate provision for, all known debts and liabili갇es of the Company. Preferred Shares The Declara갇on 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 갇me to 갇me 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 Declara갇on of Trust to set for each such series, subject to the provisions of our Declara갇on of Trust regarding the restric갇on on transfer of shares of beneﬁcial interest, the terms, the preferences, conversion or other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends or other distribu갇ons, qualiﬁca갇ons and terms or condi갇ons of redemp갇on for each such series. Thus, our Board of Trustees could authorize the issuance of addi갇onal preferred shares with terms and condi갇ons which could have the eﬀect of delaying, deferring or preven갇ng a transac갇on 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 connec갇on with the acquisi갇on of wholly owned hotels and joint venture interests in hotel proper갇es. The total number of Common Units outstanding as of December 31, 2016, 2015 and 2014 was 1,928,386, 1,703,386 and 1,712,353, respec갇vely. These units can be redeemed for cash or converted to common shares, at the Company’s op갇on, on a one‐for‐one basis. The number of common shares issuable upon exercise of the redemp갇on rights will be adjusted upon the occurrence of stock splits, mergers, consolida갇on or similar pro rata share transac갇ons, that otherwise would have the eﬀect of dilu갇ng the ownership interest of the limited partners or our shareholders. During 2016, 2015 and 2014, 0, 8,965 and 4,725 Common Units were converted to common shares, respec갇vely. In addi갇on, as noted in “Note 8 – Share Based Payments,” during 2016, the Company issued 294,245 LTIP Units. 106 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 [IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS] NOTE 12 – INCOME TAXES The Company elected to be taxed as a REIT under Sec갇ons 856 through 860 of the Code commencing with its taxable year ended December 31, 1999. To qualify as a REIT, the Company must meet a number of organiza갇onal and opera갇onal requirements, including a requirement that it currently distribute at least 90% of its REIT taxable income, determined without regard to the deduc갇on for dividends paid and excluding net capital gain, to its shareholders. It is the Company’s current inten갇on to adhere to these requirements and maintain the Company’s qualiﬁca갇on for taxa갇on as a REIT. As a REIT, the Company generally will not be subject to federal corporate income tax on that por갇on of its net income that is currently distributed to shareholders. If the Company fails to qualify for taxa갇on as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alterna갇ve minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualiﬁes for taxa갇on 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 ac갇vi갇es managed through TRSs is subject to federal, state and local income taxes. As a TRS, 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 statutory federal income tax rate to pretax income from con갇nuing opera갇ons as a result of the following diﬀerences: For the year ended December 31, 2015 2014 2016 Statutory federal income tax provision Adjustment for nontaxable income for Hersha Hospitality Trust State income taxes, net of federal income tax eﬀect Recogni갇on of deferred tax assets Total income tax beneﬁt $ $ $ 39,633 (44,078) (725) 282 $ 13,282 (15,853) (581) 11 22,865 (25,274) (367) 91 (4,888) $ (3,141) $ (2,685) The components of the Company’s income tax expense (beneﬁt) from con갇nuing opera갇ons for the years ended December 31, 2016, 2015 and 2014 were as follows: For the year ended December 31, 2015 2014 2016 Income tax expense (beneﬁt): Current: Federal State Deferred: Federal State Total Income tax expense (beneﬁt): From con갇nuing opera갇ons From discon갇nued opera갇ons Total $ $ $ ‐ ‐ (3,790) (1,098) (4,888) (4,888) ‐ (4,888) $ $ $ ‐ ‐ (2,261) (880) (3,141) (3,141) ‐ (3,141) $ $ $ ‐ ‐ (2,130) (555) (2,685) (2,685) 2 (2,683) 107 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] NOTE 12 – INCOME TAXES (CONTINUED) The components of consolidated TRS’s net deferred tax asset as of December 31, 2016 and 2015 were as follows: Deferred tax assets: Net opera갇ng loss carryforwards Accrued expenses and other Tax credit carryforwards Total gross deferred tax assets Valua갇on allowance Total net deferred tax assets Deferred tax liabili갇es: Deprecia갇on and amor갇za갇on Total Net deferred tax assets As of December 31, 2016 2015 $ $ $ 18,448 1,494 567 20,509 (804) 19,705 3,508 16,197 $ $ $ 14,168 1,292 558 16,018 (804) 15,214 624 14,590 In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some por갇on or all of the deferred tax assets will not be realized. Based on limita갇ons related to the u갇liza갇on of certain tax a姫ribute carryforwards, the Company recorded a valua갇on allowance of approximately $804 as these a姫ributes are not more likely than not to be realized prior to their expira갇on. Based on the level of historical taxable income, tax planning strategies and projec갇ons for future taxable income over the periods in which the remaining deferred tax assets are deduc갇ble, Management believes it is more likely than not that the remaining deferred tax assets will be realized. As of December 31, 2016, we have gross federal net opera갇ng loss carryforwards of $46,125 which expire over various periods from 2023 through 2036. As of December 31, 2016, we have gross state net opera갇ng loss carryforwards of $54,281 which expire over various periods from 2016 to 2036. The Company has tax credits of $567 available which begin to expire in 2028. Earnings and proﬁts, which will determine the taxability of distribu갇ons to shareholders, will diﬀer from net income reported for ﬁnancial repor갇ng purposes due to the diﬀerences for federal tax purposes in the es갇mated useful lives and methods used to compute deprecia갇on. The following table sets forth certain per share informa갇on regarding the Company’s common and preferred share distribu갇ons for the years ended December 31, 2016, 2015 and 2014. Preferred Shares ‐ 8% Series B Ordinary income Return of Capital Capital Gain Distribu갇on Preferred Shares ‐ 6.875% Series C Ordinary income Return of Capital Capital Gain Distribu갇on Preferred Shares ‐ 6.5% Series D Ordinary income Return of Capital Capital Gain Distribu갇on Common Shares ‐ Class A Ordinary income Return of Capital Capital Gain Distribu갇on There were no Preferred Shares Series E dividends paid during 2016. 108 2016 2015 2014 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% N/A N/A N/A 79.49% 20.51% 0.00% 100.00% 0.00% 0.00% 100.00% 0.00% 0.00% N/A N/A N/A 76.34% 23.66% 0.00% HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 [IN THOUSANDS] NOTE 13 – SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Year Ended December 31, 2016 First Quarter Second Quarter Third Quarter Fourth Quarter $ 106,916 $ 223,077 $ 120,702 $ 115,121 (214) (8,419) ‐ (8,419) (687) ‐ 3,589 112,709 1,521 111,889 3,070 114,959 4,748 4,021 4,000 110,223 (3,717) 6,762 1,443 8,205 211 ‐ 4,417 $ $ $ (11,321) $ 102,190 $ 3,577 $ (0.26) $ (0.26) $ 2.35 $ 2.33 $ 0.08 $ 0.08 $ 132,135 126,385 587 6,337 375 6,712 205 ‐ 5,374 1,133 0.04 0.03 44,379,327 44,379,327 43,427,726 43,863,577 42,309,044 42,745,864 41,733,272 42,307,583 Year Ended December 31, 2015 First Quarter Second Quarter Third Quarter Fourth Quarter $ 95,760 $ 127,081 $ 124,560 $ 99,875 (274) (4,389) ‐ (4,389) (443) 3,589 108,090 526 19,517 109 19,626 405 3,589 111,396 608 13,772 631 14,403 244 3,589 (7,535) $ 15,632 $ 10,570 $ 123,177 113,116 105 10,166 2,401 12,567 205 3,589 8,773 (0.16) $ 0.32 $ 0.22 $ 0.19 49,582,790 49,582,790 48,530,716 49,043,914 47,417,452 47,909,549 45,663,416 46,211,104 $ $ 109 Total Revenues Total Expenses (Loss) Income from Unconsolidated Joint Ventures (Loss) Income from Con갇nuing Opera갇ons Income Tax Beneﬁt Net (Loss) Income (Loss) Income Allocated to Noncontrolling Interests in Con갇nuing Opera갇ons Issuance Costs of Redeemed Preferred Stock Preferred Distribu갇ons Net (Loss) Income applicable to Common Shareholders Earnings per share: Basic Net (Loss) Income applicable to Common Shareholders Diluted Net (Loss) Income applicable to Common Shareholders Weighted Average Common Shares Outstanding Basic Diluted Total Revenues Total Expenses (Loss) Income from Unconsolidated Joint Ventures (Loss) Income from Con갇nuing Opera갇ons Income Tax Beneﬁt Net (Loss) Income (Loss) Income Allocated to Noncontrolling Interests in Con갇nuing Opera갇ons Preferred Distribu갇ons Net (Loss) Income applicable to Common Shareholders Basic and diluted earnings per share: Net (Loss) Income applicable to Common Shareholders Weighted Average Common Shares Outstanding Basic Diluted HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] Ini갇al Costs Costs Capitalized Subsequent to Acquisi갇on Gross Amounts at which Carried at Close of Period Accumulated Deprecia갇on Net Book Value Descrip갇on Encumbrances Land Buildings & Improvements Buildings & Improvements Land Buildings & Improvements Total Buildings & Improvements* Land Land, Buildings & Improvements Date of Acquisi갇on Courtyard, Brookline, MA Residence Inn, Tyson's Corner, VA Hilton Garden Inn, JFK Airport, NY ‐ 47,414 4,283 14,475 (19,034) ‐ 25,018 Holiday Inn Exp, Cambridge, MA 1,956 9,793 Hya姫 House, Gaithersburg, MD Hya姫 House, White Plains, NY Holiday Inn Exp & Suites, Chester, NY 2,912 16,001 8,823 30,273 1,500 6,671 Hampton Inn, Seaport, NY 7,816 19,040 Sheraton Hotel, JFK Airport, NY ‐ 27,315 Hampton Inn, Philadelphia, PA 3,490 24,382 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 4,754 ‐ 52,168 52,168 (15,567) 36,601 06/16/05 1,962 4,283 16,437 20,720 (5,315) 15,405 02/02/06 2,892 ‐ 27,910 27,910 (8,659) 19,251 02/16/06 2,461 1,956 12,254 14,210 (4,467) 9,743 05/03/06 4,165 2,912 20,166 23,078 (6,475) 16,603 12/28/06 2,807 8,823 33,080 41,903 (9,761) 32,142 12/28/06 322 1,500 6,993 8,493 (1,807) 6,686 01/25/07 1,355 7,816 20,395 28,211 (5,271) 22,940 02/01/07 2,313 ‐ 29,628 29,628 (6,807) 22,821 06/13/08 5,972 3,490 30,354 33,844 (12,839) 21,005 02/15/06 110 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] Duane Street, Tribeca, NY (8,973) 8,213 12,869 NU Hotel, Brooklyn, NY Hilton Garden Inn, Tribeca, NY ‐ 22,042 (46,500) 21,077 42,955 ‐ ‐ ‐ 1,940 8,213 14,809 23,022 (3,887) 19,135 01/04/08 1,650 ‐ 23,692 23,692 (5,496) 18,196 01/14/08 935 21,077 43,890 64,967 (8,614) 56,353 05/01/09 111 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] Ini갇al Costs Costs Capitalized Subsequent to Acquisi갇on Gross Amounts at which Carried at Close of Period Accumulated Deprecia갇on Net Book Value Descrip갇on Encumbrances Land Buildings & Improvements Buildings & Improvements Land Buildings & Improvements Total Buildings & Improvements* Land Land, Buildings & Improvements Date of Acquisi갇on Hampton Inn, Washington, DC 9,335 58,048 ‐ ‐ 1,256 9,335 59,304 68,639 (9,906) 58,733 09/01/10 1,400 1,765 18,329 20,094 (4,880) 15,214 12/21/10 1,765 16,929 Sheraton, Wilmington South, DE Capitol Hill Suites Washington, DC Courtyard, LA Westside, CA Hampton Inn, Pearl Street, NY Courtyard, Miami, FL The Ri姫enhouse Hotel, PA Bulﬁnch, Boston, MA Holiday Inn Express, Manha姫an, NY Hya姫, Union Square, NY Courtyard, San Diego, CA (25,000) 8,095 35,141 ‐ 4,261 8,095 39,402 47,497 (7,218) 40,279 04/15/11 (35,000) 13,489 27,025 ‐ 4,834 13,489 31,859 45,348 (5,830) 39,518 05/19/11 11,384 23,432 ‐ 580 11,384 24,012 35,396 (1,637) 33,759 07/22/11 35,699 55,805 ‐ 23,119 35,699 78,924 114,623 (9,483) 105,140 11/16/11 7,108 29,556 ‐ 16,428 7,108 45,984 53,092 (10,501) 42,591 03/01/12 1,456 14,954 ‐ 1,511 1,456 16,465 17,921 (2,510) 15,411 05/07/12 30,329 57,016 ‐ 905 30,329 57,921 88,250 (6,887) 81,363 06/18/12 (55,750) 32,940 79,300 ‐ 2,253 32,940 81,553 114,493 (7,769) 106,724 04/09/13 15,656 51,674 ‐ 1,786 15,656 53,460 69,116 (5,048) 64,068 05/30/13 112 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] Residence Inn, Coconut Grove, FL Hotel Milo, Santa Barbara, CA 4,146 17,456 ‐ 7,140 4,146 24,596 28,742 (3,761) 24,981 06/12/13 (23,701) ‐ 55,080 ‐ 2,795 ‐ 57,875 57,875 (4,408) 53,467 02/28/14 113 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] Ini갇al Costs Costs Capitalized Subsequent to Acquisi갇on Gross Amounts at which Carried at Close of Period Accumulated Deprecia갇on Net Book Value Descrip갇on Encumbrances Land Buildings & Improvements Buildings & Improvements Land Land Buildings & Improvements Total Buildings & Improvements* Land, Buildings & Improvements Date of Acquisi갇on Hilton Garden Inn, Midtown East, NY 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. Sanctuary Beach Resort, Marina, CA Hilton Garden Inn M Street, Washington D.C. (44,325) 45,480 60,762 ‐ 180 45,480 60,942 106,422 (3,982) 102,440 05/27/14 57,889 33,959 ‐ 560 57,889 34,519 92,408 (2,369) 90,039 05/07/14 5,400 18,147 ‐ 611 5,400 18,758 24,158 (1,512) 22,646 12/20/13 4,874 20,354 ‐ 806 4,874 21,160 26,034 (1,694) 24,340 12/20/13 (24,946) 23,764 33,005 ‐ 2,889 23,764 35,894 59,658 (1,421) 58,237 06/16/15 ‐ 18,999 ‐ 327 ‐ 19,326 19,326 (647) 18,679 08/25/15 17,825 29,584 ‐ 260 17,825 29,844 47,669 (746) 46,923 12/29/15 (14,700) 20,278 17,319 ‐ 430 20,278 17,749 38,027 (409) 37,618 01/28/16 ‐ ‐ ‐ 16 30,793 67,436 98,229 (1,341) 96,888 03/09/16 ‐ ‐ 25,264 75,979 101,243 (849) 100,394 07/21/16 17,694 53,272 70,966 (266) 70,700 10/20/16 114 30,793 67,420 Envoy Hotel, Boston, MA 25,264 75,979 Courtyard, Sunnyvale, CA (40,600) 17,694 53,272 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] The Ambrose, Santa Monica, CA Total Investment in Real Estate $ 18,750 26,839 ‐ 89 18,750 26,928 45,678 (56) 45,622 12/01/16 ($338,529)$499,483 $1,275,303 $ $0 $107,964 $499,483 $1,383,267 $1,882,750 $ ($190,095) $1,692,655 115 HERSHA HOSPITALITY TRUST AND SUBSIDIARIES HERSHA HOSPITALITY TRUST AND SUBSIDIARIES SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2016 (CONTINUED) [IN THOUSANDS] Ini갇al Costs Costs Capitalized Subsequent to Acquisi갇on Gross Amounts at which Carried at Close of Period Accumulated Deprecia갇on Net Book Value Descrip갇on Encumbrances Land Buildings & Improvements Land Buildings & Improvements Land Buildings & Improvements Total Buildings & Improvements* Land, Buildings & Improvements Date of Acquisi갇on Residence Inn, Greenbelt, MD Hya姫 House, Pleasant Hill, CA Hya姫 House, Pleasanton, CA 2,615 14,815 (20,160) 6,216 17,229 (14,490) 3,941 12,560 Hya姫 House, Sco姫sdale, AZ (16,778) 3,060 19,968 Courtyard, Alexandria, VA 6,376 26,089 ‐ ‐ ‐ ‐ ‐ 2,290 2,615 17,105 19,720 (6,131) 13,589 07/16/04 3,025 6,216 20,254 26,470 (5,611) 20,859 12/28/06 3,530 3,941 16,090 20,031 (5,138) 14,893 12/28/06 3,535 3,060 23,503 26,563 (7,200) 19,363 12/28/06 2,622 6,376 28,711 35,087 (8,337) 26,750 09/29/06 Total Assets Held For Sale $ (51,428) 22,208 90,661 $ ‐ 15,002 22,208 105,663 127,871 $ (32,417) 95,454 Total Real Estate $ (389,957)521,691 1,365,964 $ ‐ 122,966 521,691 1,488,930 2,010,621 $ (222,512) 1,788,109 * 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, 2016, 2015 and 2014 is approximately $1,926,585, $1,848,773 and $1,836,861, respec갇vely. Deprecia갇on 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 Accoun갇ng Firm 116 Reconcilia갇on of Real Estate Balance at beginning of year Addi갇ons during the year Disposi갇ons/Deconsolida갇on of consolidated joint venture during the year Total Real Estate Reconcilia갇on of Accumulated Deprecia갇on Balance at beginning of year Deprecia갇on for year Accumulated deprecia갇on on assets sold Balance at the end of year 2016 2015 2014 1,999,438 $ 1,864,382 $ 1,629,312 372,011 (360,828) 135,056 ‐ 333,889 (98,819) 2,010,621 $ 1,999,438 $ 1,864,382 237,129 $ 189,889 $ 46,078 (60,695) 47,240 ‐ 222,512 $ 237,129 $ 162,189 43,218 (15,518) 189,889 $ $ $ $ 117 Item 9. Changes in and Disagreements with Accountants on Accoun갇ng and Financial Disclosure None. Item 9A. Controls and Procedures EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Under the supervision and with the par갇cipa갇on of our management, including our Chief Execu갇ve Oﬃcer and Chief Financial Oﬃcer, we conducted an evalua갇on of our disclosure controls and procedures, as such term is deﬁned under Rule 13a‐15(e) promulgated under the Securi갇es Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this report. Based on that evalua갇on, the Chief Execu갇ve Oﬃcer and Chief Financial Oﬃcer concluded that our disclosure controls and procedures as of the end of the period covered by this report are func갇oning eﬀec갇vely to provide reasonable assurance that the informa갇on required to be disclosed by us in reports ﬁled under the Securi갇es Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the 갇me periods speciﬁed in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Execu갇ve Oﬃcer and Chief Financial Oﬃcer, as appropriate to allow 갇mely decisions regarding disclosure. A control system cannot provide absolute assurance, however, that the objec갇ves of the controls system are met, and no evalua갇on 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 repor갇ng, as deﬁned within Exchange Act Rules 13a‐15(f) and 15d‐15(f). Internal control over ﬁnancial repor갇ng refers to the processes designed to provide reasonable assurance regarding the reliability of ﬁnancial repor갇ng and the prepara갇on of ﬁnancial statements for external purposes in accordance with generally accepted accoun갇ng principles, and includes policies and procedures that:    pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transac갇ons and disposi갇ons of the assets of the Company; provide reasonable assurance that transac갇ons are recorded as necessary to permit prepara갇on of ﬁnancial statements in accordance with generally accepted accoun갇ng principles, and that receipts and expenditures of the Company are being made only in accordance with authoriza갇ons of management and directors of the Company; and provide reasonable assurance regarding preven갇on or 갇mely detec갇on of unauthorized acquisi갇on, use, or disposi갇on of the Company’s assets that could have a material eﬀect on the ﬁnancial statements. Because of its inherent limita갇ons, internal control over ﬁnancial repor갇ng may not prevent or detect misstatements. Also, projec갇ons of any evalua갇on of eﬀec갇veness to future periods are subject to the risk that controls may become inadequate because of changes in condi갇ons, or that the degree of compliance with the policies or procedures may deteriorate. Management conducted an evalua갇on of the eﬀec갇veness of the Company’s internal control over ﬁnancial repor갇ng based on the criteria contained in Internal Control — Integrated Framework (2013) issued by the Commi姫ee of Sponsoring Organiza갇ons (COSO) of the Treadway Commission as of December 31, 2015. Based on that evalua갇on, management has concluded that, as of December 31, 2016, the Company’s internal control over ﬁnancial repor갇ng was eﬀec갇ve based on those criteria. The eﬀec갇veness of our internal control over ﬁnancial repor갇ng as of December 31, 2016 has been audited by KPMG LLP, an independent registered public accoun갇ng ﬁrm, as stated in their a姫esta갇on report which is included herein. 118 The Board of Trustees and Stockholders Hersha Hospitality Trust: Report of Independent Registered Public Accoun갇ng Firm We have audited Hersha Hospitality Trust’s internal control over ﬁnancial repor갇ng as of December 31, 2016, based on criteria established in Internal Control ‐ Integrated Framework (2013) issued by the Commi姫ee of Sponsoring Organiza갇ons of the Treadway Commission (COSO). Hersha Hospitality Trust’s management is responsible for maintaining eﬀec갇ve internal control over ﬁnancial repor갇ng and for its assessment of the eﬀec갇veness of internal control over ﬁnancial repor갇ng, included in the accompanying Management’s Annual Report on Internal Control over Financial Repor갇ng. Our responsibility is to express an opinion on the Company’s internal control over ﬁnancial repor갇ng based on our audit. We conducted our audit in accordance with the standards of the Public Company Accoun갇ng Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether eﬀec갇ve internal control over ﬁnancial repor갇ng was maintained in all material respects. Our audit included obtaining an understanding of internal control over ﬁnancial repor갇ng, assessing the risk that a material weakness exists, and tes갇ng and evalua갇ng the design and opera갇ng eﬀec갇veness 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 repor갇ng is a process designed to provide reasonable assurance regarding the reliability of ﬁnancial repor갇ng and the prepara갇on of ﬁnancial statements for external purposes in accordance with generally accepted accoun갇ng principles. A company’s internal control over ﬁnancial repor갇ng includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transac갇ons and disposi갇ons of the assets of the company; (2) provide reasonable assurance that transac갇ons are recorded as necessary to permit prepara갇on of ﬁnancial statements in accordance with generally accepted accoun갇ng principles, and that receipts and expenditures of the company are being made only in accordance with authoriza갇ons of management and directors of the company; and (3) provide reasonable assurance regarding preven갇on or 갇mely detec갇on of unauthorized acquisi갇on, use, or disposi갇on of the company’s assets that could have a material eﬀect on the ﬁnancial statements. Because of its inherent limita갇ons, internal control over ﬁnancial repor갇ng may not prevent or detect misstatements. Also, projec갇ons of any evalua갇on of eﬀec갇veness to future periods are subject to the risk that controls may become inadequate because of changes in condi갇ons, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Hersha Hospitality Trust maintained, in all material respects, eﬀec갇ve internal control over ﬁnancial repor갇ng as of December 31, 2016, based on based on criteria established in Internal Control ‐ Integrated Framework (2013) issued by the Commi姫ee of Sponsoring Organiza갇ons of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accoun갇ng Oversight Board (United States), the consolidated balance sheets of Hersha Hospitality Trust and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of opera갇ons, comprehensive income, equity, and cash ﬂows for each of the years in the three‐year period ended December 31, 2016, and our report dated February 23, 2017 expressed an unqualiﬁed opinion on those consolidated ﬁnancial statements. Philadelphia, Pennsylvania February 23, 2017 /s/ KPMG LLP 119 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in our internal control over ﬁnancial repor갇ng during the quarter ended December 31, 2016, that have materially aﬀected, or are reasonably likely to materially aﬀect, our internal control over ﬁnancial repor갇ng. Item 9B. Other Informa갇on None 120 Item 10. Trustees, Execu갇ve Oﬃcers and Corporate Governance PART III The required informa갇on is incorporated herein by reference from our deﬁni갇ve proxy statement to be ﬁled with the Securi갇es and Exchange Commission within 120 days a耀er the end of the year covered by this Annual Report on Form 10‐K with respect to our 2017 Annual Mee갇ng of Shareholders. Item 11. Execu갇ve Compensa갇on The required informa갇on is incorporated herein by reference from our deﬁni갇ve proxy statement to be ﬁled with the Securi갇es and Exchange Commission within 120 days a耀er the end of the year covered by this Annual Report on Form 10‐K with respect to our 2017 Annual Mee갇ng of Shareholders. Item 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder Ma姫ers Certain of the required informa갇on is incorporated herein by reference from our deﬁni갇ve proxy statement to be ﬁled with the Securi갇es and Exchange Commission within 120 days a耀er the end of the year covered by this Annual Report on Form 10‐K with respect to our 2017 Annual Mee갇ng of Shareholders. SECURITIES ISSUABLE PURSUANT TO EQUITY COMPENSATION PLANS As of December 31, 2016, no op갇ons or warrants to acquire our securi갇es pursuant to equity compensa갇on plans were outstanding. The following table sets forth the number of securi갇es to be issued upon exercise of outstanding op갇ons, warrants and rights; weighted average exercise price of outstanding op갇ons, warrants and rights; and the number of securi갇es remaining available for future issuance under our equity compensa갇on plans as of December 31, 2016: Plan Category Number of securi갇es to be issued upon exercise of outstanding op갇ons, warrants and rights (a) Weighted average exercise price of outstanding op갇ons, warrants and rights (b) (1) Number of securi갇es remaining available for future issuance under equity compensa갇on plans(1) (c) Equity compensa갇on plans approved by security holders Equity compensa갇on plans not approved by security holders Total ‐ ‐ ‐ ‐ ‐ ‐ 1,897,442 ‐ 1,897,442 (1) Represents shares issuable under the Company’s 2012 Amended and Restated Equity Incen갇ve Plan. On January 1, 2012, the Company’s 2008 Equity Incen갇ve Plan (“2008 EIP”) was terminated. Termina갇on of the 2008 EIP does not impact awards issued under the 2008 EIP prior its termina갇on. Item 13. Certain Rela갇onships and Related Transac갇ons, and Trustee Independence The required informa갇on is incorporated herein by reference from our deﬁni갇ve proxy statement to be ﬁled with the Securi갇es and Exchange Commission within 120 days a耀er the end of the year covered by this Annual Report on Form 10‐K with respect to our 2017 Annual Mee갇ng of Shareholders. Item 14. Principal Accountant Fees and Services The required informa갇on is incorporated herein by reference from our deﬁni갇ve proxy statement to be ﬁled with the Securi갇es and Exchange Commission within 120 days a耀er the end of the year covered by this Annual Report on Form 10‐K with respect to our 2017 Annual Mee갇ng of Shareholders. 121 PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Documents ﬁled as part of this report. Financial Statements: The following ﬁnancial statements are included in this report on pages 57 to 108: Report of Independent Registered Public Accoun갇ng Firm Consolidated Balance Sheets as of December 31, 2016 and 2015 Consolidated Statements of Opera갇ons for the years ended December 31, 2016, 2015 and 2014 Consolidated Statements of Equity and Comprehensive Income for the years ended December 31, 2016, 2015 and 2014 Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 Notes to Consolidated Financial Statements 2. Financial Statement Schedules: The following ﬁnancial statement schedule is included in this report on pages 109 to 116: Schedule III ‐ Real Estate and Accumulated Deprecia갇on for the year ended December 31, 2016 122 3. Exhibits The following exhibits listed are ﬁled as a part of this report: Exhibit No. 3.1 Ar갇cles of Amendment and Restatement of the Declara갇on of Trust of Hersha Hospitality Trust, as amended and supplemented.* 3.2 Amended and Restated Bylaws of Hersha Hospitality Trust (ﬁled as Exhibit 3.1 to the Current Report on Form 8‐K, ﬁled by Hersha Hospitality Trust on February 15, 2012 and incorporated by reference herein). 4.1 Form of Common Share Cer갇ﬁcate. (ﬁled as Exhibit 4.1 to Hersha Hospitality Trust Registra갇on Statement on Form S‐ 11/A ﬁled July 30, 1998 (SEC File No. 333‐56087) and incorporated by reference herein). 4.2 Junior Subordinated Indenture, dated as of May 13, 2005, between Hersha Hospitality Limited Partnership and JPMorgan Chase Bank, Na갇onal Associa갇on, as trustee (ﬁled as Exhibit 4.1 to the Current Report on Form 8‐K ﬁled by Hersha Hospitality Trust on May 17, 2005 and incorporated by reference herein). 4.3 Form of Junior Subordinated Note (included in Exhibit 4.2). 4.4 Amended and Restated Trust Agreement of Hersha Statutory Trust I, dated as of May 13, 2005, among Hersha Hospitality Limited Partnership, as depositor, JPMorgan Chase Bank, Na갇onal Associa갇on, as property trustee, Chase Bank USA, Na갇onal Associa갇on, as Delaware trustee, the Administra갇ve Trustees named therein and the holders of undivided beneﬁcial interests in the assets of Hersha Statutory Trust I (ﬁled as Exhibit 4.2 to the Current Report on Form 8‐K ﬁled by Hersha Hospitality Trust on May 17, 2005 and incorporated by reference herein). 4.5 Form of Trust Preferred Security Cer갇ﬁcate (included in Exhibit 4.4). 4.6 Junior Subordinated Indenture, dated as of May 31, 2005, between Hersha Hospitality Limited Partnership and Wilmington Trust Company, as trustee (ﬁled as Exhibit 4.1 to the Current Report on Form 8‐K ﬁled by Hersha Hospitality Trust on June 6, 2005 and incorporated by reference herein). 4.7 Form of Junior Subordinated Note (included in Exhibit 4.6 hereto). 4.8 Amended and Restated Trust Agreement of Hersha Statutory Trust II, dated as of May 31, 2005, among Hersha Hospitality Limited Partnership, as depositor, Wilmington Trust Company, as property trustee and as Delaware trustee, the Administra갇ve Trustees named therein and the holders of undivided beneﬁcial interests in the assets of Hersha Statutory Trust II (ﬁled as Exhibit 4.2 to the Current Report on Form 8‐K ﬁled by Hersha Hospitality Trust on June 6, 2005 and incorporated by reference herein). 4.9 Form of Trust Preferred Security Cer갇ﬁcate (included in Exhibit 4.8 hereto). 4.10 4.11 4.12 10.1 10.2 Form of specimen cer갇ﬁcate represen갇ng the 6.875% Series C Cumula갇ve Redeemable Preferred Shares, $0.01 par value per share (incorporated by reference to Exhibit 4.1 to Hersha Hospitality Trust's Registra갇on Statement on Form 8‐A ﬁled on March 1, 2013). Form of specimen cer갇ﬁcate represen갇ng the 6.50% Series D Cumula갇ve Redeemable Preferred Shares, $0.01 par value per share (incorporated by reference to Exhibit 4.1 to Hersha Hospitality Trust's Registra갇on Statement on Form 8‐A ﬁled on May 27, 2016). Form of specimen cer갇ﬁcate represen갇ng the 6.50% Series E Cumula갇ve Redeemable Preferred Shares, $0.01 par value per share (incorporated by reference to Exhibit 4.1 to Hersha Hospitality Trust's Registra갇on Statement on Form 8‐A ﬁled on November 4, 2016). Amended and Restated Agreement of Limited Partnership of Hersha Hospitality Limited Partnership (ﬁled as Exhibit 10.1 to the Registra갇on Statement on Form S‐11 ﬁled by Hersha Hospitality Trust on June 5, 1998 and incorporated by reference herein). Op갇on Agreement, dated as of June 3, 1998, among Hasu P. Shah, Jay H. Shah, Neil H. Shah, Bharat C. Mehta, K.D. Patel, Rajendra O. Gandhi, Kiran P. Patel, David L. Desfor, Madhusudan I. Patni, Manhar Gandhi and Hersha Hospitality Limited Partnership (ﬁled as Exhibit 10.20 to the Registra갇on Statement on Form S‐11 ﬁled by Hersha Hospitality Trust on June 5, 1998 and incorporated by reference herein). 10.3 Amendment to Op갇on Agreement, dated December 4, 1998 (ﬁled as Exhibit 10.19(a) to the Registra갇on Statement on Form S‐11/A ﬁled by Hersha Hospitality Trust on December 7, 1998 and incorporated by reference herein). 10.4 10.5 Administra갇ve Services Agreement, dated January 26, 1999, between Hersha Hospitality Trust and Hersha Hospitality Management, L.P. (ﬁled as Exhibit 10.21 to the Registra갇on Statement on Form S‐11 ﬁled by Hersha Hospitality Trust on June 5, 1998 and incorporated by reference herein). Second Amendment to the Amended and Restated Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, dated as of April 21, 2003 (ﬁled as Exhibit 10.2 to the Current Report on Form 8‐K ﬁled by Hersha Hospitality Trust on April 23, 2003 and incorporated by reference herein). 123 Exhibit No. 10.6 Second Amendment to Op갇on Agreement (ﬁled as Exhibit 10.15 to the Registra갇on Statement on Form S‐3 ﬁled by Hersha Hospitality Trust on February 24, 2004 and incorporated by reference herein). 10.7 10.8 10.9 10.10 10.11 10.12 10.13 Third Amendment to Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, dated August 5, 2005 (ﬁled as Exhibit 10.1 to the Current Report on Form 8‐K ﬁled by Hersha Hospitality Trust on August 8, 2005 and incorporated by reference herein). Fourth Amendment to Agreement of Limited Partnership of Hersha Hospitality Trust, dated May 18, 2011 (ﬁled as Exhibit 10.1 to the Quarterly Report on Form 10‐Q for the quarter ended June 30, 2011, ﬁled by Hersha Hospitality Trust on August 8, 2011 and incorporated by reference herein). Second Amended and Restated Employment Agreement, dated April 18, 2012, by and between Hersha Hospitality Trust and Hasu P. Shah (ﬁled as Exhibit 10.1 to the Quarterly Report on Form 10‐Q for the quarter ended March 31, 2012 and incorporated by reference herein). Second Amended and Restated Employment Agreement, dated April 18, 2012, by and between Hersha Hospitality Trust and Jay H. Shah (ﬁled as Exhibit 10.2 to the Quarterly Report on Form 10‐Q for the quarter ended March 31, 2012 and incorporated by reference herein). Second Amended and Restated Employment Agreement, dated April 18, 2012, by and between Hersha Hospitality Trust and Neil H. Shah (ﬁled as Exhibit 10.3 to the Quarterly Report on Form 10‐Q for the quarter ended March 31, 2012 and incorporated by reference herein). Second Amended and Restated Employment Agreement, dated April 18, 2012, by and between Hersha Hospitality Trust and Ashish R. Parikh (ﬁled as Exhibit 10.4 to the Quarterly Report on Form 10‐Q for the quarter ended March 31, 2012 and incorporated by reference herein). Second Amended and Restated Employment Agreement, dated April 18, 2012, by and between Hersha Hospitality Trust and Michael R. Gillespie (ﬁled as Exhibit 10.5 to the Quarterly Report on Form 10‐Q for the quarter ended March 31, 2012 and incorporated by reference herein). 10.14 Form of Share Award Agreement for April 2012 restricted common share award (ﬁled as Exhibit 10.6 to the Quarterly Report on Form 10‐Q for the quarter ended March 31, 2012 and incorporated by reference herein). 10.15 Form of Fi耀h Amendment to Agreement of Limited Partnership of Hersha Hospitality Trust Limited Partnership (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on Form 8‐K ﬁled on March 1, 2013). 10.16 10.17 10.18 Amended and Restated Credit Agreement, dated as of February 28, 2014, among Hersha Hospitality Limited Partnership, as borrower, Hersha Hospitality Trust, as the parent REIT and a guarantor, certain direct or indirect subsidiaries of the borrower, as guarantors, Ci갇bank, N.A., as administra갇ve agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on Form 8‐K ﬁled on March 6, 2014). Sixth Amendment to Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, dated as of December 23, 2014 (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on December 23, 2014). Amended and Restated Hersha Hospitality Trust 2012 Equity Incen갇ve Plan, eﬀec갇ve as of December 23, 2014 (incorporated by reference to Exhibit 10.2 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on December 23, 2014). 10.19 Form of LTIP Unit Ves갇ng Agreement (incorporated by reference to Exhibit 10.3 to t Hersha Hospitality Trust's Current Report on 8‐K ﬁled on December 23, 2014). 124 Exhibit No. 10.20 Seventh Amendment to Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, dated as of June 22, 2015 (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Quarterly Report on 10‐Q for the quarter ended June 30, 2015). 10.21 Term Loan Agreement, dated as of August 10, 2015, among Hersha Hospitality Limited Partnership, as borrower, Hersha Hospitality Trust, as parent guarantor, the guarantors named therein, as guarantors, the ini갇al lenders named therein, as ini갇al lenders, Ci갇bank, N.A., as administra갇ve agent, Wells Fargo Bank, N.A., as syndica갇on agent, and Ci갇group Global Markets Inc. and Wells Fargo Securi갇es, LLC, as joint lead arrangers and joint book running managers (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on August 12, 2015). 10.22 Amendment No. 1 to the Amended and Restated Credit Agreement, dated as of August 10, 2015, among Hersha Hospitality Limited Partnership, as borrower, Hersha Hospitality Trust, as the parent REIT and a guarantor, certain direct or indirect subsidiaries of the borrower, as guarantors, Ci갇bank, N.A., as administra갇ve agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on August 12, 2015). 10.23 Contribu갇on Agreement by and among Cindat Manha姫an Hotel Por韃olio (US) LLC, a Delaware limited liability company, Cindat Hersha Owner JV LLC, a Delaware limited liability company, Cindat Hersha Lessee JV LLC, a Delaware limited liability company, HHLP Duo Three Associates, LLC, a Delaware limited liability company, HHLP Duo Three Lessee, LLC, a Delaware limited liability company, HCIN NYC Owner, LLC, a Delaware limited liability company, and HCIN NYC Lessee, LLC, a Delaware limited liability company, dated as of February 2, 2016 (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on February 4, 2016). 10.24 10.25 Contribu갇on Agreement by and among Cindat Manha姫an Hotel Por韃olio (US) LLC, a Delaware limited liability company, Cindat Hersha Owner JV LLC, a Delaware limited liability company, Cindat Hersha Lessee JV LLC, a Delaware limited liability company, Brisam, LLC, a Delaware limited liability company, HHLP MSG Lessee, LLC, a Delaware limited liability company, HCIN NYC Owner, LLC, a Delaware limited liability company, and HCIN NYC Lessee, LLC, a Delaware limited liability company, dated as of February 2, 2016 (incorporated by reference to Exhibit 10.2 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on February 4, 2016). Contribu갇on Agreement by and among Cindat Manha姫an Hotel Por韃olio (US) LLC, a Delaware limited liability company, Cindat Hersha Owner JV LLC, a Delaware limited liability company, Cindat Hersha Lessee JV LLC, a Delaware limited liability company, Maiden Hotel LLC, a New York limited liability company, HHLP Wall Street Lessee, LLC, a Delaware limited liability company, HCIN NYC Owner, LLC, a Delaware limited liability company, and HCIN NYC Lessee, LLC, a Delaware limited liability company, dated as of February 2, 2016 (incorporated by reference to Exhibit 10.3 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on February 4, 2016). 10.26 Contribu갇on Agreement by and among Cindat Manha姫an Hotel Por韃olio (US) LLC, a Delaware limited liability company, Cindat Hersha Owner JV LLC, a Delaware limited liability company, Cindat Hersha Lessee JV LLC, a Delaware limited liability company, HHLP Duo One Associates LLC, a New York limited liability company, HHLP Duo One Lessee, LLC, a Delaware limited liability company, HCIN NYC Owner, LLC, a Delaware limited liability company, and HCIN NYC Lessee, LLC, a Delaware limited liability company, dated as of February 2, 2016 (incorporated by reference to Exhibit 10.4 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on February 4, 2016). 10.27 Contribu갇on Agreement by and among Cindat Manha姫an Hotel Por韃olio (US) LLC, a Delaware limited liability company, Cindat Hersha Owner JV LLC, a Delaware limited liability company, Cindat Hersha Lessee JV LLC, a Delaware limited liability company, Chelsea Grand East, LLC, a New York limited liability company, 44 Chelsea Delaware, LLC, a Delaware limited liability company, HCIN NYC Owner, LLC, a Delaware limited liability company, and HCIN NYC Lessee, LLC, a Delaware limited liability company, dated as of February 2, 2016 (incorporated by reference to Exhibit 10.5 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on February 4, 2016). 10.28 Contribu갇on Agreement by and among Cindat Manha姫an Hotel Por韃olio (US) LLC, a Delaware limited liability company, Cindat Hersha Owner JV LLC, a Delaware limited liability company, Cindat Hersha Lessee JV LLC, a Delaware limited liability company, HHLP Water Street Associates, LLC, a Delaware limited liability company, HHLP Water Street Lessee, LLC, a New York limited liability company, HCIN NYC Owner, LLC, a Delaware limited liability company, and HCIN NYC Lessee, LLC, a Delaware limited liability company, dated as of February 2, 2016 (incorporated by reference to Exhibit 10.6 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on February 4, 2016). 125 Exhibit No. 10.29 Contribu갇on Agreement by and among Cindat Manha姫an Hotel Por韃olio (US) LLC, a Delaware limited liability company, Cindat Hersha Owner JV LLC, a Delaware limited liability company, Cindat Hersha Lessee JV LLC, a Delaware limited liability company, HHLP Duo Two Associates, LLC, a New York limited liability company, HHLP Duo Two Lessee, LLC, a Delaware limited liability company, HCIN NYC Owner, LLC, a Delaware limited liability company, and HCIN NYC Lessee, LLC, a Delaware limited liability company, dated as of February 2, 2016 (incorporated by reference to Exhibit 10.7 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on February 4, 2016). 10.30 Amended and Restated Opera갇ng Agreement of Cindat Hersha Owner JV LLC, dated as of April 29, 2016, by and between Cindat Manha姫an Hotel Por韃olio (US) LLC and HCIN NYC Owner, LLC (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on May 5, 2016). 10.31 Amended and Restated Opera갇ng Agreement of Cindat Hersha Lessee JV LLC, dated as of April 29, 2016, by and between Cindat Manha姫an Hotel Por韃olio (US) LLC and HCIN NYC Lessee, LLC (incorporated by reference to Exhibit 10.2 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on May 5, 2016). 10.32 Term Loan Agreement, dated as of April 29, 2016, between HCIN Maiden Hotel Associates, LLC, HCIN Water Street Associates, LLC, HCIN Chelsea Grand East Associates, LLC, HCIN Herald Square Associates, LLC, HCIN Duo Three Associates, LLC, HCIN Duo Two Associates, LLC and HCIN Duo One Associates, LLC, as borrower, HCIN Maiden Hotel Lessee, LLC, HCIN Water Street Lessee, LLC, HCIN Chelsea Grand East Lessee, LLC, HCIN Herald Square Lessee, LLC, HCIN Duo Three Lessee, LLC, HCIN Duo Two Lessee, LLC and HCIN Duo One Lessee, LLC, as opera갇ng lessee, Na갇xis Real Estate Capital LLC, as Lender, Compass Bank, as documenta갇on agent, and Manufacturers and Traders Trust Company, as syndica갇on agent (incorporated by reference to Exhibit 10.3 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on May 5, 2016). 10.33 Project Loan Agreement, dated as of April 29, 2016, between HCIN Maiden Hotel Associates, LLC, HCIN Water Street Associates, LLC, HCIN Chelsea Grand East Associates, LLC, HCIN Herald Square Associates, LLC, HCIN Duo Three Associates, LLC, HCIN Duo Two Associates, LLC and HCIN Duo One Associates, LLC, as borrower, HCIN Maiden Hotel Lessee, LLC, HCIN Water Street Lessee, LLC, HCIN Chelsea Grand East Lessee, LLC, HCIN Herald Square Lessee, LLC, HCIN Duo Three Lessee, LLC, HCIN Duo Two Lessee, LLC and HCIN Duo One Lessee, LLC, as opera갇ng lessee, Na갇xis Real Estate Capital LLC, as Lender, Compass Bank, as documenta갇on agent, and Manufacturers and Traders Trust Company, as syndica갇on agent (incorporated by reference to Exhibit 10.4 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on May 5, 2016). 10.34 Mezzanine Loan Agreement, dated as of April 29, 2016, between Cindat Hersha Owner JV Associates, LLC, as Borrower, Cindat Hersha Lessee JV Associates, LLC, as Opera갇ng Lessee Owner, and Hersha Mezz Gap Lender, LLC, as Lender (incorporated by reference to Exhibit 10.5 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on May 5, 2016). 10.35 Eighth Amendment to Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, dated as of May 27, 2016 (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on May 24, 2016). 10.36 Term Loan Agreement, dated as of August 2, 2016, among Hersha Hospitality Limited Partnership, as borrower, Hersha Hospitality Trust, as parent guarantor, the subsidiary guarantors named therein, as guarantors, the ini갇al lenders named therein, as ini갇al lenders, Ci갇bank, N.A., as administra갇ve agent, Wells Fargo Bank, N.A., as syndica갇on agent, and Ci갇group Global Markets Inc. and Wells Fargo Securi갇es, LLC, as joint lead arrangers and joint book running managers (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on August 5, 2016). 10.37 Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of August 10, 2015, among Hersha Hospitality Limited Partnership, as borrower, Hersha Hospitality Trust, as the parent REIT and a guarantor, certain direct or indirect subsidiaries of the borrower, as guarantors, Ci갇bank, N.A., as administra갇ve agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on August 5, 2016). 10.38 Amendment No. 1 to the Term Loan Agreement, dated as of August 10, 2015, among Hersha Hospitality Limited Partnership, as borrower, Hersha Hospitality Trust, as parent guarantor, the subsidiary guarantors named therein, as guarantors, the ini갇al lenders named therein, as ini갇al lenders, Ci갇bank, N.A., as administra갇ve agent, Wells Fargo Bank, N.A., as syndica갇on agent, and Ci갇group Global Markets Inc. and Wells Fargo Securi갇es, LLC, as joint lead arrangers and joint book running managers (incorporated by reference to Exhibit 10.3 to Hersha Hospitality Trust's Current Report on 8‐ K ﬁled on August 5, 2016). 10.39 Ninth Amendment to Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, dated as of November 4, 2016 (incorporated by reference to Exhibit 10.1 to Hersha Hospitality Trust's Current Report on 8‐K ﬁled on November 4, 2016). 126 Exhibit No. 12.1 Statement Regarding Computa갇on of Ra갇o of Per Statement Regarding the Computa갇on of Ra갇o of Earnings to Combined Fixed Charges and Preferred Share Dividends.* 21.1 List of Subsidiaries of the Registrant.* 23.1 Consent of KPMG LLP.* 31.1 Cer갇ﬁca갇on of Chief Execu갇ve Oﬃcer pursuant to Sec갇on 302 of the Sarbanes‐Oxley Act of 2002.* 31.2 Cer갇ﬁca갇on of Chief Financial Oﬃcer pursuant to Sec갇on 302 of the Sarbanes‐Oxley Act of 2002.* 32.1 Cer갇ﬁca갇on of Chief Execu갇ve Oﬃcer pursuant to Sec갇on 906 of the Sarbanes‐Oxley Act of 2002.* 32.2 Cer갇ﬁca갇on of Chief Financial Oﬃcer pursuant to Sec갇on 906 of the Sarbanes‐Oxley Act of 2002.* 101.INS Instance Document 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calcula갇on Linkbase Document* 101.DEF XBRL Taxonomy Extension Deﬁni갇on Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Extension Presenta갇on Linkbase Document* * Filed herewith. 127 Pursuant to the requirements of Sec갇on 13 or 15(d) of the Securi갇es Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES February 23, 2017 HERSHA HOSPITALITY TRUST /s/ Jay H. Shah Jay H. Shah Chief Execu갇ve Oﬃcer (Principal Execu갇ve Oﬃcer) Pursuant to the requirements of the Securi갇es Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capaci갇es and on the dates indicated. Signature /s/ Hasu P. Shah Hasu P. Shah /s/ Jay H. Shah Jay H. Shah /s/ Neil H. Shah Neil H. Shah /s/ Ashish R. Parikh Ashish R. Parikh /s/ Michael R. Gillespie Michael R. Gillespie /s/ Donald J. Landry Donald J. Landry /s/ Thomas J. Hutchison III Thomas J. Hutchison III /s/ Michael A. Leven Michael A. Leven /s/ Dianna F. Morgan Dianna F. Morgan /s/ John M. Sabin John M. Sabin (Back To Top) Section 2: EX3.1 (EX3.1) Title Date Chairman and Trustee February 23, 2017 Chief Execu갇ve Oﬃcer and Trustee (Principal Execu⁛ve Oﬃcer) President and Chief Opera갇ng Oﬃcer (Chief Opera⁛ng Oﬃcer) Chief Financial Oﬃcer (Principal Financial Oﬃcer) Chief Accoun갇ng Oﬃcer (Principal Accoun⁛ng Oﬃcer) Trustee Trustee Trustee Trustee Trustee 128 February 23, 2017 February 23, 2017 February 23, 2017 February 23, 2017 February 23, 2017 February 23, 2017 February 23, 2017 February 23, 2017 February 23, 2017 HERSHA HOSPITALITY TRUST ARTICLES OF AMENDMENT AND RESTATEMENT Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”) formed under Title 8 of the Corpora갇on and Associa갇ons Ar갇cle of the Annotated Code of Maryland (“Title 8”), desires to amend and restate its Declara갇on of Trust as currently in eﬀect as hereina耀er amended. FIRST: The following provisions are all of the provisions of the Declara갇on of Trust currently in eﬀect and as hereina耀er amended: ARTICLE I FORMATION The Trust is a real estate investment trust (a “REIT”) within the meaning of Title 8. The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or a corpora갇on (but nothing herein shall preclude the Trust from being treated for tax purposes as an associa갇on under the Internal Revenue Code of 1986, as amended (the “Code”). The name of the Trust is: Hersha Hospitality Trust ARTICLE II NAME Under circumstances in which the Board of Trustees of the Trust (the “Board of Trustees” or “Board”) determines that the use of the name of the Trust is not prac갇cable, the Trust may use any other designa갇on or name for the Trust. ARTICLE III PURPOSES AND POWERS Section 1. Purposes. The purposes for which the Trust is formed are to invest in and to acquire, hold, manage, administer, control and dispose of property and interests in property, including, without limita갇on or obliga갇on, engaging in business as a REIT under the Code. Section 2. Powers. The Trust shall have all of the powers granted to REITs by Title 8 and all other powers set forth in the Declara갇on of Trust as ﬁled for record with the State Department of Assessment and Taxa갇on of Maryland, and any amendments or supplements thereto (the “Declara갇on of Trust”) that are not inconsistent with law and are appropriate to promote and a姫ain the purposes set forth in the Declara갇on of Trust. The name of the resident agent of the Trust in the State of Maryland is James J. Hanks, Jr., c/o Ballard Spahr Andrews & Ingersoll, whose post oﬃce address is 300 East Lombard Street, Bal갇more, Maryland 21202. The resident agent is a ci갇zen of and resides in the State of Maryland. The Trust may have such oﬃces or places of business within or outside the State of Maryland as the Board of Trustees of the Trust may from 갇me to 갇me determine. 1 ARTICLE IV RESIDENT AGENT (b) (c) Section 1. Powers. ARTICLE V BOARD OF TRUSTEES (a) Subject to any express limita갇ons contained in the Declara갇on of Trust or in the Bylaws of the Trust (“Bylaws”), (i) the business and aﬀairs of the Trust shall be managed under the direc갇on of the Board of Trustees and (ii) the Board shall have full, exclusive and absolute power, control and authority over any and all property of the Trust. The Board may take any ac갇on as it, in its sole judgment and discre갇on, deems necessary or appropriate to conduct the business and aﬀairs of the Trust. The Declara갇on of Trust shall be construed with a presump갇on in favor of the grant of power and authority to the Board. Any construc갇on of the Declara갇on of Trust or determina갇on made in good faith by the Board concerning its powers and authority hereunder shall be conclusive. The enumera갇on and deﬁni갇on of par갇cular powers of the Trustees included in the Declara갇on of Trust or in the Bylaws shall in no way be construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board of Trustees under the general laws of the State of Maryland or any other applicable laws. Except as otherwise provided in the Bylaws, the Board, without any ac갇on by the shareholders of the Trust, shall have and may exercise, on behalf of the Trust, without limita갇on, the power to adopt, amend and repeal Bylaws; to elect oﬃcers in the manner prescribed in the Bylaws; to solicit proxies from holders of shares of beneﬁcial interest of the Trust; and to do any other acts and deliver any other documents necessary or appropriate to the foregoing powers. It shall be the duty of the Board of Trustees to use any and all commercially reasonable eﬀorts to ensure that the Trust sa갇sﬁes the requirements for qualiﬁca갇on as a REIT under the Code, including, but not limited to, the ownership of outstanding shares of its beneﬁcial interest, the nature of its assets, the sources of its income, and the amount and 갇ming of its distribu갇ons to its shareholders. The Board of Trustees shall take no ac갇on to disqualify the Trust as a REIT or to otherwise revoke the Trust’s elec갇on to be taxed as a REIT without the aﬃrma갇ve vote of two‐thirds of the number of Common Shares en갇tled to vote on such ma姫er at a mee갇ng of the shareholders. Section 2. Classiﬁca갇on and Number. (a) The Trustees of the Trust (hereina耀er the “Trustees”) (other than any Trustee elected solely by holders of one or more classes or series of Preferred Shares) shall be classiﬁed, with respect to the terms for which they severally hold oﬃce, into two classes, as nearly equal in number as possible, one class (“Class I”) to hold oﬃce ini갇ally for a term expiring at the ﬁrst annual mee갇ng of shareholders (1999) and another class (“Class II”) to hold oﬃce ini갇ally for a term expiring at the second succeeding annual mee갇ng of shareholders (2000), with the Trustees of each class to hold oﬃce un갇l their successors are duly elected and qualiﬁed. At each annual mee갇ng of shareholders, the successors to the class of Trustees whose term expires at such mee갇ng shall be elected to hold oﬃce for a term expiring at the annual mee갇ng of shareholders held in the second year following the year of their elec갇on. Shareholder votes to elect Trustees shall be conducted in the manner provided in the Bylaws. (b) The number of Trustees shall be no less than one and no more than seven, which number may be increased or decreased pursuant to the Bylaws. The name and class of the Trustee who shall serve un갇l his successor is duly elected and qualiﬁed shall be as follows: Name Hasu P. Shah Class Class II 2 The Trustees may increase the number of Trustees and ﬁll any vacancy, whether resul갇ng from an increase in the number of Trustees or otherwise, on the Board of Trustees in the manner provided in the Bylaws. The Independent Trustees (as hereina耀er deﬁned) shall nominate replacements for vacancies among the Independent Trustees’ posi갇ons. In the event that, a耀er the closing of the Ini갇al Public Oﬀering (as hereina耀er deﬁned), three members of the Board of Trustees are not Independent Trustees by reason of the resigna갇on or removal of one or more Independent Trustees or otherwise, it shall be a qualiﬁca갇on for any individual elected to ﬁll such vacancy that he sa갇sfy the requirements of Sec갇on 4 of this Ar갇cle V for being an Independent Trustee. It shall not be necessary to list in the Declara갇on of Trust the names and addresses of any Trustees hereina耀er elected. Section 3. Resigna갇on or Removal. Any Trustee may resign by wri姫en no갇ce to the Board, eﬀec갇ve upon execu갇on and delivery to the Trust of such wri姫en no갇ce or upon any future date speciﬁed in the no갇ce. Subject to the rights of holders of one or more classes or series of Preferred Shares to elect or remove one or more Trustees, a Trustee may be removed at any 갇me, with or without cause, at a mee갇ng of the shareholders, by the aﬃrma갇ve vote of the holders of not less than two‐thirds of the Shares then outstanding and en갇tled to vote generally in the elec갇on of Trustees. Section 4. Independent Trustees. Notwithstanding anything herein to the contrary, at all 갇mes from and a耀er the closing with respect to the Company’s ini갇al public oﬀering of its Priority Class A Common Shares (except during a period not to exceed sixty (60) days following the death, resigna갇on, incapacity or removal from oﬃce of a Trustee prior to expira갇on of the Trustee’s term of oﬃce), three members of the Board of Trustees shall be comprised of persons who are not oﬃcers, directors or employees of the Trust, any lessee of the Trust’s or the Partnership’s proper갇es or any underwriter or placement agent of the shares of beneﬁcial interest of the Trust that has been engaged by the Trust within the past three years, or any “Aﬃliates” thereof (each such person serving on the Board of Trustees being an “Independent Trustee”). Section 5. Deﬁni갇on of Aﬃliate. For purposes of Sec갇on 4 above, “Aﬃliate” of a person shall mean (i) any person that, directly or indirectly, controls or is controlled by or is under common control with such person, (ii) any other person that owns, beneﬁcially, directly or indirectly, ﬁve percent (5%) or more of the outstanding capital shares, shares or equity interests of such person, or (iii) any oﬃcer, director, employee, partner or trustee (including any family member of the foregoing) of such person or of any person controlling, controlled by or under common control with such person (excluding trustees and persons serving in similar capaci갇es who are not otherwise an Aﬃliate of such person). The term “person” means and includes individuals, corpora갇ons, general and limited partnerships, stock companies or associa갇ons, joint ventures, associa갇ons, companies, trusts, banks, trust companies, land trusts, business trusts, real estate investment trusts or other en갇갇es and governments and agencies and poli갇cal subdivisions thereof. For the purpose of this deﬁni갇on, “control” (including the correla갇ve meanings of the terms “controlled by” and “under common control with”), as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direc갇on of the management and policies of such person, through the ownership of vo갇ng securi갇es, partnership interests or other equity interests. ARTICLE VI SHARES OF BENEFICIAL INTEREST Section 1. Authorized Shares. The beneﬁcial interest of the Trust shall be divided into shares of beneﬁcial interest (the “Shares”). The Trust has authority to issue: (i) one hundred million (100,000,000) common shares of beneﬁcial interest, $.01 par value per share (“Common Shares”), of which ﬁ耀y million (50,000,000) will be Priority Class A Common Shares (the “Priority Common Shares”) and ﬁ耀y million (50,000,000) will be Class B Common Shares (the “Class B Common Shares”); and (ii) ten million (10,000,000) 3 preferred shares of beneﬁcial interest, $.01 par value per share (“Preferred Shares”). If Shares of one class are classiﬁed or reclassiﬁed into Shares of another class pursuant to this Ar갇cle VI, the number of authorized Shares of the former class shall be automa갇cally decreased and the number of Shares of the la姫er class shall be automa갇cally increased, in each case by the number of Shares so classiﬁed or reclassiﬁed, so that the aggregate number of Shares of all classes that the Trust has the authority to issue shall not be more than the total number of Shares set forth in the second sentence of this paragraph. The Board of Trustees, without any ac갇on by the shareholders of the Trust, may amend the Declara갇on of Trust from 갇me to 갇me to increase or decrease the aggregate number of Shares or the number of Shares of any class that the Trust has authority to issue. Section 2. Common Shares. Subject to the provisions of Ar갇cle VII, each Common Share shall en갇tle the holder thereof to one vote on each ma姫er upon which holders of Common Shares are en갇tled to vote. The holders of the Priority Common Shares and the Class B Common Shares shall vote together as a single class. The Board of Trustees may reclassify any unissued Common Shares from 갇me to 갇me in one or more classes or series of Shares. (a) Priority Class A Common Shares. The holders of the Priority Common Shares shall be en갇tled to the following rights (the “Priority Rights”) during the period beginning on the date of the closing of the ini갇al public oﬀering of the Priority Common Shares (the “Oﬀering”), and ending on the earlier of: (i) the date that is 15 trading days a耀er the Company sends no갇ce to the record holders of the Priority Common Shares that their Priority Rights will terminate in 15 trading days, provided that the closing bid price of the Priority Common Shares is at least $7.00 on each trading day during such 15‐day period; or (ii) the ﬁ耀h anniversary of the closing of the Oﬀering (the “Priority Period”). A “trading day” shall mean a day on which the principal na갇onal securi갇es exchange on which the Priority Common Shares are listed or admi姫ed to trading is open for the transac갇on of business or, if the Priority Common Shares are not listed or admi姫ed to trading on any na갇onal securi갇es exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking ins갇tu갇ons in the State of New York are authorized or obligated by law or execu갇ve order to close. Notwithstanding the foregoing, the Priority Period shall not end un갇l the holders of the Priority Common Shares have received any accrued, but unpaid, Priority Distribu갇ons. (i) The Dividend Priority. The holders of the Priority Common Shares shall be en갇tled to receive, prior to any distribu갇ons to the holders of the Class B Common Shares, cumula갇ve dividends in an amount per Priority Common Share equal to $.18 per quarter (the “Priority Distribu갇on”). A耀er the holders of the Class B Common Shares have received an amount per Class B Common Share equal to the Priority Distribu갇on, the holders of the Priority Common Shares shall be en갇tled to receive any further distribu갇ons on a pro rata basis with the holders of the Class B Common Shares. A耀er the Priority Period, the holders of the Priority Common Shares shall be en갇tled to receive any further distribu갇ons on a pro rata basis with the holders of the Class B Common Shares. The dividends paid to the holders of the Priority Common Shares will be subject to the rights of any class or series of Preferred Shares. No dividend will be declared or paid or other distribu갇on of cash or other property declared or made directly by the Company or any person ac갇ng on behalf of the Company on any shares of beneﬁcial interest that rank junior to the Priority Common Shares as to the payment of dividends or amounts upon liquida갇on, dissolu갇on and winding up (“Junior Shares”) unless full cumula갇ve dividends have been declared and paid or are contemporaneously declared and funds suﬃcient for payment set aside on the Priority Common Shares for all prior and contemporaneous dividend periods; provided, however, that if accumulated and accrued dividends on the Priority Common Shares for all prior and contemporaneous dividend periods have not been paid in full then any dividend declared on the Priority Common Shares for any dividend period and on any shares of beneﬁcial interest of the Company that rank on parity with the Priority Common Shares as to the payment of dividends or amounts upon liquida갇on, dissolu갇on and winding up (“Parity Shares”) will 4 be declared ratably in propor갇on to accumulated, accrued and unpaid dividends on the Priority Common Shares and such Parity Shares. No distribu갇ons on the Priority Common Shares shall be authorized by the Board of Trustees or paid or set apart for payment by the Company at such 갇me as the terms and provisions of any agreement of the Company, including any agreement rela갇ng to its indebtedness, prohibits such authoriza갇on, payment or se駫ng apart for payment or provides that such authoriza갇on, payment or se駫ng apart for payment would cons갇tute a breach thereof or a default thereunder, or if such authoriza갇on or payment shall be restricted or prohibited by law. Any distribu갇on payment made on the Priority Common Shares shall ﬁrst be credited against the earliest accrued but unpaid distribu갇on due with respect to such shares which remains payable. (ii) Liquida갇on Preference. In the event of any liquida갇on, dissolu갇on or winding up of the Company, whether voluntary or involuntary, during the Priority Period, the holders of the Priority Common Shares shall be en갇tled to receive, prior to any liquida갇ng payments to the holders of the Class B Common Shares, $6.00 per Priority Common Share (the “Liquida갇on Preference”), plus any accumulated and unpaid Priority Distribu갇ons (whether or not declared) on the Priority Common Shares to the date of distribu갇on. A耀er the holders of the Class B Common Shares have received an amount equal to the Liquida갇on Preference plus any accumulated and unpaid Priority Distribu갇ons (whether or not declared) on the Class B Common Shares to the date of distribu갇on, the holders of the Priority Common Shares shall share ratably with the holders of the Class B Common Shares in the assets of the Company. In the event of any liquida갇on, dissolu갇on or winding up of the Company, whether voluntary or involuntary, a耀er the Priority Period, the holders of the Priority Common Shares shall share ratably with the holders of the Class B Common Shares in the assets of the Company. The rights of the holders of the Priority Common Shares to liquida갇ng payments shall be subject to rights of any class or series of Preferred Shares. If, upon any liquida갇on, dissolu갇on or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Priority Common Shares are insuﬃcient to pay in full the Liquida갇on Preference and all accumulated and unpaid dividends with respect to any of the Parity Shares, then such assets or the proceeds thereof will be distributed among the holders of the Priority Common Shares and any such Parity Shares ratably in accordance with the respec갇ve amounts that would be payable on the Priority Common Shares and such Parity Shares if all amounts payable thereon were paid in full. None of (i) a consolida갇on or merger of the Company with another corpora갇on, (ii) a statutory share exchange by the Company or (iii) a sale or transfer of all or substan갇ally all of the Company’s assets will be considered a liquida갇on, dissolu갇on or winding up, voluntary or involuntary, of the Company. (b) The Class B Common Shares (i) Dividends. Subject to the preferen갇al rights of the Priority Common Shares during the Priority Period or of any other shares or series of beneﬁcial interest and to the provisions of this Declara갇on of Trust regarding the restric갇on on the transfer of shares of beneﬁcial interest, holders of Class B Common Shares are en갇tled to receive dividends on shares if, as and when authorized and declared by the Board of Trustees of the Company out of assets legally available therefor and to share ratably in the assets of the Company legally available for distribu갇on to its shareholders in the event of its liquida갇on, dissolu갇on or winding‐up a耀er payment of, or adequate provision for, all known debts and liabili갇es of the Company. In the event that the Company at any 갇me is unable to pay to the holders of the Class B Common Shares an amount per Class B Common Share equal to the Priority Distribu갇on, during the Priority Period the holders of the Class B Common Shares shall be en갇tled to receive an amount such that the cumula갇ve amount received per Class B Common Share is equal to the cumula갇ve Priority Distribu갇on received per 5 Priority Common Share. The Company shall pay such amounts at such subsequent dividend payment dates that the Company has cash available for distribu갇on to shareholders to pay such dividends. (ii) Conversion. Upon termina갇on of the Priority Period, the Class B Common Shares automa갇cally will be converted into Priority Common Shares on a one‐for‐one basis, subject to adjustment as described in this Ar갇cle VI, Sec갇on 2(b)(iii). A no갇ce informing holders of the Class B Common Shares of such conversion will be mailed by the Company to the holders of record of the Class B Common Shares as of the dividend payment record date for the next dividend payable a耀er the expira갇on of the Priority Period, together with the dividend payable on such shares, at their respec갇ve addresses as they appear on the share transfer records of the Company. No fewer than all of the outstanding Class B Common Shares shall be converted. If the expira갇on of the Priority Period falls a耀er a dividend payment record date and prior to the related payment date, the holders of the Class B Common Shares at the close of business on such record date will be en갇tled to receive the dividend payable on such shares on the corresponding dividend payment date, notwithstanding the conversion of such shares prior to such dividend payment date. Upon expira갇on of the Priority Period, each holder of Class B Common Shares (unless the Company defaults in the delivery of the Priority Common Shares) will be, without any further ac갇on, deemed a holder of the amount of Priority Common Shares, as the case may be, for which such Class B Common Shares are conver갇ble. Frac갇onal Priority Common Shares will not be issued upon conversion of the Class B Common Shares. (c) Conversion Ra갇o Adjustments. The conversion ra갇o is subject to adjustment as hereina耀er provided upon certain events, including (i) the payment of dividends (and other distribu갇ons) payable in Priority Common Shares on any class of shares of beneﬁcial interest of the Company, (ii) subdivisions, combina갇ons and reclassiﬁca갇ons of Priority Common Shares and (iii) distribu갇ons to all holders of Priority Common Shares of evidences of indebtedness of the Company or assets (including securi갇es, but excluding those dividends, rights, warrants and distribu갇ons referred to in clause (i) or (ii) above and dividends and distribu갇ons paid in cash). In the case of the events referred to in clauses (i) and (ii) above, the number of Priority Common Shares to be issued upon conversion shall be determined by mul갇plying the number of Class B Common Shares to be converted by a frac갇on, the numerator of which shall be the number of Priority Common Shares issued and outstanding immediately a耀er such event, and the denominator of which shall be the number of Priority Common Shares issued and outstanding immediately prior to such event. In the case of the events referred to in clause (iii) above, the number of Priority Common Shares to be issued upon conversion shall be determined by mul갇plying the number of Class B Common Shares to be converted by a frac갇on, the numerator of which shall be the value, immediately a耀er such event, of the Priority Common Shares plus the value of the evidences of indebtedness or assets received, and the denominator of which shall be the value of the Priority Common Shares immediately prior to such event. The foregoing provisions notwithstanding, in making adjustments to the conversion ra갇o pursuant to this paragraph, no Priority Common Shares issued a耀er the closing with respect to the Company’s ini갇al public oﬀering of Priority Common Shares (other than shares issued in connec갇on with the events referred to in clauses (i) or (ii) above) and no evidences of indebtedness or assets received with respect to such shares shall be included in either numerator or denominator in making such adjustments. In addi갇on to the foregoing adjustments, the Company will be permi姫ed to make such reduc갇ons in the conversion ra갇o as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of Shares or share rights will not be taxable to the holders of the Class B Common Shares or, if that is not possible, to diminish any income taxes that are otherwise payable because of such event. 6 adjustments not so required to be made will be carried forward and taken into account in subsequent adjustments. No adjustment of the conversion ra갇o is required to be made in any case un갇l cumula갇ve adjustments amount to 1% or more of the conversion ra갇o. Any Section 3. Preferred Shares. The Board of Trustees may classify any unissued Preferred Shares and reclassify any previously classiﬁed but unissued Preferred Shares of any class or series from 갇me to 갇me, in one or more classes or series of Shares. Section 4. Classiﬁed or Reclassiﬁed Shares. Prior to issuance of classiﬁed or reclassiﬁed Shares of any class or series, the Board of Trustees by resolu갇on shall (a) designate that class or series to dis갇nguish it from all other classes and series of Shares; (b) specify the number of Shares to be included in the class or series; (c) set, subject to the provisions of Ar갇cle VII and subject to the express terms of any class or series of Shares outstanding at the 갇me, the preferences, conversion or other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends or other distribu갇ons, qualiﬁca갇ons and terms and condi갇ons of redemp갇on for each series; and (d) cause the Trust to ﬁle ar갇cles supplementary with the State Department of Assessments and Taxa갇on of Maryland (“SDAT”). Any of the terms of any class or series of Shares set pursuant to clause (c) of this Sec갇on 3 may be made dependent upon facts or events ascertainable outside the Declara갇on of Trust (including the occurrence of any event, including a determina갇on by the Trust or any other person or body) and may vary among holders thereof, provided that the manner in which such facts, events or varia갇ons shall operate upon the terms of such class or series of Shares is clearly and expressly set forth in ar갇cles supplementary ﬁled with the SDAT. Section 5. Authoriza갇on by Board of Share Issuance. The Board of Trustees may authorize the issuance from 갇me to 갇me of Shares of any class or series, whether now or herea耀er authorized, or securi갇es or rights conver갇ble into Shares of any class or series, whether now or herea耀er authorized, for such considera갇on (whether in cash, property, past or future services, obliga갇on for future payment or otherwise) as the Board of Trustees may deem advisable (or without considera갇on in the case of a Share split or Share dividend), subject to such restric갇ons or limita갇ons, if any, as may be set forth in the Declara갇on of Trust or the Bylaws. Notwithstanding any other provision in the Declara갇on of Trust, no determina갇on shall be made by the Board of Trustees nor shall any transac갇on be entered into by the Trust that would cause any Shares or other beneﬁcial interest in the Trust not to cons갇tute “transferable shares” or “transferable cer갇ﬁcates of beneﬁcial interest” under Sec갇on 856(a)(2) of the Code or which would cause any distribu갇on to cons갇tute a preferen갇al dividend as described in Sec갇on 562(c) of the Code. Section 6. Dividends and Distribu갇ons. The Board of Trustees may from 갇me to 갇me authorize to shareholders dividends or distribu갇ons, in cash or other assets of the Trust or in securi갇es of the Trust or from any other source as the Board of Trustees in its discre갇on shall determine. The Board of Trustees shall endeavor to authorize the Trust to pay such dividends and distribu갇ons as shall be necessary for the Trust to qualify as a REIT under the Code; however, shareholders shall have no right to any dividend or distribu갇on unless and un갇l authorized by the Board. The exercise of the powers and rights of the Board of Trustees pursuant to this Sec갇on shall be subject to the provisions of any class or series of Shares at the 갇me outstanding. Notwithstanding any other provision in the Declara갇on of Trust, no determina갇on shall be made by the Board of Trustees nor shall any transac갇on be entered into by the Trust that would cause any Shares not to cons갇tute “transferable shares” or “transferable cer갇ﬁcates of beneﬁcial interest” under Sec갇on 856(a)(2) of the Code or that would cause any distribu갇on to cons갇tute a preferen갇al dividend as described in Sec갇on 562(c) of the Code. Section 7. General Nature of Shares. All Shares shall be personal property en갇tling the shareholders only to those rights provided in the Declara갇on of Trust. The shareholders shall have no interest in the property of the Trust and shall have no right to compel any par갇갇on, division, dividend or 7 distribu갇on of the Trust or of the property of the Trust. The death of a shareholder shall not terminate the Trust. The Trust is en갇tled to treat as shareholders only those persons in whose names Shares are registered as holders of Shares on the beneﬁcial interest ledger of the Trust. Section 8. Frac갇onal Shares. The Trust may, without the consent or approval of any shareholder, issue frac갇onal Shares, eliminate a frac갇on of a Share by rounding up or down to a full Share, arrange for the disposi갇on of a frac갇on of a Share by the person en갇tled to it, or pay cash for the fair value of a frac갇on of a Share. Section 9. Declara갇on of Trust and Bylaws. All shareholders are subject to the provisions of the Declara갇on of Trust and the Bylaws of the Trust. Section 10. Divisions and Combina갇ons of Shares. Subject to an express provision to the contrary in the terms of any class or series of beneﬁcial interest herea耀er authorized, the Board of Trustees shall have the power to divide or combine the outstanding shares of any class or series of beneﬁcial interest, without a vote of the shareholders, so long as the number of shares combined into one share in any such combina갇on or series of combina갇ons within any period of twelve months is not greater than four. Section 1. Restric갇ons on Transfer. (a) Deﬁni갇ons. For the purpose of this Ar갇cle VII, the following terms shall have the following meanings: ARTICLE VII RESTRICTIONS ON TRANSFER AND SHARES‐IN‐TRUST “Beneﬁcial Ownership” shall mean ownership of Equity Shares (or op갇ons to acquire Equity Shares) by a Person who would be treated as an owner of such Equity Shares either (a) directly (including through a nominee or similar arrangement) or (b) indirectly through the applica갇on of Sec갇on 544 of the Code, as modiﬁed by Sec갇on 856(h)(1)(B) of the Code. The terms “Beneﬁcial Owner,” “Beneﬁcially Owns” and “Beneﬁcially Owned” shall have correla갇ve meanings. (i) (vii) or (viii) thereof) and Sec갇on 170(c)(2) of the Code that are named by the Share Trust as the beneﬁciary or beneﬁciaries of such Share Trust, in accordance with the provisions of Sec갇on 2(A) hereof. “Beneﬁciary” shall mean, with respect to any Share Trust, one or more organiza갇ons described in each of Sec갇on 170(b)(1)(A) (other than clause “Board of Trustees” shall mean the Board of Trustees of the Trust. “Code” shall mean the Internal Revenue Code of 1986, as amended from 갇me to 갇me. Equity Shares is held directly or indirectly (including a nominee or similar arrangement), and shall include interests that are or would be treated as owned through the applica갇on of Sec갇on 318 of the Code, as modiﬁed by Sec갇on 856(d)(5) of the Code. The terms “Construc갇ve Owner,” “Construc갇vely Owns” and “Construc갇vely Owned” shall have correla갇ve meanings. “Construc갇ve Ownership” shall mean ownership of Equity Shares (or op갇ons to acquire Equity Shares) by a Person, whether the interest in the 8 (ii) (iii) (iv) (v) (vi) (vii) (viii) (x) (xi) Shares” shall include all Preferred Shares and Common Shares that are held as Shares‐in‐Trust in accordance with the provisions of Sec갇on 2(A) hereof. “Equity Shares” shall mean Shares of all classes or series, including without limita갇on Preferred Shares and Common Shares. The term “Equity “Hersha Hospitality Partnership Agreement” shall mean the agreement of limited partnership of Hersha Hospitality Limited Partnership, a Virginia limited partnership, as amended and restated. ﬁled under the Securi갇es Act of 1933, as amended. “Ini갇al Public Oﬀering” means the sale of Common Shares pursuant to the Trust’s ﬁrst eﬀec갇ve registra갇on statement for such Common Shares (ix) “Market Price” on any date shall mean, with respect to any class or series of outstanding Equity Shares, the average of the Closing Price for the ﬁve consecu갇ve Trading Days ending on such date. The “Closing Price” on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transac갇on repor갇ng system with respect to securi갇es listed or admi姫ed to trading on the New York Stock Exchange or, if the Equity Shares are not listed or admi姫ed to trading on the New York Stock Exchange, as reported in the principal consolidated transac갇on repor갇ng system with respect to securi갇es listed on the principal na갇onal securi갇es exchange on which the Equity Shares are listed or admi姫ed to trading or, if the Equity Shares are not listed or admi姫ed to trading on any na갇onal securi갇es exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked prices in the over‐the‐counter market, as reported by the Na갇onal Associa갇on of Securi갇es Dealers, Inc. Automated Quota갇on System or, if such system is no longer in use, the principal other automated quota갇ons system that may then be in use or, if the Equity Shares are not quoted by any such organiza갇on, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Equity Shares selected by the Board of Trustees or, in the event that no trading price is available for such Equity Shares, the fair market value of the Equity Shares, as determined in good faith by the Board of Trustees. “Trading Day” shall mean a day on which the principal na갇onal securi갇es exchange on which the Equity Shares are listed or admi姫ed to trading is open for the transac갇on of business or, if the Equity Shares are not listed or admi姫ed to trading on any na갇onal securi갇es exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking ins갇tu갇ons in the State of New York are authorized or obligated by law or execu갇ve order to close. of the Equity Shares, including, but not limited to, the gran갇ng of any op갇on or entering into any agreement for the sale, transfer or other disposi갇on of Equity Shares or the sale, transfer, assignment or other disposi갇on of any securi갇es or rights conver갇ble into or exchangeable for Equity Shares. “Non‐Transfer Event” shall mean an event (other than a purported Transfer) that would result in a change in Beneﬁcial or Construc갇ve Ownership of the aggregate number of outstanding Preferred Shares of any class or series of Preferred Shares, in each case considered separately on a class by class or series by series basis. “Ownership Limit” shall mean 9.9% of the aggregate number of outstanding Common Shares of any class or series of Common Shares and 9.9% (xii) (xiii) limited partnership. “Partnership” shall mean Hersha Hospitality Limited Partnership, a Virginia limited partnership. “Partnership Unit” shall mean a frac갇onal, undivided share of the partnership interests of Hersha Hospitality Limited Partnership, a Virginia 9 (xiv) “Permi姫ed Transferee” shall mean any Person designated as a Permi姫ed Transferee in accordance with the provisions of Sec갇on 2(E) hereof. “Person” shall mean an individual, corpora갇on, partnership, limited liability company, estate, trust, a por갇on of a trust permanently set aside for or to be used exclusively for the purposes described in Sec갇on 642(c) of the Code, associa갇on, private founda갇on within the meaning of Sec갇on 509(a) of the Code, joint stock company or other en갇ty and also includes a “group” as that term is used for purposes of Sec갇on 13(d)(3) of the Securi갇es Exchange Act of 1934, as amended. (xv) 1(C) hereof, would own record 갇tle to Equity Shares. “Prohibited Owner” shall mean, with respect to any purported Transfer or Non‐Transfer Event, any Person who, but for the provisions of Sec갇on under certain circumstances, their Partnership Units for cash (or, at the op갇on of the Trust, Common Shares). “Redemp갇on Rights” shall mean the rights granted under the Hersha Hospitality Partnership Agreement to the limited partners to redeem, “REIT” shall mean a real estate investment trust under Sec갇on 856 of the Code. shareholders of the Trust determine, pursuant to Ar갇cle V, Sec갇on 1(C), that it is no longer in the best interests of the Trust to a姫empt to, or con갇nue to, qualify as a REIT or for any other reason, the Board of Trustees and the shareholders amend the Declara갇on of Trust to terminate the provisions of this Ar갇cle VII. “Restric갇on Termina갇on Date” shall mean the ﬁrst day a耀er the date of the Ini갇al Public Oﬀering on which the Board of Trustees and the “Shares‐in‐Trust” shall mean any Equity Shares designated Shares‐in‐Trust pursuant to Sec갇on 1(C) hereof. “Share Trust” shall mean any separate trust created pursuant to Sec갇on 1(C) hereof and administered in accordance with the terms of Sec갇on 2 “Share Trustee” shall mean any person or en갇ty unaﬃliated with both the Trust and any Prohibited Owner designated by the Trust to act as involuntary, whether of record, construc갇vely or beneﬁcially and whether by opera갇on of law or otherwise. “Transfer” (as a verb) shall have the correla갇ve meaning. “Transfer” (as a noun) shall mean any issuance, sale, transfer, gi耀, assignment, devise or other disposi갇on of Equity Shares, whether voluntary or hereof, for the exclusive beneﬁt of any Beneﬁciary. trustee of any Share Trust, or any successor trustee thereof. (b) Restric갇on on Transfers. shall Beneﬁcially Own or Construc갇vely Own outstanding Equity Shares in excess of the Ownership Limit. Except as provided in Sec갇on 1(G) hereof, from the date of the Ini갇al Public Oﬀering and prior to the Restric갇on Termina갇on Date, no Person Restric갇on Termina갇on Date, any Transfer that, if eﬀec갇ve, would result in any Person Beneﬁcially Owning or Construc갇vely Owning Equity Shares in excess of Except as provided in Sec갇on 1(G) hereof and subject to Sec갇on 1(H) hereof, from the date of the Ini갇al Public Oﬀering and prior to the 10 (xvi) (xvii) (xviii) (xix) (xx) (xxi) (xxii) (xxiii) (i) (ii) (iv) (v) the Ownership Limit shall be void ab ini갇o as to the Transfer of that number of Equity Shares that would be otherwise Beneﬁcially Owned or Construc갇vely Owned by such Person in excess of the Ownership Limit, and the intended transferee shall acquire no rights in such excess Equity Shares. (iii) Subject to Sec갇on 1(H) hereof, from the date of the Ini갇al Public Oﬀering and prior to the Restric갇on Termina갇on Date, any Transfer that, if eﬀec갇ve, would result in the Equity Shares being beneﬁcially owned by fewer than 100 Persons (determined without reference to any rules of a姫ribu갇on) shall be void ab ini갇o as to the Transfer of that number of shares that otherwise would result in the Equity Shares being beneﬁcially owned by fewer than 100 Persons (determined without reference to any rules of a姫ribu갇on), and the intended transferee shall acquire no rights in such excess Equity Shares; provided, however that this Sec갇on 1(B)(3) shall not apply to the Transfer of Equity Shares from the Trust to the underwriter of the Ini갇al Public Oﬀering. Shares that, if eﬀec갇ve, would result in the Trust being “closely held” within the meaning of Sec갇on 856(h) of the Code shall be void ab ini갇o as to the Transfer of that number of Equity Shares that would cause the Trust to be “closely held” within the meaning of Sec갇on 856(h) of the Code, and the intended transferee shall acquire no rights in such excess Equity Shares; provided, however, that this Sec갇on 1(B)(4) shall not apply to the Transfer of Equity Shares from the Trust to the underwriter of the Ini갇al Public Oﬀering. Subject to Sec갇on 1(H) hereof, from the date of the Ini갇al Public Oﬀering and prior to the Restric갇on Termina갇on Date, any Transfer of Equity Subject to Sec갇on 1(H) hereof, from the date of the Ini갇al Public Oﬀering and prior to the Restric갇on Termina갇on Date, any Transfer of Equity Shares that, if eﬀec갇ve, would cause the Trust to Construc갇vely Own 10% or more of the ownership interests in a tenant of the Trust’s or the Partnership’s real property, within the meaning of Sec갇on 856(d)(2)(B) of the Code, shall be void ab ini갇o as to the Transfer of that number of Equity Shares that would cause the Trust to Construc갇vely Own 10% or more of the ownership interests in a tenant of the Trust’s or the Partnership’s real property, within the meaning of Sec갇on 856(d)(2)(B) of the Code, and the intended transferee shall acquire no rights in such excess Equity Shares. (c) Transfer to Share Trust. (i) If, notwithstanding the other provisions contained in this Sec갇on 1, at any 갇me a耀er the date of the Ini갇al Public Oﬀering and prior to the Restric갇on Termina갇on Date, there is a purported Transfer or Non‐Transfer Event such that any Person would either Beneﬁcially Own or Construc갇vely Own Equity Shares in excess of the Ownership Limit, then (x) except as otherwise provided in Sec갇on 1(G) hereof, the purported transferee shall acquire no right or interest (or, in the case of a Non‐ Transfer Event, the person holding record 갇tle to the Equity Shares Beneﬁcially Owned or Construc갇vely Owned by such Beneﬁcial Owner or Construc갇ve Owner, shall cease to own any right or interest) in such number of Equity Shares that would cause such Beneﬁcial Owner or Construc갇ve Owner to Beneﬁcially Own or Construc갇vely Own Equity Shares in excess of the Ownership Limit, (y) such number of Equity Shares in excess of the Ownership Limit (rounded up to the nearest whole share) shall be designated Shares‐ in ‐Trust and, in accordance with the provisions of Sec갇on 2 hereof, transferred automa갇cally and by opera갇on of law to a Share Trust to be held in accordance with that Sec갇on 2, and (z) the Prohibited Owner shall submit such number of Equity Shares to the Trust for registra갇on in the name of the Share Trust. Such transfer to a Share Trust and the designa갇on of shares as Shares‐in‐Trust shall be eﬀec갇ve as of the close of business on the business day prior to the date of the Transfer or Non‐Transfer Event, as the case may be. Restric갇on Termina갇on Date, there is a (ii) If, notwithstanding the other provisions contained in this Sec갇on 1, at any 갇me a耀er the date of the Ini갇al Public Oﬀering and prior to the 11 purported Transfer or Non‐Transfer Event that, if eﬀec갇ve, would (i) result in the Equity Shares being beneﬁcially owned by fewer than 100 Persons (determined without reference to any rules of a姫ribu갇on), (ii) result in the Trust being “closely held” within the meaning of Sec갇on 856(h) of the Code, or (iii) cause the Trust to Construc갇vely Own 10% or more of the ownership interests in a tenant of the Trust’s or the Partnership’s real property, within the meaning of Sec갇on 856(d)(2)(B) of the Code, then (x) the purported transferee shall not acquire any right or interest (or, in the case of a Non‐Transfer Event, the person holding record 갇tle of the Equity Shares with respect to which such Non‐Transfer Event occurred, shall cease to own any right or interest) in such number of Equity Shares, the ownership of which by such purported transferee or record holder would (A) result in the Equity Shares being beneﬁcially owned by fewer than 100 Persons (determined without reference to any rules of a姫ribu갇on), (B) result in the Trust being “closely held” within the meaning of Sec갇on 856(h) of the Code or (C) cause the Trust to Construc갇vely Own 10% or more of the ownership interests in a tenant of the Trust’s or the Partnership’s real property, within the meaning of Sec갇on 856(d)(2)(B) of the Code, (y) such number of Equity Shares (rounded up to the nearest whole share) shall be designated Shares‐in ‐Trust and, in accordance with the provisions of Sec갇on 2 hereof, transferred automa갇cally and by opera갇on of law to the Share Trust to be held in accordance with that Sec갇on 2 and (z) the Prohibited Owner shall submit such number of Equity Shares to the Trust for registra갇on in the name of the Share Trust. Such transfer to a Share Trust and the designa갇on of shares as Shares‐in ‐Trust shall be eﬀec갇ve as of the close of business on the business day prior to the date of the Transfer or Non‐Transfer Event, as the case may be. (d) Remedies For Breach. If the Trust, or its designees, shall at any 갇me determine in good faith that a Transfer has taken place in viola갇on of Sec갇on 1(B) hereof or that a Person intends to acquire or has a姫empted to acquire Beneﬁcial Ownership or Construc갇ve Ownership of any Equity Shares in viola갇on of Sec갇on 1(B) hereof, the Trust shall take such ac갇on as it deems advisable to refuse to give eﬀect to or to prevent such Transfer or acquisi갇on, including, but not limited to, refusing to give eﬀect to such Transfer on the books of the Trust or ins갇tu갇ng proceedings to enjoin such Transfer or acquisi갇on. (e) No갇ce of Restricted Transfer . Any Person who acquires or a姫empts to acquire Equity Shares in viola갇on of Sec갇on 1(B) hereof, or any Person who owned Equity Shares that were transferred to a Share Trust pursuant to the provisions of Sec갇on 1(C) hereof, shall immediately give wri姫en no갇ce to the Trust of such event and shall provide to the Trust such other informa갇on as the Trust may request in order to determine the eﬀect, if any, of such Transfer or Non‐Transfer Event, as the case may be, on the Trust’s status as a REIT. (f) Owners Required To Provide Informa갇on . From the date of the Ini갇al Public Oﬀering and prior to the Restric갇on Termina갇on Date: (i) Every Beneﬁcial Owner or Construc갇ve Owner of more than 5%, or such lower percentages as required pursuant to regula갇ons under the Code, of the outstanding Equity Shares of the Trust shall, within 30 days a耀er December 31 of each year, provide to the Trust a wri姫en statement or aﬃdavit sta갇ng the name and address of such Beneﬁcial Owner or Construc갇ve Owner, the number of Equity Shares Beneﬁcially Owned or Construc갇vely Owned, and a descrip갇on of how such shares are held. Each such Beneﬁcial Owner or Construc갇ve Owner shall provide to the Trust such addi갇onal informa갇on as the Trust may request in order to determine the eﬀect, if any, of such Beneﬁcial Ownership or Construc갇ve Ownership on the Trust’s status as a REIT and to ensure compliance with the Ownership Limit and the other restric갇ons set forth in Sec갇on 1(B). holding Equity Shares for a Beneﬁcial Owner or Construc갇ve Owner shall provide to the Trust a wri姫en statement or aﬃdavit sta갇ng such (ii) Each Person who is a Beneﬁcial Owner or Construc갇ve Owner of Equity Shares and each Person (including the shareholder of record) who is 12 informa갇on as the Trust may request in order to determine the Trust’s status as a REIT and to ensure compliance with the Ownership Limit and the other restric갇ons set forth in Sec갇on 1(B). (g) Excep갇on to Ownership Limit. The Ownership Limit shall not apply to the acquisi갇on of Equity Shares by an underwriter that par갇cipates in a public oﬀering of such shares, for a period of 90 days following the purchase by such underwriter of such shares. In addi갇on, the Board of Trustees, upon receipt of advice of counsel or other evidence sa갇sfactory to the Board of Trustees, in its sole and absolute discre갇on, in each case to the eﬀect that the restric갇ons contained in Sec갇ons 1(B)(3), (4) and (5) hereof will not be violated and that REIT status will not otherwise be lost, may, in its sole and absolute discre갇on, exempt a Person from the Ownership Limit if such Person is not an individual for purposes of Sec갇on 542(a)(2) of the Code, provided that (i) the Board of Trustees obtains such representa갇ons and undertakings from such Person as are reasonably necessary to ascertain that no individual’s Beneﬁcial Ownership or Construc갇ve Ownership of Equity Shares will violate the Ownership Limit as a result of the exemp갇on and (ii) such Person agrees that any viola갇on or a姫empted viola갇on of the terms of the exemp갇on will result in a transfer to the Share Trust of Equity Shares pursuant to Sec갇on 1(C) hereof. (h) New York Stock Exchange Transac갇ons. Notwithstanding any provision contained herein to the contrary, nothing in this Declara갇on of Trust shall preclude the se姫lement of any transac갇on entered into through the facili갇es of the New York Stock Exchange. The fact that the se姫lement of any transac갇on occurs shall not negate the eﬀect of any other provision of this Ar갇cle VII and any transferee in such a transac갇on shall be subject to all of the provisions and limita갇ons set forth in this Ar갇cle VII. Section 2. Shares‐ in‐Trust. (a) Share Trust. Any Equity Shares transferred to a Share Trust and designated Shares‐in‐Trust pursuant to Sec갇on 1(C) hereof shall be held for the exclusive beneﬁt of a Beneﬁciary. The Trust shall name a Beneﬁciary of each Share Trust within ﬁve days a耀er discovery of the existence thereof. Any transfer to a Share Trust, and subsequent designa갇on of Equity Shares as Shares‐in ‐Trust, pursuant to Sec갇on 1(C) hereof shall be eﬀec갇ve as of the close of business on the business day prior to the date of the Transfer or Non‐Transfer Event that results in the transfer to the Share Trust. Shares‐in ‐Trust shall remain issued and outstanding Equity Shares of the Trust and shall be en갇tled to the same rights and privileges on iden갇cal terms and condi갇ons as are all other issued and outstanding Equity Shares of the same class and series. When transferred to a Permi姫ed Transferee in accordance with the provisions of Sec갇on 2(E) hereof, such Shares‐in ‐Trust shall cease to be designated as Shares‐in ‐Trust. (b) Dividend Rights. The Share Trust, as record holder of Shares‐in‐Trust, shall be en갇tled to receive all dividends and distribu갇ons as may be declared by the Board of Trustees on such Equity Shares and shall hold such dividends or distribu갇ons in trust for the beneﬁt of the Beneﬁciary. The Prohibited Owner with respect to Shares‐in‐ Trust shall repay to the Share Trust the amount of any dividends or distribu갇ons received by it that (i) are a姫ributable to any Equity Shares designated Shares‐in‐Trust and (ii) the record date for which was on or a耀er the date that such shares became Shares‐in‐Trust. The Trust shall take all measures that it determines reasonably necessary to recover the amount of any such dividend or distribu갇on paid to a Prohibited Owner, including, if necessary, withholding any por갇on of future dividends or distribu갇ons payable on Equity Shares Beneﬁcially Owned or Construc갇vely Owned by the Person who, but for the provisions of Sec갇on 1(C) hereof, would Construc갇vely Own or Beneﬁcially Own the Shares‐in‐Trust; and, as soon as reasonably prac갇cable following the Trust’s receipt or withholding thereof, shall pay over to the Share Trust for the beneﬁt of the Beneﬁciary the dividends so received or withheld, as the case may be. 13 (c) Rights Upon Liquida갇on. In the event of any voluntary or involuntary liquida갇on, dissolu갇on or winding up of, or any distribu갇on of the assets of, the Trust, each holder of Shares‐in‐Trust shall be en갇tled to receive, ratably with each other holder of Equity Shares of the same class or series, that por갇on of the assets of the Trust that is available for distribu갇on to the holders of such class or series of Equity Shares. The Share Trust shall distribute to the Prohibited Owner the amounts received upon such liquida갇on, dissolu갇on or winding up, or distribu갇on; provided, however, that the Prohibited Owner shall not be en갇tled to receive amounts pursuant to this Sec갇on 2(C) in excess of (i) in the case of a purported Transfer in which the Prohibited Owner gave value for Equity Shares and which Transfer resulted in the transfer of the shares to the Share Trust, the price per share, if any, such Prohibited Owner paid for the Equity Shares and (ii) in the case of a Non‐Transfer Event or Transfer in which the Prohibited Owner did not give value for such shares (e.g., if the shares were received through a gi耀 or devise) and which Non‐Transfer Event or Transfer, as the case may be, resulted in the transfer of shares to the Share Trust, the price per share equal to the Market Price on the date of such Non‐Transfer Event or Transfer. Any remaining amount in such Share Trust shall be distributed to the Beneﬁciary. (d) Vo갇ng Rights. The Share Trustee shall be en갇tled to vote all Shares‐in‐Trust. Any vote by a Prohibited Owner as a holder of Equity Shares prior to the discovery by the Trust that the Equity Shares are Shares‐in‐Trust shall, subject to Maryland law, be rescinded and shall be void ab ini갇o with respect to such Shares‐in‐Trust and the Prohibited Owner shall be deemed to have given, as of the close of business on the business day prior to the date of the purported Transfer or Non‐Transfer Event that results in the transfer to the Share Trust of Equity Shares under Sec갇on 1(C) hereof, an irrevocable proxy to the Share Trustee to vote the Shares‐in‐Trust in the manner in which the Share Trustee, in its sole and absolute discre갇on, desires; provided, however, that if the Trust has already taken irreversible trust ac갇on, the Share Trustee shall not have the authority to rescind and recast such vote. (e) Designa갇on of Permi姫ed Transferee. The Share Trustee shall have the exclusive and absolute right to designate a Permi姫ed Transferee of any and all Shares‐in‐Trust. In an orderly fashion so as not to materially adversely aﬀect the Market Price of the Shares‐in‐Trust, the Share Trustee shall designate any Person as Permi姫ed Transferee, provided, however, that (i) the Permi姫ed Transferee so designated purchases for valuable considera갇on (whether in a public or private sale), at a price as set forth in Sec갇on 2(G) hereof, the Shares‐in‐Trust and (ii) the Permi姫ed Transferee so designated may acquire such Shares‐in‐Trust without such acquisi갇on resul갇ng in a transfer to a Share Trust and the redesigna갇on of such Equity Shares so acquired as Shares‐in‐Trust under Sec갇on 1(C) hereof. Upon the designa갇on by the Share Trustee of a Permi姫ed Transferee in accordance with the provisions of this Sec갇on 2(E), the Share Trustee shall (i) cause to be transferred to the Permi姫ed Transferee that number of Shares‐in‐Trust acquired by the Permi姫ed Transferee, (ii) cause to be recorded on the books of the Trust that the Permi姫ed Transferee is the holder of record of such number of Equity Shares, (iii) cause the Shares‐in‐Trust to be canceled and (iv) distribute to the Beneﬁciary any and all amounts held with respect to the Shares‐in‐Trust a耀er making the payment to the Prohibited Owner pursuant to Sec갇on 2(F) hereof. (f) Compensa갇on to Record Holder of Equity Shares that Become Shares‐ in‐Trust. Any Prohibited Owner shall be en갇tled (following discovery of the Shares‐ in‐Trust and subsequent designa갇on of the Permi姫ed Transferee in accordance with Sec갇on 2(E) hereof or following the acceptance of the oﬀer to purchase such shares in accordance with Sec갇on 2(G) hereof) to receive from the Share Trustee following the sale or other disposi갇on of such Shares‐in‐Trust the lesser of (i) in the case of (a) a purported Transfer in which the Prohibited Owner gave value for Equity Shares and which Transfer resulted in the transfer of the shares to the Share Trust, the price per share, if any, such Prohibited Owner paid for the Equity Shares, or (b) a Non‐Transfer Event or Transfer in which the Prohibited Owner did not give value for such shares (e.g., if the shares were received through a gi耀 or devise) and which Non‐Transfer Event or Transfer, as the case may be, resulted in the transfer of shares to the Share Trust, the price per share equal to the Market Price on the date 14 of such Non‐Transfer Event or Transfer and (ii) the price per share received by the Share Trustee from the sale or other disposi갇on of such Shares‐in‐Trust in accordance with Sec갇on 2(E) hereof. Any amounts received by the Share Trustee in respect of such Shares‐in‐Trust and in excess of such amounts to be paid the Prohibited Owner pursuant to this Sec갇on 2(F) shall be distributed to the Beneﬁciary in accordance with the provisions of Sec갇on 2(E) hereof. Each Beneﬁciary and Prohibited Owner waive any and all claims that they may have against the Share Trustee and the Share Trust arising out of the disposi갇on of Shares‐in‐Trust, except for claims arising out of the gross negligence or willful misconduct of, or any failure to make payments in accordance with this Sec갇on 2 by, such Share Trustee or the Trust. (g) Purchase Right in Shares‐in‐Trust. Shares‐in‐Trust shall be deemed to have been oﬀered for sale to the Trust, or its designee, at a price per share equal to the lesser of (i) the price per share in the transac갇on that created such Shares‐in‐Trust (or, in the case of devise, gi耀 or Non‐Transfer Event, the Market Price at the 갇me of such devise, gi耀 or Non‐Transfer Event) and (ii) the Market Price on the date the Trust, or its designee, accepts such oﬀer. The Trust shall have the right to accept such oﬀer for a period of ninety days a耀er the later of (i) the date of the Non‐Transfer Event or purported Transfer that resulted in such Shares‐in‐Trust and (ii) the date the Trust determines in good faith that a Transfer or Non‐Transfer Event resul갇ng in Shares‐in‐Trust has occurred, if the Trust does not receive a no갇ce of such Transfer or Non‐Transfer Event pursuant to Sec갇on 1(E) hereof. Section 3. Remedies Not Limited. Subject to Sec갇on 1(H) hereof, nothing contained in this Ar갇cle VII shall limit the authority of the Trust to take such other ac갇on as it deems necessary or advisable to protect the Trust and the interests of its shareholders by preserva갇on of the Trust’s status as a REIT and to ensure compliance with the Ownership Limit. Section 4. Ambiguity. In the case of an ambiguity in the applica갇on of any of the provisions of Ar갇cle VII, including any deﬁni갇on contained in Sec갇on 1(A) hereof, the Board of Trustees shall have the power to determine the applica갇on of the provisions of this Ar갇cle VII with respect to any situa갇on based on the facts known to it. Section 5. Legend. Each cer갇ﬁcate for Equity Shares shall bear substan갇ally the following legend: “The [Common or Preferred] Shares evidenced by this cer갇ﬁcate are subject to restric갇ons on transfer. Subject to certain further restric갇ons and except as provided in the Declara갇on of Trust of the Trust, no Person may (i) Beneﬁcially or Construc갇vely Own Common Shares in excess of 9.9% of the number of outstanding Common Shares of any class or series, (ii) Beneﬁcially or Construc갇vely Own Preferred Shares in excess of 9.9% of the number of outstanding Preferred Shares of any class or series, (iii) Beneﬁcially Own Equity Shares that would result in the Equity Shares being beneﬁcially owned by fewer than 100 Persons (determined without reference to any rules of a姫ribu갇on), (iv) Beneﬁcially Own Equity Shares that would result in the Trust being “closely held” under Sec갇on 856(h) of the Internal Revenue Code of 1986, as amended (the “Code”), or (v) Construc갇vely Own Equity Shares that would cause the Trust to Construc갇vely Own 10% or more of the ownership interests in a tenant of the Trust’s or the Partnership’s real property, within the meaning of Sec갇on 856(d)(2)(B) of the Code. Any Person who a姫empts to Beneﬁcially or Construc갇vely Own Equity Shares in excess of the above limita갇ons must immediately no갇fy the Trust in wri갇ng. If any restric갇ons above are violated, the Equity Shares evidenced hereby will be transferred automa갇cally to a Share Trust and shall be designated Shares‐in‐Trust for the beneﬁt of one or more charitable beneﬁciaries. In addi갇on, upon the occurrence of certain events, a姫empted transfers in viola갇on of the restric갇ons described above may be void ab ini갇o. All capitalized terms in this legend have the meanings deﬁned in the Trust’s Declara갇on of Trust, as the same may be further amended from 갇me to 갇me, a copy of which, including the restric갇ons on transfer, will be sent without charge to each shareholder who 15 so requests. Such requests must be made to the Secretary of the Trust at its principal oﬃce or to the transfer agent.” on request and without charge. In place of the foregoing legend, the cer갇ﬁcate may state that the Trust will furnish a full statement about certain restric갇ons or transferability to a shareholder Section 6. Severability. If any provision of this Ar갇cle VII or any applica갇on of any such provision is determined to be invalid by any federal or state court having jurisdic갇on over the issues, the validity of the remaining provisions shall not be aﬀected and other applica갇ons of such provision shall be aﬀected only to the extent necessary to comply with the determina갇on of such court. Section 7. Non‐ Waiver. No delay or failure on the part of the Trust or the Board of Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be, except to the extent speciﬁcally waived in wri갇ng. Section 1. Mee갇ngs. There shall be an annual mee갇ng of the shareholders, to be held on proper no갇ce at such 갇me (a耀er the delivery of the annual report) and convenient loca갇on as shall be determined by or in the manner prescribed in the Bylaws, for the elec갇on of the Trustees, if required, and for the transac갇on of any other business within the powers of the Trust. If there are no Trustees, the oﬃcers of the Trust shall promptly call a special mee갇ng of the shareholders en갇tled to vote for the elec갇on of successor Trustees. Any mee갇ng may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws. ARTICLE VIII SHAREHOLDERS Section 2. Vo갇ng Rights. Subject to the provisions of any class or series of Shares then outstanding, the shareholders shall be en갇tled to vote only on the following ma姫ers: (a) termina갇on of REIT status as provided in Ar갇cle V, Sec갇on (1)(C), (b) elec갇on of Trustees as provided in Ar갇cle V, Sec갇on 2(A) and the removal of Trustees as provided in Ar갇cle V, Sec갇on 3; (c) amendment of the Declara갇on of Trust as provided in Ar갇cle X; (d) termina갇on of the Trust as provided in Ar갇cle XII, Sec갇on 2; (e) merger or consolida갇on of the Trust, or the sale or disposi갇on of substan갇ally all of the Trust Property (as hereina耀er deﬁned), as provided in Ar갇cle XI; and (f) such other ma姫ers with respect to which a vote of the shareholders is required by applicable law or the Board of Trustees has adopted a resolu갇on declaring that a proposed ac갇on is advisable and direc갇ng that the ma姫er be submi姫ed to the shareholders for approval or ra갇ﬁca갇on. Except with respect to the foregoing ma姫ers, no ac갇on taken by the shareholders at any mee갇ng shall in any way bind the Board of Trustees. Section 3. Preemp갇ve and Appraisal Rights. Except as may be provided by the Board of Trustees in se駫ng the terms of classiﬁed or reclassiﬁed Shares pursuant to Ar갇cle VI, Sec갇on 4 or as otherwise may be provided by contract, no holder of Shares shall, as such holder, (a) have any preemp갇ve or preferen갇al right to purchase or subscribe for any addi갇onal Shares of the Trust or any other security of the Trust that it may issue or sell or (b), except as expressly required by Title 8, have any right to require the Trust to pay him the fair value of his Shares in an appraisal or similar proceeding. Section 4. Extraordinary Ac갇ons. Except as speciﬁcally provided in Ar갇cle V, Sec갇ons 1(C) and 3, Ar갇cle X, Sec갇on 3 and Ar갇cle XII, Sec갇on 2 of this Declara갇on of Trust, notwithstanding any provision of law permi駫ng or requiring ac갇on to be taken or authorized by the aﬃrma갇ve vote of the holders of a greater number of votes, any such ac갇on shall be eﬀec갇ve and valid if taken or approved by the aﬃrma갇ve vote of holders of Shares en갇tled to cast a majority of all of the votes en갇tled to be cast on the ma姫er. 16 Section 5. Section 6. Board Approval . The submission of any ac갇on to the shareholders for their considera갇on shall ﬁrst be approved as advised by the Board of Trustees. without a mee갇ng by the wri姫en consent of the shareholders en갇tled to cast a suﬃcient number of votes to approve the ma姫er as required by statute, the Declara갇on of Trust or the Bylaws, as the case may be. Ac갇on By Shareholders Without a Mee갇ng. The Bylaws may provide that any ac갇on required or permi姫ed to be taken by the shareholders may be taken ARTICLE IX LIABILITY LIMITATION, INDEMNIFICATION AND TRANSACTIONS WITH THE TRUST Section 1. Limita갇on of Shareholder Liability. No shareholder shall be liable for any debt, claim, demand, judgment or obliga갇on of any kind of, against or with respect to the Trust by reason of his being a shareholder, nor shall any shareholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connec갇on with the property or the aﬀairs of the Trust by reason of his being a shareholder. Section 2. Limita갇on of Trustee and Oﬃcer Liability. To the maximum extent that Maryland law in eﬀect from 갇me to 갇me permits limita갇on of the liability of trustees and oﬃcers of a REIT, no Trustee or oﬃcer of the Trust shall be liable to the Trust or to any shareholder for money damages. Neither the amendment nor repeal of this Sec갇on, nor the adop갇on or amendment of any other provision of the Declara갇on of Trust or Bylaws inconsistent with this Sec갇on, shall apply to or aﬀect in any respect the applicability of the preceding sentence with respect to any act or failure to act that occurred prior to such amendment, repeal or adop갇on. In the absence of any Maryland statute limi갇ng the liability of trustees and oﬃcers of a Maryland REIT for money damages in a suit by or on behalf of the Trust or by any shareholder, no Trustee or oﬃcer of the Trust shall be liable to the Trust or to any shareholder for money damages except to the extent that (a) the Trustee or oﬃcer actually received an improper beneﬁt or proﬁt in money, property or services, for the amount of the beneﬁt or proﬁt in money, property or services actually received; or (b) a judgment or other ﬁnal adjudica갇on adverse to the Trustee or oﬃcer is entered in a proceeding based on a ﬁnding in the proceeding that the Trustee’s or oﬃcer’s ac갇on or failure to act was the result of ac갇ve and deliberate dishonesty and was material to the cause of ac갇on adjudicated in the proceeding. Section 3. Express Exculpatory Clauses in Instruments. Neither the shareholders nor the Trustees, oﬃcers, employees or agents of the Trust shall be liable under any wri姫en instrument crea갇ng an obliga갇on of the Trust, and all Persons shall look solely to the Trust Property for the payment of any claim under or for the performance of that instrument. The omission of the foregoing exculpatory language from any instrument shall not aﬀect the validity or enforceability of such instrument and shall not render any Shareholder, Trustee, oﬃcer, employee or agent liable thereunder to any third party, nor shall the Trustees or any oﬃcer, employee or agent of the Trust be liable to anyone for such omission. As used in this Declara갇on of Trust, “Trust Property” means any and all property, real, personal or otherwise, tangible or intangible, which is transferred or conveyed to the Trust or the Trustees (including all rents, income, proﬁts and gains therefrom), which is owned or held by, or for the account of, the Trust or the Trustees. Section 4. Indemniﬁca갇on. The Trust shall have the power, to the maximum extent permi姫ed by Maryland law in eﬀect from 갇me to 갇me, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of ﬁnal disposi갇on of a proceeding to, (a) any individual who is a present or former shareholder, Trustee or oﬃcer of the Trust or (b) any individual who, while a Trustee of the Trust and at the request of the Trust, serves or has served as a director, oﬃcer, partner, trustee, employee or agent of another corpora갇on, partnership, joint venture, trust, real estate investment trust, employee beneﬁt plan or 17 other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his status as a present or former shareholder, Trustee or oﬃcer of the Trust. The Trust shall have the power, with the approval of its Board of Trustees, to provide such indemniﬁca갇on and advancement of expenses to a person who served as a predecessor of the Trust in any of the capaci갇es described in (a) or (b) above, and to any employee or agent of the Trust or a predecessor of the Trust. Section 5. Transac갇ons Between the Trust and its Trustees, Oﬃcers, Employees and Agents. Subject to any express restric갇ons in the Declara갇on of Trust or adopted by the Trustees in the Bylaws or by resolu갇on, the Trust may enter into any contract or transac갇on of any kind with any person, including any Trustee, oﬃcer, employee or agent of the Trust or any person aﬃliated with a Trustee, oﬃcer, employee or agent of the Trust, whether or not any of them has a ﬁnancial interest in such transac갇on. ARTICLE X AMENDMENTS Section 1. General . The Trust reserves the right from 갇me to 갇me to make any amendment to the Declara갇on of Trust, now or herea耀er authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the Declara갇on of Trust, of any Shares. All rights and powers conferred by this Declara갇on of Trust on shareholders, Trustees and oﬃcers are granted subject to this reserva갇on. An amendment to the Declara갇on of Trust (a) shall be signed and acknowledged by at least a majority of the Trustees or an oﬃcer duly authorized by at least a majority of the Trustees, (b) shall be ﬁled for record with SDAT as provided in Ar갇cle XIII, Sec갇on 5 and (c) shall become eﬀec갇ve as of the later of the 갇me the SDAT accepts the amendment for record or the 갇me established in the amendment, not to exceed 30 days a耀er the amendment is accepted for record. All references to the Declara갇on of Trust shall include all amendments thereto. Section 2. By Trustees . The Trustees by a majority vote may amend the Declara갇on of Trust from 갇me to 갇me in the manner provided by Title 8, without any ac갇on by the shareholders, to qualify as a REIT under the Code or under Title 8. Section 3. By Shareholders. Other than amendments pursuant to Sec갇on 2 of this Ar갇cle X and Sec갇on 1 of Ar갇cle VI, any amendment to the Declara갇on of Trust shall be valid only if approved by the aﬃrma갇ve vote of at least a majority of all the votes en갇tled to be cast on the ma姫er, except that any amendment to Ar갇cle V, Ar갇cle VII, Ar갇cle X, Sec갇ons 2 and 3 and Ar갇cle XII, Sec갇on 2 of this Declara갇on of Trust shall be valid only if approved by the aﬃrma갇ve vote of two‐thirds of all the votes en갇tled to be cast on the ma姫er; but in each case only a耀er due authoriza갇on, advice and approval of the Board of Trustees. ARTICLE XI MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY Subject to the provisions of any class or series of Shares at the 갇me outstanding, the Trust may (a) merge the Trust into another en갇ty, (b) consolidate the Trust with one or more other en갇갇es into a new en갇ty or (c) sell, lease, exchange or otherwise transfer all or substan갇ally all of the Trust Property. Any such ac갇on must be approved as advised by the Board of Trustees and, a耀er no갇ce to all shareholders en갇tled to vote on the ma姫er, by the aﬃrma갇ve vote of a majority of all the votes en갇tled to be cast on the ma姫er, except where approval of the shareholders is not required by Title 8 or would not be required by the Maryland General Corpora갇on Law if the Trust were a Maryland corpora갇on. 18 Section 1. Dura갇on. The Trust shall con갇nue perpetually unless terminated pursuant to Sec갇on 2 of this Ar갇cle XII or pursuant to any applicable provision of Title 8. Section 2. Termina갇on. ARTICLE XII DURATION AND TERMINATION OF TRUST (a) Subject to the provision of any class or series of Shares at the 갇me outstanding, the Trust may be terminated at any mee갇ng of shareholders, by the aﬃrma갇ve vote of two thirds of all the votes en갇tled to be cast on the ma姫er, a耀er due authoriza갇on, advice and approval thereof by a majority of the en갇re Board of Trustees. Upon the termina갇on of the Trust: (i) The Trust shall carry on no business except for the purpose of winding up its aﬀairs. (ii) The Trustees shall proceed to wind up the aﬀairs of the Trust and all of the powers of the Trustees under the Declara갇on of Trust shall con갇nue, including the powers to fulﬁll or discharge the Trust’s contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Trust Property to one or more persons at public or private sale for considera갇on that may consist in whole or in part of cash, securi갇es or other property of any kind, discharge or pay its liabili갇es and do all other acts appropriate to liquidate its business. (iii) A耀er paying or adequately providing for the payment of all liabili갇es, and upon receipt of such releases, indemni갇es and agreements as it deems necessary for its protec갇on, the Trust may distribute the remaining Trust Property among the shareholders so that a耀er payment in full or the se駫ng apart for payment of such preferen갇al amounts, if any, to which the holders of any Shares at the 갇me outstanding shall be en갇tled, the remaining Trust Property shall, subject to any par갇cipa갇ng or similar rights of Shares at the 갇me outstanding, be distributed ratably among the holders of Common Shares at the 갇me outstanding. (b) A耀er termina갇on of the Trust, the liquida갇on of its business and the distribu갇on to the shareholders as herein provided, a majority of the Trustees shall execute and ﬁle with the Trust’s records a document cer갇fying that the Trust has been duly terminated, and the Trustees shall be discharged from all liabili갇es and du갇es hereunder, and the rights and interests of all shareholders shall cease. Section 1. Governing Law. The Declara갇on of Trust is executed by the undersigned Trustees and delivered in the State of Maryland with reference to the laws thereof, and the rights of all par갇es and the validity, construc갇on and eﬀect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland without regard to conﬂicts of laws provisions thereof. ARTICLE XIII MISCELLANEOUS Section 2. Reliance by Third Par갇es. Any cer갇ﬁcate shall be ﬁnal and conclusive as to any person dealing with the Trust if executed by the Secretary or an Assistant Secretary of the Trust or a Trustee, and if cer갇fying to: (a) the number or iden갇ty of Trustees, oﬃcers of the Trust or shareholders; (b) the due authoriza갇on of the execu갇on of any document; (c) the ac갇on or vote taken, and the existence of a quorum, at a mee갇ng of the Board of Trustees or shareholders; (d) a copy of the Declara갇on of Trust or of the Bylaws as a true and complete copy as then in force; (e) an amendment to the Declara갇on of Trust; (f) the termina갇on of the Trust; or (g) the existence of any fact rela갇ng to the aﬀairs of the Trust. No purchaser, 19 lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transac갇on purpor갇ng to be made by the Trust on its behalf or by any oﬃcer, employee or agent of the Trust. Section 3. Severability. (a) The provisions of the Declara갇on of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the “Conﬂic갇ng Provisions”) are in conﬂict with the Code, Title 8 or other applicable federal or state laws, the Conﬂic갇ng Provisions, to the extent of the conﬂict, shall be deemed never to have cons갇tuted a part of the Declara갇on of Trust, even without any amendment of the Declara갇on of Trust pursuant to Ar갇cle X and without aﬀec갇ng or impairing any of the remaining provisions of the Declara갇on of Trust or rendering invalid or improper any ac갇on taken or omi姫ed prior to such determina갇on. No Trustee shall be liable for making or failing to make such a determina갇on. In the event of any such determina갇on by the Board of Trustees, the Board shall amend the Declara갇on of Trust in the manner provided in Ar갇cle X, Sec갇on 2. (b) If any provision of the Declara갇on of Trust shall be held invalid or unenforceable in any jurisdic갇on, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner aﬀect, impair or render invalid or unenforceable such provision in any other jurisdic갇on or any other provision of the Declara갇on of Trust in any jurisdic갇on. Section 4. Construc갇on. In the Declara갇on of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words deno갇ng any gender include all genders. The 갇tle and headings of diﬀerent parts are inserted for convenience and shall not aﬀect the meaning, construc갇on or eﬀect of the Declara갇on of Trust. In deﬁning or interpre갇ng the powers and du갇es of the Trust and its Trustees and oﬃcers, reference may be made by the Trustees or oﬃcers, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corpora갇ons and Associa갇ons Ar갇cle of the Annotated Code of Maryland. In furtherance and not in limita갇on of the foregoing, in accordance with the provisions of Title 3, Sub갇tles 6 and 7, of the Corpora갇ons and Associa갇ons Ar갇cle of the Annotated Code of Maryland, the Trust shall be included within the deﬁni갇on of “corpora갇on” for purposes of such provisions. Section 5. Recorda갇on. The Declara갇on of Trust and any amendment hereto shall be ﬁled for record with the SDAT and may also be ﬁled or recorded in such other places as the Trustees deem appropriate, but failure to ﬁle for record the Declara갇on of Trust or any amendment hereto in any oﬃce other than in the State of Maryland shall not aﬀect or impair the validity or eﬀec갇veness of the Declara갇on of Trust or any part thereof. A restated Declara갇on of Trust shall, upon ﬁling, be conclusive evidence of all amendments contained therein and may therea耀er be referred to in lieu of the original Declara갇on of Trust and the various amendments thereto. SECOND: These Ar갇cles of Amendment and Restatement have been duly adopted by the Board of Trustees and approved by the Shareholders of the Trust as required by law. THIRD: The total number of shares of beneﬁcial interest which the Trust had authority to issue immediately prior to the ﬁling of these Ar갇cles of Amendment and Restatement was 1,000, all of which were common shares of beneﬁcial interest, par value $.01 per share. The aggregate par value of all shares of beneﬁcial interest having par value was $10.00. The total number of shares of beneﬁcial interest which the Trust has authority to issue pursuant to these Ar갇cles of Amendment and Restatement is 110,000,000 consis갇ng of 100,000,000 common shares of beneﬁcial interest, par value $.01 per share and 10,000,000 of preferred shares of beneﬁcial interest, par 20 value $.01 per share. The aggregate par value of all authorized shares of beneﬁcial interest having par value is $1,100,000.00. FOURTH: The undersigned Chairman of the Board of Trustees and Chief Execu갇ve Oﬃcer acknowledges these Ar갇cles of Amendment and Restatement to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned Chairman of the Board of Trustees and Chief Execu갇ve Oﬃcer acknowledges that, to the best of his knowledge, informa갇on and belief, these ma姫ers are true in all material respects and that this statement is made under the penal갇es for perjury. IN WITNESS WHEREOF, the Trust has caused these Ar갇cles of Amendment and Restatement to be signed in its name and on its behalf by its Chairman of the Board of Trustees and Chief Execu갇ve Oﬃcer, and a姫est to by its Secretary, on this 22nd day of December, 1998. ATTEST: /s/Kiran P. Patel Secretary HERSHA HOSPITALITY TRUST /s/ Hasu P. Shah Hasu P. Shah Chairman of the Board of Trustees and Chief Execu갇ve Oﬃcer 21 HERSHA HOSPITALITY TRUST ARTICLES SUPPLEMENTARY Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of Maryland that: FIRST: Under a power contained in Ar갇cle VI of the Trust’s Amended and Restated Declara갇on of Trust (the “Declara갇on”), the Board of Trustees of the Trust (the “Board of Trustees”), by resolu갇on duly adopted at a mee갇ng duly called and held, classiﬁed and designated 350,000 preferred shares of beneﬁcial interest (as deﬁned in the Declara갇on) as Series A Preferred Shares of beneﬁcial interest, par value $.01 per share (the “Series A Preferred Shares”), with the preferences, conversion and other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends and other distribu갇ons, qualiﬁca갇ons and terms and condi갇ons of redemp갇on set forth below. Upon any restatement of the Declara갇on, Sec갇ons 1 through 10 of this Ar갇cle FIRST shall become part of Ar갇cle Sixth of the Declara갇on, with such changes in enumera갇on as are necessary to complete such restatement. SERIES A PREFERRED SHARES 1. Designa갇on and Amount; Rank. 350,000 preferred shares of beneﬁcial interest are classiﬁed and designated as Series A Preferred Shares of beneﬁcial interest, par value $.01 per share (the “Series A Preferred Shares”). The Series A Preferred Shares shall rank (i) senior to any class of common shares of the Trust regardless of whether or not exis갇ng on the date of ﬁling of these Ar갇cles Supplementary, which shall include, without limita갇on, the Trust’s Priority Class A Common Shares, $.01 par value per share, and the Trust’s Class B Common Shares, $.01 par value per share, and any other class or series of shares of beneﬁcial interest of the Trust, either speciﬁcally ranking by its terms junior to the Series A Preferred Shares or not speciﬁcally ranking by its terms senior to or on parity with the Series A Preferred Shares (collec갇vely, the “Junior Securi갇es”), (ii) on parity with any class or series of shares of beneﬁcial interest of the Trust speciﬁcally ranking by its terms on parity with the Series A Preferred Shares, and (iii) junior to any class or series of shares of beneﬁcial interest of the Trust speciﬁcally ranking by its terms senior to the Series A Preferred Shares, in each case, as to payment of dividends, vo갇ng, distribu갇ons of assets upon liquida갇on, dissolu갇on or winding‐up, whether voluntary or involuntary, or otherwise. 2. Dividend Rights. (a) Each Series A Preferred Share shall en갇tle the holder thereof to receive dividends out of any assets legally available therefor, prior to and in preference to any declara갇on or payment of any dividend on any Junior Securi갇es and pari passu with any shares of beneﬁcial interest ranking on parity with the Series A Preferred Shares. Dividends shall be payable when and as authorized by the Board of Trustees and declared by the Trust. Dividends on each Series A Preferred Share shall accrue at 10.5% per annum (the “Dividend Rate”) on the Original Issue Price (as herea耀er deﬁned), which dividend shall commence accruing on the Original Issue Date (as hereina耀er deﬁned). Dividends on the Series A Preferred Shares shall be cumula갇ve and shall be payable in cash in arrears on a date no later than the twen갇eth (20th) day a耀er the end of each quarter (each a “Dividend Payment Date”), commencing with the quarter ending June 30, 2003, to holders of record on the close of business on the last Business day of the applicable quarter. Dividends shall accrue whether or not they have been declared and whether or not there are proﬁts, surplus or other funds of the Trust legally available for the payment of dividends. To the extent that any dividend on the Series A Preferred Shares is not paid on the Dividend Payment Date, such dividend shall accumulate, but not compound, from that date at the Dividend Rate un갇l such dividend is paid in full. The date on which the 1 Trust ini갇ally issues a Series A Preferred Share shall be referred to as the “Original Issue Date” regardless of the number of transfers of such shares made on the share records maintained by or for the Trust and regardless of the number of cer갇ﬁcates that may be issued to evidence such share. (b) The Trust shall not (i) pay or set aside for payment any dividends on Junior Securi갇es or (ii) redeem, repurchase or otherwise acquire any Junior Securi갇es, except as required by Ar갇cle VII of the Declara갇on of Trust or the excess share and real estate investment trust qualiﬁca갇on provisions of applicable law in a manner which sa갇sﬁes Sec갇on 305(b) of the Code, un갇l all accumulated, accrued and unpaid dividends have been paid on the Series A Preferred Shares through the last preceding Dividend Payment Date. (c) The amount of dividends payable for each quarterly dividend period for the Series A Preferred Shares shall be computed by mul갇plying the Original Issue Price by the Dividend Rate and dividing the result by four. The amount of dividends payable for the ini갇al dividend period or any other period shorter or longer than a full quarterly period shall be computed on the basis of twelve 30‐day months and a 360‐day year. Dividend payments shall be made by wire transfer to an account designated by each holder of the Series A Preferred Shares or, if no account informa갇on is provided to the Trust by a holder of the Series A Preferred Shares, dividend payments shall be made by check delivered by ﬁrst class mail to the address of such holder as set forth in the share records of the Trust. (d) For the sole purpose of determining whether a distribu갇on (as deﬁned in Sec갇on 2‐301 of the Maryland General Corpora갇on Law) is permi姫ed under Maryland law, amounts that would be needed, if the Trust were dissolved at the 갇me of the distribu갇on, to sa갇sfy the preferen갇al rights upon dissolu갇on of shareholders whose preferen갇al rights on dissolu갇on are superior to those receiving the distribu갇on shall not be added to the Trust’s total liabili갇es. (e) 3. Liquida갇on Rights. (a) In the event of any liquida갇on, dissolu갇on or winding up of the Trust, whether voluntary or involuntary, a耀er payment or provision for payment of debts and other liabili갇es of the Trust, each holder of Series A Preferred Shares, before any distribu갇on or payment is made upon any Junior Securi갇es, shall be en갇tled to receive, out of the assets of the Trust available for distribu갇on to the Trust’s shareholders, the sum of (A) $100.00 per share (subject to equitable adjustment to reﬂect share splits, share combina갇ons, share dividends, recapitaliza갇ons, and like occurrences) and (B) all accrued but unpaid dividends (if any) payable with respect to such shares (the “Liquida갇on Preference”). (b) In the event the assets to be distributed among the holders of the Series A Preferred Shares upon any liquida갇on, dissolu갇on or winding up of the Trust, whether voluntary or involuntary, shall be insuﬃcient to permit full payment of the Liquida갇on Preference and similar payments on any other class of shares ranking on a parity with the Series A Preferred Shares upon liquida갇on, then the holders of the Series A Preferred Shares and such other shares shall share ratably in any such distribu갇on of the Trust’s assets in propor갇on to the full respec갇ve distributable amounts to which they are en갇tled. (c) Upon any such liquida갇on, dissolu갇on or winding up of the Trust, a耀er the holders of the Series A Preferred Shares and any other class of beneﬁcial interests ranking on a parity with the Series A Preferred Shares upon liquida갇on shall have been paid in full in accordance with the rights and preferences to which they are en갇tled, the remaining net assets of the Trust shall be distributed to the holders of Junior Securi갇es. 2 (d) (e) (f) (a) (b) (c) where said sums shall be payable shall be given by mail, postage prepaid, not less than 30 or more than 60 days prior to the payment date stated therein, to the holders of record of the Series A Preferred Shares, such no갇ce to be addressed to each such holder at his post oﬃce address as shown on the records of the Trust. Wri姫en no갇ce of such liquida갇on, dissolu갇on or winding up, sta갇ng a payment date, the amount of the Liquida갇on Preference and the place For purposes of this Sec갇on, a liquida갇on, dissolu갇on or winding up of the Trust shall be deemed to be occasioned by, or to include, (A) the acquisi갇on of a majority of the beneﬁcial interests in the Trust by another en갇ty by means of any transac갇on or series of related transac갇ons (including, without limita갇on, any reorganiza갇on, merger or consolida갇on, but excluding any merger eﬀected exclusively for the purpose of changing the domicile of the Trust) in which outstanding shares of the Trust are exchanged for securi갇es or other considera갇on issued, or caused to be issued by the acquiring en갇ty or its subsidiary (an “Acquisi갇on”), or (B) a sale, lease, exchange or other transfer (in one transac갇on or a series of transac갇ons) of all or substan갇ally all of the assets of the Trust (an “Asset Transfer”), unless in each of the cases set forth in (A) and (B) of this Sec갇on 3(e), the Trust’s shareholders of record as cons갇tuted immediately prior to such Acquisi갇on or Asset Transfer will, immediately a耀er such Acquisi갇on or Asset Transfer (by virtue of securi갇es issued as considera갇on for the Trust’s Acquisi갇on or sale or otherwise) hold at least 50% of the vo갇ng power of the surviving, con갇nuing or purchasing en갇ty. fair market value thereof as determined in good faith by a majority of the independent Trustees then serving on the Board of Trustees. For purposes of this provision, the “independent” Trustees shall be those Trustees serving on the Board of Trustees of the Trust who sa갇sfy the requirements for treatment as an “independent” trustee or “independent” director under the rules of the American Stock Exchange. Whenever the distribu갇on provided for in this Sec갇on 3 shall be payable in property other than cash, the value of such property shall be the 4. Conversion. The holders of Series A Preferred Shares shall have the following rights with respect to the conversion of the Series A Preferred Shares into shares of the Trust’s Priority Class A Common Shares (the “Conversion Rights”): holder, be converted at any 갇me into fully paid and nonassessable shares of the Trust’s Priority Class A Common Shares. The number of shares of Priority Class A Common Shares to which a holder of Series A Preferred Shares shall be en갇tled upon conversion shall be the product obtained by mul갇plying the Conversion Rate then in eﬀect (determined as provided in Sec갇on 4(b)) by the number of Series A Preferred Shares being converted. Op갇onal Conversion. Subject to and in compliance with the provisions of this Sec갇on 4, any Series A Preferred Shares may, at the op갇on of the quo갇ent obtained by dividing (x) $100.00 (hereina耀er, the “Original Issue Price”), plus the per share amount of all accrued but unpaid dividends outstanding on the shares to be converted by (y) the Conversion Price, calculated as provided in Sec갇on 4(c). Conversion Rate. The conversion rate in eﬀect at any 갇me for conversion of the Series A Preferred Shares (the “Conversion Rate”) shall be the the “Conversion Price”). Such ini갇al Conversion Price shall be adjusted from 갇me to 갇me in accordance with this Sec갇on 4. All references to the Conversion Price herein shall mean the Conversion Price as so adjusted. Conversion Price. The conversion price for the Series A Preferred Shares shall ini갇ally be equal to $6.7555 (as adjusted as hereina耀er provided, (d) Mechanics of Conversion. convert a stated number of Series A Preferred (i) The Conversion Rights in this Sec갇on 4 shall be exercised by the holder thereof by giving wri姫en no갇ce that the holder elects to 3 Shares into Priority Class A Common Shares and by surrender of a cer갇ﬁcate or cer갇ﬁcates for the shares so to be converted and delivery of the undertaking described in Subsec갇on (d)(ii) below, to the Trust at its principal oﬃce (or such other oﬃce or agency of the Trust as the Trust may designate by no갇ce in wri갇ng to the holder or holders of the Series A Preferred Shares) at any 갇me during its usual business hours on the date set forth in such no갇ce, together with a statement of the name or names (with addresses), subject to compliance with Ar갇cle VII of the Declara갇on and applicable laws to the extent such designa갇on shall involve a transfer, in which the cer갇ﬁcate or cer갇ﬁcates for shares of Priority Class A Common Shares shall be issued. Promptly a耀er the receipt by the Trust of the wri姫en no갇ce referred to in this Subsec갇on 4(d) and surrender of the cer갇ﬁcate or cer갇ﬁcates for the share or shares of the Series A Preferred Shares to be converted, the Trust shall issue and deliver, or cause to be issued and delivered, to the holder, within ﬁve (5) business days, registered in such name or names as such holder may direct, subject to compliance with Ar갇cle VII of the Declara갇on and applicable laws to the extent such designa갇on shall involve a transfer, a cer갇ﬁcate or cer갇ﬁcates for the number of whole shares of Priority Class A Common Shares issuable upon the conversion of such share or Series A Preferred Shares. To the extent permi姫ed by law, such conversion shall be deemed to have been eﬀected as of the close of business on the date on which such wri姫en no갇ce shall have been received by the Trust and the cer갇ﬁcate or cer갇ﬁcates for such share or shares shall have been surrendered as aforesaid, and at such 갇me the rights of the holder of such Series A Preferred Shares shall cease, and the person or persons in whose name or names any cer갇ﬁcate or cer갇ﬁcates for shares of Priority Class A Common Shares shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. (ii) It shall be a condi갇on to the exercise of the conversion rights hereunder that each proposed registered holder of the Priority Class A Shares shall have executed and delivered to the Trust an undertaking to reimburse the Trust for the amount of any “unearned dividends” with respect to such shares. The per share amount of such “unearned dividends” shall be equal to the product of (A) the amount of the per share dividend paid in respect of the Priority Class A Shares in respect of the next record date which is on or a耀er the eﬀec갇ve date of the conversion (which record date is herea耀er referred to as the “Current Record Date”) mul갇plied by (B) a frac갇on, the numerator of which is the number of days in the period beginning with the day following the record date for the preceding dividend payment date (the “Prior Record Date”) and ending with the eﬀec갇ve date of the conversion and the denominator of which is the number of days in the period beginning with the day following the Prior Record Date and ending on the Current Record Date. Such undertaking shall acknowledge that the cer갇ﬁcates represen갇ng the Priority Class A Shares may bear a legend referring to the provisions of this clause (ii) and such undertaking, which shall be binding on any transferee of such shares. (e) (f) Adjustment for Shares Splits and Combina갇ons. If the Trust shall, at any 갇me or from 갇me to 갇me a耀er the Original Issue Date, eﬀect a subdivision of the outstanding Priority Class A Common Shares without a corresponding subdivision of the Series A Preferred Shares, the Conversion Price in eﬀect immediately before that subdivision shall be propor갇onately decreased. Conversely, if the Trust shall, at any 갇me or from 갇me to 갇me a耀er the Original Issue Date, combine the outstanding shares of Priority Class A Common Shares into a smaller number of shares without a corresponding combina갇on of the Series A Preferred Shares, the Conversion Price in eﬀect immediately before the combina갇on shall be propor갇onately increased. Any adjustment under this Subsec갇on 4(e) shall become eﬀec갇ve at the close of business on the date the subdivision or combina갇on becomes eﬀec갇ve. Common Shares issuable upon the conversion of the Series A Preferred Shares are changed into the same or a diﬀerent number of shares of any class or classes of shares, whether by recapitaliza갇on, reclassiﬁca갇on or otherwise (other than a subdivision or combina갇on of shares or share dividend or a reorganiza갇on, merger, consolida갇on or sale of assets provided Adjustment for Reclassiﬁca갇on, Exchange and Subs갇tu갇on. If, at any 갇me or from 갇me to 갇me a耀er the Original Issue Date, the Priority Class A 4 for elsewhere in this Sec갇on 4), each holder of Series A Preferred Shares shall have the right therea耀er to convert such shares into the kind and amount of shares and other securi갇es and property receivable upon such recapitaliza갇on, reclassiﬁca갇on or other change by holders of the maximum number of shares of Priority Class A Common Shares into which such Series A Preferred Shares could have been converted immediately prior to such recapitaliza갇on, reclassiﬁca갇on or change, all subject to further adjustment as provided herein or with respect to such other securi갇es or property by the terms thereof. (g) Reorganiza갇ons, Mergers, Consolida갇ons or Sales of Assets. If, at any 갇me or from 갇me to 갇me a耀er the Original Issue Date, there is a capital reorganiza갇on of the Priority Class A Common Shares (other than an Acquisi갇on or Asset Transfer as deﬁned in Sec갇on 3, or a recapitaliza갇on, subdivision, combina갇on, reclassiﬁca갇on, exchange or subs갇tu갇on of shares provided for elsewhere in this Sec갇on 4), as a part of such capital reorganiza갇on, provision shall be made so that the holders of the Series A Preferred Shares shall therea耀er be en갇tled to receive upon conversion of the Series A Preferred Shares the number of shares or other securi갇es or property of the Trust to which a holder of the number of shares of Priority Class A Common Shares deliverable upon conversion would have been en갇tled on such capital reorganiza갇on, subject to adjustment in respect of such shares or securi갇es by the terms thereof. In any such case, appropriate adjustment shall be made in the applica갇on of the provisions of this Sec갇on 4 with respect to the rights of the holders of Series A Preferred Shares a耀er the capital reorganiza갇on such that the provisions of this Sec갇on 4 (including adjustment of the Conversion Price then in eﬀect and the number of shares issuable upon conversion of the Series A Preferred Shares) shall be applicable a耀er that event and be as nearly equivalent as prac갇cable. (h) Sale of HT Common Shares Below Conversion Price. (i) If, at any 갇me or from 갇me to 갇me a耀er the Original Issue Date, the Trust issues or sells, or is “deemed” by the express provisions of this Subsec갇on 4(h)(i) to have issued or sold (other than in connec갇on with an “An갇dilu갇on Carve Out Event”), Addi갇onal HT Common Shares (as deﬁned in Subsec갇on 4(h)(iv) below), for an Eﬀec갇ve Price (as deﬁned in Subsec갇on 4(h)(iv) below) that is less than eighty‐ﬁve percent (85%) of the then eﬀec갇ve Conversion Price, then and in each such case, the then exis갇ng Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by mul갇plying the Conversion Price by a frac갇on (i) the numerator of which shall be (A) the number of HT Common Shares deemed outstanding (as deﬁned in the next sentence) immediately prior to such issue or sale, plus (B) the number of HT Common Shares which the aggregate considera갇on received (as deﬁned in Subsec갇on 4(h)(ii)) by the Trust for the total number of Addi갇onal HT Common Shares so issued would purchase at such Conversion Price, and (ii) the denominator of which shall be the number of HT Common Shares deemed outstanding (as deﬁned below) immediately prior to such issue or sale plus the total number of Addi갇onal HT Common Shares actually issued. As used herein, the number of HT Common Shares “deemed” to be outstanding as of a given date shall be the sum of (A) the number of HT Common Shares actually outstanding, (B) the number of HT Common Shares into which the then outstanding Series A Preferred Shares could be converted if fully converted on the day immediately preceding the given date, and (C) the number of HT Common Shares which could be obtained through the exercise or conversion of all other rights, op갇ons and conver갇ble securi갇es outstanding on the day immediately preceding the given date as set forth in Sec갇on 4(h)(ii) below. As used herein, an “An갇dilu갇on Carve Out Event” shall mean the issuance of HT Common Shares (A) as a dividend or other distribu갇on on any class of shares, (B) pursuant to a subdivision or combina갇on of HT Common Shares as provided in Sec갇on 4(e) above, (C) pursuant to any employee beneﬁt plan approved by the Board of Trustees which plans shall issue, in the aggregate, no more than 650,000 shares of HT Common Shares (an “Approved Employee Beneﬁt Plan”), (D) pursuant to a plan providing for the issuance of addi갇onal HT Common Shares upon reinvestment of dividends and addi갇onal op갇onal amounts under such plan where the dividends are reinvested at an amount per HT Common Share issued thereunder that is equal to or greater than 95% of the fair market value of such HT Common Shares (a 5 “DRIP”) or (E) upon exchange of partnership interests in the Opera갇ng Partnership pursuant to and in accordance with Sec갇on 8.05 of the Amended and Restated Limited Partnership Agreement of Hersha Hospitality Limited Partnership (the “HLP Agreement”). (ii) For the purpose of making any adjustment required under this Sec갇on 4(h), the considera갇on received by the Trust for any issue or sale of securi갇es shall (A) to the extent it consists of cash, be computed at the net amount of cash received by the Trust, a耀er deduc갇on of any underwri갇ng or similar discount, commission, compensa갇on or concessions paid or allowed by the Trust in connec갇on with such issue or sale, but without deduc갇on of any expenses payable by the Trust, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board of Trustees, and (C) if Addi갇onal HT Common Shares, Conver갇ble Securi갇es (as deﬁned in subsec갇on 4(h)(iii)) or rights or op갇ons to purchase either Addi갇onal HT Common Shares or Conver갇ble Securi갇es are issued or sold together with other stock or securi갇es or other assets of the Trust for a considera갇on which covers both, be computed as the por갇on of the considera갇on so received that may be reasonably determined in good faith by the Trust’s Board of Trustees to be allocable to such Addi갇onal HT Common Shares, Conver갇ble Securi갇es or rights or op갇ons. (iii) For the purpose of the adjustment required under this Sec갇on 4(h), if the Trust issues or sells (i) stock or other securi갇es conver갇ble into Addi갇onal HT Common Shares (such conver갇ble stock or securi갇es being herein referred to as “Conver갇ble Securi갇es”) or (ii) rights or op갇ons for the purchase of Addi갇onal HT Common Shares or Conver갇ble Securi갇es, and if the Eﬀec갇ve Price of such Addi갇onal HT Common Shares is less than eighty‐ﬁve percent (85%) of the then eﬀec갇ve Conversion Price, then in each such case, the Trust shall be deemed to have issued at the 갇me of the issuance of such rights or op갇ons or Conver갇ble Securi갇es the maximum number of Addi갇onal HT Common Shares issuable upon exercise or conversion thereof and to have received as considera갇on for the issuance of such shares an amount equal to the total amount of the considera갇on, if any, received by the Trust for the issuance of such rights or op갇ons or Conver갇ble Securi갇es, plus, in the case of such rights or op갇ons, the minimum amounts of considera갇on, if any, payable to the Trust upon the exercise of such rights or op갇ons, plus, in the case of Conver갇ble Securi갇es, the minimum amount of considera갇on, if any, payable to the Trust (other than by cancella갇on of liabili갇es or obliga갇ons evidenced by such Conver갇ble Securi갇es) upon the conversion thereof; provided that if in the case of Conver갇ble Securi갇es the minimum amount of such considera갇on cannot be ascertained, but is a func갇on of an갇dilu갇on or similar protec갇ve clauses, the Trust shall be deemed to have received the minimum amounts of considera갇on without reference to such clauses; provided further that if the minimum amount of considera갇on payable to the Trust upon the exercise or conversion of rights, op갇ons or Conver갇ble Securi갇es is reduced over 갇me or on the occurrence or non‐occurrence of speciﬁed events other than by reason of an갇dilu갇on adjustments, the Eﬀec갇ve Price shall be recalculated using the ﬁgure to which such minimum amount of considera갇on is reduced; and provided further that if the minimum amount of considera갇on payable to the Trust upon the exercise or conversion of such rights, op갇ons or Conver갇ble Securi갇es is subsequently increased, the Eﬀec갇ve Price shall be again recalculated using the increased minimum amount of considera갇on payable to the Trust upon the exercise or conversion of such rights, op갇ons or Conver갇ble Securi갇es. No further adjustment of the Conversion Price, as adjusted upon the issuance of such rights, op갇ons or Conver갇ble Securi갇es, shall be made as a result of the actual issuance of Addi갇onal HT Common Shares on the exercise of any such rights or op갇ons or the conversion of any such Conver갇ble Securi갇es. If any such rights or op갇ons or the conversion privilege represented by any such Conver갇ble Securi갇es shall expire without having been exercised, the Conversion Price as adjusted upon the issuance of such rights, op갇ons or Conver갇ble Securi갇es shall be readjusted to the Conversion Price which would have been in eﬀect had an adjustment been made on the basis that the only Addi갇onal HT Common Shares so issued were the Addi갇onal HT Common Shares, if any, actually issued or sold on the exercise of such rights or op갇ons or rights of conversion of such Conver갇ble Securi갇es, and such Addi갇onal HT Common Shares, if any, were issued or sold for the considera갇on actually received by the Trust 6 upon such exercise, plus the considera갇on, if any, actually received by the Trust for the gran갇ng of all such rights or op갇ons, whether or not exercised, plus the considera갇on received for issuing or selling the Conver갇ble Securi갇es actually converted, plus the considera갇on, if any, actually received by the Trust (other than by cancella갇on of liabili갇es or obliga갇ons evidenced by such Conver갇ble Securi갇es) on the conversion of such Conver갇ble Securi갇es, provided that such readjustment shall not apply to prior conversions of Series A Preferred Shares. (iv) “HT Common Shares” shall mean and include the Trust’s authorized Priority Class A Common Shares, as cons갇tuted on the date of ﬁling of these Ar갇cles Supplementary; provided, however, that such term, when used to describe the securi갇es receivable upon conversion of shares of the Series A Preferred Shares, shall include only shares designated as HT Common Shares of the Trust on the date of ﬁling of these Ar갇cles Supplementary, any shares resul갇ng from any combina갇on or subdivision thereof referred to in Sec갇on 4, or in case of any reorganiza갇on or reclassiﬁca갇on of the outstanding shares thereof, the stock, securi갇es or assets provided for in Sec갇on 4). “Addi갇onal HT Common Shares” shall mean all HT Common Shares issued by the Trust or deemed to be issued pursuant to this Sec갇on 4(h), whether or not subsequently reacquired or re갇red by the Trust. The “Eﬀec갇ve Price” of Addi갇onal HT Common Shares shall mean the quo갇ent determined by dividing the aggregate considera갇on received, or deemed to have been received by the Trust for such issuance or sale or deemed issuance or sale under this Sec갇on 4(h), for such Addi갇onal HT Common Shares by the total number of Addi갇onal HT Common Shares issued or sold, or deemed to have been issued or sold by the Trust under this Sec갇on 4(h). (v) If the Trust proposes to issue or sell Addi갇onal HT Common Shares for an Eﬀec갇ve Price that is less than eighty‐ﬁve percent (85%) of the Conversion Price and such issuance or sale will result in a reduc갇on of the Conversion Price pursuant to this Sec갇on (h) (an “AMEX Dilu갇ve Issuance”), then the AMEX Dilu갇ve Issuance and the resul갇ng poten갇al issuance of Addi갇onal HT Common Shares upon conversion of the Series A Preferred Shares at a Conversion Price below the ini갇al Conversion Price, must be approved by the shareholders of the Trust to the extent required by the rules of the American Stock Exchange. If such holders do not approve the AMEX Dilu갇ve Issuance, and the resul갇ng poten갇al issuance of Addi갇onal HT Common Shares upon conversion of the Series A Preferred Shares at a Conversion Price below the ini갇al Conversion Price, as required to be approved by the preceding sentence, then the Trust shall not consummate the AMEX Dilu갇ve Issuance in any manner that would cause a reduc갇on of the Conversion Price pursuant to this Subsec갇on (h). Cer갇ﬁcate of Adjustment. In each case of an adjustment or readjustment of the Conversion Price for the number of Priority Class A Common Shares or other securi갇es issuable upon conversion of any Series A Preferred Shares, if the Series A Preferred Shares are then conver갇ble pursuant to this Sec갇on 4, the Trust, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a cer갇ﬁcate showing such adjustment or readjustment, and shall mail such cer갇ﬁcate, by ﬁrst class mail, postage prepaid, to each registered holder of Series A Preferred Shares at such holder’s address as shown in the Trust’s books and records. The cer갇ﬁcate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the considera갇on received or deemed to be received by the Trust for any Addi갇onal HT Common Shares issued or sold or deemed to have been issued or sold, (ii) the Conversion Price in eﬀect at the 갇me, (iii) the number of Addi갇onal HT Common Shares issued or sold or deemed to have been issued or sold and (iv) the type and amount, if any, of other property which at the 갇me would be received upon conversion of the Series A Preferred Shares. Sec갇on 4 in an amount less than $.01 per share, and any such lesser adjustment shall be carried forward and shall be made at the 갇me and together Minimum Adjustment. Notwithstanding anything herein to the contrary, no adjustment of the Conversion Price shall be made pursuant to this (i) (j) 7 with the next subsequent adjustment which together with any adjustments so carried forward shall amount to $.01 per share or more. (k) No갇ces of Record Date. Upon (i) any taking by the Trust of a record of the holders of any class of securi갇es for the purpose of determining the holders thereof who are en갇tled to receive any dividend or other distribu갇on, or (ii) any Acquisi갇on (as deﬁned in Sec갇on 3) or other capital reorganiza갇on of the Trust, any reclassiﬁca갇on or recapitaliza갇on of the capital stock of the Trust, any merger or consolida갇on of the Trust with or into any other en갇ty, or any Asset Transfer (as deﬁned in Sec갇on 3), or any voluntary or involuntary dissolu갇on, liquida갇on or winding up of the Trust, the Trust shall mail to each holder of Series A Preferred Shares at least ten (10) days prior to the record date speciﬁed therein a no갇ce specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribu갇on and a descrip갇on of such dividend or distribu갇on, (B) the date on which any such Acquisi갇on, reorganiza갇on, reclassiﬁca갇on, transfer, consolida갇on, merger, Asset Transfer, dissolu갇on, liquida갇on or winding up is expected to become eﬀec갇ve, and (C) the date, if any, that is to be ﬁxed as to when the holders of record of Priority Class A Common Shares (or other securi갇es) shall be en갇tled to exchange their shares of Priority Class A Common Shares (or other securi갇es) for securi갇es or other property deliverable upon such Acquisi갇on, reorganiza갇on, reclassiﬁca갇on, transfer, consolida갇on, merger, Asset Transfer, dissolu갇on, liquida갇on or winding up. (l) Op갇onal Redemp갇on by the Trust. (i) At any 갇me, and from 갇me to 갇me, the Trust, by vote of a majority of the members of the Board of Trustees, may redeem all or any part of the outstanding Series A Preferred Shares (which number shall be in an amount not less than the lesser of the number of such shares outstanding or 50,000 shares), by giving wri姫en no갇ce at least 30 but not more than 90 days prior to the Call Date (as deﬁned below) (the “Redemp갇on No갇ce”) to those holders whose Series A Preferred Shares the Trust wishes to redeem of the date on which such redemp갇on will occur (the “Call Date”), during which period (the “Redemp갇on No갇ce Period”), the holders of the Series A Preferred Shares who have received a Redemp갇on No갇ce may in lieu of having their shares redeemed, elect to convert the Series A Preferred Shares covered by the Redemp갇on No갇ce in accordance with the conversion provisions set forth in Sec갇on 4(d). No갇ce having been mailed as aforesaid, from and a耀er the Call Date (unless the Trust shall fail to make available an amount of cash necessary to eﬀect such redemp갇on), (i) except as otherwise provided herein, dividends on the Series A Preferred Shares so called for redemp갇on shall cease to accrue, (ii) such shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Series A Preferred Shares shall cease (except the rights to convert and to receive the cash payable upon such redemp갇on, without interest thereon, upon surrender and endorsement of their cer갇ﬁcates if so required and to receive any dividends payable thereon as described in clause (iii) below). The Trust’s obliga갇on to provide cash in accordance with the preceding sentence shall be deemed fulﬁlled if, on or before the Call Date, the Trust shall, in a segregated account separate from the Trust’s general assets, deposit with a bank or trust company (which may be an aﬃliate of the Trust) that has an oﬃce in the Borough of Manha姫an, City of New York, and that has, or is an aﬃliate of a bank or trust company that has, capital and surplus of at least $50,000,000, the cash necessary for such redemp갇on, in trust, with irrevocable instruc갇ons that such cash be applied to the redemp갇on of the Series A Preferred Shares so called for redemp갇on. No interest shall accrue for the beneﬁt of the holders of Series A Preferred Shares to be redeemed on any cash so set aside by the Trust. Subject to applicable escheat laws, any such cash unclaimed at the end of two years from the Call Date shall revert to the general funds of the Trust, a耀er which reversion the holders of such shares so called for redemp갇on shall look only to the general funds of the Trust for the payment of such cash. the Trust shall so require and if the no갇ce Promptly a耀er the surrender (in accordance with such no갇ce) of the cer갇ﬁcates for any such shares so redeemed (properly endorsed or assigned for transfer, if 8 shall so state), such shares shall be exchanged for any cash (without interest thereon) for which such shares have been redeemed. If fewer than all the outstanding Series A Preferred Shares are to be redeemed, shares to be redeemed shall be selected by the Trust from outstanding Series A Preferred Shares not previously called for redemp갇on pro rata (as nearly as may be), by lot or by any other method determined by the Trust in its sole discre갇on to be equitable. If fewer than all the Series A Preferred Shares evidenced by any cer갇ﬁcate are redeemed, then new cer갇ﬁcates evidencing the unredeemed shares shall be issued without cost to the holder thereof. (ii) (iii) Redemp갇on Price and (D) all other relevant terms. The Redemp갇on No갇ce shall be mailed by the Trust, postage prepaid, to each holder whose shares are to be redeemed at its address shown on the records of the Trust. If the Trust elects to redeem any Series A Preferred Shares pursuant to this Sec갇on 4(l), such elec갇on shall not be revocable by the Trust and the Trust shall be obligated to redeem at the Redemp갇on Price all shares to be redeemed on the Call Date set forth in the Redemp갇on No갇ce, as described above. The Redemp갇on No갇ce shall set forth (A) the number of shares to be redeemed, (B) the Call Date, (C) the amount of the The per share Redemp갇on Price shall be the sum of (A) the Original Issue Price, (B) all accrued but unpaid dividends thereon pursuant to Sec갇on 2(a) hereof, through and including the Call Date, without interest, and (C) a premium (the “Premium”), which Premium shall decline on a straight line basis over a ten (10) year period equal to: $10.50 per share, with respect to redemp갇ons no갇ced during the ﬁrst twelve month period immediately following the Original Issue Date; $9.45 per share with respect to redemp갇ons no갇ced during the second twelve month period immediately following the Original Issue Date; $8.40 per share with respect to redemp갇ons no갇ced during the third twelve month period immediately following the Original Issue Date; $7.35 per share with respect to redemp갇ons no갇ced during the fourth twelve month period immediately following the Original Issue Date; $6.30 per share with respect to redemp갇ons no갇ced during the ﬁ耀h twelve month period immediately following the Original Issue Date; $5.25 per share with respect to redemp갇ons no갇ced during the sixth twelve month period immediately following the Original Issue Date; $4.20 per share with respect to redemp갇ons no갇ced during the seventh twelve month period immediately following the Original Issue Date; $3.15 per share with respect to redemp갇ons no갇ced during the eighth twelve month period immediately following the Original Issue Date; $2.10 per share with respect to redemp갇ons no갇ced during the ninth twelve month period immediately following the Original Issue Date; $1.05 per share with respect to redemp갇ons no갇ced during the tenth twelve month period immediately following the Original Issue Date; and, no premium with respect to redemp갇ons no갇ced a耀er comple갇on of the tenth twelve month period immediately following the Original Issue Date. If the Call Date falls a耀er a dividend payment record date and prior to the corresponding Dividend Payment Date, then each holder of Series A Preferred Shares at the close of business on such dividend payment record date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding any redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Shares called for redemp갇on. (m) Frac갇onal Shares. No frac갇onal shares of Priority Class A Common Shares shall be issued upon conversion of Series A Preferred Shares. All shares of Priority Class A Common Shares (including frac갇ons thereof) issuable upon conversion of more than one share of Series A Preferred Shares by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any frac갇onal share. If, a耀er the aforemen갇oned aggrega갇on, the conversion would result in the issuance of any frac갇onal share, the Trust shall, in lieu of issuing any frac갇onal shares, pay cash equal to the product of such frac갇on mul갇plied by the Priority Class A Common Shares’ fair market value per share on the date of conversion (as reported by the securi갇es exchange on which the Priority Class A Common Shares are then 9 listed for trading, or if none, the most recently reported “over the counter” trade price or if none, as determined in good faith by the Board of Trustees). (n) (o) (p) Reserva갇on of Shares Issuable Upon Conversion. The Trust shall at all 갇mes reserve and keep available out of its authorized but unissued shares of Priority Class A Common Shares, solely for the purpose of eﬀec갇ng the conversion of the shares of the Series A Preferred Shares, such number of its shares of Priority Class A Common Shares as shall from 갇me to 갇me be suﬃcient to eﬀect the conversion of all outstanding shares of the Series A Preferred Shares. If at any 갇me the number of authorized but unissued shares of Priority Class A Common Shares shall not be suﬃcient to eﬀect the conversion of all then outstanding shares of the Series A Preferred Shares, the Trust shall, prior to exceeding such number of authorized but unissued shares, take such Trust ac갇on as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Priority Class A Common Shares to such number of shares as shall be suﬃcient for such purpose. No갇ces. Any no갇ce required by the provisions of this Sec갇on 4 shall be in wri갇ng and shall be deemed eﬀec갇vely given: (i) upon personal delivery to the party to be no갇ﬁed, (ii) when sent by conﬁrmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) ﬁve (5) days a耀er having been sent by registered or cer갇ﬁed mail, return receipt requested, postage prepaid, or (iv) one (1) day a耀er deposit with a na갇onally recognized overnight courier, specifying next day delivery, with wri姫en veriﬁca갇on of receipt. All no갇ces shall be addressed to each holder of record at the address of such holder appearing on the books of the Trust. with the issuance of the Series A Preferred Shares and all Priority Class A Common Shares issuable upon exchange of the Conver갇ble Preferred Units, or conversion of the Series A Preferred Shares. Payment of Taxes . The Trust shall pay any and all stamp, transfer and other similar taxes payable or determined to be payable in connec갇on 5. Vo갇ng Rights. (a) General Rights. Holders of Series A Preferred Shares shall have the right to no갇ce of and to vote, on an as converted basis, and as a single class with holders of Priority Class A Common Shares on all ma姫ers which holders of Priority Class A Common Shares have a right to vote by law, rules of any securi갇es exchange on which any of the Trust’s securi갇es are listed, provision of the Declara갇on, or otherwise, and as a separate class on those ma姫ers set forth in Sec갇on 5(c) hereof; provided, however, that holders of Series A Preferred Shares shall not have the right to par갇cipate in the designa갇on, elec갇on or removal of trustees except as provided in Sec갇on 5(b) below. (b) Board of Trustees Designees. If a Vo갇ng Event (as deﬁned below) occurs, the holders of the Series A Preferred Shares, vo갇ng separately as a class, shall, have the right to nominate and elect at least one member and in any event no less than 11.1% of the total members of the Board of Trustees (the “Series A Preferred Share Trustees”) at each mee갇ng of holders of shares of HT’s shares of beneﬁcial interest held (or pursuant to ac갇on by wri姫en consent taken) for the purpose of elec갇ng members of the Board of Trustees. Further, if either (x) the Trust fails to pay in full for two consecu갇ve quarters the dividend required pursuant to Sec갇on 2 hereof, or the Opera갇ng Partnership, pursuant to the HLP Agreement , fails to pay two consecu갇ve quarterly dividends or distribu갇ons with respect to its 10.5% Series A Preferred Units (the “Conver갇ble Preferred Units”), as the case may be, or (y) the Trust fails to maintain its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, (the “Code”), then, upon no갇ce from the holders of a majority of the Series A Preferred Shares outstanding (if any), either (A) 40% of the Board of Trustees shall resign and the holders of a majority of the Series A Preferred Shares shall have the right to elect members to the Board of Trustees to ﬁll the vacancies created by such resigna갇ons, or (B) the 10 Trust shall cause (and promptly take all Trust ac갇on as may be necessary to cause) the Declara갇on and/or the Trust’s Bylaws to be amended to increase the size of the Board of Trustees and the holders of a majority of the Series A Preferred Shares outstanding (if any) shall have the right to elect such number of members of the increased Board of Trustees as shall cons갇tute 40% of the number of members of the increased Board of Trustees. In the event 40% of the Board of Trustees, absent an increase, does not equal a whole number of Trustees, the Trust shall cause (and promptly take all Trust ac갇on as may be necessary to cause) the Declara갇on and/or the Trust’s Bylaws to be amended to increase or decrease (at the op갇on of the Trust) the size of the Board of Trustees such that 40% of the total number of Trustees that the holders of a majority of the outstanding Series A Preferred Shares have the right to elect shall equal a whole number of Trustees. While such vo갇ng rights con갇nue, only the holders of a majority of the Series A Preferred Shares shall nominate and elect the Series A Preferred Share Trustees and the Series A Preferred Share Trustees shall be removed and replaced and their vacancies ﬁlled only by the aﬃrma갇ve vote of the holders of a majority of the Series A Preferred Shares. One Series A Preferred Share Trustee shall be a member of all commi姫ees and sub‐ commi姫ees of the Board of Trustees. In the event such Series A Preferred Share Trustee shall, by virtue of any law or the rules and regula갇ons of the SEC or any na갇onal securi갇es exchange on which the Trust’s Priority Class A Common Shares are listed for trading, be precluded from being a member of the Trust’s audit or other commi姫ee, then the Series A Preferred Share Trustee shall have the right to observe and be present, but not vote, at all such commi姫ee mee갇ngs and shall have all other rights a姫endant to members of such commi姫ees but shall not be counted for purposes of determining whether a quorum is present. A “Vo갇ng Event” shall mean any of: (w) the receipt by the holder of a majority of the Series A Preferred Shares of a favorable ruling (a “Private Le姫er Ruling”) from the Internal Revenue Service which permits such holder of a majority of the Series A Preferred Shares to con갇nue to qualify as a real estate investment trust within the meaning of Sec갇on 856 et seq. of the Code in the event such securi갇es qualiﬁed as securi갇es described in Sec갇on 856(c)(4)(A) of the Code as of the close of a quarter but failed to so qualify as of the close of a subsequent quarter and also failed to sa갇sfy the requirements of Sec갇on 856(c)(4)(B)(iii) of the Code as of the close of such subsequent quarter or the close of any quarter therea耀er, provided certain other requirements are met, (x) a change in law providing for relief comparable to that sought in the above referenced Private Le姫er Ruling, (y) the receipt by the holder of a majority of the Series A Preferred Shares of an opinion of counsel that is consistent with the relief sought in the above referenced Private Le姫er Ruling, or (z) a transfer of Conver갇ble Preferred Units whereby the holder of a majority of the Series A Preferred Shares was a transferee of Conver갇ble Preferred Units of the Opera갇ng Partnership which were converted into Series A Preferred Shares and such holder of a majority of the Series A Preferred Shares could hold such securi갇es without causing such holder to violate the requirements of Sec갇on 856(c)(4) of the Code in the event such securi갇es were to fail to qualify as securi갇es deﬁned in Sec갇on 856(c)(4)(A) of the Code and 856(c)(4)(B)(iii) of the Code as of the close of any quarter (including, for this purpose, a holder of Series A Preferred Shares which has not made an elec갇on to be taxable as a real estate investment trust pursuant to the provisions of Sec갇on 856 et seq. of the Code). The right to nominate and elect members of the Board of Trustees hereunder shall only exist at such 갇mes as holders of the Series A Preferred Shares hold that number of Series A Preferred Shares and other conver갇ble and exchangeable securi갇es that represents, on an as converted/exchanged basis, at least 5% of the HT Common Shares then issued and outstanding, on a fully diluted basis (which shall assume the conversion and/or exchange of all the Trust’s and the Opera갇ng Partnership’s securi갇es conver갇ble into or exchangeable for HT Common Shares): (c) Separate Class Vo갇ng Rights. In addi갇on to any other vote or consent required herein or by law, the vote or wri姫en consent of the holders of at least a majority of the then outstanding Series A Preferred Shares shall be necessary for eﬀec갇ng the following ac갇ons, except for any such ac갇on that provides that all holders of Series A Preferred Shares shall as a result of and simultaneously with such ac갇on receive a distribu갇on of cash which is not less than the Liquida갇on Preference, plus the applicable Premium calculated pursuant to Sec갇on 4(l)(iii), provided, that the separate vo갇ng rights of the holders of Series A Preferred Shares described in clauses (v), (vi), (vii), (x) and (xi) below, shall only exist at such 갇mes as 11 holders of the Series A Preferred Shares hold that number of Series A Preferred Shares that represents on an as converted basis at least 5% of the HT Common Shares then issued and outstanding, on a fully diluted basis (which shall assume the conversion and/or exchange of all the Trust’s and the Opera갇ng Partnership’s securi갇es conver갇ble into or exchangeable for HT Common Shares): (i) (A) any authoriza갇on or any designa갇on, whether by reclassiﬁca갇on or otherwise, of any new class or series of shares of beneﬁcial interest or any other security conver갇ble into equity securi갇es of the Trust (or any increase in the authorized or designated number of any such new class or series) ranking senior to the Series A Preferred Shares as to payment of dividends, distribu갇on of assets upon liquida갇on, dissolu갇on or winding‐up (whether voluntary or involuntary), vo갇ng or otherwise; or (B) other than in connec갇on with a “Vo갇ng/Preemp갇ve Rights Carve Out Event” as deﬁned below, any issuance of any class or series of equity interest of the Trust or the Opera갇ng Partnership prior, in the case of the events set forth in this Subsec갇on (i)(B), to the ﬁrst to occur of (1) the issuance and sale of an aggregate 250,000 Conver갇ble Preferred Units pursuant to the terms of the Securi갇es Purchase Agreement or (2) a “SPA Termina갇on,” deﬁned as the termina갇on of the Securi갇es Purchase Agreement pursuant to Sec갇on 7.1 or 7.2 of the Securi갇es Purchase Agreement. As used herein, “Vo갇ng/Preemp갇ve Rights Carve Out Event” shall mean (w) at any 갇me a耀er the consumma갇on of the First Closing and the Second Closing under the Securi갇es Purchase Agreement, the issuance of Common Units in exchange for a contribu갇on of proper갇es to the Opera갇ng Partnership approved by the Board of Trustees, (x) the issuance of Class B Common Shares upon redemp갇on of Common Units, pursuant to the HLP Agreement, (y) the issuance of any securi갇es pursuant to an Approved Employee Beneﬁt Plan, which plans shall issue, in the aggregate, no more than 650,000 shares of HT Class A Common Shares or (z) the issuance of securi갇es pursuant to a DRIP; any shares of Junior Securi갇es or any partnership or other interest in the Opera갇ng Partnership (other than the issuance of Class B Common Shares upon redemp갇on of Common Units) in accordance with Sec갇on 8.05 of the HLP Agreement; (ii) Any purchase, redemp갇on or other acquisi갇on for value (or payment into or se駫ng aside as a sinking fund for such purpose) of Any ac갇on that results in the declara갇on or payment of dividends or any other distribu갇on, direct or indirect on account of the Junior Securi갇es, or any partnership or other interest in the Opera갇ng Partnership or the se駫ng aside of any funds for any such purpose provided, that no such vote or consent shall be required if the Trust or the Opera갇ng Partnership (as the case may be) is not in default of its obliga갇ons to pay quarterly dividends on the Series A Preferred Shares or quarterly distribu갇ons on the Conver갇ble Preferred Units at the 갇me of such ac갇on; (iii) (iv) Any ac갇on that results in any amendment, altera갇on, or repeal (by merger or consolida갇on or otherwise) of any provisions of these Ar갇cles Supplementary, the Declara갇on, the Trust’s Bylaws, or of the HLP Agreement, the cer갇ﬁcate of limited partnership of the Opera갇ng Partnership or any cer갇ﬁcate amendatory thereof which eliminates, amends or aﬀects any term (adversely or otherwise) of the Series A Preferred Shares and/or the Class A Shares or shares of any series ranking senior to the Series A Preferred Shares, including, without limita갇on, the redemp갇on, dividend, vo갇ng, preemp갇ve, an갇dilu갇on and other powers, rights and preferences of such shares or adversely aﬀects any holder thereof; Any ac갇on where the Trust, the Opera갇ng Partnership or any of its or their subsidiaries merges with or into or consolidates than in the case of opera갇ng leases entered into in the Trust’s and/or the Opera갇ng Partnership’s ordinary course of business), transfers, conveys or assigns Any ac갇on where the Trust, the Opera갇ng Partnership or any of its or their subsidiaries directly or indirectly sells, leases (other with any other en갇ty; (v) (vi) 12 (whether in a single transac갇on or series of related transac갇ons) all or substan갇ally all of the Trust’s, the Opera갇ng Partnership’s or any of its or their subsidiaries assets; Rule 145 under the Securi갇es Act of 1933, as amended, and all transac갇ons involving the Trust cons갇tu갇ng a change‐in‐control within the meaning of Rule 14(f) under the Securi갇es Exchange Act of 1934, as amended; All transac갇ons involving the Trust, the Opera갇ng Partnership or any of its subsidiaries of the type referred in paragraph (a) of ﬁling of any involuntary, pe갇갇on for relief under 갇tle 11 of the United States Code or any successor statute or under any reorganiza갇on, arrangement, insolvency, readjustment of debt, dissolu갇on or liquida갇on law with respect to the Trust, the Opera갇ng Partnership or any of its or their subsidiaries; Any ac갇on where the Trust, the Opera갇ng Partnership or any of its or their subsidiaries ﬁles any voluntary, or consents to the in, the appointment of a receiver, conservator, trustee or other similar oﬃcial charged with the administra갇on, control, management, opera갇on, liquida갇on, dissolu갇on or valua갇on of the Trust, the Opera갇ng Partnership or any of their subsidiaries, or any of their respec갇ve businesses or assets; Any ac갇on where the Trust, the Opera갇ng Partnership or any of its or their subsidiaries appoints or consents to, or acquiesces Any ac갇on where the Trust, the Opera갇ng Partnership or any of its or their subsidiaries, or Hersha Hospitality Management, L.P., a Pennsylvania limited partnership, on the one hand, engages in any transac갇on with an aﬃliate of the Trust on the other hand, provided, however, to the extent such transac갇ons are of the type which, but for their aﬃliated nature, would fall within the ordinary course of business and day‐to day aﬀairs of the Trust, such ac갇ons need not be approved on a transac갇on‐by‐transac갇on basis but may be entered into pursuant to annual budgets and purchase plans approved by the holders of the Series A Preferred Shares. For purposes of this provision and these Ar갇cles Supplementary, “aﬃliate”, and all deriva갇ons thereof, shall have the meaning set forth in Rule 12b‐2 of the Exchange Act and shall include, without limita갇on, for the avoidance of doubt, (a) the trustees and senior oﬃcers of HT, HLP and any Subsidiary, his or her spouse, parent, sibling, mother‐ in‐law, father in‐law, brother‐in‐law, sister‐in‐law, aunt, uncle, or ﬁrst cousin, (b) any Person directly or indirectly owning, controlling or holding the power to vote 5% or more of the outstanding vo갇ng securi갇es of HT, HLP or any Subsidiary, and (c) any Person 5% or more of whose outstanding vo갇ng securi갇es are directly or indirectly owned, controlled or held with power to vote by HT, HLP or any subsidiary. Opera갇ng Partnership), in each case, other than through the Opera갇ng Partnership; The conduct by the Trust of any trade or business or the ownership of any asset (other than partnership interests in the of such business or ownership of the assets related to such business will result in the Trust failing to sa갇sfy the provisions of Sec갇on 856 of the Code; For the Trust, the Opera갇ng Partnership or any of its or their Subsidiaries to engage in any business where either the opera갇on (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) The termina갇on of the Trust’s status as a REIT for federal income tax purposes; and Any agreement to do any of the transac갇ons set forth in this Sec갇on. 13 6. Preemp갇ve Rights. Pursuant to Ar갇cle VIII, Sec갇on 3 of the Declara갇on, each of the holders of the Series A Preferred Shares shall have the following preemp갇ve rights: (a) Sale. At all 갇mes commencing on the Original Issue Date and termina갇ng three years therea耀er, before the Trust oﬀers to any party (a “Sale”) any shares of any class or series or any equity security, or any obliga갇on or instrument conver갇ble into or exchangeable for shares of any class or series of equity security of the Trust (the “Oﬀered Securi갇es”), other than in connec갇on with the issuance of securi갇es pursuant to a Vo갇ng/Preemp갇ve Rights Carve Out Event, the Trust shall provide wri姫en no갇ce at least ﬁ耀een (15) days in advance of the consumma갇on of such Sale (the “Oﬀer No갇ce”) to each holder of Series A Preferred Shares. The holders of Series A Preferred Shares shall have no rights under this Sec갇on 6 in connec갇on with the ul갇mate conversion or exchange of conver갇ble or exchangeable securi갇es if, prior to issuing such conver갇ble or exchangeable securi갇es, such conver갇ble or exchangeable securi갇es were oﬀered to the holders of Series A Preferred Shares pursuant to this Sec갇on 6. (b) Oﬀer. The Oﬀer No갇ce shall be irrevocable and shall cons갇tute an oﬀer by the Trust to sell to each holder of the Series A Preferred Shares at the per share sale price which the Trust would receive upon consumma갇on of such proposed Sale (the “Sales Price”) up to such number of Oﬀered Securi갇es (or in the event the Trust desires to sell a ﬁxed number of securi갇es to a par갇cular third party, such number of addi갇onal securi갇es of the same class or series to permit the Trust to sell such ﬁxed number of securi갇es to such third party and sa갇sfy its obliga갇ons under this Sec갇on 6) equal to the percentage which (i) the total number of shares of Priority Class A Common Shares into which such holders’ equity securi갇es in the Trust and the Opera갇ng Partnership are conver갇ble plus the number of Priority Class A Common Shares such Holder then holds, bears to (ii) the total number of shares of Priority Class A Common Shares into which any outstanding equity securi갇es of the Trust and the Opera갇ng Partnership (which are conver갇ble into Priority Class A Common Shares) are conver갇ble plus the total number of Priority Class A Common Shares then issued and outstanding (the “Pro Rata Share”). Response Period. Each holder of the Series A Preferred Shares shall have a period of ﬁ耀een (15) days a耀er receipt of the Oﬀer No갇ce in which to elect to purchase up to its Pro Rata Share of the Oﬀered Securi갇es at the Sales Price, such elec갇on to be made by such holder by wri姫en no갇ce (the “Acceptance No갇ce”). Each Acceptance No갇ce shall also specify the maximum amount of addi갇onal Oﬀered Securi갇es which such holder desires to purchase in the event any other Holder fails to elect to purchase all of its Pro Rata Share of Oﬀered Securi갇es pursuant to the immediately preceding sentence on a 갇mely basis or elects in wri갇ng not to do so (such unpurchased Oﬀered Securi갇es are hereina耀er referred to as the “Remaining Securi갇es”). In the event that there are Remaining Securi갇es available for purchase, each holder of the Series A Preferred Shares having speciﬁed in its Acceptance No갇ce a desire to purchase such Remaining Securi갇es shall purchase such Remaining Securi갇es on a pro rata basis (up to the amount of Remaining Securi갇es speciﬁed by such holder in its Acceptance No갇ce), or in such other propor갇ons as such holders may all agree, on the terms set forth herein. Closing and Payment. The closing of the sale and delivery of the share cer갇ﬁcates represen갇ng the Oﬀered Securi갇es purchased hereunder by any such holder of the Series A Preferred Shares, and payment therefor (which shall be made by wire transfer in immediately available funds to an account designated by the Trust), shall be at a 갇me and place designated by the Trust on the tenth (10th) day following the Trust’s receipt of such holder’s Acceptance No갇ce or such later date agreed to by a majority of the par갇cipa갇ng holders of Series A Preferred Shares. The closing of any sale of Oﬀered Securi갇es to the par갇cipa갇ng holders of Series A Preferred Shares shall be condi갇oned on the closing of the ini갇al proposed Sale. (c) (d) 14 of the Series A Preferred Shares may exercise the rights set forth in this Ar갇cle 6 hereof to the fullest extent permi姫ed hereunder. (e) Authoriza갇on of Securi갇es. The Trust shall reserve from 갇me to 갇me a suﬃcient number of Priority Class A Common Shares so that the holders 7. 8. 9. Tax Procedures. While any Series A Preferred Shares are outstanding, the Trust shall (i) maintain such controls and procedures designed to ensure REIT compliance as are speciﬁed pursuant to Sec갇on 5.2(s) of the Securi갇es Purchase Agreement, and (ii) within a reasonable period of 갇me prior to consumma갇on of any acquisi갇on, disposi갇on or other extraordinary corporate transac갇on, deliver to holders of the Series A Preferred Shares, any summary of the material terms and an analysis of the federal and state tax implica갇ons of such transac갇on delivered to any member of the Board of Trustees. appraisal or similar proceeding, as set forth in Title 3 Sub갇tle 2 of the MGCL. Appraisal Rights. Each holder of Series A Preferred Shares shall have the same rights to require the Trust to make payment of the fair value of its shares in an have waived, any other applicable rights granted to such holders under applicable law. No Waiver. Except as otherwise modiﬁed or provided for herein, the holders of Series A Preferred Shares shall also be en갇tled to, and shall not be deemed to 10. No Impairment. The Trust shall not by amendment of its Declara갇on, or these Ar갇cles Supplementary, through any reorganiza갇on, transfer of assets, merger, dissolu갇on, issue or sale of securi갇es or any other voluntary ac갇on, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Trust but will at all 갇mes in good faith, assist in the carrying out of all the provisions of these Ar갇cles Supplementary and in the taking of all such ac갇on as may be necessary or appropriate in order to protect the conversion rights and liquida갇on preferences granted hereunder to the holders of the Series A Preferred Shares against impairment. SECOND: The Series A Preferred Shares have been classiﬁed and designated by the Board of Trustees under the authority contained in the Declara갇on. THIRD: These Ar갇cles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. FOURTH: The undersigned President and Chief Execu갇ve Oﬃcer acknowledges these Ar갇cles Supplementary to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned President and Chief Execu갇ve Oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. IN WITNESS WHEREOF, the Trust has caused these Ar갇cles Supplementary to be executed on behalf of the Trust by its President and Chief Execu갇ve Oﬃcer and a姫ested to by its Secretary this 21st day of April 2003. ATTEST: /s/Kiran P. Patel Name: Kiran P. Patel Title: Secretary HERSHA HOSPITALITY TRUST /s/ Hasu P. Shah Name: Hasu P. Shah Title: President and Chief Execu갇ve Oﬃcer 15 HERSHA HOSPITALITY TRUST ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF 8.00% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES Pursuant to Sec갇on 8‐203 of Title 8 of the Corpora갇ons and Associa갇ons Ar갇cle of the Annotated Code of Maryland Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of the State (“SDAT”) of Maryland that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees of the Trust by Ar갇cle VI of its Amended and Restated Declara갇on of Trust (which, as herea耀er restated or amended from 갇me to 갇me, are together with these Ar갇cles Supplementary herein referred to as the “Declara갇on”), the Board of Trustees has, by unanimous wri姫en consent, duly redesignated and reclassiﬁed its previously classiﬁed but unissued Series A preferred shares of beneﬁcial interest of the Trust into a newly classiﬁed series of 2,400,000 preferred shares of beneﬁcial interest designated the 8.00% Series A Cumula갇ve Redeemable Preferred Shares of beneﬁcial interest, par value $.01 per shares (the “Series A Preferred Shares”), and has provided for the issuance of such series. Capitalized terms used herein and not otherwise deﬁned shall have the meanings given to them in the Declara갇on. SECOND: Subject in all cases to the provisions of the Declara갇on, including without limita갇on, Ar갇cle VII with respect to limita갇ons on the transfer and ownership of shares of beneﬁcial interest of the Trust, the Series A Preferred Shares shall have the preferences, conversion and other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends, qualiﬁca갇ons and terms and condi갇ons of redemp갇on as set forth below: (1) Designa갇on and Number. A series of preferred shares of beneﬁcial interest, par value $.01 per share, designated the “8.00% Series A Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest” (the “Series A Preferred Shares”), is hereby established. The number of Series A Preferred Shares hereby authorized shall be 2,400,000. The terms of these Ar갇cles Supplementary replace in their en갇rety the terms of the Ar갇cles Supplementary designa갇ng the series A preferred shares of beneﬁcial interest and ﬁled with the SDAT on April 18, 2003. (2) Rank. The Series A Preferred Shares shall, with respect to dividend rights and rights upon liquida갇on, dissolu갇on or winding up of the Trust, rank (a) senior to all classes or series of Common Shares of the Trust, and to all equity securi갇es issued by the Trust ranking junior to such Series A Preferred Shares; (b) on a parity with all other equity securi갇es issued by the Trust the terms of which speciﬁcally provide that such equity securi갇es rank on a parity with the Series A Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up; and (c) junior to (i) all indebtedness of the Trust and (ii) equity securi갇es issued by the Trust the terms of which speciﬁcally provide that such equity securi갇es rank senior to the Series A Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up. The term “equity securi갇es” shall not include conver갇ble debt securi갇es. 1 (3) Dividends. (a) Holders of the then outstanding Series A Preferred Shares shall be en갇tled to receive, when and as declared by the Board of Trustees, out of funds legally available for the payment of dividends, cumula갇ve cash dividends at the rate of 8.00% per year of the $25.00 liquida갇on preference (equivalent to a ﬁxed annual amount of $2.00 per share). Dividends on the Series A Preferred Shares are payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year and, if such day is not a business day, the next succeeding business day, commencing on October 15, 2005 (each, a “Dividend Payment Date”). The quarterly period between Dividend Payment Dates is referred to herein as a “dividend period” and the dividend which shall accrue in respect of any full dividend period shall be $0.50 regardless of the actual number of days in such full dividend period. The ﬁrst dividend will be for less than a full quarter and will cover the period from August 5, 2005 to October 15, 2005. Such dividend and any dividend payable on the Series A Preferred Shares for any par갇al dividend period will be computed on the basis of a 360‐day year consis갇ng of twelve 30‐day months. Dividends will be payable to holders of record as they appear in the stock records of the Trust at the close of business on the applicable record date, which shall be the ﬁrst day of the calendar month in which the applicable Dividend Payment Date falls or on such other date designated by the Board of Trustees of the Trust as the record date for the payment of dividends on the Series A Preferred Shares that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). (b) No dividends on Series A Preferred Shares shall be declared by the Board of Trustees of the Trust or paid or set apart for payment by the Trust at such 갇me as the terms and provisions of any agreement of the Trust, including any agreement rela갇ng to its indebtedness, (i) prohibits such declara갇on, payment or se駫ng apart for payment of dividends or (ii) provides that such declara갇on, payment or se駫ng apart for payment of dividends would cons갇tute a breach thereof or a default thereunder, or if such declara갇on or payment shall be restricted or prohibited by law. (c) Notwithstanding the foregoing, dividends on the Series A Preferred Shares shall accrue whether or not the terms and provisions set forth in Sec갇on 3(b) hereof at any 갇me prohibit the current payment of dividends, whether or not the Trust has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. (d) Accrued but unpaid dividends on the Series A Preferred Shares will accumulate as of the Dividend Payment Date on which they ﬁrst become payable. Except as provided in Sec갇on 3(e) below, no dividends will be declared or paid or set apart for payment, and no distribu갇on will be made on any shares of beneﬁcial interest in the Trust or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series A Preferred Shares other than a dividend that consists of the Trust’s Common Shares or shares of any other class of shares of beneﬁcial interest ranking junior to the Series A Preferred Shares as to dividends and upon liquida갇on, for any period unless full cumula갇ve dividends on the Series A Preferred Shares have been or contemporaneously are declared and paid, or declared and a sum suﬃcient for the payment thereof is set apart for such payment on the Series A Preferred Shares for all dividend periods ending on or prior to the date of such ac갇on with respect to our Common Shares or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series A Preferred Shares. (e) When dividends are not paid in full (or a sum suﬃcient for such full payment is not so set apart) upon the Series A Preferred Shares and the shares of any other series of Preferred Shares ranking on a parity as to dividends with the Series A Preferred Shares, all dividends declared upon the Series A Preferred Shares and any other series of Preferred Shares ranking on a parity as to dividends with the Series A Preferred Shares shall be declared pro rata so that the amount of dividends declared per share of Series A Preferred Shares and such other series of Preferred Shares shall in all cases bear to each other the 2 same ra갇o that accrued dividends per share on the Series A Preferred Shares and such other series of Preferred Shares (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Shares do not have a cumula갇ve dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series A Preferred Shares which may be in arrears. (f) Except as provided in the immediately preceding paragraph, unless full cumula갇ve dividends on the Series A Preferred Shares have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than dividends paid in Common Shares or other shares of beneﬁcial interest ranking junior to the Series A Preferred Shares as to dividends and upon liquida갇on) shall be declared or paid or set aside for payment, nor shall any other distribu갇on be declared or made, upon the Common Shares or any other shares of beneﬁcial Interest of the Trust ranking junior to or on a parity with the Series A Preferred Shares as to dividends or upon liquida갇on, nor shall any Common Shares, or any other shares of beneﬁcial interest of the Trust ranking junior to or on a parity with the Series A Preferred Shares as to dividends or upon liquida갇on be redeemed, purchased or otherwise acquired for any considera갇on (or any moneys be paid to or made available for a sinking fund for the redemp갇on of any such shares) by the Trust (except by conversion into or exchange for other shares of beneﬁcial interest of the Trust ranking junior to the Series A Preferred Shares as to dividends and upon liquida갇on and except for the redemp갇on, purchase or acquisi갇on of “Shares‐in ‐Trust” under the Declara갇on, which are intended to assist the Trust in qualifying as a REIT for federal income tax purposes). (g) Holders of the Series A Preferred Shares shall not be en갇tled to any dividend, whether payable in cash, property or shares of beneﬁcial interest in excess of full cumula갇ve dividends on the Series A Preferred Shares as provided above. Any dividend payment made on Series A Preferred Shares shall ﬁrst be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. (4) Liquida갇on Preference. (a) Upon any voluntary or involuntary liquida갇on, dissolu갇on or winding up of the aﬀairs of the Trust, the holders of Series A Preferred Shares then outstanding are en갇tled to be paid out of the assets of the Trust legally available for distribu갇on to its shareholders a liquida갇on preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribu갇on of assets is made to holders of Common Shares or any other class or series of shares of beneﬁcial interest of the Trust that ranks junior to the Series A Preferred Shares as to liquida갇on rights. A耀er payment of the full amount of the liquida갇ng distribu갇ons to which they are en갇tled, the holders of Series A Preferred Shares will have no right or claim to any of the remaining assets of the Trust. (b) In the event that, upon any such voluntary or involuntary liquida갇on, dissolu갇on or winding up, the available assets of the Trust are insuﬃcient to pay the amount of the liquida갇ng distribu갇ons on all outstanding Series A Preferred Shares and the corresponding amounts payable on all shares of other classes or series of shares of beneﬁcial interest of the Trust ranking on a parity with the Series A Preferred Shares in the distribu갇on of assets, then the holders of the Series A Preferred Shares and all other such classes or series of shares of beneﬁcial interest shall share ratably in any such distribu갇on of assets in propor갇on to the full liquida갇ng distribu갇ons to which they would otherwise be respec갇vely en갇tled. where, the amounts distributable in such circumstances shall be payable, shall be given by ﬁrst class mail, postage pre‐paid, not less than 30 nor more (c) Wri姫en no갇ce of any such liquida갇on, dissolu갇on or winding up of the Trust, sta갇ng the payment date or dates when, and the place or places 3 than 60 days prior to the payment date stated therein, to each record holder of the Series A Preferred Shares at the respec갇ve addresses of such holders as the same shall appear on the stock transfer records of the Trust. (d) The consolida갇on, combina갇on or merger of the Trust with or into any other corpora갇on, trust or en갇ty or consolida갇on or merger of any other corpora갇on with or into the Trust, or the sale, lease or conveyance of all or substan갇ally all of the Trust’s assets, property or business or any statutory share exchange, shall not be deemed to cons갇tute a liquida갇on, dissolu갇on or winding up of the Trust. (5) Redemp갇on. (a) Right of Op갇onal Redemp갇on. The Series A Preferred Shares are not redeemable prior to August 5, 2010. However, in an eﬀort to ensure that the Trust remains a qualiﬁed real estate investment trust (“REIT”) for federal income tax purposes, the Series A Preferred Shares are, together with all other classes or series of shares of beneﬁcial interest of the Trust, subject in all respects to the provisions of Ar갇cle VII of the Declara갇on. Accordingly, pursuant to Ar갇cle VII of the Declara갇on, a purported Transfer (as deﬁned in Ar갇cle VII) of Series A Preferred Shares as a result of which any person would maintain Beneﬁcial Ownership (as deﬁned in Ar갇cle VII) of more than 9.9% of the outstanding Series A Preferred Shares will cause the number of Series A Preferred shares in excess of the Ownership Limit (rounded up to the nearest whole share) to be designated Shares‐in ‐Trust and in accordance with the provisions of Ar갇cle VII of the Declara갇on, be transferred to a Share Trust (as such term is deﬁned in the Declara갇on), and the Trust will have the right to purchase such Shares‐in ‐Trust from the holder. On and a耀er August 5, 2010, the Trust, at its op갇on and upon not less than 30 nor more than 60 days’ wri姫en no갇ce, may redeem the Series A Preferred Shares, in whole or in part, at any 갇me or from 갇me to 갇me, for cash at a redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends thereon to the date ﬁxed for redemp갇on (except as provided in Sec갇on 5(c) below), without interest. If less than all of the outstanding Series A Preferred Shares is to be redeemed, the Series A Preferred Shares to be redeemed shall be selected pro rata (as nearly as may be prac갇cable without crea갇ng frac갇onal shares) or by any other equitable method determined by the Trust. (b) Limita갇ons on Redemp갇on. Unless full cumula갇ve dividends on all Series A Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series A Preferred Shares shall be redeemed unless all outstanding Series A Preferred Shares are simultaneously redeemed, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series A Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series A Preferred Shares as to dividends and upon liquida갇on); provided, however, that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes or the purchase or acquisi갇on of Series A Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series A Preferred Shares. (c) Payment of Dividends in Connec갇on with Redemp갇on. Immediately prior to any redemp갇on of Series A Preferred Shares, the Trust shall pay, in cash, any accumulated and unpaid dividends through the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series A Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Shares which are redeemed. 4 (d) Procedures for Redemp갇on. (i) No갇ce of redemp갇on will be given (A) by publica갇on in the New York Times, Wall Street Journal or other newspaper of similar general circula갇on in the city of New York, such publica갇on to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemp갇on date, and (B) mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the redemp갇on date, addressed to the respec갇ve holders of record of the Series A Preferred Shares to be redeemed at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series A Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. may be listed or admi姫ed to trading, such no갇ce shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the number of Series A Preferred Shares to be redeemed; (D) the place or places where the Series A Preferred Shares are to be surrendered for payment of the redemp갇on price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemp갇on date. If less than all of the Series A Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series A Preferred Shares held by such holder to be redeemed. In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which Series A Preferred Shares If no갇ce of redemp갇on of any Series A Preferred Shares has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series A Preferred Shares so called for redemp갇on, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series A Preferred Shares, such Series A Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price. Holders of Series A Preferred Shares to be redeemed shall surrender such Series A Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series A Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series A Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series A Preferred Shares represented by any such cer갇ﬁcate are redeemed, a new cer갇ﬁcate or cer갇ﬁcates shall be issued represen갇ng the unredeemed Series A Preferred Shares without cost to the holder thereof. (ii) (iii) The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series A Preferred Shares shall be earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, any balance of monies so deposited by the Trust and unclaimed by the holders of the Series A Preferred Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) limita갇on, the provision for the purchase of Shares‐in ‐Trust. In addi갇on to the purchase right set forth in Ar갇cle VII of the Declara갇on, Shares‐in ‐Trust (e) Shares‐ In‐ Trust Provisions. The Series A Preferred Shares are subject to the provisions of Ar갇cle VII of the Declara갇on, including, without 5 irrevocable except that: (iv) (A) issued upon exchange of Series A Preferred Shares pursuant to such Ar갇cle VII may be redeemed, in whole or in part, at any 갇me when outstanding Series A Preferred Shares are being redeemed, for cash, at a redemp갇on price of $25.00 per Series A Preferred Share, plus all accrued and unpaid dividends on the Series A Preferred Shares that were exchanged for such Shares‐in‐Trust, through the date of such exchange, without interest. If the Trust elects to redeem Shares‐in‐Trust pursuant to the redemp갇on right set forth in the preceding sentence, such Shares‐in‐Trust shall be redeemed in such propor갇on and in accordance with such procedures as Series A Preferred Shares are being redeemed. (f) Status of Redeemed Shares. Any Series A Preferred Shares that shall at any 갇me have been redeemed shall, a耀er such redemp갇on, have the status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. (6) Vo갇ng Rights. law. (a) (b) Holders of the Series A Preferred Shares will not have any vo갇ng rights, except as set forth below or as otherwise from 갇me to 갇me required by Whenever dividends on any Series A Preferred Shares shall be in arrears for six or more quarterly periods, whether or not consecu갇ve (a “Preferred Dividend Default”), the holders of Series A Preferred Shares (vo갇ng separately as a class with the holders of all other series of Preferred Shares ranking on a parity with the Series A Preferred Shares as to dividends or upon liquida갇on (“Parity Preferred”) upon which like vo갇ng rights have been conferred and are exercisable) will be en갇tled to vote for the elec갇on of a total of two trustees of the Trust (the “Preferred Share Trustees”) at a special mee갇ng of the shareholders called by the holders of record of at least 20% of the Series A Preferred Shares or the holders of 20% of any other series of Parity Preferred so in arrears (unless such request is received less than 90 days before the date ﬁxed for the next annual or special mee갇ng of shareholders), and at each subsequent annual mee갇ng un갇l all dividends accrued on such Series A Preferred Shares for the past dividend periods shall have been fully paid or declared and a sum suﬃcient for the payment thereof set aside for payment. (c) If and when all accumulated dividends on the Series A Preferred Shares shall have been paid in full or declared and set aside for payment in full, the holders of Series A Preferred Shares shall be divested of the vo갇ng rights set forth in Sec갇on 6(b) hereof (subject to reves갇ng in the event of each and every Preferred Dividend Default) and, if all accumulated dividends have been paid in full or declared and set aside for payment in full on all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable, the term of oﬃce of each Preferred Share Trustee so elected shall terminate. Any Preferred Share Trustee may be removed at any 갇me with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series A Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 6(b) (vo갇ng separately as a class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). So long as a Preferred Dividend Default shall con갇nue, any vacancy in the oﬃce of a Preferred Share Trustee may be ﬁlled by wri姫en consent of the Preferred Share Trustee remaining in oﬃce, or if none remains in oﬃce, by a vote of the holders of record of a majority of the outstanding Series A Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 6(b) (vo갇ng separately as a class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). The Preferred Share Trustees shall each be en갇tled to one vote per trustee on any ma姫er. least two‐thirds of the Series A Preferred Shares outstanding at the 갇me, given in person or by proxy, either in wri갇ng or at a mee갇ng (vo갇ng separately as a (d) So long as any Series A Preferred Shares remain outstanding, the Trust shall not, without the aﬃrma갇ve vote or consent of the holders of at 6 class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of shares of beneﬁcial interest ranking senior to the Series A Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up or reclassify any authorized shares of beneﬁcial interest of the Trust into any such shares, or create, authorize or issue any obliga갇on or security conver갇ble into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Declara갇on, whether by merger, consolida갇on or otherwise, so as to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series A Preferred Shares or the holders thereof; provided, however, that with respect to the occurrence of any event set forth in (ii) above, the occurrence of any such event will not be deemed to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series A Preferred Shares or the holders thereof so long as the Series A Preferred Shares remain outstanding with the terms thereof materially unchanged or, if the Trust is not the surviving en갇ty in such transac갇on, are exchanged for a security of the surviving en갇ty with terms that are materially the same as the Series A Preferred Shares, the occurrence of any such event shall not be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers of the holders of the Series A Preferred Shares and; provided, further, that (x) any increase in the amount of the authorized Common Shares or Preferred Shares or the crea갇on or issuance of any other series of Common Shares or Preferred Shares, in each case ranking on a parity with or junior to the Series A Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up, (y) any change to the number or classiﬁca갇on of our trustees, or (z) any amendment to Ar갇cle VII of the Declara갇on rela갇ng to Shares‐In‐Trust, the Ownership Limit or any other ma姫er described therein of any type or nature shall in no event be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers so long as a耀er such amendment any single holder may maintain “beneﬁcial ownership” (as deﬁned in Ar갇cle VII prior to or a耀er such amendment) 9.9% of the outstanding Series A Preferred Shares and 9.9% of any other class or series of shares of beneﬁcial interest without viola갇ng the Ownership Limit. (e) The foregoing vo갇ng provisions will not apply if, at or prior to the 갇me when the act with respect to which such vote would otherwise be required to be eﬀected, all outstanding Series A Preferred Shares shall have been redeemed or called for redemp갇on upon proper no갇ce and suﬃcient funds shall have been deposited in trust to eﬀect such redemp갇on. (7) Conversion. The Series A Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except that the Series A Preferred Shares will automa갇cally be exchanged by the Trust for Shares‐In‐Trust, in accordance with Ar갇cle VII of the Declara갇on in the same manner that Common Shares are exchanged for Shares‐In‐Trust pursuant thereto, in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes. THIRD: The Series A Preferred Shares have been classiﬁed and designated by the Board of Trustees under the authority contained in the Declara갇on. FOURTH: These Ar갇cles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. FIFTH: The undersigned President and Chief Opera갇ng Oﬃcer acknowledges these Ar갇cles Supplementary to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned President and Chief Opera갇ng Oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. 7 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles Supplementary to be executed on behalf of the Trust by its President and Chief Opera갇ng Oﬃcer and a姫ested to by its Secretary this 2nd day of August 2005. By: /s/ Jay H. Shah Jay H. Shah President and Chief Opera갇ng Oﬃcer A姫est: By: /s/ Kiran P. Patel Kiran P. Patel Secretary 8 HERSHA HOSPITALITY TRUST ARTICLES OF AMENDMENT TO DECLARATION OF TRUST Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of Maryland that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees of the Trust by Ar갇cle VI of its Amended and Restated Declara갇on of Trust (the “Declara갇on of Trust”), the Board of Trustees of the Trust has, by unanimous wri姫en consent, duly authorized an increase in the aggregate number of Common Shares (as deﬁned below) that the Trust has authority to issue from 81,000,000 Common Shares to 151,000,000 Common Shares, of which 150,000,000 shares now will be Priority Common Shares (as deﬁned below) and 1,000,000 shares will con갇nue to be Class B Common Shares (as deﬁned below). In furtherance thereof, Sec갇on 1 of Ar갇cle VI of the Declara갇on of Trust is hereby amended and replaced in its en갇rety by the following: “Sec갇on 1. Authorized Shares. The beneﬁcial interest of the Trust shall be divided into shares of beneﬁcial interest (the “Shares”). The Trust has authority to issue: (i) one hundred ﬁ耀y one million (151,000,000) common shares of beneﬁcial interest, $0.01 par value per share (“Common Shares”), of which one hundred ﬁ耀y million (150,000,000) will be Priority Class A Common Shares (the “Priority Common Shares”) and one million (1,000,000) will be Class B Common Shares (the “Class B Common Shares”); and (ii) twenty nine million (29,000,000) will be preferred shares of beneﬁcial interest, $0.01 par value per share (“Preferred Shares”). If Shares of one class are classiﬁed or reclassiﬁed into Shares of another class pursuant to this Ar갇cle VI, the number of authorized Shares of the former class shall be automa갇cally decreased and the number of Shares of the la姫er class shall be automa갇cally increased, in each case by the number of Shares so classiﬁed or reclassiﬁed, so that the aggregate number of Shares of all classes that the Trust has the authority to issue shall not be more than the total number of Shares set forth in the second sentence of this paragraph. The Board of Trustees, without any ac갇on by the shareholders of the Trust, may amend the Declara갇on of Trust to increase or decrease the aggregate number of Shares or the number of Shares of any class or series that the Trust has authority to issue.” SECOND: The Shares have been authorized by the Board of Trustees under the authority contained in the Declara갇on of Trust. THIRD: These Ar갇cles of Amendment to the Declara갇on of Trust (this “Amendment”) have been duly adopted by the Board of Trustees of the Trust in the manner and by the vote required by law. FOURTH: The undersigned Chief Execu갇ve Oﬃcer of the Trust acknowledges this Amendment to be the act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned Chief Execu갇ve Oﬃcer of the Trust acknowledges that, to the best of his knowledge, informa갇on and belief, these ma姫ers are true in all material respects and that this statement is made under the penal갇es for perjury. IN WITNESS WHEREOF, the Trust has caused these Ar갇cles of Amendment to be signed in its name and on its behalf by its Chief Execu갇ve Oﬃcer, and a姫ested to by its Secretary, on this 26 day of May, 2009. /s/ David L. /s/ Jay H. 1 ATTEST: HERSHA HOSPITALITY TRUST By: /s/ David L. Desfor Name: David L. Desfor Title: Treasurer and Corporate Secretary By: /s/ Jay H. Shah Name: Jay H. Shah Title: Chief Execu갇ve Oﬃcer 2 HERSHA HOSPITALITY TRUST ARTICLES OF AMENDMENT TO DECLARATION OF TRUST Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of Maryland that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees of the Trust by Ar갇cle VI of its Amended and Restated Declara갇on of Trust (the “Declara갇on of Trust”), the Board of Trustees of the Trust has duly authorized an increase in the aggregate number of Common Shares (as deﬁned below) that the Trust has authority to issue from 151,000,000 Common Shares to 301,000,000 Common Shares, of which 300,000,000 shares now will be Priority Common Shares (as deﬁned below) and 1,000,000 shares will con갇nue to be Class B Common Shares (as deﬁned below). In furtherance thereof, Sec갇on 1 of Ar갇cle VI of the Declara갇on of Trust is hereby amended and replaced in its en갇rety by the following: “Sec갇on 1. Authorized Shares. The beneﬁcial interest of the Trust shall be divided into shares of beneﬁcial interest (the “Shares”). The Trust has authority to issue: (i) 301,000,000 common shares of beneﬁcial interest, $0.01 par value per share (“ Common Shares”), of which 300,000,000 will be Priority Class A Common Shares (the “Priority Common Shares”) and 1,000,000 will be Class B Common Shares (the “Class B Common Shares”); and (ii) 29,000,000 will be preferred shares of beneﬁcial interest, $0.01 par value per share (“ Preferred Shares”). If Shares of one class are classiﬁed or reclassiﬁed into Shares of another class pursuant to this Ar갇cle VI, the number of authorized Shares of the former class shall be automa갇cally decreased and the number of Shares of the la姫er class shall be automa갇cally increased, in each case by the number of Shares so classiﬁed or reclassiﬁed, so that the aggregate number of Shares of all classes that the Trust has the authority to issue shall not be more than the total number of Shares set forth in the second sentence of this paragraph. The Board of Trustees, without any ac갇on by the shareholders of the Trust, may amend the Declara갇on of Trust to increase or decrease the aggregate number of Shares or the number of Shares of any class or series that the Trust has authority to issue.” SECOND: The Shares have been authorized by the Board of Trustees under the authority contained in the Declara갇on of Trust. THIRD: These Ar갇cles of Amendment to the Declara갇on of Trust (this “Amendment”) have been duly adopted by the Board of Trustees of the Trust in the manner and by the vote required by law. FOURTH: The undersigned Chief Execu갇ve Oﬃcer of the Trust acknowledges this Amendment to be the act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned Chief Execu갇ve Oﬃcer of the Trust acknowledges that, to the best of his knowledge, informa갇on and belief, these ma姫ers are true in all material respects and that this statement is made under the penal갇es for perjury. IN WITNESS WHEREOF, the Trust has caused these Ar갇cles of Amendment to be signed in its name and on its behalf by its Chief Execu갇ve Oﬃcer, and a姫ested to by its Secretary, on this 18th day of March, 2010. 1 ATTEST: HERSHA HOSPITALITY TRUST By: /s/ David L. Desfor Name: David L. Desfor Title: Treasurer and Corporate Secretary By: /s/ Jay H. Shah Name: Jay H. Shah Title: Chief Execu갇ve Oﬃcer 2 HERSHA HOSPITALITY TRUST ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF 8.00% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES Pursuant to Sec갇on 8‐203 of Title 8 of the Corpora갇ons and Associa갇ons Ar갇cle of the Annotated Code of Maryland Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of the State of Maryland (“ SDAT”) that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees of the Trust by Ar갇cle VI of its Amended and Restated Declara갇on of Trust (which, as herea耀er restated or amended from 갇me to 갇me, are together with these Ar갇cles Supplementary herein referred to as the “Declara갇on”), the Board of Trustees has duly classiﬁed and designated 4,600,000 authorized but unissued preferred shares of beneﬁcial interest, par value $.01 per share, of the Trust as 8.00% Series B Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share (the “Series B Preferred Shares”), and has provided for the issuance of such series. Capitalized terms used herein and not otherwise deﬁned shall have the meanings given to them in the Declara갇on. SECOND: Subject in all cases to the provisions of the Declara갇on, including without limita갇on, Ar갇cle VII with respect to limita갇ons on the transfer and ownership of shares of beneﬁcial interest of the Trust, the Series B Preferred Shares shall have the preferences, conversion and other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends, qualiﬁca갇ons and terms and condi갇ons of redemp갇on as set forth below: 1. 2. Preferred Shares of Beneﬁcial Interest” is hereby established. The number of Series B Preferred Shares hereby authorized shall be 4,600,000. Designa갇on and Number. A series of preferred shares of beneﬁcial interest, par value $.01 per share, designated the “8.00% Series B Cumula갇ve Redeemable Rank. The Series B Preferred Shares shall, with respect to dividend rights and rights upon liquida갇on, dissolu갇on or winding up of the Trust, rank (a) senior to all classes or series of Common Shares of the Trust, and to all equity securi갇es issued by the Trust ranking junior to such Series B Preferred Shares; (b) on a parity with the Trust’s 8.00% Series A Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share, and all other equity securi갇es issued by the Trust the terms of which speciﬁcally provide that such equity securi갇es rank on a parity with the Series B Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up; and (c) junior to (i) all indebtedness of the Trust and (ii) equity securi갇es issued by the Trust the terms of which speciﬁcally provide that such equity securi갇es rank senior to the Series B Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up. The term “equity securi갇es” shall not include conver갇ble debt securi갇es. 1 3. Dividends. (a) Holders of the then outstanding Series B Preferred Shares shall be en갇tled to receive, when and as declared by the Board of Trustees, out of funds legally available for the payment of dividends, cumula갇ve cash dividends at the rate of 8.00% per year of the $25.00 liquida갇on preference (equivalent to a ﬁxed annual amount of $2.00 per share). Dividends on the Series B Preferred Shares are payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year and, if such day is not a business day, the next succeeding business day, commencing on July 15, 2011 (each, a “Dividend Payment Date”). The quarterly period between Dividend Payment Dates is referred to herein as a “dividend period” and the dividend which shall accrue in respect of any full dividend period shall be $[0.50] regardless of the actual number of days in such full dividend period. The ﬁrst dividend will be for less than a full quarter and will cover the period from May 18, 2011 to June 30, 2011. Such dividend and any dividend payable on the Series B Preferred Shares for any par갇al dividend period will be computed on the basis of a 360‐day year consis갇ng of twelve 30‐day months. Dividends will be payable to holders of record as they appear in the stock records of the Trust at the close of business on the applicable record date, which shall be the ﬁrst day of the calendar month in which the applicable Dividend Payment Date falls or on such other date designated by the Board of Trustees of the Trust as the record date for the payment of dividends on the Series B Preferred Shares that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). (b) No dividends on Series B Preferred Shares shall be declared by the Board of Trustees of the Trust or paid or set apart for payment by the Trust at such 갇me as the terms and provisions of any agreement of the Trust, including any agreement rela갇ng to its indebtedness, (i) prohibits such declara갇on, payment or se駫ng apart for payment of dividends or (ii) provides that such declara갇on, payment or se駫ng apart for payment of dividends would cons갇tute a breach thereof or a default thereunder, or if such declara갇on or payment shall be restricted or prohibited by law. (c) Notwithstanding the foregoing, dividends on the Series B Preferred Shares shall accrue whether or not the terms and provisions set forth in Sec갇on 3(b) hereof at any 갇me prohibit the current payment of dividends, whether or not the Trust has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. (d) Accrued but unpaid dividends on the Series B Preferred Shares will accumulate as of the Dividend Payment Date on which they ﬁrst become payable. Except as provided in Sec갇on 3(e) below, no dividends will be declared or paid or set apart for payment, and no distribu갇on will be made on any shares of beneﬁcial interest in the Trust or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series B Preferred Shares other than a dividend that consists of the Trust’s Common Shares or shares of any other class of shares of beneﬁcial interest ranking junior to the Series B Preferred Shares as to dividends and upon liquida갇on, for any period unless full cumula갇ve dividends on the Series B Preferred Shares have been or contemporaneously are declared and paid, or declared and a sum suﬃcient for the payment thereof is set apart for such payment on the Series B Preferred Shares for all dividend periods ending on or prior to the date of such ac갇on with respect to our Common Shares or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series B Preferred Shares. (e) When dividends are not paid in full (or a sum suﬃcient for such full payment is not so set apart) upon the Series B Preferred Shares and the shares of any other series of Preferred Shares ranking on a parity as to dividends with the Series B Preferred Shares, all dividends declared upon the Series B Preferred Shares and any other series of Preferred Shares ranking on a parity as to dividends with the Series B Preferred Shares shall be declared pro rata so that the amount of dividends declared per share of Series B Preferred Shares and such other series of Preferred Shares shall in all cases bear to each other the 2 same ra갇o that accrued dividends per share on the Series B Preferred Shares and such other series of Preferred Shares (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Shares do not have a cumula갇ve dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series B Preferred Shares which may be in arrears. (f) Except as provided in the immediately preceding paragraph, unless full cumula갇ve dividends on the Series B Preferred Shares have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than dividends paid in Common Shares or other shares of beneﬁcial interest ranking junior to the Series B Preferred Shares as to dividends and upon liquida갇on) shall be declared or paid or set aside for payment, nor shall any other distribu갇on be declared or made upon the Common Shares or any other shares of beneﬁcial Interest of the Trust ranking junior to or on a parity with the Series B Preferred Shares as to dividends or upon liquida갇on, nor shall any Common Shares, or any other shares of beneﬁcial interest of the Trust ranking junior to or on a parity with the Series B Preferred Shares as to dividends or upon liquida갇on be redeemed, purchased or otherwise acquired for any considera갇on (or any moneys be paid to or made available for a sinking fund for the redemp갇on of any such shares) by the Trust (except by conversion into or exchange for other shares of beneﬁcial interest of the Trust ranking junior to the Series B Preferred Shares as to dividends and upon liquida갇on and except for the redemp갇on, purchase or acquisi갇on of “Shares‐in‐Trust” under the Declara갇on, which are intended to assist the Trust in qualifying as a REIT for federal income tax purposes). (g) Holders of the Series B Preferred Shares shall not be en갇tled to any dividend, whether payable in cash, property or shares of beneﬁcial interest in excess of full cumula갇ve dividends on the Series B Preferred Shares as provided above. Any dividend payment made on Series B Preferred Shares shall ﬁrst be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. 4. Liquida갇on Preference. (a) Upon any voluntary or involuntary liquida갇on, dissolu갇on or winding up of the aﬀairs of the Trust, the holders of Series B Preferred Shares then outstanding are en갇tled to be paid out of the assets of the Trust legally available for distribu갇on to its shareholders a liquida갇on preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribu갇on of assets is made to holders of Common Shares or any other class or series of shares of beneﬁcial interest of the Trust that ranks junior to the Series B Preferred Shares as to liquida갇on rights. A耀er payment of the full amount of the liquida갇ng distribu갇ons to which they are en갇tled, the holders of Series B Preferred Shares will have no right or claim to any of the remaining assets of the Trust. (b) In the event that, upon any such voluntary or involuntary liquida갇on, dissolu갇on or winding up, the available assets of the Trust are insuﬃcient to pay the amount of the liquida갇ng distribu갇ons on all outstanding Series B Preferred Shares and the corresponding amounts payable on all shares of other classes or series of shares of beneﬁcial interest of the Trust ranking on a parity with the Series B Preferred Shares in the distribu갇on of assets, then the holders of the Series B Preferred Shares and all other such classes or series of shares of beneﬁcial interest shall share ratably in any such distribu갇on of assets in propor갇on to the full liquida갇ng distribu갇ons to which they would otherwise be respec갇vely en갇tled. where, the amounts distributable in such circumstances shall be payable, shall be given by ﬁrst class mail, postage pre‐ paid, not less than 30 nor more (c) Wri姫en no갇ce of any such liquida갇on, dissolu갇on or winding up of the Trust, sta갇ng the payment date or dates when, and the place or places 3 than 60 days prior to the payment date stated therein, to each record holder of the Series B Preferred Shares at the respec갇ve addresses of such holders as the same shall appear on the stock transfer records of the Trust. (d) The consolida갇on, combina갇on or merger of the Trust with or into any other corpora갇on, trust or en갇ty or consolida갇on or merger of any other corpora갇on with or into the Trust, or the sale, lease or conveyance of all or substan갇ally all of the Trust’s assets, property or business or any statutory share exchange, shall not be deemed to cons갇tute a liquida갇on, dissolu갇on or winding up of the Trust. 5. Redemp갇on. (a) Op갇onal Redemp갇on. The Series B Preferred Shares are not redeemable prior to May 18, 2016, except as otherwise provided in this Sec갇on 5 and Sec갇on 6 below. On and a耀er May 18, 2016, the Trust, at its op갇on and upon not less than 30 nor more than 60 days’ wri姫en no갇ce, may redeem the Series B Preferred Shares, in whole or in part, at any 갇me or from 갇me to 갇me, for cash at a redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends thereon to the date ﬁxed for redemp갇on (except as provided in Sec갇on 5(c) below), without interest. If less than all of the outstanding Series B Preferred Shares is to be redeemed, the Series B Preferred Shares to be redeemed shall be selected pro rata (as nearly as may be prac갇cable without crea갇ng frac갇onal shares) or by lot or by any other equitable method determined by the Trust. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series B Preferred Shares would become a holder of a number of Series B Preferred Shares in excess of the Ownership Limit because such holder’s Series B Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series B Preferred Shares of such holder such that no holder will hold in excess of the Ownership Limit subsequent to such redemp갇on. (b) REIT Qualiﬁca갇on. In an eﬀort to ensure that the Trust remains qualiﬁed as a real estate investment trust (“ REIT”) for federal income tax purposes, the Series B Preferred Shares are, together with all other classes or series of shares of beneﬁcial interest of the Trust, subject in all respects to the provisions of Ar갇cle VII of the Declara갇on. Accordingly, pursuant to Ar갇cle VII of the Declara갇on, a purported Transfer (as deﬁned in Ar갇cle VII) of Series B Preferred Shares as a result of which any person would maintain Beneﬁcial Ownership (as deﬁned in Ar갇cle VII) of more than 9.9% of the outstanding Series B Preferred Shares will cause the number of Series B Preferred shares in excess of the Ownership Limit (rounded up to the nearest whole share) to be designated Shares‐in ‐Trust and in accordance with the provisions of Ar갇cle VII of the Declara갇on, be transferred to a Share Trust (as such term is deﬁned in the Declara갇on), and the Trust will have the right to purchase such Shares‐in ‐ Trust from the holder. Limita갇ons on Redemp갇on. Unless full cumula갇ve dividends on all Series B Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series B Preferred Shares shall be redeemed unless all outstanding Series B Preferred Shares are simultaneously redeemed, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series B Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series B Preferred Shares as to dividends and upon liquida갇on); provided, however , that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes or the purchase or acquisi갇on of Series B Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series B Preferred Shares. Payment of Dividends in Connec갇on with Redemp갇on. Immediately prior to any redemp갇on of Series B Preferred Shares, the Trust shall pay, in (c) (d) cash, any accumulated and unpaid dividends 4 to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series B Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series B Preferred Shares which are redeemed. (e) Procedures for Redemp갇on. (i) No갇ce of redemp갇on will be given (A) by publica갇on in the New York Times, Wall Street Journal or other newspaper of similar general circula갇on in the city of New York, such publica갇on to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemp갇on date, and (B) mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the redemp갇on date, addressed to the respec갇ve holders of record of the Series B Preferred Shares to be redeemed at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series B Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. may be listed or admi姫ed to trading, such no갇ce shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the number of Series B Preferred Shares to be redeemed; (D) the place or places where the Series B Preferred Shares are to be surrendered for payment of the redemp갇on price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemp갇on date. If less than all of the Series B Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series B Preferred Shares held by such holder to be redeemed. In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which Series B Preferred Shares If no갇ce of redemp갇on of any Series B Preferred Shares has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series B Preferred Shares so called for redemp갇on, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however , if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series B Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series B Preferred Shares to be redeemed shall surrender such Series B Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series B Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series B Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series B Preferred Shares represented by any such cer갇ﬁcate are redeemed, a new cer갇ﬁcate or cer갇ﬁcates shall be issued represen갇ng the unredeemed Series B Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series B Preferred Shares are held in book‐entry form through the facili갇es of The Depository Trust Company (“ DTC”), such no갇ce shall comply with applicable procedures of DTC. (ii) (iii) 5 The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series B Preferred Shares shall be irrevocable except that: (iv) (A) (f) (g) (a) earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, any balance of monies so deposited by the Trust and unclaimed by the holders of the Series B Preferred Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) Shares‐ In‐ Trust Provisions. The Series B Preferred Shares are subject to the provisions of Ar갇cle VII of the Declara갇on, including, without limita갇on, the provision for the purchase of Shares‐in ‐Trust. In addi갇on to the purchase right set forth in Ar갇cle VII of the Declara갇on, Shares‐in ‐Trust issued upon exchange of Series B Preferred Shares pursuant to such Ar갇cle VII may be redeemed, in whole or in part, at any 갇me when outstanding Series B Preferred Shares are being redeemed, for cash, at a redemp갇on price of $25.00 per Series B Preferred Share, plus all accrued and unpaid dividends on the Series B Preferred Shares that were exchanged for such Shares‐ in ‐Trust, through the date of such exchange, without interest. If the Trust elects to redeem Shares‐in ‐Trust pursuant to the redemp갇on right set forth in the preceding sentence, such Shares‐in ‐Trust shall be redeemed in such propor갇on and in accordance with such procedures as Series B Preferred Shares are being redeemed. status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. Status of Redeemed Shares. Any Series B Preferred Shares that shall at any 갇me have been redeemed shall, a耀er such redemp갇on, have the 6. Special Op갇onal Redemp갇on. 30 nor more than 60 days in advance of the date ﬁxed for redemp갇on, may redeem the Series B Preferred Shares, in whole or in part, within 120 days a耀er the ﬁrst date on which such Change of Control occurred, at a cash redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends to the date ﬁxed for redemp갇on (the “Special Op갇onal Redemp갇on Right”). Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b)(ii) below), the Trust, at its op갇on and upon giving no갇ce not less than (b) A “Change of Control” is when, a耀er the original issuance of the Series B Preferred Shares, the following have occurred and are con갇nuing: (i) the acquisi갇on by any person, including any syndicate or group deemed to be a “person” under Sec갇on 13(d)(3) of the Securi갇es Exchange Act of 1934, as amended, of beneﬁcial ownership, directly or indirectly, through a purchase, merger or other acquisi갇on transac갇on or series of purchases, mergers or other acquisi갇on transac갇ons of shares of beneﬁcial interest of the Trust en갇tling such person to exercise more than 50% of the total vo갇ng power of all shares of beneﬁcial interest of the Trust en갇tled to vote generally in elec갇ons of trustees (except that such person will be deemed to have beneﬁcial ownership of all securi갇es that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condi갇on); and 6 (d) (e) following the closing of any transac갇on referred to in Sec갇on 6(b)(i) above, neither the Trust nor the acquiring or surviving en갇ty has a class of common securi갇es (or American Depositary Receipts represen갇ng such securi갇es) listed on the New York Stock Exchange (the “NYSE”), the NYSE Amex Equi갇es (the “NYSE Amex”), or the NASDAQ Stock Market (“ NASDAQ”) or listed or quoted on an exchange or quota갇on system that is a successor to the NYSE, the NYSE Amex or NASDAQ. (ii) (c) If fewer than all of the outstanding Series B Preferred Shares are to be redeemed pursuant to the Special Op갇onal Redemp갇on Right, the shares to be redeemed shall be selected pro rata (as nearly as prac갇cable without crea갇ng frac갇onal shares) or by lot or in such other equitable method prescribed by the Trust. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series B Preferred Shares would become a holder of a number of Series B Preferred Shares in excess of the Share Ownership Limit because such holder’s Series B Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series B Preferred Shares of such holder such that no holder will hold in excess of the Share Ownership Limit subsequent to such redemp갇on. Limita갇ons on Special Op갇onal Redemp갇on. Unless full cumula갇ve dividends on all Series B Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series B Preferred Shares shall be redeemed pursuant to the Special Op갇onal Redemp갇on Right unless all outstanding Series B Preferred Shares are simultaneously redeemed pursuant to the Special Op갇onal Redemp갇on Right, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series B Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series B Preferred Shares as to dividends and upon liquida갇on); provided, however , that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes or the purchase or acquisi갇on of Series B Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series B Preferred Shares. Payment of Dividends in Connec갇on with Special Op갇onal Redemp갇on. Immediately prior to any redemp갇on of Series B Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right, the Trust shall pay, in cash, any accumulated and unpaid dividends to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series B Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series B Preferred Shares which are redeemed. (f) Procedures for Special Op갇onal Redemp갇on. (i) No갇ce of redemp갇on will be given (A) by publica갇on in the New York Times, Wall Street Journal or other newspaper of similar general circula갇on in the city of New York, such publica갇on to be made once a week for two successive weeks commencing not less than 30 nor more than 60 days prior to the redemp갇on date, and (B) mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the redemp갇on date, addressed to the respec갇ve holders of record of the Series B Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series B Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. 7 (ii) In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which the Series B Preferred Shares may be listed or admi姫ed to trading, the redemp갇on no갇ce contemplated by this Sec갇on 6 shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the number of Series B Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right; (D) the place or places where the cer갇ﬁcates for the Series B Preferred Shares, to the extent Series B Preferred Shares are cer갇ﬁcated, are to be surrendered (if so required in the no갇ce) for payment of the redemp갇on price; (E) a brief descrip갇on of the transac갇on or transac갇ons cons갇tu갇ng such Change of Control and that holders of the Series B Preferred Shares to which the no갇ce relates will not be able to tender such Series B Preferred Shares for conversion in connec갇on with the Change of Control and each Series B Preferred Share tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemp갇on will be redeemed on the related redemp갇on date instead of converted on the Change of Control Conversion Date; and (F) that distribu갇ons on the Series B Preferred Shares to be redeemed will cease to accumulate on such redemp갇on date. If fewer than all of the Series B Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series B Preferred Shares held by such holder to be redeemed pursuant to the Special Op갇onal Redemp갇on Right. (iii) If no갇ce of redemp갇on of any Series B Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series B Preferred Shares so called for redemp갇on pursuant to the Special Op갇onal Redemp갇on Right, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however , if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series B Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series B Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right shall surrender such Series B Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series B Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series B Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series B Preferred Shares represented by any such cer갇ﬁcate are redeemed pursuant to the Special Op갇onal Redemp갇on Right, a new cer갇ﬁcate or cer갇ﬁcates shall be issued represen갇ng the unredeemed Series B Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series B Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. Special Op갇onal Redemp갇on Right shall be irrevocable except that: (iv) The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series B Preferred Shares pursuant to the earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and (A) the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, any balance of monies so deposited by the Trust and unclaimed by the holders of the Series B Preferred Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) 8 (g) (a) Redemp갇on Right shall, a耀er such redemp갇on, have the status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. Status of Redeemed Shares. Any Series B Preferred Shares that shall at any 갇me have been redeemed pursuant to the Special Op갇onal 7. Change of Control Rights. The Series B Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except upon the occurrence of a Change of Control as provided in this Sec갇on 7. Change of Control. Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b) above), each holder of Series B Preferred Shares shall have the right, unless, prior to the Change of Control Conversion Date (as deﬁned in Sec갇on 7(b)(v) hereof), the Trust provides no갇ce of its elec갇on to redeem the Series B Preferred Shares pursuant to the redemp갇on right set forth in Sec갇on 5 above or Special Op갇onal Redemp갇on Right set forth in Sec갇on 6 above, to convert some or all of the Series B Preferred Shares held by such holder (the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number Common Shares, per Series B Preferred Share to be converted (the “Common Share Conversion Considera갇on”) equal to the lesser of: (A) the quo갇ent obtained by dividing (i) the sum of (x) the $25.00 liquida갇on preference plus (y) the amount of any accrued and unpaid distribu갇ons to the Change of Control Conversion Date (unless the Change of Control Conversion Date is a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no addi갇onal amount for such accrued and unpaid distribu갇on will be included in such sum) by (ii) the Common Share Price (as deﬁned in Sec갇on 7(b)(vi) hereof); and (B) 8.2237 Common Shares (the “Share Cap”), subject to the immediately succeeding paragraph. (i) The Share Cap is subject to pro rata adjustments for any share splits (including those eﬀected pursuant to a Common Share distribu갇on), subdivisions or combina갇ons (in each case, a “Share Split”) with respect to Common Shares. The adjusted Share Cap as the result of a Share Split shall be the number of Common Shares that is equivalent to the product obtained by mul갇plying (A) the Share Cap in eﬀect immediately prior to such Share Split by (B) a frac갇on, the numerator of which is the number of Common Shares outstanding a耀er giving eﬀect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split. (ii) (iii) equivalent Alterna갇ve Conversion Considera갇on (as deﬁned below), as applicable) issuable in connec갇on with the exercise of the Change of Control Conversion Right shall not exceed 37,829,020 Common Shares (or equivalent Alterna갇ve Conversion Considera갇on, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap. For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of Common Shares (or or assets (including any combina갇on thereof) (the “Alterna갇ve Form Considera갇on”), a holder of Series B Preferred Shares shall receive upon conversion of such Series B Preferred Shares the kind and amount of Alterna갇ve Form Considera갇on which such holder of Series B Preferred Shares would have owned or been en갇tled to receive upon the Change of Control had such holder of Series B Preferred Shares held a number of Common Shares equal to the Common Share Conversion Considera갇on immediately prior to the eﬀec갇ve 갇me of the Change of Control (the “Alterna갇ve Conversion Considera갇on”; and the Common Share Conversion Considera갇on or the Alterna갇ve Conversion Considera갇on, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Considera갇on”). In the case of a Change of Control pursuant to which Common Shares shall be converted into cash, securi갇es or other property 9 Change of Control, the considera갇on that the holders of Series B Preferred Shares shall receive shall be the form of considera갇on elected by the holders of the Common Shares who par갇cipate in the determina갇on (based on the weighted average of elec갇ons) and shall be subject to any limita갇ons to which all holders of Common Shares are subject, including, without limita갇on, pro rata reduc갇ons applicable to any por갇on of the considera갇on payable in the Change of Control. In the event that holders of Common Shares have the opportunity to elect the form of considera갇on to be received in the Series B Preferred Shares shall be converted pursuant to the Change of Control Conversion Right, which shall be a business day set forth in the no갇ce of Change of Control provided in accordance with Sec갇on 7(d) below that is no less than 20 days nor more than 35 days a耀er the date on which the Trust provides such no갇ce. The “Change of Control Conversion Date” shall be a date ﬁxed by the Board of Trustees, in its sole discre갇on, as the date the received in the Change of Control by holders of Common Shares is solely cash, and (ii) the average of the closing prices per Common Share on the NYSE for the ten consecu갇ve trading days immediately preceding, but not including, the eﬀec갇ve date of the Change of Control, if the considera갇on to be received in the Change of Control by holders of Common Shares is other than solely cash. The “Common Share Price” shall be (i) the amount of cash considera갇on per Common Share, if the considera갇on to be (iv) (v) (vi) en갇tled to receive the cash value of such frac갇onal shares based on the Common Share Price. No frac갇onal Common Shares shall be issued upon the conversion of Series B Preferred Shares. In lieu of frac갇onal shares, holders shall be Within 15 days following the occurrence of a Change of Control, a no갇ce of occurrence of the Change of Control, describing the resul갇ng Change of Control Conversion Right, shall be delivered to the holders of record of the Series B Preferred Shares at their addresses as they appear on the Trust’s share transfer records and no갇ce shall be provided to the Trust’s transfer agent. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the conversion of any Series B Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. Each no갇ce shall state: (i) the events cons갇tu갇ng the Change of Control; (ii) the date of the Change of Control; (iii) the Change of Control Conversion Date; (iv) the method and period for calcula갇ng the Common Share Price; (v) that if, prior to the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem all or any por갇on of the Series B Preferred Shares, the holder will not be able to convert Series B Preferred Shares and such Series B Preferred Shares shall be redeemed on the related redemp갇on date, even if they have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vi) if applicable, the type and amount of Alterna갇ve Conversion Considera갇on en갇tled to be received per Series B Preferred Share; (vii) the name and address of the paying agent and the conversion agent; and (viii) the procedures that the holders of Series B Preferred Shares must follow to exercise the Change of Control Conversion Right. or such other news or press organiza갇on as is reasonably calculated to broadly disseminate the relevant informa갇on to the public, or post no갇ce on the Trust’s website, in any event prior to the opening of business on the ﬁrst business day following any date on which the Trust provides no갇ce pursuant to Sec갇on 7(c) above to the holders of Series B Preferred Shares. The Trust shall issue a press release for publica갇on on the Dow Jones & Company, Inc., Business Wire, PR Newswire, Bloomberg Business News transfer agent, on or before the close of business on the business day prior to the Change of Control Conversion Date, the cer갇ﬁcates evidencing the Series B In order to exercise the Change of Control Conversion Right, a holder of Series B Preferred Shares shall be required to deliver to the Trust’s (b) (c) (d) (e) 10 Preferred Shares, to the extent such shares are cer갇ﬁcated, to be converted, duly endorsed for transfer, together with a wri姫en conversion no갇ce. Such conversion no갇ce shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of Series B Preferred Shares to be converted; and (iii) that terms of the Series B Preferred Shares pursuant to which the Series B Preferred Shares are to be converted. Notwithstanding the foregoing, if the Series B Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. (f) Holders of Series B Preferred Shares may withdraw any no갇ce of exercise of a Change of Control Conversion Right (in whole or in part) by a wri姫en no갇ce of withdrawal delivered to the Trust’s transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The no갇ce of withdrawal must state: (i) the number of withdrawn Series B Preferred Shares; (ii) if cer갇ﬁcated Series B Preferred Shares have been issued, the cer갇ﬁcate numbers of the withdrawn Series B Preferred Shares; and (iii) the number of Series B Preferred Shares, if any, which remain subject to the conversion no갇ce. Notwithstanding the foregoing, if the Series B Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. (g) Series B Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion no갇ce has not been properly withdrawn shall be converted into the applicable Conversion Considera갇on in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the close of business on the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem such Series B Preferred Shares, whether pursuant to its Redemp갇on Right or Special Op갇onal Redemp갇on Right. If the Trust elects to redeem Series B Preferred Shares that would otherwise be converted into the applicable Conversion Considera갇on on a Change of Control Conversion Date, such Series B Preferred Shares shall not be so converted and the holders of such shares shall be en갇tled to receive on the applicable redemp갇on date $25.00 per share, plus any accrued and unpaid distribu갇ons thereon to, but not including, the redemp갇on date. The Trust shall deliver the applicable Conversion Considera갇on no later than the third business day following the Change of Control Conversion convert such Series B Preferred Shares into Common Shares to the extent that receipt of such Common Shares would cause the holder of such Common Shares (or any other person) to Beneﬁcially Own or Construc갇vely Own, within the meaning of the Declara갇on, Common Shares of the Trust in excess of the Share Ownership Limit, as such term is deﬁned in the Declara갇on, as applicable. Limita갇ons on Conversion. Notwithstanding anything to the contrary contained herein, no holder of Series B Preferred Shares will be en갇tled to Holders of the Series B Preferred Shares will not have any vo갇ng rights, except as set forth below or as otherwise from 갇me to 갇me required by Whenever dividends on any Series B Preferred Shares shall be in arrears for six or more quarterly periods, whether or not consecu갇ve (a “Preferred Dividend Default”), the holders of Series B Preferred Shares (vo갇ng separately as a class with the holders of all other series of Preferred Shares ranking on a parity with the Series B Preferred Shares as to dividends or upon liquida갇on (“ Parity Preferred”) upon which like vo갇ng rights have been conferred and are exercisable) will be en갇tled to vote for the elec갇on of a total of two trustees of the Trust (the “Preferred Share Trustees”) at a special mee갇ng of the shareholders called by the holders of record of at least 20% of the Series B Preferred Shares or the holders of 20% of any other series of Parity Preferred so in arrears (unless such request is received less than 90 days before the 11 Date. (h) (i) 8. Vo갇ng Rights. law. (a) (b) date ﬁxed for the next annual or special mee갇ng of shareholders), and at each subsequent annual mee갇ng un갇l all dividends accrued on such Series B Preferred Shares for the past dividend periods shall have been fully paid or declared and a sum suﬃcient for the payment thereof set aside for payment. (c) If and when all accumulated dividends on the Series B Preferred Shares shall have been paid in full or declared and set aside for payment in full, the holders of Series B Preferred Shares shall be divested of the vo갇ng rights set forth in Sec갇on 8(b) hereof (subject to reves갇ng in the event of each and every Preferred Dividend Default) and, if all accumulated dividends have been paid in full or declared and set aside for payment in full on all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable, the term of oﬃce of each Preferred Share Trustee so elected shall terminate. Any Preferred Share Trustee may be removed at any 갇me with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series B Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng separately as a class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). So long as a Preferred Dividend Default shall con갇nue, any vacancy in the oﬃce of a Preferred Share Trustee may be ﬁlled by wri姫en consent of the Preferred Share Trustee remaining in oﬃce, or if none remains in oﬃce, by a vote of the holders of record of a majority of the outstanding Series B Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng separately as a class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). The Preferred Share Trustees shall each be en갇tled to one vote per trustee on any ma姫er. (d) So long as any Series B Preferred Shares remain outstanding, the Trust shall not, without the aﬃrma갇ve vote or consent of the holders of at least two‐thirds of the Series B Preferred Shares outstanding at the 갇me, given in person or by proxy, either in wri갇ng or at a mee갇ng (vo갇ng separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of shares of beneﬁcial interest ranking senior to the Series B Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up or reclassify any authorized shares of beneﬁcial interest of the Trust into any such shares, or create, authorize or issue any obliga갇on or security conver갇ble into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Declara갇on, whether by merger, consolida갇on or otherwise, so as to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series B Preferred Shares or the holders thereof; provided, however , that with respect to the occurrence of any event set forth in (ii) above, the occurrence of any such event will not be deemed to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series B Preferred Shares or the holders thereof so long as the Series B Preferred Shares remain outstanding with the terms thereof materially unchanged or, if the Trust is not the surviving en갇ty in such transac갇on, are exchanged for a security of the surviving en갇ty with terms that are materially the same as the Series B Preferred Shares, the occurrence of any such event shall not be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers of the holders of the Series B Preferred Shares and; provided, further , that (x) any increase in the amount of the authorized Common Shares or Preferred Shares or the crea갇on or issuance of any other series of Common Shares or Preferred Shares, in each case ranking on a parity with or junior to the Series B Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up, (y) any change to the number or classiﬁca갇on of our trustees, or (z) any amendment to Ar갇cle VII of the Declara갇on rela갇ng to Shares‐In‐Trust, the Ownership Limit or any other ma姫er described therein of any type or nature shall in no event be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers so long as a耀er such amendment any single holder may maintain “beneﬁcial ownership” (as deﬁned in Ar갇cle VII prior to or a耀er such amendment) 9.9% of the outstanding Series B Preferred Shares and 9.9% of any other class or series of shares of beneﬁcial interest without viola갇ng the Ownership Limit. 12 9. 10. (e) The foregoing vo갇ng provisions will not apply if, at or prior to the 갇me when the act with respect to which such vote would otherwise be required to be eﬀected, all outstanding Series B Preferred Shares shall have been redeemed or called for redemp갇on upon proper no갇ce and suﬃcient funds shall have been deposited in trust to eﬀect such redemp갇on. Conversion. Except as set forth in Sec갇on 7 above upon the occurrence of a Change of Control, the Series B Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except that the Series B Preferred Shares will automa갇cally be exchanged by the Trust for Shares‐In‐Trust, in accordance with Ar갇cle VII of the Declara갇on in the same manner that Common Shares are exchanged for Shares‐In‐Trust pursuant thereto, in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes. Informa갇on Rights. During any period in which the Trust is not subject to the repor갇ng requirements of Sec갇on 13 or 15(d) of the Exchange Act and any Series B Preferred Shares are outstanding, the Trust will: (a) transmit by mail or other permissible means under the Exchange Act to all holders of Series B Preferred Shares as their names and addresses appear in the Trust’s record books and without cost to such holders, copies of the Annual Reports on Form 10‐K and Quarterly Reports on Form 10‐Q that the Trust would have been required to ﬁle with the SEC pursuant to Sec갇on 13 or 15(d) of the Exchange Act if the Trust were subject thereto (other than any exhibits that would have been required); and (b) within 15 days following wri姫en request, supply copies of such reports to any prospec갇ve holder of the Series B Preferred Shares. The Trust will mail (or otherwise provide) the reports to the holders of Series A Preferred Shares within 15 days a耀er the respec갇ve dates by which the Trust would have been required to ﬁle such reports with the SEC if the Trust was subject to Sec갇on 13 or 15(d) of the Exchange Act. THIRD: The Series B Preferred Shares have been classiﬁed and designated by the Board of Trustees under the authority contained in the Declara갇on. FOURTH: These Ar갇cles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. FIFTH: The undersigned President and Chief Opera갇ng Oﬃcer acknowledges these Ar갇cles Supplementary to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned President and Chief Opera갇ng Oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. [Signature page follows.] 13 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles Supplementary to be executed on behalf of the Trust by its President and Chief Opera갇ng Oﬃcer and a姫ested to by its Assistant Secretary this 17th day of May 2011. Date A姫est: By: /s/ Ashish R. Parikh Name: Ashish R. Parikh Title: Assistant Secretary By: /s/ Neil H. Shah Name: Neil H. Shah Title: President and Chief Opera갇ng Oﬃcer Articles Supplementary Series B Preferred Shares HERSHA HOSPITALITY TRUST ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF 6.875% SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES Pursuant to Sec갇on 8‐203 of Title 8 of the Corpora갇ons and Associa갇ons Ar갇cle of the Annotated Code of Maryland Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of the State of Maryland (“ SDAT”) that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees of the Trust by Ar갇cle VI of its Amended and Restated Declara갇on of Trust (which, as herea耀er restated or amended from 갇me to 갇me, are together with these Ar갇cles Supplementary herein referred to as the “Declara갇on”), the Board of Trustees has duly classiﬁed and designated 3,000,000 authorized but unissued preferred shares of beneﬁcial interest, par value $.01 per share, of the Trust as 6.875% Series C Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share (the “Series C Preferred Shares”), and has provided for the issuance of such series. Capitalized terms used herein and not otherwise deﬁned shall have the meanings given to them in the Declara갇on. SECOND: Subject in all cases to the provisions of the Declara갇on, including without limita갇on, Ar갇cle VII with respect to limita갇ons on the transfer and ownership of shares of beneﬁcial interest of the Trust, the Series C Preferred Shares shall have the preferences, conversion and other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends, qualiﬁca갇ons and terms and condi갇ons of redemp갇on as set forth below: 1. 2. Preferred Shares of Beneﬁcial Interest” is hereby established. The number of Series C Preferred Shares hereby authorized shall be 3,000,000. Designa갇on and Number. A series of preferred shares of beneﬁcial interest, par value $.01 per share, designated the “6.875% Series C Cumula갇ve Redeemable Rank. The Series C Preferred Shares shall, with respect to dividend rights and rights upon liquida갇on, dissolu갇on or winding up of the Trust, rank (a) senior to all classes or series of Common Shares of the Trust and to all equity securi갇es issued by the Trust ranking junior to such Series C Preferred Shares; (b) on a parity with the Trust’s 8.00% Series A Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share (the “Series A Preferred Shares”), the Trust’s 8.00% Series B Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $.01 per share (the “Series B Preferred Shares”), and all other equity securi갇es issued by the Trust, the terms of which speciﬁcally provide that such equity securi갇es rank on a parity with the Series C Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up of the Trust; and (c) junior to (i) all indebtedness of the Trust and (ii) equity securi갇es issued by the Trust, the terms of which speciﬁcally provide that such equity securi갇es rank senior to the Series C Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up of the Trust. The term “equity securi갇es” shall not include conver갇ble debt securi갇es. 1 3. Dividends. (a) Holders of the then outstanding Series C Preferred Shares shall be en갇tled to receive, when and as declared by the Board of Trustees, out of funds legally available for the payment of dividends, cumula갇ve cash dividends at the rate of 6.875% per year of the $25.00 liquida갇on preference (equivalent to a ﬁxed annual amount of $1.71875 per share). Dividends on the Series C Preferred Shares are payable quarterly in arrears on January 15th , April 15th , July 15th and October 15th of each year and, if such day is not a business day, the next succeeding business day, commencing on April 15, 2013 (each, a “Dividend Payment Date”). The quarterly period beginning on, and including, each Dividend Payment Date and ending on, but excluding, the next succeeding Dividend Payment Date is referred to herein as a “dividend period” and the dividend which shall accrue in respect of any full dividend period shall be $0.4296875 regardless of the actual number of days in such full dividend period. The ﬁrst dividend will be for less than a full quarter and will cover the period from, and including, March 6, 2013 to, but excluding, April 15, 2013. Such dividend and any dividend payable on the Series C Preferred Shares for any par갇al dividend period will be computed on the basis of a 360‐day year consis갇ng of twelve 30‐day months. Dividends will be payable to holders of record as they appear in the stock records of the Trust at the close of business on the applicable record date, which shall be the ﬁrst day of the calendar month in which the applicable Dividend Payment Date falls or on such other date designated by the Board of Trustees of the Trust as the record date for the payment of dividends on the Series C Preferred Shares that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). (b) No dividends on Series C Preferred Shares shall be declared by the Board of Trustees of the Trust or paid or set apart for payment by the Trust at such 갇me as the terms and provisions of any agreement of the Trust, including any agreement rela갇ng to its indebtedness, (i) prohibits such declara갇on, payment or se駫ng apart for payment of dividends or (ii) provides that such declara갇on, payment or se駫ng apart for payment of dividends would cons갇tute a breach thereof or a default thereunder, or if such declara갇on or payment shall be restricted or prohibited by law. (c) Notwithstanding the foregoing, dividends on the Series C Preferred Shares shall accrue whether or not the terms and provisions set forth in Sec갇on 3(b) hereof at any 갇me prohibit the current payment of dividends, whether or not the Trust has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. (d) Accrued but unpaid dividends on the Series C Preferred Shares will accumulate as of the Dividend Payment Date on which they ﬁrst become payable. Except as provided in Sec갇on 3(e) below, no dividends will be declared or paid or set apart for payment, and no distribu갇on will be made on any shares of beneﬁcial interest in the Trust or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series C Preferred Shares (other than a dividend that consists of the Trust’s Common Shares or shares of any other class of shares of beneﬁcial interest ranking junior to the Series C Preferred Shares as to dividends and upon liquida갇on), for any period unless full cumula갇ve dividends on the Series C Preferred Shares have been or contemporaneously are declared and paid, or declared and a sum suﬃcient for the payment thereof is set apart for such payment on the Series C Preferred Shares for all dividend periods ending on or prior to the date of such ac갇on with respect to our Common Shares or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series C Preferred Shares. (e) When dividends are not paid in full (or a sum suﬃcient for such full payment is not so set apart) upon the Series C Preferred Shares and the shares of any other series of Preferred Shares ranking on a parity as to dividends with the Series C Preferred Shares, all dividends declared upon the Series C Preferred Shares and any other series of Preferred Shares ranking on a parity as to dividends with the Series C Preferred Shares shall be declared pro rata so that the amount of dividends declared per share of 2 Series C Preferred Shares and such other series of Preferred Shares shall in all cases bear to each other the same ra갇o that accrued dividends per share on the Series C Preferred Shares and such other series of Preferred Shares (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Shares do not have a cumula갇ve dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series C Preferred Shares which may be in arrears. (f) Except as provided in the immediately preceding paragraph, unless full cumula갇ve dividends on the Series C Preferred Shares have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than dividends paid in Common Shares or other shares of beneﬁcial interest ranking junior to the Series C Preferred Shares as to dividends and upon liquida갇on) shall be declared or paid or set aside for payment, nor shall any other distribu갇on be declared or made upon the Common Shares or any other shares of beneﬁcial Interest of the Trust ranking junior to or on a parity with the Series C Preferred Shares as to dividends or upon liquida갇on, nor shall any Common Shares, or any other shares of beneﬁcial interest of the Trust ranking junior to or on a parity with the Series C Preferred Shares as to dividends or upon liquida갇on be redeemed, purchased or otherwise acquired for any considera갇on (or any moneys be paid to or made available for a sinking fund for the redemp갇on of any such shares) by the Trust (except by conversion into or exchange for other shares of beneﬁcial interest of the Trust ranking junior to the Series C Preferred Shares as to dividends and upon liquida갇on and except for the redemp갇on, purchase or acquisi갇on of “Shares‐in‐Trust” under the Declara갇on, which are intended to assist the Trust in qualifying as a REIT for federal income tax purposes). (g) Holders of the Series C Preferred Shares shall not be en갇tled to any dividend, whether payable in cash, property or shares of beneﬁcial interest in excess of full cumula갇ve dividends on the Series C Preferred Shares as provided above. Any dividend payment made on Series C Preferred Shares shall ﬁrst be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. 4. Liquida갇on Preference. (a) Upon any voluntary or involuntary liquida갇on, dissolu갇on or winding up of the aﬀairs of the Trust, the holders of Series C Preferred Shares then outstanding are en갇tled to be paid out of the assets of the Trust legally available for distribu갇on to its shareholders a liquida갇on preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribu갇on of assets is made to holders of Common Shares or any other class or series of shares of beneﬁcial interest of the Trust that ranks junior to the Series C Preferred Shares as to liquida갇on rights. A耀er payment of the full amount of the liquida갇ng distribu갇ons to which they are en갇tled, the holders of Series C Preferred Shares will have no right or claim to any of the remaining assets of the Trust. (b) In the event that, upon any such voluntary or involuntary liquida갇on, dissolu갇on or winding up of the Trust , the available assets of the Trust are insuﬃcient to pay the amount of the liquida갇ng distribu갇ons on all outstanding Series C Preferred Shares and the corresponding amounts payable on all shares of other classes or series of shares of beneﬁcial interest of the Trust ranking on a parity with the Series C Preferred Shares in the distribu갇on of assets, then the holders of the Series C Preferred Shares and all other such classes or series of shares of beneﬁcial interest shall share ratably in any such distribu갇on of assets in propor갇on to the full liquida갇ng distribu갇ons to which they would otherwise be respec갇vely en갇tled. 3 (c) Wri姫en no갇ce of any such liquida갇on, dissolu갇on or winding up of the Trust, sta갇ng the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by ﬁrst class mail, postage pre‐paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series C Preferred Shares at the respec갇ve addresses of such holders as the same shall appear on the stock transfer records of the Trust. (d) The consolida갇on, combina갇on or merger of the Trust with or into any other corpora갇on, trust or en갇ty or consolida갇on or merger of any other corpora갇on with or into the Trust, or the sale, lease or conveyance of all or substan갇ally all of the Trust’s assets, property or business or any statutory share exchange, shall not be deemed to cons갇tute a liquida갇on, dissolu갇on or winding up of the Trust. 5. Redemp갇on. (a) Op갇onal Redemp갇on. The Series C Preferred Shares are not redeemable prior to March 6, 2018, except as otherwise provided in this Sec갇on 5 and Sec갇on 6 below. On and a耀er March 6, 2018, the Trust, at its op갇on and upon not less than 30 nor more than 60 days’ wri姫en no갇ce, may redeem the Series C Preferred Shares, in whole or in part, at any 갇me or from 갇me to 갇me, for cash at a redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends thereon to the date ﬁxed for redemp갇on (except as provided in Sec갇on 5(c) below), without interest. If less than all of the outstanding Series C Preferred Shares is to be redeemed, the Series C Preferred Shares to be redeemed shall be selected pro rata (as nearly as may be prac갇cable without crea갇ng frac갇onal shares) or by lot or by any other equitable method determined by the Trust. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series C Preferred Shares would become a holder of a number of Series C Preferred Shares in excess of the Ownership Limit because such holder’s Series C Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series C Preferred Shares of such holder such that no holder will hold in excess of the Ownership Limit subsequent to such redemp갇on. (b) REIT Qualiﬁca갇on. In an eﬀort to ensure that the Trust remains qualiﬁed as a real estate investment trust (“ REIT”) for federal income tax purposes, the Series C Preferred Shares are, together with all other classes or series of shares of beneﬁcial interest of the Trust, subject in all respects to the provisions of Ar갇cle VII of the Declara갇on. Accordingly, pursuant to Ar갇cle VII of the Declara갇on, a purported Transfer (as deﬁned in Ar갇cle VII) of Series C Preferred Shares as a result of which any person would maintain Beneﬁcial Ownership (as deﬁned in Ar갇cle VII) of more than 9.9% of the outstanding Series C Preferred Shares will cause the number of Series C Preferred shares in excess of the Ownership Limit (rounded up to the nearest whole share) to be designated Shares‐in ‐Trust and in accordance with the provisions of Ar갇cle VII of the Declara갇on, be transferred to a Share Trust (as such term is deﬁned in the Declara갇on), and the Trust will have the right to purchase such Shares‐in ‐ Trust from the holder. (c) Limita갇ons on Redemp갇on. Unless full cumula갇ve dividends on all Series C Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series C Preferred Shares shall be redeemed unless all outstanding Series C Preferred Shares are simultaneously redeemed, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series C Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series C Preferred Shares as to dividends and upon liquida갇on); provided, however , that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes or the purchase or acquisi갇on of Series C Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series C Preferred Shares. 4 (d) Payment of Dividends in Connec갇on with Redemp갇on. Immediately prior to any redemp갇on of Series C Preferred Shares, the Trust shall pay, in cash, any accumulated and unpaid dividends to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series C Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series C Preferred Shares which are redeemed. (e) Procedures for Redemp갇on. redemp갇on date, addressed to the respec갇ve holders of record of the Series C Preferred Shares to be redeemed at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series C Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. No갇ce of redemp갇on will be mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the may be listed or admi姫ed to trading, such no갇ce shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the number of Series C Preferred Shares to be redeemed; (D) the place or places where the Series C Preferred Shares are to be surrendered for payment of the redemp갇on price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemp갇on date. If less than all of the Series C Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series C Preferred Shares held by such holder to be redeemed. In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which Series C Preferred Shares If no갇ce of redemp갇on of any Series C Preferred Shares has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series C Preferred Shares so called for redemp갇on, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series C Preferred Shares, such Series C Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however , if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series C Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series C Preferred Shares to be redeemed shall surrender such Series C Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series C Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series C Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series C Preferred Shares represented by any such cer갇ﬁcate are redeemed, a new cer갇ﬁcate or cer갇ﬁcates shall be issued represen갇ng the unredeemed Series C Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series C Preferred Shares are held in book‐entry form through the facili갇es of The Depository Trust Company (“ DTC”), such no갇ce shall comply with applicable procedures of DTC. (i) (ii) (iii) 5 The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series C Preferred Shares shall be irrevocable except that: (iv) (A) (f) (g) (a) earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, any balance of monies so deposited by the Trust and unclaimed by the holders of the Series C Preferred Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) Shares‐ In‐Trust Provisions. The Series C Preferred Shares are subject to the provisions of Ar갇cle VII of the Declara갇on, including, without limita갇on, the provision for the purchase of Shares‐in‐Trust. In addi갇on to the purchase right set forth in Ar갇cle VII of the Declara갇on, Shares‐in‐Trust issued upon exchange of Series C Preferred Shares pursuant to such Ar갇cle VII may be redeemed, in whole or in part, at any 갇me when outstanding Series C Preferred Shares are being redeemed, for cash, at a redemp갇on price of $25.00 per Series C Preferred Share, plus all accrued and unpaid dividends on the Series C Preferred Shares that were exchanged for such Shares‐ in‐Trust, through the date of such exchange, without interest. If the Trust elects to redeem Shares‐in‐Trust pursuant to the redemp갇on right set forth in the preceding sentence, such Shares‐in ‐Trust shall be redeemed in such propor갇on and in accordance with such procedures as Series C Preferred Shares are being redeemed. status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. Status of Redeemed Shares. Any Series C Preferred Shares that shall at any 갇me have been redeemed shall, a耀er such redemp갇on, have the 6. Special Op갇onal Redemp갇on. 30 nor more than 60 days in advance of the date ﬁxed for redemp갇on, may redeem the Series C Preferred Shares, in whole or in part, within 120 days a耀er the ﬁrst date on which such Change of Control occurred, at a cash redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends to the date ﬁxed for redemp갇on (the “Special Op갇onal Redemp갇on Right”). Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b)(ii) below), the Trust, at its op갇on and upon giving no갇ce not less than (b) A “Change of Control” is when, a耀er the original issuance of the Series C Preferred Shares, the following have occurred and are con갇nuing: (i) the acquisi갇on by any person, including any syndicate or group deemed to be a “person” under Sec갇on 13(d)(3) of the Securi갇es Exchange Act of 1934, as amended, of beneﬁcial ownership, directly or indirectly, through a purchase, merger or other acquisi갇on transac갇on or series of purchases, mergers or other acquisi갇on transac갇ons of shares of beneﬁcial interest of the Trust en갇tling such person to exercise more than 50% of the total vo갇ng power of all shares of beneﬁcial interest of the Trust en갇tled to vote generally in elec갇ons of trustees (except that such person will be deemed to have beneﬁcial ownership of all securi갇es that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condi갇on); and 6 (d) (e) (ii) following the closing of any transac갇on referred to in Sec갇on 6(b)(i) above, neither the Trust nor the acquiring or surviving en갇ty has a class of common securi갇es (or American Depositary Receipts represen갇ng such securi갇es) listed on the New York Stock Exchange (the “NYSE”), the NYSE MKT LLC (the “NYSE MKT”) or the NASDAQ Stock Market (“ NASDAQ”), or listed or quoted on an exchange or quota갇on system that is a successor to the NYSE, the NYSE MKT or NASDAQ. (c) If fewer than all of the outstanding Series C Preferred Shares are to be redeemed pursuant to the Special Op갇onal Redemp갇on Right, the shares to be redeemed shall be selected pro rata (as nearly as prac갇cable without crea갇ng frac갇onal shares) or by lot or in such other equitable method prescribed by the Trust. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series C Preferred Shares would become a holder of a number of Series C Preferred Shares in excess of the Share Ownership Limit because such holder’s Series C Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series C Preferred Shares of such holder such that no holder will hold in excess of the Share Ownership Limit subsequent to such redemp갇on. Limita갇ons on Special Op갇onal Redemp갇on. Unless full cumula갇ve dividends on all Series C Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series C Preferred Shares shall be redeemed pursuant to the Special Op갇onal Redemp갇on Right unless all outstanding Series C Preferred Shares are simultaneously redeemed pursuant to the Special Op갇onal Redemp갇on Right, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series C Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series C Preferred Shares as to dividends and upon liquida갇on); provided, however , that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes or the purchase or acquisi갇on of Series C Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series C Preferred Shares. Payment of Dividends in Connec갇on with Special Op갇onal Redemp갇on. Immediately prior to any redemp갇on of Series C Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right, the Trust shall pay, in cash, any accumulated and unpaid dividends to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series C Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series C Preferred Shares which are redeemed. (f) Procedures for Special Op갇onal Redemp갇on. redemp갇on date, addressed to the respec갇ve holders of record of the Series C Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series C Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. No갇ce of redemp갇on will be mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the Shares may be listed or admi姫ed to trading, the redemp갇on no갇ce contemplated by this Sec갇on 6 shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which the Series C Preferred (i) (ii) 7 number of Series C Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right; (D) the place or places where the cer갇ﬁcates for the Series C Preferred Shares, to the extent Series C Preferred Shares are cer갇ﬁcated, are to be surrendered (if so required in the no갇ce) for payment of the redemp갇on price; (E) a brief descrip갇on of the transac갇on or transac갇ons cons갇tu갇ng such Change of Control and that holders of the Series C Preferred Shares to which the no갇ce relates will not be able to tender such Series C Preferred Shares for conversion in connec갇on with the Change of Control and each Series C Preferred Share tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemp갇on will be redeemed on the related redemp갇on date instead of converted on the Change of Control Conversion Date; and (F) that distribu갇ons on the Series C Preferred Shares to be redeemed will cease to accumulate on such redemp갇on date. If fewer than all of the Series C Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series C Preferred Shares held by such holder to be redeemed pursuant to the Special Op갇onal Redemp갇on Right. (iii) If no갇ce of redemp갇on of any Series C Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series C Preferred Shares so called for redemp갇on pursuant to the Special Op갇onal Redemp갇on Right, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series C Preferred Shares, such Series C Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however , if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series C Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series C Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right shall surrender such Series C Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series C Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series C Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series C Preferred Shares represented by any such cer갇ﬁcate are redeemed pursuant to the Special Op갇onal Redemp갇on Right, a new cer갇ﬁcate or cer갇ﬁcates shall be issued represen갇ng the unredeemed Series C Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series C Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. Special Op갇onal Redemp갇on Right shall be irrevocable except that: (iv) The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series C Preferred Shares pursuant to the earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and (A) the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, any balance of monies so deposited by the Trust and unclaimed by the holders of the Series C Preferred Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) Redemp갇on Right shall, a耀er such redemp갇on, have (g) Status of Redeemed Shares. Any Series C Preferred Shares that shall at any 갇me have been redeemed pursuant to the Special Op갇onal 8 the status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. 7. Change of Control Rights. The Series C Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except upon the occurrence of a Change of Control as provided in this Sec갇on 7. (a) Change of Control. Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b) above), each holder of Series C Preferred Shares shall have the right, unless, prior to the Change of Control Conversion Date (as deﬁned in Sec갇on 7(b)(v) hereof), the Trust provides no갇ce of its elec갇on to redeem the Series C Preferred Shares pursuant to the redemp갇on right set forth in Sec갇on 5 above or Special Op갇onal Redemp갇on Right set forth in Sec갇on 6 above, to convert some or all of the Series C Preferred Shares held by such holder (the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number Common Shares, per Series C Preferred Share to be converted (the “Common Share Conversion Considera갇on”) equal to the lesser of: (A) the quo갇ent obtained by dividing (i) the sum of (x) the $25.00 liquida갇on preference plus (y) the amount of any accrued and unpaid distribu갇ons to the Change of Control Conversion Date (unless the Change of Control Conversion Date is a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no addi갇onal amount for such accrued and unpaid distribu갇on will be included in such sum) by (ii) the Common Share Price (as deﬁned in Sec갇on 7(b)(vi) hereof); and (B) 9.2421 Common Shares (the “Share Cap”), subject to the immediately succeeding paragraph. (i) The Share Cap is subject to pro rata adjustments for any share splits (including those eﬀected pursuant to a Common Share distribu갇on), subdivisions or combina갇ons (in each case, a “Share Split”) with respect to Common Shares. The adjusted Share Cap as the result of a Share Split shall be the number of Common Shares that is equivalent to the product obtained by mul갇plying (A) the Share Cap in eﬀect immediately prior to such Share Split by (B) a frac갇on, the numerator of which is the number of Common Shares outstanding a耀er giving eﬀect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split. equivalent Alterna갇ve Conversion Considera갇on (as deﬁned below), as applicable) issuable in connec갇on with the exercise of the Change of Control Conversion Right shall not exceed 27,726,300 Common Shares (or equivalent Alterna갇ve Conversion Considera갇on, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap. For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of Common Shares (or or assets (including any combina갇on thereof) (the “Alterna갇ve Form Considera갇on”), a holder of Series C Preferred Shares shall receive upon conversion of such Series C Preferred Shares the kind and amount of Alterna갇ve Form Considera갇on which such holder of Series C Preferred Shares would have owned or been en갇tled to receive upon the Change of Control had such holder of Series C Preferred Shares held a number of Common Shares equal to the Common Share Conversion Considera갇on immediately prior to the eﬀec갇ve 갇me of the Change of Control (the “Alterna갇ve Conversion Considera갇on”; and the Common Share Conversion Considera갇on or the Alterna갇ve Conversion Considera갇on, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Considera갇on”). In the case of a Change of Control pursuant to which Common Shares shall be converted into cash, securi갇es or other property Change of Control, the considera갇on that the holders of Series C Preferred Shares shall receive shall be the form of considera갇on elected by the holders of the In the event that holders of Common Shares have the opportunity to elect the form of considera갇on to be received in the (ii) (iii) (iv) 9 Common Shares who par갇cipate in the determina갇on (based on the weighted average of elec갇ons) and shall be subject to any limita갇ons to which all holders of Common Shares are subject, including, without limita갇on, pro rata reduc갇ons applicable to any por갇on of the considera갇on payable in the Change of Control. Series C Preferred Shares shall be converted pursuant to the Change of Control Conversion Right, which shall be a business day set forth in the no갇ce of Change of Control provided in accordance with Sec갇on 7(d) below that is no less than 20 days nor more than 35 days a耀er the date on which the Trust provides such no갇ce. The “Change of Control Conversion Date” shall be a date ﬁxed by the Board of Trustees, in its sole discre갇on, as the date the received in the Change of Control by holders of Common Shares is solely cash, and (ii) the average of the closing prices per Common Share on the NYSE for the ten consecu갇ve trading days immediately preceding, but not including, the eﬀec갇ve date of the Change of Control, if the considera갇on to be received in the Change of Control by holders of Common Shares is other than solely cash. The “Common Share Price” shall be (i) the amount of cash considera갇on per Common Share, if the considera갇on to be (v) (vi) en갇tled to receive the cash value of such frac갇onal shares based on the Common Share Price. No frac갇onal Common Shares shall be issued upon the conversion of Series C Preferred Shares. In lieu of frac갇onal shares, holders shall be Within 15 days following the occurrence of a Change of Control, a no갇ce of occurrence of the Change of Control, describing the resul갇ng Change of Control Conversion Right, shall be delivered to the holders of record of the Series C Preferred Shares at their addresses as they appear on the Trust’s share transfer records and no갇ce shall be provided to the Trust’s transfer agent. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the conversion of any Series C Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. Each no갇ce shall state: (i) the events cons갇tu갇ng the Change of Control; (ii) the date of the Change of Control; (iii) the Change of Control Conversion Date; (iv) the method and period for calcula갇ng the Common Share Price; (v) that if, prior to the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem all or any por갇on of the Series C Preferred Shares, the holder will not be able to convert Series C Preferred Shares and such Series C Preferred Shares shall be redeemed on the related redemp갇on date, even if they have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vi) if applicable, the type and amount of Alterna갇ve Conversion Considera갇on en갇tled to be received per Series C Preferred Share; (vii) the name and address of the paying agent and the conversion agent; and (viii) the procedures that the holders of Series C Preferred Shares must follow to exercise the Change of Control Conversion Right. or such other news or press organiza갇on as is reasonably calculated to broadly disseminate the relevant informa갇on to the public, or post no갇ce on the Trust’s website, in any event prior to the opening of business on the ﬁrst business day following any date on which the Trust provides no갇ce pursuant to Sec갇on 7(c) above to the holders of Series C Preferred Shares. The Trust shall issue a press release for publica갇on on the Dow Jones & Company, Inc., Business Wire, PR Newswire, Bloomberg Business News transfer agent, on or before the close of business on the business day prior to the Change of Control Conversion Date, the cer갇ﬁcates evidencing the Series C Preferred Shares, to the extent such shares are cer갇ﬁcated, to be converted, duly endorsed for transfer, together with a wri姫en conversion no갇ce. Such conversion no갇ce shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of Series C Preferred Shares to be converted; and (iii) that terms of In order to exercise the Change of Control Conversion Right, a holder of Series C Preferred Shares shall be required to deliver to the Trust’s (b) (c) (d) (e) 10 the Series C Preferred Shares pursuant to which the Series C Preferred Shares are to be converted. Notwithstanding the foregoing, if the Series C Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. (f) Holders of Series C Preferred Shares may withdraw any no갇ce of exercise of a Change of Control Conversion Right (in whole or in part) by a wri姫en no갇ce of withdrawal delivered to the Trust’s transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The no갇ce of withdrawal must state: (i) the number of withdrawn Series C Preferred Shares; (ii) if cer갇ﬁcated Series C Preferred Shares have been issued, the cer갇ﬁcate numbers of the withdrawn Series C Preferred Shares; and (iii) the number of Series C Preferred Shares, if any, which remain subject to the conversion no갇ce. Notwithstanding the foregoing, if the Series C Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. (g) Series C Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion no갇ce has not been properly withdrawn shall be converted into the applicable Conversion Considera갇on in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the close of business on the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem such Series C Preferred Shares, whether pursuant to its Redemp갇on Right or Special Op갇onal Redemp갇on Right. If the Trust elects to redeem Series C Preferred Shares that would otherwise be converted into the applicable Conversion Considera갇on on a Change of Control Conversion Date, such Series C Preferred Shares shall not be so converted and the holders of such shares shall be en갇tled to receive on the applicable redemp갇on date $25.00 per share, plus any accrued and unpaid distribu갇ons thereon to, but not including, the redemp갇on date. The Trust shall deliver the applicable Conversion Considera갇on no later than the third business day following the Change of Control Conversion convert such Series C Preferred Shares into Common Shares to the extent that receipt of such Common Shares would cause the holder of such Common Shares (or any other person) to Beneﬁcially Own or Construc갇vely Own, within the meaning of the Declara갇on, Common Shares of the Trust in excess of the Share Ownership Limit, as such term is deﬁned in the Declara갇on, as applicable. Limita갇ons on Conversion. Notwithstanding anything to the contrary contained herein, no holder of Series C Preferred Shares will be en갇tled to Holders of the Series C Preferred Shares will not have any vo갇ng rights, except as set forth below or as otherwise from 갇me to 갇me required by Whenever dividends on any Series C Preferred Shares shall be in arrears for six or more quarterly periods, whether or not consecu갇ve (a “Preferred Dividend Default”), the number of trustees then cons갇tu갇ng the Board of Trustees shall be increased by two, if not already increased by reason of similar types of provisions with respect to another series of Parity Preferred (as deﬁned below), and the holders of Series C Preferred Shares (vo갇ng together as a single class with the holders of all other series of Preferred Shares ranking on a parity with the Series C Preferred Shares as to dividends or upon liquida갇on (“Parity Preferred”) upon which like vo갇ng rights have been conferred and are exercisable) will be en갇tled to vote for the elec갇on of a total of two trustees of the Trust (the “Preferred Share Trustees”), if not already elected by the holders of Parity Preferred by reason of similar types of provisions with respect to Preferred Share Trustees, at a special mee갇ng of the shareholders called by the holders of record of at least 20% of the Series C Preferred Shares or the holders of 20% of any other series of Parity Preferred so in arrears (unless 11 Date. (h) (i) 8. Vo갇ng Rights. law. (a) (b) such request is received less than 90 days before the date ﬁxed for the next annual or special mee갇ng of shareholders), and at each subsequent annual mee갇ng un갇l all dividends accrued on such Series C Preferred Shares for the past dividend periods shall have been fully paid or declared and a sum suﬃcient for the payment thereof set aside for payment. (c) If and when all accumulated dividends on the Series C Preferred Shares shall have been paid in full or declared and set aside for payment in full, the holders of Series C Preferred Shares shall be divested of the vo갇ng rights set forth in Sec갇on 8(b) hereof (subject to reves갇ng in the event of each and every Preferred Dividend Default) and, if all accumulated dividends have been paid in full or declared and set aside for payment in full on all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable, the term of oﬃce of each Preferred Share Trustee so elected shall terminate. Any Preferred Share Trustee may be removed at any 갇me with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series C Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng together as a single class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). So long as a Preferred Dividend Default shall con갇nue, any vacancy in the oﬃce of a Preferred Share Trustee may be ﬁlled by wri姫en consent of the Preferred Share Trustee remaining in oﬃce, or if none remains in oﬃce, by a vote of the holders of record of a majority of the outstanding Series C Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng together as a single class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). The Preferred Share Trustees shall each be en갇tled to one vote per trustee on any ma姫er. (d) So long as any Series C Preferred Shares remain outstanding, the Trust shall not, without the aﬃrma갇ve vote or consent of the holders of at least two‐thirds of the Series C Preferred Shares outstanding at the 갇me, given in person or by proxy, either in wri갇ng or at a mee갇ng (vo갇ng separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of shares of beneﬁcial interest ranking senior to the Series C Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up of the Trust or reclassify any authorized shares of beneﬁcial interest of the Trust into any such shares, or create, authorize or issue any obliga갇on or security conver갇ble into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Declara갇on, whether by merger, consolida갇on or otherwise, so as to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series C Preferred Shares or the holders thereof; provided, however , that with respect to the occurrence of any event set forth in (ii) above, the occurrence of any such event will not be deemed to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series C Preferred Shares or the holders thereof so long as the Series C Preferred Shares remain outstanding with the terms thereof materially unchanged or, if the Trust is not the surviving en갇ty in such transac갇on, are exchanged for a security of the surviving en갇ty with terms that are materially the same as the Series C Preferred Shares, the occurrence of any such event shall not be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers of the holders of the Series C Preferred Shares and; provided, further , that (x) any increase in the amount of the authorized Common Shares or Preferred Shares or the crea갇on or issuance of any other series of Common Shares or Preferred Shares, in each case ranking on a parity with or junior to the Series C Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up of the Trust , (y) any change to the number or classiﬁca갇on of our trustees, or (z) any amendment to Ar갇cle VII of the Declara갇on rela갇ng to Shares‐In‐Trust, the Ownership Limit or any other ma姫er described therein of any type or nature shall in no event be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers so long as a耀er such amendment any single holder may maintain “beneﬁcial ownership” (as deﬁned in Ar갇cle VII prior to or a耀er such amendment) 9.9% of the outstanding Series C Preferred Shares and 9.9% of any other class or series of shares of beneﬁcial interest without viola갇ng the Ownership Limit. 12 9. 10. (e) The foregoing vo갇ng provisions will not apply if, at or prior to the 갇me when the act with respect to which such vote would otherwise be required to be eﬀected, all outstanding Series C Preferred Shares shall have been redeemed or called for redemp갇on upon proper no갇ce and suﬃcient funds shall have been deposited in trust to eﬀect such redemp갇on. Conversion. Except as set forth in Sec갇on 7 above upon the occurrence of a Change of Control, the Series C Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except that the Series C Preferred Shares will automa갇cally be exchanged by the Trust for Shares‐In‐Trust, in accordance with Ar갇cle VII of the Declara갇on in the same manner that Common Shares are exchanged for Shares‐In‐Trust pursuant thereto, in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes. Informa갇on Rights. During any period in which the Trust is not subject to the repor갇ng requirements of Sec갇on 13 or 15(d) of the Exchange Act and any Series C Preferred Shares are outstanding, the Trust will: (a) transmit by mail or other permissible means under the Exchange Act to all holders of Series C Preferred Shares as their names and addresses appear in the Trust’s record books and without cost to such holders, copies of the Annual Reports on Form 10‐K and Quarterly Reports on Form 10‐Q that the Trust would have been required to ﬁle with the SEC pursuant to Sec갇on 13 or 15(d) of the Exchange Act if the Trust were subject thereto (other than any exhibits that would have been required); and (b) within 15 days following wri姫en request, supply copies of such reports to any prospec갇ve holder of the Series C Preferred Shares. The Trust will mail (or otherwise provide) the reports to the holders of Series C Preferred Shares within 15 days a耀er the respec갇ve dates by which the Trust would have been required to ﬁle such reports with the SEC if the Trust was subject to Sec갇on 13 or 15(d) of the Exchange Act. THIRD: The Series C Preferred Shares have been classiﬁed and designated by the Board of Trustees under the authority contained in the Declara갇on. FOURTH: These Ar갇cles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. FIFTH: The undersigned President and Chief Opera갇ng Oﬃcer acknowledges these Ar갇cles Supplementary to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned President and Chief Opera갇ng Oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. [Signature page follows.] 13 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles Supplementary to be executed on behalf of the Trust by its President and Chief Opera갇ng Oﬃcer and a姫ested to by its Assistant Secretary this 1st day of March, 2013. By: /s/ Neil H. Shah Name: Neil H. Shah Title: President and Chief Opera갇ng Oﬃcer A姫est: By: /s/ Ashish R. Parikh Name: Ashish R. Parikh Title: Assistant Secretary Articles Supplementary Series C Preferred Shares HERSHA HOSPITALITY TRUST ARTICLES OF AMENDMENT Hersha Hospitality Trust , a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of Maryland that: FIRST: The declara갇on of trust of the Trust (the “Declara갇on”) is hereby amended to provide that, immediately upon the Reverse Share Split Eﬀec갇ve Time (as deﬁned below), every four Priority Class A Common Shares of beneﬁcial interest, $0.01 par value per share (“Priority Common Shares”), of the Trust that were issued and outstanding immediately prior to the Reverse Share Split Eﬀec갇ve Time shall be combined into one issued and outstanding Priority Common Share with a par value of $0.04 per share. SECOND : No frac갇onal Priority Common Shares will be or remain issued upon such amendment and each shareholder otherwise en갇tled to a frac갇onal share shall be en갇tled to receive in lieu thereof cash in an amount equal to the product of the frac갇on of a share mul갇plied by the closing price of the Priority Common Shares as reported by the New York Stock Exchange on the date of the Reverse Share Split Eﬀec갇ve Time; provided, however, that holders of any Priority Common Shares issued pursuant to the Trust’s Dividend Reinvestment Plan (“DRIP Priority Common Shares”) shall be en갇tled to receive frac갇onal shares with respect to such Drip Priority Common Shares upon the Reverse Share Split Eﬀec갇ve Time to the extent applicable. THIRD: The amendment to the Declara갇on as set forth in Ar갇cle FIRST above has been duly approved by a majority of the Board of Trustees of the Trust as required by the Maryland REIT Law (the “MRL”). The amendment set forth in Ar갇cle FIRST above is limited to a change expressly authorized by Sec갇on 8‐501(f)(2) of the MRL to be made without ac갇on by the shareholders of the Trust. FOURTH: The Declara갇on is hereby amended, eﬀec갇ve immediately a耀er the Reverse Share Split Eﬀec갇ve Time, to decrease the par value of the Priority Common Shares issued and outstanding at the Reverse Share Split Eﬀec갇ve Time from $0.04 per share to $0.01 per share. FIFTH: The amendment to the Declara갇on as set forth in Ar갇cle FOURTH above has been duly approved by a majority of the en갇re Board of Trustees of the Trust as required by the MRL. The amendment set forth in Ar갇cle FOURTH above is limited to a change expressly authorized by Sec갇on 8‐501(e)(2) of the MRL to be made without ac갇on by the shareholders of the Trust. SIXTH: These Ar갇cles of Amendment shall become eﬀec갇ve at 5:00 p.m., Eastern Time, on June 22, 2015 (the “Reverse Share Split Eﬀec갇ve Time”). SEVENTH: The amendments to the Declara갇on as set forth above do not increase the authorized shares of the Trust. EIGHTH: The undersigned oﬃcer of the Trust acknowledges these Ar갇cles of Amendment to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. ‐Signature page follows‐ 1 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles of Amendment to be executed in its name and on its behalf by its Chief Financial Oﬃcer and Assistant Secretary and a姫ested to by its Treasurer and Corporate Secretary on this 18 day of June, 2015. ATTEST: Chief Financial Oﬃcer and Assistant Secretary HERSHA HOSPITALITY TRUST Ashish R. Parikh By: /s/ David L. Desfor Name: David L. Desfor Title: Treasurer and Corporate Secretary By: /s/ Ashish R. Parikh(SEAL) Name: Ashish R. Parikh Title: Chief Financial Oﬃcer and Assistant Secretary 2 HERSHA HOSPITALITY TRUST ARTICLES OF AMENDMENT Hersha Hospitality Trust, a Maryland real estate investment trust (the “ Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of Maryland that: FIRST: The declara갇on of trust of the Trust (the “Declara갇on”) is hereby amended by dele갇ng therefrom in its en갇rety the ﬁrst two sentences of Sec갇on 1 of Ar갇cle VI and inser갇ng in lieu thereof two new sentences to read as follows: The beneﬁcial interest of the Trust shall be divided into shares of beneﬁcial interest (the “Shares”). The Trust has authority to issue: (i) 76,000,000 common shares of beneﬁcial interest, $0.01 par value per share (“Common Shares”), of which 75,000,000 will be Priority Class A Common Shares (the “Priority Common Shares”) and 1,000,000 will be Class B Common Shares (the “Class B Common Shares”); and (ii) 29,000,000 preferred shares of beneﬁcial interest, $0.01 par value per share (“Preferred Shares”). SECOND: The total number of shares of beneﬁcial interest which the Trust had authority to issue immediately prior to the foregoing amendment of the Declara갇on was (i) 301,000,000 common shares of beneﬁcial interest, $0.01 par value per share, consis갇ng of 300,000,000 Priority Class A Common Shares and 1,000,000 Class B Common Shares; and (ii) 29,000,000 preferred shares of beneﬁcial interest, $0.01 par value per share. The aggregate par value of all authorized shares of beneﬁcial interest having par value was $3,300,000. THIRD: The total number of shares of beneﬁcial interest which the Trust has authority to issue pursuant to the foregoing amendment of the Declara갇on is 76,000,000 common shares of beneﬁcial interest, $0.01 par value per share, consis갇ng of 75,000,000 Priority Class A Common Shares and 1,000,000 Class B Common Shares; and (ii) 29,000,000 preferred shares of beneﬁcial interest, $0.01 par value per share. The aggregate par value of all authorized shares of beneﬁcial interest having par value is $1,050,000. FOURTH: The amendment to the Declara갇on as set forth above has been duly approved by the Board of Trustees of the Trust as required by law. Pursuant to Sec갇on 8‐ 203(a)(8) of the Maryland REIT Law and Sec갇on 1 of Ar갇cle VI of the Declara갇on, no shareholder approval was required. The undersigned oﬃcer of the Trust acknowledges these Ar갇cles of Amendment to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. [SIGNATURE PAGE FOLLOWS] 1 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles of Amendment to be executed in its name and on its behalf by its Chief Financial Oﬃcer and Assistant Secretary and a姫ested to by its Treasurer and Corporate Secretary on this 10th day of May, 2016. ATTEST: Michael R. Gillespie Chief Accoun갇ng Oﬃce & Chief Financial Oﬃcer and Assistant Corporate Secretary HERSHA HOSPITALITY TRUST Ashish R. Parikh By: /s/ Michael R. Gillespie Name: Michael R. Gillespie Title: Chief Accoun갇ng Oﬃce & Assistant Corporate Secretary By: /s/ Ashish R. Parikh(SEAL) Name: Ashish R. Parikh Title: Chief Financial Oﬃcer and Assistant Corporate Secretary 2 HERSHA HOSPITALITY TRUST ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF 6.50% SERIES D CUMULATIVE REDEEMABLE PREFERRED SHARES Pursuant to Sec갇on 8‐203 of Title 8 of the Corpora갇ons and Associa갇ons Ar갇cle of the Annotated Code of Maryland Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of the State of Maryland (“ SDAT”) that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees (the “Board of Trustees”) of the Trust by Ar갇cle VI of its Declara갇on of Trust (which, as herea耀er restated or amended from 갇me to 갇me, are together with these Ar갇cles Supplementary herein referred to as the “Declara갇on”), the Board of Trustees has duly classiﬁed and designated 8,050,000 authorized but unissued preferred shares of beneﬁcial interest, par value $.01 per share, of the Trust as 6.50% Series D Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $0.01 per share (the “Series D Preferred Shares”), and has provided for the issuance of such series. Capitalized terms used herein and not otherwise deﬁned shall have the meanings given to them in the Declara갇on. SECOND: Subject in all cases to the provisions of the Declara갇on, including, without limita갇on, Ar갇cle VII with respect to limita갇ons on the transfer and ownership of shares of beneﬁcial interest of the Trust, the Series D Preferred Shares shall have the preferences, conversion and other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends, qualiﬁca갇ons and terms and condi갇ons of redemp갇on as set forth below: 1. 2. Preferred Shares of Beneﬁcial Interest” is hereby established. The number of Series D Preferred Shares hereby authorized shall be 8,050,000. Designa갇on and Number. A series of preferred shares of beneﬁcial interest, par value $0.01 per share, designated the “6.50% Series D Cumula갇ve Redeemable Rank. The Series D Preferred Shares shall, with respect to dividend rights and rights upon liquida갇on, dissolu갇on or winding up of the Trust, rank (a) senior to all classes or series of Common Shares of the Trust and to all equity securi갇es issued by the Trust ranking junior to such Series D Preferred Shares; (b) on a parity with the Trust’s 8.00% Series B Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $0.01 per share (the “Series B Preferred Shares”), the Trust’s 6.875% Series C Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $0.01 per share (the “Series C Preferred Shares”), and all other equity securi갇es issued by the Trust, the terms of which speciﬁcally provide that such equity securi갇es rank on a parity with the Series D Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up of the Trust; and (c) junior to (i) all indebtedness of the Trust and (ii) equity securi갇es issued by the Trust, the terms of which speciﬁcally provide that such equity securi갇es rank senior to the Series D Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up of the Trust. The term “equity securi갇es” shall not include conver갇ble debt securi갇es. 1 3. Dividends. (a) Holders of the then outstanding Series D Preferred Shares shall be en갇tled to receive, when and as authorized by the Board of Trustees and declared by the Trust, out of funds legally available for the payment of dividends, cumula갇ve cash dividends at the rate of 6.50% per year of the $25.00 liquida갇on preference (equivalent to a ﬁxed annual amount of $1.625 per share). Dividends on the Series D Preferred Shares are payable quarterly in arrears on January 15th, April 15th, July 15th and October 15th of each year and, if such day is not a business day, the next succeeding business day, commencing on July 15, 2016 (each, a “Dividend Payment Date”). The quarterly period beginning on, and including, each Dividend Payment Date and ending on, but excluding, the next succeeding Dividend Payment Date is referred to herein as a “dividend period” and the dividend which shall accrue in respect of any full dividend period shall be $1.625 regardless of the actual number of days in such full dividend period. The ﬁrst dividend will be for less than a full quarter and will cover the period from, and including, May 31, 2016 to, but excluding, July 15, 2016. Such dividend and any dividend payable on the Series D Preferred Shares for any par갇al dividend period will be computed on the basis of a 360‐day year consis갇ng of twelve 30‐day months. Dividends will be payable to holders of record as they appear in the stock records of the Trust at the close of business on the applicable record date, which shall be the ﬁrst day of the calendar month in which the applicable Dividend Payment Date falls or on such other date designated by the Board of Trustees of the Trust as the record date for the payment of dividends on the Series D Preferred Shares that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). payment by the Trust at such 갇me as the terms and provisions of any agreement of the Trust, including any agreement rela갇ng to its indebtedness, (i) prohibits such authoriza갇on, declara갇on, payment or se駫ng apart for payment of dividends or (ii) provides that such authoriza갇on, declara갇on, payment or se駫ng apart for payment of dividends would cons갇tute a breach thereof or a default thereunder, or if such declara갇on or payment shall be restricted or prohibited by law. No dividends on Series D Preferred Shares shall be authorized by the Board of Trustees or declared by the Trust or paid or set apart for Sec갇on 3(b) hereof at any 갇me prohibit the current payment of dividends, whether or not the Trust has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Notwithstanding the foregoing, dividends on the Series D Preferred Shares shall accrue whether or not the terms and provisions set forth in (d) Accrued but unpaid dividends on the Series D Preferred Shares will accumulate as of the Dividend Payment Date on which they ﬁrst become payable. Except as provided in Sec갇on 3(e) below, no dividends will be declared or paid or set apart for payment, and no distribu갇on will be made on any shares of beneﬁcial interest in the Trust or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series D Preferred Shares (other than a dividend that consists of the Common Shares or shares of any other class of shares of beneﬁcial interest ranking junior to the Series D Preferred Shares as to dividends and upon liquida갇on), for any period unless full cumula갇ve dividends on the Series D Preferred Shares have been or contemporaneously are declared and paid, or declared and a sum suﬃcient for the payment thereof is set apart for such payment on the Series D Preferred Shares for all past dividend periods. (e) When dividends are not paid in full (or a sum suﬃcient for such full payment is not so set apart) upon the Series D Preferred Shares and the shares of any other series of Preferred Shares ranking on a parity as to dividends with the Series D Preferred Shares, all dividends declared upon the Series D Preferred Shares and any other series of Preferred Shares ranking on a parity as to dividends with the Series D Preferred Shares shall be declared pro rata so that the amount of dividends declared per share of Series D Preferred Shares and such other series of Preferred Shares shall in all cases bear to each other the same ra갇o that accrued dividends per share on the Series D Preferred Shares and such other series of 2 (b) (c) Preferred Shares (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Shares do not have a cumula갇ve dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series D Preferred Shares which may be in arrears. (f) Except as provided in the immediately preceding paragraph, unless full cumula갇ve dividends on the Series D Preferred Shares have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than dividends paid in Common Shares or other shares of beneﬁcial interest ranking junior to the Series D Preferred Shares as to dividends and upon liquida갇on) shall be declared or paid or set aside for payment, nor shall any other distribu갇on be declared or made upon the Common Shares or any other shares of beneﬁcial interest of the Trust ranking junior to or on a parity with the Series D Preferred Shares as to dividends or upon liquida갇on, nor shall any Common Shares, or any other shares of beneﬁcial interest of the Trust ranking junior to or on a parity with the Series D Preferred Shares as to dividends or upon liquida갇on be redeemed, purchased or otherwise acquired for any considera갇on (or any moneys be paid to or made available for a sinking fund for the redemp갇on of any such shares) by the Trust (except by conversion into or exchange for other shares of beneﬁcial interest of the Trust ranking junior to the Series D Preferred Shares as to dividends and upon liquida갇on and except for the redemp갇on, purchase or acquisi갇on of “Shares‐in‐Trust” under the Declara갇on, which are intended to assist the Trust in qualifying as a REIT for federal income tax purposes). (g) Holders of the Series D Preferred Shares shall not be en갇tled to any dividend, whether payable in cash, property or shares of beneﬁcial interest in excess of full cumula갇ve dividends on the Series D Preferred Shares as provided above. Any dividend payment made on Series D Preferred Shares shall ﬁrst be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. 4. Liquida갇on Preference. (a) Upon any voluntary or involuntary liquida갇on, dissolu갇on or winding up of the aﬀairs of the Trust, the holders of Series D Preferred Shares then outstanding are en갇tled to be paid out of the assets of the Trust legally available for distribu갇on to its shareholders a liquida갇on preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribu갇on of assets is made to holders of Common Shares or any other class or series of shares of beneﬁcial interest of the Trust that ranks junior to the Series D Preferred Shares as to liquida갇on rights. A耀er payment of the full amount of the liquida갇ng distribu갇ons to which they are en갇tled, the holders of Series D Preferred Shares will have no right or claim to any of the remaining assets of the Trust. (b) In the event that, upon any such voluntary or involuntary liquida갇on, dissolu갇on or winding up of the Trust, the available assets of the Trust are insuﬃcient to pay the amount of the liquida갇ng distribu갇ons on all outstanding Series D Preferred Shares and the corresponding amounts payable on all shares of other classes or series of shares of beneﬁcial interest of the Trust ranking on a parity with the Series D Preferred Shares in the distribu갇on of assets upon liquida갇on, then the holders of the Series D Preferred Shares and all other such classes or series of shares of beneﬁcial interest shall share ratably in any such distribu갇on of assets in propor갇on to the full liquida갇ng distribu갇ons to which they would otherwise be respec갇vely en갇tled. where, the amounts distributable in such circumstances shall be payable, shall be given by ﬁrst class mail, postage pre‐paid, not less than 30 nor more (c) Wri姫en no갇ce of any such liquida갇on, dissolu갇on or winding up of the Trust, sta갇ng the payment date or dates when, and the place or places 3 than 60 days prior to the payment date stated therein, to each record holder of the Series D Preferred Shares at the respec갇ve addresses of such holders as the same shall appear on the stock transfer records of the Trust. (d) The consolida갇on, conversion, combina갇on or merger of the Trust with or into any other corpora갇on, trust or en갇ty or consolida갇on, conversion or merger of any other corpora갇on with or into the Trust, or the sale, lease or conveyance of all or substan갇ally all of the Trust’s assets, property or business or any statutory share exchange, shall not be deemed to cons갇tute a liquida갇on, dissolu갇on or winding up of the Trust. 5. Redemp갇on. (a) Op갇onal Redemp갇on. The Series D Preferred Shares are not redeemable prior to May 31, 2021, except as otherwise provided in this Sec갇on 5 and Sec갇on 6 below. On and a耀er May 31, 2021, the Trust, at its op갇on and upon not less than 30 nor more than 60 days’ wri姫en no갇ce, may redeem the Series D Preferred Shares, in whole or in part, at any 갇me or from 갇me to 갇me, for cash at a redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends thereon to the date ﬁxed for redemp갇on (except as provided in Sec갇on 5(d) below), without interest. If less than all of the outstanding Series D Preferred Shares is to be redeemed, the Series D Preferred Shares to be redeemed shall be selected pro rata (as nearly as may be prac갇cable without crea갇ng frac갇onal shares) or by lot or by any other equitable method determined by the Trust. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series D Preferred Shares would become a holder of a number of Series D Preferred Shares in excess of the Ownership Limit because such holder’s Series D Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series D Preferred Shares of such holder such that no holder will hold in excess of the Ownership Limit subsequent to such redemp갇on. (b) (c) REIT Qualiﬁca갇on. The Series D Preferred Shares are, together with all other classes or series of shares of beneﬁcial interest of the Trust, subject in all respects to the provisions of Ar갇cle VII of the Declara갇on. Accordingly, pursuant to Ar갇cle VII of the Declara갇on, a purported Transfer (as deﬁned in Ar갇cle VII) of Series D Preferred Shares as a result of which any person would maintain Beneﬁcial Ownership (as deﬁned in Ar갇cle VII) of more than 9.9% of the outstanding Series D Preferred Shares will cause the number of Series D Preferred shares in excess of the Ownership Limit (rounded up to the nearest whole share) to be designated Shares‐in ‐Trust and in accordance with the provisions of Ar갇cle VII of the Declara갇on, be transferred to a Share Trust (as such term is deﬁned in the Declara갇on), and the Trust will have the right to purchase such Shares‐in ‐Trust from the holder. Limita갇ons on Redemp갇on. Unless full cumula갇ve dividends on all Series D Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series D Preferred Shares shall be redeemed unless all outstanding Series D Preferred Shares are simultaneously redeemed, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series D Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series D Preferred Shares as to dividends and upon liquida갇on); provided, however, that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a real estate investment trust (“REIT”) for federal income tax purposes or the purchase or acquisi갇on of Series D Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series D Preferred Shares. 4 (d) Payment of Dividends in Connec갇on with Redemp갇on. Immediately prior to any redemp갇on of Series D Preferred Shares, the Trust shall pay, in cash, any accumulated and unpaid dividends to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series D Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series D Preferred Shares which are redeemed. (e) Procedures for Redemp갇on. the redemp갇on date, addressed to the respec갇ve holders of record of the Series D Preferred Shares to be redeemed at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series D Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. No갇ce of redemp갇on will be mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to may be listed or admi姫ed to trading, such no갇ce shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the number of Series D Preferred Shares to be redeemed; (D) the place or places where the cer갇ﬁcates evidencing Series D Preferred Shares are to be surrendered for payment of the redemp갇on price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemp갇on date. If less than all of the Series D Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series D Preferred Shares held by such holder to be redeemed. In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which Series D Preferred Shares If no갇ce of redemp갇on of any Series D Preferred Shares has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series D Preferred Shares so called for redemp갇on, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series D Preferred Shares, such Series D Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however, if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series D Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series D Preferred Shares to be redeemed shall surrender cer갇ﬁcates evidencing such Series D Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series D Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series D Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series D Preferred Shares evidenced by any such cer갇ﬁcate are redeemed, a new cer갇ﬁcate or cer갇ﬁcates shall be issued evidencing the unredeemed Series D Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series D Preferred Shares are held in book‐entry form through the facili갇es of The Depository Trust Company (“ DTC”), such no갇ce shall comply with applicable procedures of DTC. (i) (ii) (iii) 5 The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series D Preferred Shares shall be irrevocable except that: (iv) (A) (f) (g) earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) any balance of monies so deposited by the Trust and unclaimed by the holders of the Series D Preferred Shares‐ In‐ Trust Provisions. The Series D Preferred Shares are subject to the provisions of Ar갇cle VII of the Declara갇on, including, without limita갇on, the provision for the purchase of Shares‐in ‐Trust. In addi갇on to the purchase right set forth in Ar갇cle VII of the Declara갇on, Shares‐in ‐Trust issued upon exchange of Series D Preferred Shares pursuant to such Ar갇cle VII may be redeemed, in whole or in part, at any 갇me when outstanding Series D Preferred Shares are being redeemed, for cash, at a redemp갇on price of $25.00 per Series D Preferred Share, plus all accrued and unpaid dividends on the Series D Preferred Shares that were exchanged for such Shares‐ in ‐Trust, through the date of such exchange, without interest. If the Trust elects to redeem Shares‐in ‐Trust pursuant to the redemp갇on right set forth in the preceding sentence, such Shares‐in ‐ Trust shall be redeemed in such propor갇on and in accordance with such procedures as Series D Preferred Shares are being redeemed. status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. Status of Redeemed Shares. Any Series D Preferred Shares that shall at any 갇me have been redeemed shall, a耀er such redemp갇on, have the 6. Special Op갇onal Redemp갇on. (a) Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b) below), the Trust, at its op갇on and upon giving no갇ce not less than 30 nor more than 60 days in advance of the date ﬁxed for redemp갇on, may redeem the Series D Preferred Shares, in whole or in part, within 120 days a耀er the ﬁrst date on which such Change of Control occurred, at a cash redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends to the date ﬁxed for redemp갇on (the “Special Op갇onal Redemp갇on Right”). (b) A “Change of Control” is when, a耀er the original issuance of the Series D Preferred Shares, the following have occurred and are con갇nuing: (i) the acquisi갇on by any person, including any syndicate or group deemed to be a “person” under Sec갇on 13(d)(3) of the Securi갇es Exchange Act of 1934, as amended, of beneﬁcial ownership, directly or indirectly, through a purchase, merger or other acquisi갇on transac갇on or series of purchases, mergers or other acquisi갇on transac갇ons of shares of beneﬁcial interest of the Trust en갇tling such person to exercise more than 50% of the total vo갇ng power of all shares of beneﬁcial interest of the Trust en갇tled to vote generally in elec갇ons of trustees (except that such person will be deemed to have beneﬁcial ownership of all securi갇es that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condi갇on); and 6 (d) (e) (ii) following the closing of any transac갇on referred to in Sec갇on 6(b)(i) above, neither the Trust nor the acquiring or surviving en갇ty has a class of common securi갇es (or American Depositary Receipts represen갇ng such securi갇es) listed on the New York Stock Exchange (the “NYSE”), the NYSE MKT LLC (the “NYSE MKT”) or the NASDAQ Stock Market (“ NASDAQ”), or listed or quoted on an exchange or quota갇on system that is a successor to the NYSE, the NYSE MKT or NASDAQ. (c) If fewer than all of the outstanding Series D Preferred Shares are to be redeemed pursuant to the Special Op갇onal Redemp갇on Right, the shares to be redeemed shall be selected pro rata (as nearly as prac갇cable without crea갇ng frac갇onal shares) or by lot or in such other equitable method prescribed by the Trust. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series D Preferred Shares would become a holder of a number of Series D Preferred Shares in excess of the Ownership Limit because such holder’s Series D Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series D Preferred Shares of such holder such that no holder will hold in excess of the Ownership Limit subsequent to such redemp갇on. Limita갇ons on Special Op갇onal Redemp갇on. Unless full cumula갇ve dividends on all Series D Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series D Preferred Shares shall be redeemed pursuant to the Special Op갇onal Redemp갇on Right unless all outstanding Series D Preferred Shares are simultaneously redeemed pursuant to the Special Op갇onal Redemp갇on Right, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series D Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series D Preferred Shares as to dividends and upon liquida갇on); provided, however, that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes or the purchase or acquisi갇on of Series D Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series D Preferred Shares. Payment of Dividends in Connec갇on with Special Op갇onal Redemp갇on. Immediately prior to any redemp갇on of Series D Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right, the Trust shall pay, in cash, any accumulated and unpaid dividends to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series D Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series D Preferred Shares which are redeemed. (f) Procedures for Special Op갇onal Redemp갇on. redemp갇on date, addressed to the respec갇ve holders of record of the Series D Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series D Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. No갇ce of redemp갇on will be mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the Shares may be listed or admi姫ed to trading, the redemp갇on no갇ce contemplated by this Sec갇on 6 shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which the Series D Preferred (i) (ii) 7 number of Series D Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right; (D) the place or places where the cer갇ﬁcates for the Series D Preferred Shares, to the extent Series D Preferred Shares are cer갇ﬁcated, are to be surrendered (if so required in the no갇ce) for payment of the redemp갇on price; (E) that the Series D Preferred Shares are being redeemed pursuant to the Special Op갇onal Redemp갇on Right and a brief descrip갇on of the transac갇on or transac갇ons cons갇tu갇ng such Change of Control and that holders of the Series D Preferred Shares to which the no갇ce relates will not be able to tender such Series D Preferred Shares for conversion in connec갇on with the Change of Control and each Series D Preferred Share tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemp갇on will be redeemed on the related redemp갇on date instead of converted on the Change of Control Conversion Date; and (F) that distribu갇ons on the Series D Preferred Shares to be redeemed will cease to accumulate on such redemp갇on date. If fewer than all of the Series D Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series D Preferred Shares held by such holder to be redeemed pursuant to the Special Op갇onal Redemp갇on Right. (iii) If no갇ce of redemp갇on of any Series D Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series D Preferred Shares so called for redemp갇on pursuant to the Special Op갇onal Redemp갇on Right, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series D Preferred Shares, such Series D Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however, if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series D Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series D Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right shall surrender such Series D Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series D Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series D Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series D Preferred Shares evidenced by any such cer갇ﬁcate are redeemed pursuant to the Special Op갇onal Redemp갇on Right, a new cer갇ﬁcate or cer갇ﬁcates shall be issued evidencing the unredeemed Series D Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series D Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. the Special Op갇onal Redemp갇on Right shall be irrevocable except that: (iv) The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series D Preferred Shares pursuant to earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. any balance of monies so deposited by the Trust and unclaimed by the holders of the Series D Preferred (A) (B) 8 (g) (a) Redemp갇on Right shall, a耀er such redemp갇on, have the status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. Status of Redeemed Shares. Any Series D Preferred Shares that shall at any 갇me have been redeemed pursuant to the Special Op갇onal 7. Change of Control Rights. The Series D Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except upon the occurrence of a Change of Control as provided in this Sec갇on 7. Change of Control. Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b) above), each holder of Series D Preferred Shares shall have the right, unless, prior to the Change of Control Conversion Date (as deﬁned in Sec갇on 7(b)(v) hereof), the Trust provides no갇ce of its elec갇on to redeem the Series D Preferred Shares pursuant to the redemp갇on right set forth in Sec갇on 5 above or Special Op갇onal Redemp갇on Right set forth in Sec갇on 6 above, to convert some or all of the Series D Preferred Shares held by such holder (the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number Common Shares, per Series D Preferred Share to be converted (the “Common Share Conversion Considera갇on”) equal to the lesser of: (A) the quo갇ent obtained by dividing (i) the sum of (x) the $25.00 liquida갇on preference plus (y) the amount of any accrued and unpaid distribu갇ons to the Change of Control Conversion Date (unless the Change of Control Conversion Date is a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no addi갇onal amount for such accrued and unpaid distribu갇on will be included in such sum) by (ii) the Common Share Price (as deﬁned in Sec갇on 7(b)(vi) hereof); and (B) 2.87687 Common Shares (the “Share Cap”), subject to the immediately succeeding paragraph. (i) The Share Cap is subject to pro rata adjustments for any share splits (including those eﬀected pursuant to a Common Share distribu갇on), subdivisions or combina갇ons (in each case, a “Share Split”) with respect to Common Shares. The adjusted Share Cap as the result of a Share Split shall be the number of Common Shares that is equivalent to the product obtained by mul갇plying (A) the Share Cap in eﬀect immediately prior to such Share Split by (B) a frac갇on, the numerator of which is the number of Common Shares outstanding a耀er giving eﬀect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split. (ii) (iii) equivalent Alterna갇ve Conversion Considera갇on (as deﬁned below), as applicable) issuable in connec갇on with the exercise of the Change of Control Conversion Right shall not exceed 20,138,090 Common Shares (or equivalent Alterna갇ve Conversion Considera갇on, as applicable), subject to increase to the extent the underwriters exercise an op갇on to purchase addi갇onal Series D Preferred Shares in the ini갇al public oﬀering of the Series D Preferred Shares, not to exceed 23,158,804 Common Shares (or equivalent Alterna갇ve Conversion Considera갇on, as applicable), subject to increase on a pro rata basis if the Trust issues addi갇onal Series D Preferred Shares (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap. For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of Common Shares (or or assets (including any combina갇on thereof) (the “Alterna갇ve Form Considera갇on”), a holder of Series D Preferred Shares shall receive upon conversion of such Series D Preferred Shares the kind and amount of Alterna갇ve Form Considera갇on which such holder of Series D Preferred Shares would have owned or been en갇tled to receive upon the Change of Control had such holder of Series D Preferred Shares held a number of Common Shares equal to the Common Share Conversion Considera갇on immediately prior to the eﬀec갇ve 갇me of the Change of Control (the “Alterna갇ve In the case of a Change of Control pursuant to which Common Shares shall be converted into cash, securi갇es or other property 9 (iv) (v) (vi) (b) (c) Conversion Considera갇on”; and the Common Share Conversion Considera갇on or the Alterna갇ve Conversion Considera갇on, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Considera갇on”). Change of Control, the considera갇on that the holders of Series D Preferred Shares shall receive shall be the form of considera갇on elected by the holders of the Common Shares who par갇cipate in the determina갇on (based on the weighted average of elec갇ons) and shall be subject to any limita갇ons to which all holders of Common Shares are subject, including, without limita갇on, pro rata reduc갇ons applicable to any por갇on of the considera갇on payable in the Change of Control. In the event that holders of Common Shares have the opportunity to elect the form of considera갇on to be received in the Series D Preferred Shares shall be converted pursuant to the Change of Control Conversion Right, which shall be a business day set forth in the no갇ce of Change of Control provided in accordance with Sec갇on 7(d) below that is no less than 20 days nor more than 35 days a耀er the date on which the Trust provides such no갇ce. The “Change of Control Conversion Date” shall be a date ﬁxed by the Board of Trustees, in its sole discre갇on, as the date the received in the Change of Control by holders of Common Shares is solely cash, and (ii) the average of the closing prices per Common Share on the NYSE for the ten consecu갇ve trading days immediately preceding, but not including, the eﬀec갇ve date of the Change of Control, if the considera갇on to be received in the Change of Control by holders of Common Shares is other than solely cash. The “Common Share Price” shall be (i) the amount of cash considera갇on per Common Share, if the considera갇on to be en갇tled to receive the cash value of such frac갇onal shares based on the Common Share Price. No frac갇onal Common Shares shall be issued upon the conversion of Series D Preferred Shares. In lieu of frac갇onal shares, holders shall be Within 15 days following the occurrence of a Change of Control, a no갇ce of occurrence of the Change of Control, describing the resul갇ng Change of Control Conversion Right, shall be delivered to the holders of record of the Series D Preferred Shares at their addresses as they appear on the Trust’s share transfer records and no갇ce shall be provided to the Trust’s transfer agent. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the conversion of any Series D Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. Each no갇ce shall state: (i) the events cons갇tu갇ng the Change of Control; (ii) the date of the Change of Control; (iii) the Change of Control Conversion Date; (iv) the method and period for calcula갇ng the Common Share Price; (v) that if, prior to the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem all or any por갇on of the Series D Preferred Shares, the holder will not be able to convert Series D Preferred Shares and such Series D Preferred Shares shall be redeemed on the related redemp갇on date, even if they have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vi) if applicable, the type and amount of Alterna갇ve Conversion Considera갇on en갇tled to be received per Series D Preferred Share; (vii) the name and address of the paying agent and the conversion agent; and (viii) the procedures that the holders of Series D Preferred Shares must follow to exercise the Change of Control Conversion Right. (d) The Trust shall issue a press release for publica갇on on the Wall Street Journal, Business Wire, PR Newswire, Bloomberg Business News or such other news or press organiza갇on as is reasonably calculated to broadly disseminate the relevant informa갇on to the public, or post no갇ce on the Trust’s website, in any event prior to the opening of business on the ﬁrst business day following any date on which the Trust provides no갇ce pursuant to Sec갇on 7(c) above to the holders of Series D Preferred Shares. 10 (e) (f) In order to exercise the Change of Control Conversion Right, a holder of Series D Preferred Shares shall be required to deliver to the Trust’s transfer agent, on or before the close of business on the business day prior to the Change of Control Conversion Date, the cer갇ﬁcates evidencing the Series D Preferred Shares, to the extent such shares are cer갇ﬁcated, to be converted, duly endorsed for transfer, together with a wri姫en conversion no갇ce. Such conversion no갇ce shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of Series D Preferred Shares to be converted; and (iii) that terms of the Series D Preferred Shares pursuant to which the Series D Preferred Shares are to be converted. Notwithstanding the foregoing, if the Series D Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. Holders of Series D Preferred Shares may withdraw any no갇ce of exercise of a Change of Control Conversion Right (in whole or in part) by a wri姫en no갇ce of withdrawal delivered to the Trust’s transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The no갇ce of withdrawal must state: (i) the number of withdrawn Series D Preferred Shares; (ii) if cer갇ﬁcated Series D Preferred Shares have been issued, the cer갇ﬁcate numbers of the withdrawn Series D Preferred Shares; and (iii) the number of Series D Preferred Shares, if any, which remain subject to the conversion no갇ce. Notwithstanding the foregoing, if the Series D Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. (g) Series D Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion no갇ce has not been properly withdrawn shall be converted into the applicable Conversion Considera갇on in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the close of business on the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem such Series D Preferred Shares, whether pursuant to its Redemp갇on Right or Special Op갇onal Redemp갇on Right. If the Trust elects to redeem Series D Preferred Shares that would otherwise be converted into the applicable Conversion Considera갇on on a Change of Control Conversion Date, such Series D Preferred Shares shall not be so converted and the holders of such shares shall be en갇tled to receive on the applicable redemp갇on date $25.00 per share, plus any accrued and unpaid distribu갇ons thereon to, but not including, the redemp갇on date. The Trust shall deliver the applicable Conversion Considera갇on no later than the third business day following the Change of Control Conversion Preferred Shares into Common Shares to the extent that receipt of such Common Shares would cause the holder of such Common Shares (or any other person) to Beneﬁcially Own or Construc갇vely Own, within the meaning of the Declara갇on, Common Shares of the Trust in excess of the Ownership Limit, as such term is deﬁned in the Declara갇on, as applicable. Notwithstanding anything to the contrary contained herein, no holder of Series D Preferred Shares will be en갇tled to convert such Series D Holders of the Series D Preferred Shares will not have any vo갇ng rights, except as set forth below. “Preferred Dividend Default”), the number of trustees then cons갇tu갇ng the Board of Trustees shall be increased by two, if not already increased by reason of similar types of provisions with respect to another series of Parity Preferred (as deﬁned below), and the holders of Series D Preferred Shares (vo갇ng together as a single class with the holders of all other series of Preferred Shares ranking on a parity with the Series D Preferred Shares as to dividends or upon liquida갇on (“ Whenever dividends on any Series D Preferred Shares shall be in arrears for six or more quarterly periods, whether or not consecu갇ve (a 11 Date. (h) (i) 8. Vo갇ng Rights. (a) (b) Parity Preferred”) upon which like vo갇ng rights have been conferred and are exercisable) will be en갇tled to vote for the elec갇on of a total of two trustees of the Trust (the “Preferred Share Trustees”), if not already elected by the holders of Parity Preferred by reason of similar types of provisions with respect to Preferred Share Trustees, at a special mee갇ng of the shareholders called by the holders of record of at least 20% of the Series D Preferred Shares or the holders of 20% of any other series of Parity Preferred so in arrears (unless such request is received less than 90 days before the date ﬁxed for the next annual or special mee갇ng of shareholders), and at each subsequent annual mee갇ng un갇l all dividends accrued on such Series D Preferred Shares for the past dividend periods shall have been fully paid or declared and a sum suﬃcient for the payment thereof set aside for payment. (c) If and when all accumulated dividends on the Series D Preferred Shares shall have been paid in full or declared and set aside for payment in full, the holders of Series D Preferred Shares shall be divested of the vo갇ng rights set forth in Sec갇on 8(b) hereof (subject to reves갇ng in the event of each and every Preferred Dividend Default) and, if all accumulated dividends have been paid in full or declared and set aside for payment in full on all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable, the term of oﬃce of each Preferred Share Trustee so elected shall terminate. Any Preferred Share Trustee may be removed at any 갇me with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series D Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng together as a single class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). So long as a Preferred Dividend Default shall con갇nue, any vacancy in the oﬃce of a Preferred Share Trustee may be ﬁlled by wri姫en consent of the Preferred Share Trustee remaining in oﬃce, or if none remains in oﬃce, by a vote of the holders of record of a majority of the outstanding Series D Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng together as a single class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). The Preferred Share Trustees shall each be en갇tled to one vote per trustee on any ma姫er. (d) So long as any Series D Preferred Shares remain outstanding, the Trust shall not, without the aﬃrma갇ve vote or consent of the holders of at least two‐thirds of the Series D Preferred Shares outstanding at the 갇me, given in person or by proxy, either in wri갇ng or at a mee갇ng (vo갇ng separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of shares of beneﬁcial interest ranking senior to the Series D Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up of the Trust or reclassify any authorized shares of beneﬁcial interest of the Trust into any such shares, or create, authorize or issue any obliga갇on or security conver갇ble into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Declara갇on, whether by merger, consolida갇on or otherwise, so as to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series D Preferred Shares or the holders thereof; provided, however, that with respect to the occurrence of any event set forth in (ii) above, the occurrence of any such event will not be deemed to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series D Preferred Shares or the holders thereof so long as the Series D Preferred Shares remain outstanding with the terms thereof materially unchanged or, if the Trust is not the surviving en갇ty in such transac갇on, are exchanged for a security of the consolidated surviving en갇ty with terms that are materially the same as the Series D Preferred Shares, the occurrence of any such event shall not be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers of the holders of the Series D Preferred Shares and; provided, further, that any increase in the amount of the authorized Common Shares or Preferred Shares or the crea갇on or issuance of any other series of Common Shares or Preferred Shares, in each case ranking on a parity with or junior to the Series D Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up of the Trust, (y) any change to the number or classiﬁca갇on of our trustees, or any amendment to Ar갇cle VII of the Declara갇on rela갇ng to Shares‐In‐Trust, the Ownership Limit or any other ma姫er described therein of any 12 9. 10. type or nature shall in no event be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers so long as a耀er such amendment any single holder may maintain “beneﬁcial ownership” (as deﬁned in Ar갇cle VII prior to or a耀er such amendment) of 9.9% of the outstanding Series D Preferred Shares and 9.9% of any other class or series of shares of beneﬁcial interest without viola갇ng the Ownership Limit. (e) The foregoing vo갇ng provisions will not apply if, at or prior to the 갇me when the act with respect to which such vote would otherwise be required to be eﬀected, all outstanding Series D Preferred Shares shall have been redeemed or called for redemp갇on upon proper no갇ce and suﬃcient funds shall have been deposited in trust to eﬀect such redemp갇on. Conversion. Except as set forth in Sec갇on 7 above upon the occurrence of a Change of Control, the Series D Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except that the Series D Preferred Shares will automa갇cally be exchanged by the Trust for Shares‐In‐Trust, in accordance with Ar갇cle VII of the Declara갇on in the same manner that Common Shares are exchanged for Shares‐In‐Trust pursuant thereto, in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes. Informa갇on Rights. During any period in which the Trust is not subject to the repor갇ng requirements of Sec갇on 13 or 15(d) of the Exchange Act and any Series D Preferred Shares are outstanding, the Trust will: (a) transmit by mail or other permissible means under the Exchange Act to all holders of Series D Preferred Shares as their names and addresses appear in the Trust’s record books and without cost to such holders, copies of the Annual Reports on Form 10‐K and Quarterly Reports on Form 10‐Q that the Trust would have been required to ﬁle with the SEC pursuant to Sec갇on 13 or 15(d) of the Exchange Act if the Trust were subject thereto (other than any exhibits that would have been required); and (b) within 15 days following wri姫en request, supply copies of such reports to any prospec갇ve holder of the Series D Preferred Shares. The Trust will mail (or otherwise provide) the reports to the holders of Series D Preferred Shares within 15 days a耀er the respec갇ve dates by which the Trust would have been required to ﬁle such reports with the SEC if the Trust was subject to Sec갇on 13 or 15(d) of the Exchange Act. THIRD: The Series D Preferred Shares have been classiﬁed and designated by the Board of Trustees under the authority contained in the Declara갇on. FOURTH: These Ar갇cles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. FIFTH: The undersigned President and Chief Opera갇ng Oﬃcer acknowledges these Ar갇cles Supplementary to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned President and Chief Opera갇ng Oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. [Signature page follows.] 13 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles Supplementary to be executed on behalf of the Trust by its President and Chief Opera갇ng Oﬃcer and a姫ested to by its Assistant Secretary this 27th day of May, 2016. President and Chief Opera갇ng Oﬃcer HERSHA HOSPITALITY TRUST Neil H. Shah By: /s/ Neil H. Shah Name: Neil H. Shah Title: President and Chief Opera갇ng Oﬃcer A姫est: By: /s/ Ashish R. Parikh Name: Ashish R. Parikh Title: Assistant Secretary Articles Supplementary Series D Preferred Shares HERSHA HOSPITALITY TRUST ARTICLES OF AMENDMENT Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of Maryland that: FIRST: The declara갇on of trust of the Trust (the “Declara갇on”) is hereby amended by dele갇ng therefrom in its en갇rety the ﬁrst two sentences of Sec갇on 1 of Ar갇cle VI and inser갇ng in lieu thereof two new sentences to read as follows: The beneﬁcial interest of the Trust shall be divided into shares of beneﬁcial interest (the “Shares”). The Trust has authority to issue: (i) 91,000,000 common shares of beneﬁcial interest, $0.01 par value per share (“Common Shares”), of which 90,000,000 will be Priority Class A Common Shares (the “Priority Common Shares”) and 1,000,000 will be Class B Common Shares (the “Class B Common Shares”); and (ii) 29,000,000 preferred shares of beneﬁcial interest, $0.01 par value per share (“Preferred Shares”). SECOND : The total number of shares of beneﬁcial interest which the Trust had authority to issue immediately prior to the foregoing amendment of the Declara갇on was (i) 76,000,000 common shares of beneﬁcial interest, $0.01 par value per share, consis갇ng of 75,000,000 Priority Class A Common Shares and 1,000,000 Class B Common Shares; and (ii) 29,000,000 preferred shares of beneﬁcial interest, $0.01 par value per share, of which 3,000,000 shares are classiﬁed as 6.875% Series C Cumula갇ve Redeemable Preferred Shares and 8,050,000 shares are classiﬁed as 6.50% Series D Cumula갇ve Redeemable Preferred Shares. The aggregate par value of all authorized shares of beneﬁcial interest having par value was $1,050,000. THIRD: The total number of shares of beneﬁcial interest which the Trust has authority to issue pursuant to the foregoing amendment of the Declara갇on is 91,000,000 common shares of beneﬁcial interest, $0.01 par value per share, consis갇ng of 90,000,000 Priority Class A Common Shares and 1,000,000 Class B Common Shares; and (ii) 29,000,000 preferred shares of beneﬁcial interest, $0.01 par value per share, of which 3,000,000 shares are classiﬁed as 6.875% Series C Cumula갇ve Redeemable Preferred Shares and 8,050,000 shares are classiﬁed as 6.50% Series D Cumula갇ve Redeemable Preferred Shares. The aggregate par value of all authorized shares of beneﬁcial interest having par value is $1,200,000. FOURTH : The amendment to the Declara갇on as set forth above has been duly approved by the Board of Trustees of the Trust as required by law. Pursuant to Sec갇on 8‐ 203(a)(8) of the Maryland REIT Law and Sec갇on 1 of Ar갇cle VI of the Declara갇on, no shareholder approval was required. The undersigned oﬃcer of the Trust acknowledges these Ar갇cles of Amendment to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. [SIGNATURE PAGE FOLLOWS] 1 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles of Amendment to be executed in its name and on its behalf by its Chief Financial Oﬃcer and Assistant Secretary and a姫ested to by its Treasurer and Corporate Secretary on this 4th day of November, 2016. ATTEST: David S. Desfor Treasurer and Corporate Chief Financial Oﬃcer and Assistant Secretary HERSHA HOSPITALITY TRUST Ashish R. Parikh By: /s/ David S. Desfor Name: David S. Desfor Title: Treasurer and Corporate Secretary By: /s/ Ashish R. Parikh(SEAL) Name: Ashish R. Parikh Title: Chief Financial Oﬃcer and Assistant Secretary [Signature Page to Articles of Amendment] HERSHA HOSPITALITY TRUST ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF 6.50% SERIES E CUMULATIVE REDEEMABLE PREFERRED SHARES Pursuant to Sec갇on 8‐203 of Title 8 of the Corpora갇ons and Associa갇ons Ar갇cle of the Annotated Code of Maryland Hersha Hospitality Trust, a Maryland real estate investment trust (the “Trust”), hereby cer갇ﬁes to the State Department of Assessments and Taxa갇on of the State of Maryland (“ SDAT”) that: FIRST: Pursuant to the authority expressly vested in the Board of Trustees (the “Board of Trustees”) of the Trust by Ar갇cle VI of its Declara갇on of Trust (which, as herea耀er restated or amended from 갇me to 갇me, are together with these Ar갇cles Supplementary herein referred to as the “Declara갇on”), the Board of Trustees has duly classiﬁed and designated 4,600,000 authorized but unissued preferred shares of beneﬁcial interest, par value $.01 per share, of the Trust as 6.50% Series E Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $0.01 per share (the “Series E Preferred Shares”), and has provided for the issuance of such series. Capitalized terms used herein and not otherwise deﬁned shall have the meanings given to them in the Declara갇on. SECOND: Subject in all cases to the provisions of the Declara갇on, including, without limita갇on, Ar갇cle VII with respect to limita갇ons on the transfer and ownership of shares of beneﬁcial interest of the Trust, the Series E Preferred Shares shall have the preferences, conversion and other rights, vo갇ng powers, restric갇ons, limita갇ons as to dividends, qualiﬁca갇ons and terms and condi갇ons of redemp갇on as set forth below: 1. 2. Preferred Shares of Beneﬁcial Interest” is hereby established. The number of Series E Preferred Shares hereby authorized shall be 4,600,000. Designa갇on and Number. A series of preferred shares of beneﬁcial interest, par value $0.01 per share, designated the “6.50% Series E Cumula갇ve Redeemable Rank. The Series E Preferred Shares shall, with respect to dividend rights and rights upon liquida갇on, dissolu갇on or winding up of the Trust, rank (a) senior to all classes or series of Common Shares of the Trust and to all equity securi갇es issued by the Trust ranking junior to such Series E Preferred Shares; (b) on a parity with the Trust’s 6.875% Series C Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $0.01 per share, the Trust’s 6.50% Series D Cumula갇ve Redeemable Preferred Shares of Beneﬁcial Interest, par value $0.01 per share, and all other equity securi갇es issued by the Trust, the terms of which speciﬁcally provide that such equity securi갇es rank on a parity with the Series E Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up of the Trust; and (c) junior to (i) all indebtedness of the Trust and (ii) equity securi갇es issued by the Trust, the terms of which speciﬁcally provide that such equity securi갇es rank senior to the Series E Preferred Shares as to the payment of dividends and the distribu갇on of assets in the event of any liquida갇on, dissolu갇on or winding up of the Trust. The term “equity securi갇es” shall not include conver갇ble debt securi갇es. 1 3. Dividends. (a) Holders of the then outstanding Series E Preferred Shares shall be en갇tled to receive, when and as authorized by the Board of Trustees and declared by the Trust, out of funds legally available for the payment of dividends, cumula갇ve cash dividends at the rate of 6.50% per year of the $25.00 liquida갇on preference (equivalent to a ﬁxed annual amount of $1.625 per share). Dividends on the Series E Preferred Shares are payable quarterly in arrears on January 15th, April 15th, July 15th and October 15th of each year and, if such day is not a business day, the next succeeding business day, commencing on January 15, 2017 (each, a “Dividend Payment Date”). The quarterly period beginning on, and including, each Dividend Payment Date and ending on, but excluding, the next succeeding Dividend Payment Date is referred to herein as a “dividend period” and the dividend which shall accrue in respect of any full dividend period shall be $1.625 regardless of the actual number of days in such full dividend period. The ﬁrst dividend will be for less than a full quarter and will cover the period from, and including, November 7, 2016 to, but excluding, January 15, 2017. Such dividend and any dividend payable on the Series E Preferred Shares for any par갇al dividend period will be computed on the basis of a 360‐day year consis갇ng of twelve 30‐day months. Dividends will be payable to holders of record as they appear in the stock records of the Trust at the close of business on the applicable record date, which shall be the ﬁrst day of the calendar month in which the applicable Dividend Payment Date falls or on such other date designated by the Board of Trustees of the Trust as the record date for the payment of dividends on the Series E Preferred Shares that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). by the Trust at such 갇me as the terms and provisions of any agreement of the Trust, including any agreement rela갇ng to its indebtedness, (i) prohibits such authoriza갇on, declara갇on, payment or se駫ng apart for payment of dividends or (ii) provides that such authoriza갇on, declara갇on, payment or se駫ng apart for payment of dividends would cons갇tute a breach thereof or a default thereunder, or if such declara갇on or payment shall be restricted or prohibited by law. No dividends on Series E Preferred Shares shall be authorized by the Board of Trustees or declared by the Trust or paid or set apart for payment Sec갇on 3(b) hereof at any 갇me prohibit the current payment of dividends, whether or not the Trust has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Notwithstanding the foregoing, dividends on the Series E Preferred Shares shall accrue whether or not the terms and provisions set forth in (d) Accrued but unpaid dividends on the Series E Preferred Shares will accumulate as of the Dividend Payment Date on which they ﬁrst become payable. Except as provided in Sec갇on 3(e) below, no dividends will be declared or paid or set apart for payment, and no distribu갇on will be made on any shares of beneﬁcial interest in the Trust or any other series of Preferred Shares ranking, as to dividends, on a parity with or junior to the Series E Preferred Shares (other than a dividend that consists of the Common Shares or shares of any other class of shares of beneﬁcial interest ranking junior to the Series E Preferred Shares as to dividends and upon liquida갇on), for any period unless full cumula갇ve dividends on the Series E Preferred Shares have been or contemporaneously are declared and paid, or declared and a sum suﬃcient for the payment thereof is set apart for such payment on the Series E Preferred Shares for all past dividend periods. (e) When dividends are not paid in full (or a sum suﬃcient for such full payment is not so set apart) upon the Series E Preferred Shares and the shares of any other series of Preferred Shares ranking on a parity as to dividends with the Series E Preferred Shares, all dividends declared upon the Series E Preferred Shares and any other series of Preferred Shares ranking on a parity as to dividends with the Series E Preferred Shares shall be declared pro rata so that the amount of dividends declared per share of Series E Preferred Shares and such other series of Preferred Shares shall in all cases bear to each other the same ra갇o that accrued dividends per share on the Series E Preferred Shares and such other series of Preferred Shares 2 (b) (c) (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Preferred Shares do not have a cumula갇ve dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Series E Preferred Shares which may be in arrears. (f) Except as provided in the immediately preceding paragraph, unless full cumula갇ve dividends on the Series E Preferred Shares have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than dividends paid in Common Shares or other shares of beneﬁcial interest ranking junior to the Series E Preferred Shares as to dividends and upon liquida갇on) shall be declared or paid or set aside for payment, nor shall any other distribu갇on be declared or made upon the Common Shares or any other shares of beneﬁcial interest of the Trust ranking junior to or on a parity with the Series E Preferred Shares as to dividends or upon liquida갇on, nor shall any Common Shares, or any other shares of beneﬁcial interest of the Trust ranking junior to or on a parity with the Series E Preferred Shares as to dividends or upon liquida갇on be redeemed, purchased or otherwise acquired for any considera갇on (or any moneys be paid to or made available for a sinking fund for the redemp갇on of any such shares) by the Trust (except by conversion into or exchange for other shares of beneﬁcial interest of the Trust ranking junior to the Series E Preferred Shares as to dividends and upon liquida갇on and except for the redemp갇on, purchase or acquisi갇on of “Shares‐in‐Trust” under the Declara갇on, which are intended to assist the Trust in qualifying as a REIT for federal income tax purposes). (g) Holders of the Series E Preferred Shares shall not be en갇tled to any dividend, whether payable in cash, property or shares of beneﬁcial interest in excess of full cumula갇ve dividends on the Series E Preferred Shares as provided above. Any dividend payment made on Series E Preferred Shares shall ﬁrst be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. 4. Liquida갇on Preference. (a) Upon any voluntary or involuntary liquida갇on, dissolu갇on or winding up of the aﬀairs of the Trust, the holders of Series E Preferred Shares then outstanding are en갇tled to be paid out of the assets of the Trust legally available for distribu갇on to its shareholders a liquida갇on preference of $25.00 per share, plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribu갇on of assets is made to holders of Common Shares or any other class or series of shares of beneﬁcial interest of the Trust that ranks junior to the Series E Preferred Shares as to liquida갇on rights. A耀er payment of the full amount of the liquida갇ng distribu갇ons to which they are en갇tled, the holders of Series E Preferred Shares will have no right or claim to any of the remaining assets of the Trust. (b) In the event that, upon any such voluntary or involuntary liquida갇on, dissolu갇on or winding up of the Trust, the available assets of the Trust are insuﬃcient to pay the amount of the liquida갇ng distribu갇ons on all outstanding Series E Preferred Shares and the corresponding amounts payable on all shares of other classes or series of shares of beneﬁcial interest of the Trust ranking on a parity with the Series E Preferred Shares in the distribu갇on of assets upon liquida갇on, then the holders of the Series E Preferred Shares and all other such classes or series of shares of beneﬁcial interest shall share ratably in any such distribu갇on of assets in propor갇on to the full liquida갇ng distribu갇ons to which they would otherwise be respec갇vely en갇tled. where, the amounts distributable in such circumstances shall be payable, shall be given by ﬁrst class mail, postage pre‐paid, not less than 30 nor more (c) Wri姫en no갇ce of any such liquida갇on, dissolu갇on or winding up of the Trust, sta갇ng the payment date or dates when, and the place or places 3 than 60 days prior to the payment date stated therein, to each record holder of the Series E Preferred Shares at the respec갇ve addresses of such holders as the same shall appear on the stock transfer records of the Trust. (d) The consolida갇on, conversion, combina갇on or merger of the Trust with or into any other corpora갇on, trust or en갇ty or consolida갇on, conversion or merger of any other corpora갇on with or into the Trust, or the sale, lease or conveyance of all or substan갇ally all of the Trust’s assets, property or business or any statutory share exchange, shall not be deemed to cons갇tute a liquida갇on, dissolu갇on or winding up of the Trust. 5. Redemp갇on. (a) Op갇onal Redemp갇on. The Series E Preferred Shares are not redeemable prior to November 7, 2021, except as otherwise provided in this Sec갇on 5 and Sec갇on 6 below. On and a耀er November 7, 2021, the Trust, at its op갇on and upon not less than 30 nor more than 60 days’ wri姫en no갇ce, may redeem the Series E Preferred Shares, in whole or in part, at any 갇me or from 갇me to 갇me, for cash at a redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends thereon to the date ﬁxed for redemp갇on (except as provided in Sec갇on 5(d) below), without interest. If less than all of the outstanding Series E Preferred Shares is to be redeemed, the Series E Preferred Shares to be redeemed shall be selected pro rata (as nearly as may be prac갇cable without crea갇ng frac갇onal shares) or by lot. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series E Preferred Shares would become a holder of a number of Series E Preferred Shares in excess of the Ownership Limit because such holder’s Series E Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series E Preferred Shares of such holder such that no holder will hold in excess of the Ownership Limit subsequent to such redemp갇on. (b) (c) REIT Qualiﬁca갇on. The Series E Preferred Shares are, together with all other classes or series of shares of beneﬁcial interest of the Trust, subject in all respects to the provisions of Ar갇cle VII of the Declara갇on. Accordingly, pursuant to Ar갇cle VII of the Declara갇on, a purported Transfer (as deﬁned in Ar갇cle VII) of Series E Preferred Shares as a result of which any person would maintain Beneﬁcial Ownership (as deﬁned in Ar갇cle VII) of more than 9.9% of the outstanding Series E Preferred Shares will cause the number of Series E Preferred shares in excess of the Ownership Limit (rounded up to the nearest whole share) to be designated Shares‐in ‐Trust and, in accordance with the provisions of Ar갇cle VII of the Declara갇on, be transferred to a Share Trust (as such term is deﬁned in the Declara갇on), and the Trust will have the right to purchase such Shares‐in ‐Trust from the holder. Limita갇ons on Redemp갇on. Unless full cumula갇ve dividends on all Series E Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series E Preferred Shares shall be redeemed unless all outstanding Series E Preferred Shares are simultaneously redeemed, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series E Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series E Preferred Shares as to dividends and upon liquida갇on); provided, however, that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a real estate investment trust (“ REIT”) for federal income tax purposes or the purchase or acquisi갇on of Series E Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series E Preferred Shares. 4 (d) Payment of Dividends in Connec갇on with Redemp갇on. Immediately prior to any redemp갇on of Series E Preferred Shares, the Trust shall pay, in cash, any accumulated and unpaid dividends to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series E Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series E Preferred Shares which are redeemed. (e) Procedures for Redemp갇on. redemp갇on date, addressed to the respec갇ve holders of record of the Series E Preferred Shares to be redeemed at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series E Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. No갇ce of redemp갇on will be mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the may be listed or admi姫ed to trading, such no갇ce shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the number of Series E Preferred Shares to be redeemed; (D) the place or places where the cer갇ﬁcates evidencing Series E Preferred Shares, to the extent Series E Preferred Shares are cer갇ﬁcated, are to be surrendered for payment of the redemp갇on price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemp갇on date except as otherwise provided herein. If less than all of the Series E Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series E Preferred Shares held by such holder to be redeemed. In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which Series E Preferred Shares If no갇ce of redemp갇on of any Series E Preferred Shares has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series E Preferred Shares so called for redemp갇on, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series E Preferred Shares, such Series E Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however, if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series E Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series E Preferred Shares to be redeemed shall surrender any cer갇ﬁcates evidencing such Series E Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series E Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series E Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series E Preferred Shares evidenced by any such cer갇ﬁcate are redeemed, a new cer갇ﬁcate or cer갇ﬁcates shall be issued evidencing the unredeemed Series E Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series E Preferred Shares are held in book‐entry form through the facili갇es of The Depository Trust Company (“ DTC”), such no갇ce shall comply with applicable procedures of DTC. (i) (ii) (iii) irrevocable except that: (iv) The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series E Preferred Shares shall be 5 (f) (g) earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and (A) the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, any balance of monies so deposited by the Trust and unclaimed by the holders of the Series E Preferred Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) Shares‐ In‐Trust Provisions. The Series E Preferred Shares are subject to the provisions of Ar갇cle VII of the Declara갇on, including, without limita갇on, the provision for the purchase of Shares‐in ‐Trust. In addi갇on to the purchase right set forth in Ar갇cle VII of the Declara갇on, Shares‐in ‐Trust issued upon exchange of Series E Preferred Shares pursuant to such Ar갇cle VII may be redeemed, in whole or in part, at any 갇me when outstanding Series E Preferred Shares are being redeemed, for cash, at a redemp갇on price of $25.00 per Series E Preferred Share, plus all accrued and unpaid dividends on the Series E Preferred Shares that were exchanged for such Shares‐ in ‐Trust, through the date of such exchange, without interest except as otherwise provided herein. If the Trust elects to redeem Shares‐in ‐Trust pursuant to the redemp갇on right set forth in the preceding sentence, such Shares‐in ‐Trust shall be redeemed in such propor갇on and in accordance with such procedures as Series E Preferred Shares are being redeemed. status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. Status of Redeemed Shares. Any Series E Preferred Shares that shall at any 갇me have been redeemed shall, a耀er such redemp갇on, have the 6. Special Op갇onal Redemp갇on. (a) Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b) below), the Trust, at its op갇on and upon giving no갇ce not less than 30 nor more than 60 days in advance of the date ﬁxed for redemp갇on, may redeem the Series E Preferred Shares, in whole or in part, within 120 days a耀er the ﬁrst date on which such Change of Control occurred, at a cash redemp갇on price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends to the date ﬁxed for redemp갇on (except as provided in Sec갇on 6(c) below), without interest (the “Special Op갇onal Redemp갇on Right”). (b) A “Change of Control” is when, a耀er the original issuance of the Series E Preferred Shares, the following have occurred and are con갇nuing: Securi갇es Exchange Act of 1934, as amended (the “Exchange Act”), of beneﬁcial ownership, directly or indirectly, through a purchase, merger or other acquisi갇on transac갇on or series of purchases, mergers or other acquisi갇on transac갇ons of shares of beneﬁcial interest of the Trust en갇tling such person to exercise more than 50% of the total vo갇ng power of all shares of beneﬁcial interest of the Trust en갇tled to vote generally in elec갇ons of trustees (except that such person will be deemed to have beneﬁcial ownership of all securi갇es that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condi갇on); and the acquisi갇on by any person, including any syndicate or group deemed to be a “person” under Sec갇on 13(d)(3) of the en갇ty has a class of common securi갇es (or American Depositary Receipts represen갇ng such securi갇es) listed on the New York Stock Exchange (the “NYSE”), the following the closing of any transac갇on referred to in Sec갇on 6(b)(i) above, neither the Trust nor the acquiring or surviving (i) (ii) 6 NYSE MKT LLC (the “NYSE MKT”) or the NASDAQ Stock Market (“ NASDAQ”), or listed or quoted on an exchange or quota갇on system that is a successor to the NYSE, the NYSE MKT or NASDAQ. If fewer than all of the outstanding Series E Preferred Shares are to be redeemed pursuant to the Special Op갇onal Redemp갇on Right, the shares to be redeemed shall be selected pro rata (as nearly as prac갇cable without crea갇ng frac갇onal shares) or by lot. If such redemp갇on is to be by lot and, as a result of such redemp갇on, any holder of Series E Preferred Shares would become a holder of a number of Series E Preferred Shares in excess of the Ownership Limit because such holder’s Series E Preferred Shares were not redeemed, or were only redeemed in part then, except as otherwise provided in the Declara갇on, the Trust will redeem the requisite number of Series E Preferred Shares of such holder such that no holder will hold in excess of the Ownership Limit subsequent to such redemp갇on. Limita갇ons on Special Op갇onal Redemp갇on. Unless full cumula갇ve dividends on all Series E Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum suﬃcient for the payment thereof set apart for payment for all past dividend periods, no Series E Preferred Shares shall be redeemed pursuant to the Special Op갇onal Redemp갇on Right unless all outstanding Series E Preferred Shares are simultaneously redeemed pursuant to the Special Op갇onal Redemp갇on Right, and the Trust shall not purchase or otherwise acquire directly or indirectly any Series E Preferred Shares (except by exchange for shares of beneﬁcial interest of the Trust ranking junior to the Series E Preferred Shares as to dividends and upon liquida갇on); provided, however, that the foregoing shall not prevent the purchase by the Trust of Shares‐in ‐Trust in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes or the purchase or acquisi갇on of Series E Preferred Shares pursuant to a purchase or exchange oﬀer made on the same terms to holders of all outstanding Series E Preferred Shares. Payment of Dividends in Connec갇on with Special Op갇onal Redemp갇on. Immediately prior to any redemp갇on of Series E Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right, the Trust shall pay, in cash, any accumulated and unpaid dividends to the redemp갇on date, unless a redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series E Preferred Shares at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Except as provided above, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series E Preferred Shares which are redeemed. (c) (d) (e) (f) Procedures for Special Op갇onal Redemp갇on. (i) (ii) redemp갇on date, addressed to the respec갇ve holders of record of the Series E Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right at their respec갇ve addresses as they appear on the stock transfer records of the Trust. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the redemp갇on of any Series E Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. No갇ce of redemp갇on will be mailed by the Trust, postage prepaid, not less than 30 nor more than 60 days prior to the Preferred Shares may be listed or admi姫ed to trading, the redemp갇on no갇ce contemplated by this Sec갇on 6 shall state: (A) the redemp갇on date; (B) the redemp갇on price; (C) the number of Series E Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right; (D) the place or places where the cer갇ﬁcates for the Series E Preferred Shares, to the extent Series E Preferred Shares are cer갇ﬁcated, are to be surrendered (if so required in the no갇ce) for payment of the redemp갇on price; (E) that the Series E Preferred Shares are being redeemed pursuant to the Special Op갇onal In addi갇on to any informa갇on required by law or by the applicable rules of any exchange upon which the Series E 7 Redemp갇on Right and a brief descrip갇on of the transac갇on or transac갇ons cons갇tu갇ng such Change of Control and that holders of the Series E Preferred Shares to which the no갇ce relates will not be able to tender such Series E Preferred Shares for conversion in connec갇on with the Change of Control and each Series E Preferred Share tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemp갇on will be redeemed on the related redemp갇on date instead of converted on the Change of Control Conversion Date; and (F) that distribu갇ons on the Series E Preferred Shares to be redeemed will cease to accumulate on such redemp갇on date except as otherwise provided herein. If fewer than all of the Series E Preferred Shares held by any holder are to be redeemed, the no갇ce mailed to such holder shall also specify the number of Series E Preferred Shares held by such holder to be redeemed pursuant to the Special Op갇onal Redemp갇on Right. (iii) If no갇ce of redemp갇on of any Series E Preferred Shares pursuant to the Special Op갇onal Redemp갇on Right has been given and if the funds necessary for such redemp갇on have been set aside by the Trust in trust for the beneﬁt of the holders of any Series E Preferred Shares so called for redemp갇on pursuant to the Special Op갇onal Redemp갇on Right, then from and a耀er the redemp갇on date dividends will cease to accrue on such Series E Preferred Shares, such Series E Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemp갇on price; provided, however, if the redemp갇on date falls a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, each holder of Series E Preferred Shares so called for redemp갇on at the close of business on such Dividend Record Date shall be en갇tled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemp갇on of such shares before such Dividend Payment Date. Holders of Series E Preferred Shares to be redeemed pursuant to the Special Op갇onal Redemp갇on Right shall surrender such Series E Preferred Shares at the place designated in such no갇ce and, upon surrender in accordance with said no갇ce of the cer갇ﬁcates for Series E Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the no갇ce shall so state), such Series E Preferred Shares shall be redeemed by the Trust at the redemp갇on price plus any accrued and unpaid dividends payable upon such redemp갇on. In case less than all the Series E Preferred Shares evidenced by any such cer갇ﬁcate are redeemed pursuant to the Special Op갇onal Redemp갇on Right, a new cer갇ﬁcate or cer갇ﬁcates shall be issued evidencing the unredeemed Series E Preferred Shares without cost to the holder thereof. Notwithstanding the foregoing, if the Series E Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. the Special Op갇onal Redemp갇on Right shall be irrevocable except that: (iv) The deposit of funds with a bank or trust corpora갇on for the purpose of redeeming Series E Preferred Shares pursuant to earned on any money so deposited in trust, and the holders of any shares redeemed shall have no claim to such interest or other earnings; and (A) the Trust shall be en갇tled to receive from such bank or trust corpora갇on the interest or other earnings, if any, any balance of monies so deposited by the Trust and unclaimed by the holders of the Series E Preferred Shares en갇tled thereto at the expira갇on of two years from the applicable redemp갇on dates shall be repaid, together with any interest or other earnings thereon, to the Trust, and a耀er any such repayment, the holders of the shares en갇tled to the funds so repaid to the Trust shall look only to the Trust for payment without interest or other earnings. (B) (g) Status of Redeemed Shares. Any Series E Preferred Shares that shall at any 갇me have been redeemed pursuant to the Special Op갇onal Redemp갇on Right shall, a耀er such redemp갇on, have the status of authorized but unissued Preferred Shares, without designa갇on as to series un갇l such shares are therea耀er designated as part of a par갇cular series by the Board of Trustees. 8 7. Change of Control Rights. The Series E Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except upon the occurrence of a Change of Control as provided in this Sec갇on 7. (a) Change of Control. Upon the occurrence of a Change of Control (as deﬁned in Sec갇on 6(b) above), each holder of Series E Preferred Shares shall have the right, unless, prior to the Change of Control Conversion Date (as deﬁned in Sec갇on 7(b)(v) hereof), the Trust provides no갇ce of its elec갇on to redeem the Series E Preferred Shares pursuant to the redemp갇on right set forth in Sec갇on 5 above or Special Op갇onal Redemp갇on Right set forth in Sec갇on 6 above, to convert some or all of the Series E Preferred Shares held by such holder (the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number Common Shares, per Series E Preferred Share to be converted (the “Common Share Conversion Considera갇on”) equal to the lesser of: (A) the quo갇ent obtained by dividing (i) the sum of (x) the $25.00 liquida갇on preference plus (y) the amount of any accrued and unpaid distribu갇ons to the Change of Control Conversion Date (unless the Change of Control Conversion Date is a耀er a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no addi갇onal amount for such accrued and unpaid distribu갇on will be included in such sum) by (ii) the Common Share Price (as deﬁned in Sec갇on 7(b)(vi) hereof); and (B) 2.80584 Common Shares (the “Share Cap”), subject to the immediately succeeding paragraph. Share distribu갇on), subdivisions or combina갇ons (in each case, a “Share Split”) with respect to Common Shares. The adjusted Share Cap as the result of a Share Split shall be the number of Common Shares that is equivalent to the product obtained by mul갇plying (A) the Share Cap in eﬀect immediately prior to such Share Split by (B) a frac갇on, the numerator of which is the number of Common Shares outstanding a耀er giving eﬀect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split. The Share Cap is subject to pro rata adjustments for any share splits (including those eﬀected pursuant to a Common For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of Common Shares (or equivalent Alterna갇ve Conversion Considera갇on (as deﬁned below), as applicable) issuable in connec갇on with the exercise of the Change of Control Conversion Right shall not exceed 11,223,360 Common Shares (or equivalent Alterna갇ve Conversion Considera갇on, as applicable), subject to increase to the extent the underwriters exercise an op갇on to purchase addi갇onal Series E Preferred Shares in the ini갇al public oﬀering of the Series E Preferred Shares, not to exceed 12,906,864 Common Shares (or equivalent Alterna갇ve Conversion Considera갇on, as applicable), subject to increase on a pro rata basis if the Trust issues addi갇onal Series E Preferred Shares (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap and is subject to increase in the event that addi갇onal Series E Preferred Shares are issued in the future. (iii) In the case of a Change of Control pursuant to which Common Shares shall be converted into cash, securi갇es or other property or assets (including any combina갇on thereof) (the “Alterna갇ve Form Considera갇on”), a holder of Series E Preferred Shares shall receive upon conversion of such Series E Preferred Shares the kind and amount of Alterna갇ve Form Considera갇on which such holder of Series E Preferred Shares would have owned or been en갇tled to receive upon the Change of Control had such holder of Series E Preferred Shares held a number of Common Shares equal to the Common Share Conversion Considera갇on immediately prior to the eﬀec갇ve 갇me of the Change of Control (the “Alterna갇ve Conversion Considera갇on”; and the Common Share Conversion Considera갇on or the Alterna갇ve Conversion Considera갇on, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Considera갇on”). 9 (i) (ii) Change of Control, the considera갇on that the holders of Series E Preferred Shares shall receive shall be the form of considera갇on elected by the holders of the Common Shares who par갇cipate in the determina갇on (based on the weighted average of elec갇ons) and shall be subject to any limita갇ons to which all holders of Common Shares are subject, including, without limita갇on, pro rata reduc갇ons applicable to any por갇on of the considera갇on payable in the Change of Control. In the event that holders of Common Shares have the opportunity to elect the form of considera갇on to be received in the Series E Preferred Shares shall be converted pursuant to the Change of Control Conversion Right, which shall be a business day set forth in the no갇ce of Change of Control provided in accordance with Sec갇on 7(c) below that is no less than 20 days nor more than 35 days a耀er the date on which the Trust provides such no갇ce. The “Change of Control Conversion Date” shall be a date ﬁxed by the Board of Trustees, in its sole discre갇on, as the date the received in the Change of Control by holders of Common Shares is solely cash, and (ii) the average of the closing prices per Common Share on the NYSE for the ten consecu갇ve trading days immediately preceding, but not including, the eﬀec갇ve date of the Change of Control, if the considera갇on to be received in the Change of Control by holders of Common Shares is other than solely cash. The “Common Share Price” shall be (i) the amount of cash considera갇on per Common Share, if the considera갇on to be (iv) (v) (vi) en갇tled to receive the cash value of such frac갇onal shares based on the Common Share Price. No frac갇onal Common Shares shall be issued upon the conversion of Series E Preferred Shares. In lieu of frac갇onal shares, holders shall be Within 15 days following the occurrence of a Change of Control, a no갇ce of occurrence of the Change of Control, describing the resul갇ng Change of Control Conversion Right, shall be delivered to the holders of record of the Series E Preferred Shares at their addresses as they appear on the Trust’s share transfer records and no갇ce shall be provided to the Trust’s transfer agent. No failure to give such no갇ce or any defect thereto or in the mailing thereof shall aﬀect the validity of the proceedings for the conversion of any Series E Preferred Shares except as to the holder to whom no갇ce was defec갇ve or not given. Each no갇ce shall state: (i) the events cons갇tu갇ng the Change of Control; (ii) the date of the Change of Control; (iii) the Change of Control Conversion Date; (iv) the method and period for calcula갇ng the Common Share Price; (v) that if, prior to the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem all or any por갇on of the Series E Preferred Shares, the holder will not be able to convert Series E Preferred Shares and such Series E Preferred Shares shall be redeemed on the related redemp갇on date, even if they have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vi) if applicable, the type and amount of Alterna갇ve Conversion Considera갇on en갇tled to be received per Series E Preferred Share; (vii) the name and address of the paying agent and the conversion agent; and (viii) the procedures that the holders of Series E Preferred Shares must follow to exercise the Change of Control Conversion Right. other news or press organiza갇on as is reasonably calculated to broadly disseminate the relevant informa갇on to the public, or post no갇ce on the Trust’s website, in any event prior to the opening of business on the ﬁrst business day following any date on which the Trust provides no갇ce pursuant to Sec갇on 7(c) above to the holders of Series E Preferred Shares. The Trust shall issue a press release for publica갇on on the Wall Street Journal, Business Wire, PR Newswire, Bloomberg Business News or such transfer agent, on or before the close of business on the business day prior to the Change of Control Conversion Date, the cer갇ﬁcates evidencing the Series E In order to exercise the Change of Control Conversion Right, a holder of Series E Preferred Shares shall be required to deliver to the Trust’s (b) (c) (d) (e) 10 Preferred Shares, to the extent such shares are cer갇ﬁcated, to be converted, duly endorsed for transfer, together with a wri姫en conversion no갇ce. Such conversion no갇ce shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of Series E Preferred Shares to be converted; and (iii) that terms of the Series E Preferred Shares pursuant to which the Series E Preferred Shares are to be converted. Notwithstanding the foregoing, if the Series E Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. (f) Holders of Series E Preferred Shares may withdraw any no갇ce of exercise of a Change of Control Conversion Right (in whole or in part) by a wri姫en no갇ce of withdrawal delivered to the Trust’s transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The no갇ce of withdrawal must state: (i) the number of withdrawn Series E Preferred Shares; (ii) if cer갇ﬁcated Series E Preferred Shares have been issued, the cer갇ﬁcate numbers of the withdrawn Series E Preferred Shares; and (iii) the number of Series E Preferred Shares, if any, which remain subject to the conversion no갇ce. Notwithstanding the foregoing, if the Series E Preferred Shares are held in book‐entry form through the facili갇es of DTC, such no갇ce shall comply with applicable procedures of DTC. (g) Series E Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion no갇ce has not been properly withdrawn shall be converted into the applicable Conversion Considera갇on in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the close of business on the Change of Control Conversion Date, the Trust provides no갇ce of its elec갇on to redeem such Series E Preferred Shares, whether pursuant to its Redemp갇on Right or Special Op갇onal Redemp갇on Right. If the Trust elects to redeem Series E Preferred Shares that would otherwise be converted into the applicable Conversion Considera갇on on a Change of Control Conversion Date, such Series E Preferred Shares shall not be so converted and the holders of such shares shall be en갇tled to receive on the applicable redemp갇on date $25.00 per share, plus any accrued and unpaid distribu갇ons thereon to, but not including, the redemp갇on date. The Trust shall deliver the applicable Conversion Considera갇on no later than the third business day following the Change of Control Conversion Preferred Shares into Common Shares to the extent that receipt of such Common Shares would cause the holder of such Common Shares (or any other person) to Beneﬁcially Own or Construc갇vely Own, within the meaning of the Declara갇on, Common Shares of the Trust in excess of the Ownership Limit, as such term is deﬁned in the Declara갇on, as applicable. Notwithstanding anything to the contrary contained herein, no holder of Series E Preferred Shares will be en갇tled to convert such Series E Holders of the Series E Preferred Shares will not have any vo갇ng rights, except as set forth below. Whenever dividends on any Series E Preferred Shares shall be in arrears for six or more quarterly periods, whether or not consecu갇ve (a “Preferred Dividend Default”), the number of trustees then cons갇tu갇ng the Board of Trustees shall be increased by two, if not already increased by reason of similar types of provisions with respect to another series of Parity Preferred (as deﬁned below), and the holders of Series E Preferred Shares (vo갇ng together as a single class with the holders of all other series of Preferred Shares ranking on a parity with the Series E Preferred Shares as to dividends or upon liquida갇on (“ Parity Preferred”) upon which like vo갇ng rights have been conferred and are exercisable) will be en갇tled to vote for the elec갇on of a total of two trustees of the Trust (the “Preferred Share Trustees”), if not already elected by the holders of Parity Preferred by reason of similar types of provisions with respect to Preferred 11 Date. (h) (i) 8. Vo갇ng Rights. (a) (b) Share Trustees, at a special mee갇ng of the shareholders called by the holders of record of at least 20% of the Series E Preferred Shares or the holders of 20% of any other series of Parity Preferred so in arrears (unless such request is received less than 90 days before the date ﬁxed for the next annual or special mee갇ng of shareholders), and at each subsequent annual mee갇ng un갇l all dividends accrued on such Series E Preferred Shares for the past dividend periods shall have been fully paid. (c) If and when all accumulated dividends on the Series E Preferred Shares shall have been paid in full, the holders of Series E Preferred Shares shall be divested of the vo갇ng rights set forth in Sec갇on 8(b) hereof (subject to reves갇ng in the event of each and every Preferred Dividend Default) and, if all accumulated dividends have been paid in full on all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable, the term of oﬃce of each Preferred Share Trustee so elected shall terminate. Any Preferred Share Trustee may be removed at any 갇me with or without cause by the vote of, and shall not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding Series E Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng together as a single class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). So long as a Preferred Dividend Default shall con갇nue, any vacancy in the oﬃce of a Preferred Share Trustee may be ﬁlled by wri姫en consent of the Preferred Share Trustee remaining in oﬃce, or if none remains in oﬃce, by a vote of the holders of record of a majority of the outstanding Series E Preferred Shares when they have the vo갇ng rights set forth in Sec갇on 8(b) (vo갇ng together as a single class with all other series of Parity Preferred upon which like vo갇ng rights have been conferred and are exercisable). The Preferred Share Trustees shall each be en갇tled to one vote per trustee on any ma姫er. (d) So long as any Series E Preferred Shares remain outstanding, the Trust shall not, without the aﬃrma갇ve vote or consent of the holders of at least two‐thirds of the Series E Preferred Shares outstanding at the 갇me, given in person or by proxy, either in wri갇ng or at a mee갇ng (vo갇ng separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of shares of beneﬁcial interest ranking senior to the Series E Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up of the Trust or reclassify any authorized shares of beneﬁcial interest of the Trust into any such shares, or create, authorize or issue any obliga갇on or security conver갇ble into or evidencing the right to purchase any such shares or (ii) amend, alter or repeal the provisions of the Declara갇on, whether by merger, consolida갇on or otherwise, so as to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series E Preferred Shares or the holders thereof; provided, however, that with respect to the occurrence of any event set forth in (ii) above, the occurrence of any such event will not be deemed to materially and adversely aﬀect any right, preference, privilege or vo갇ng power of the Series E Preferred Shares or the holders thereof so long as the Series E Preferred Shares remain outstanding with the terms thereof materially unchanged or, if the Trust is not the surviving en갇ty in such transac갇on, are exchanged for a security of the consolidated surviving en갇ty with terms that are materially the same as the Series E Preferred Shares, the occurrence of any such event shall not be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers of the holders of the Series E Preferred Shares and; provided, further, that (x) any increase in the amount of the authorized Common Shares or Preferred Shares or the crea갇on or issuance of any other series of Common Shares or Preferred Shares, in each case ranking on a parity with or junior to the Series E Preferred Shares with respect to payment of dividends or the distribu갇on of assets upon liquida갇on, dissolu갇on or winding up of the Trust, (y) any change to the number or classiﬁca갇on of our trustees, or (z) any amendment to Ar갇cle VII of the Declara갇on rela갇ng to Shares‐In‐Trust, the Ownership Limit or any other ma姫er described therein of any type or nature shall in no event be deemed to materially and adversely aﬀect such rights, preferences, privileges or vo갇ng powers so long as a耀er such amendment any single holder may maintain “beneﬁcial ownership” (as deﬁned in Ar갇cle VII prior to or a耀er such amendment) of 9.9% of the outstanding Series E Preferred Shares and 9.9% of any other class or series of shares of beneﬁcial interest without viola갇ng the Ownership Limit. 12 9. 10. (e) The foregoing vo갇ng provisions will not apply if, at or prior to the 갇me when the act with respect to which such vote would otherwise be required to be eﬀected, all outstanding Series E Preferred Shares shall have been redeemed or called for redemp갇on upon proper no갇ce and suﬃcient funds shall have been deposited in trust to eﬀect such redemp갇on. Conversion. Except as set forth in Sec갇on 7 above upon the occurrence of a Change of Control, the Series E Preferred Shares are not conver갇ble into or exchangeable for any other property or securi갇es of the Trust, except that the Series E Preferred Shares will automa갇cally be exchanged by the Trust for Shares‐In‐Trust, in accordance with Ar갇cle VII of the Declara갇on in the same manner that Common Shares are exchanged for Shares‐In‐Trust pursuant thereto, in order to ensure that the Trust remains qualiﬁed as a REIT for federal income tax purposes. Informa갇on Rights. During any period in which the Trust is not subject to the repor갇ng requirements of Sec갇on 13 or 15(d) of the Exchange Act and any Series E Preferred Shares are outstanding, the Trust will: (a) transmit by mail or other permissible means under the Exchange Act to all holders of Series E Preferred Shares as their names and addresses appear in the Trust’s record books and without cost to such holders, copies of the Annual Reports on Form 10‐K and Quarterly Reports on Form 10‐Q that the Trust would have been required to ﬁle with the SEC pursuant to Sec갇on 13 or 15(d) of the Exchange Act if the Trust were subject thereto (other than any exhibits that would have been required); and (b) within 15 days following wri姫en request, supply copies of such reports to any prospec갇ve holder of the Series E Preferred Shares. The Trust will mail (or otherwise provide) the reports to the holders of Series E Preferred Shares within 15 days a耀er the respec갇ve dates by which the Trust would have been required to ﬁle such reports with the Securi갇es and Exchange Commission if the Trust was subject to Sec갇on 13 or 15(d) of the Exchange Act. THIRD: The Series E Preferred Shares have been classiﬁed and designated by the Board of Trustees under the authority contained in the Declara갇on. FOURTH: These Ar갇cles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. FIFTH: The undersigned President and Chief Opera갇ng Oﬃcer acknowledges these Ar갇cles Supplementary to be the trust act of the Trust and, as to all ma姫ers or facts required to be veriﬁed under oath, the undersigned President and Chief Opera갇ng Oﬃcer acknowledges that to the best of his knowledge, informa갇on and belief, these ma姫ers and facts are true in all material respects and that this statement is made under the penal갇es for perjury. [Signature page follows.] 13 IN WITNESS WHEREOF, the Trust has caused these Ar갇cles Supplementary to be executed on behalf of the Trust by its President and Chief Opera갇ng Oﬃcer and a姫ested to by its Assistant Secretary this 4th day of November, 2016. President and Chief Opera갇ng Oﬃcer HERSHA HOSPITALITY TRUST Neil H. Shah By: /s/ Neil H. Shah Name: Neil H. Shah Title: President and Chief Opera갇ng Oﬃcer A姫est: By: /s/ Ashish R. Parikh Name: Ashish R. Parikh Title: Assistant Secretary Articles Supplementary Series E Preferred Shares (Back To Top) Section 3: EX12.1 (EX12.1) Hersha Hospitality Trust Computa갇on of Ra갇o of Earnings to Combined Fixed Charges and Preferred Share Dividends (dollars in thousands) Earnings Pre‐tax income from con갇nuing opera갇ons before income (loss) from equity investees Interest expensed and amor갇zed premiums, discounts and capitalized expenses related to indebtedness Distributed income of equity investees Combined Fixed Charges and Preferred Share Dividends Interest expensed and amor갇zed premiums, discounts and capitalized expenses related to indebtedness Interest capitalized Preferred share distribu갇ons Year Ended December 31, 2016 2015 2014 2013 2012 $ 118,392 $ 38,101 $ 66,558 $ 16,988 $ 6,267 44,352 43,557 43,357 40,935 1,574 1,446 1,262 568 38,070 1,387 $ 164,318 $ 83,104 $ 111,177 $ 58,491 $ 45,724 44,352 43,557 43,357 ‐ ‐ 458 17,380 14,356 14,356 40,935 1,320 14,611 $ 61,732 $ 57,913 $ 58,171 $ 56,866 $ 38,070 1,542 14,000 53,612 Ra갇o of earnings to combined ﬁxed charges and preferred share dividends 2.66 1.43 1.91 1.03 0.85 For the year ended December 31, 2012, combined ﬁxed charges and preferred share dividends exceeded earnings. The following table notes the amounts by which combined ﬁxed charges and preferred share dividends exceeded earnings: Combined ﬁxed charged and preferred share dividends in excess of earnings $ N/A $ N/A $ N/A $ N/A $ 7,888 Year Ended December 31, 2016 2015 2014 2013 2012 Exhibit 12.1 1 (Back To Top) Section 4: EX21.1 (EX21.1) 2144 Associates ‐ Hershey (LP) Name of En갇ty 2144 Associates ‐ New Columbia 2144 Associates ‐ Selinsgrove (LP) 2444 Associates (LP) Ownership 1% by Hersha Hospitality Limited Liability Company ‐ Hershey 99% by HHLP 1% by Hersha Hospitality Limited Liability Company ‐ New Columbia 99% by HHLP 1% by Hersha Hospitality Limited Liability Company ‐ Selinsgrove 99% by HHLP 1% by Hersha Hospitality Limited Liability Company ‐ West Hanover 99% by HHLP 2801 Roosevelt Development Master Property Owners' Associa갇on, Inc. 100% by HHLP Key West One Associates, LLC 2844 Associates, LP 3044 Associates, LP 3144 Associates, LP 315 Trumbull Street Associates, LLC 320 Pearl Street, Inc. 44 Aar갇 Associates, LP 44 Alexandria Hotel Management, LLC 44 Alexandria Hotel, LLC 44 Brookline Hotel, LLC 44 Brookline Management, LLC 44 Brookline Manager, LLC 44 Cambridge Associates, LLC 1% by HH LLC 99% by HHLP 1% by HH LLC 99% by HHLP 1% by HH LLC 99% by HHLP 88% by Mys갇c Partners, LLC 12% by a third party 100% by HHLP 1% by HH LLC 99% by HHLP 100% by 44 New England Management Company 100% by HHLP 1% by 44 Brookline Manager, LLC 99% by HHLP 100% by 44 New England Management Company 100% by HHLP 100% by HHLP Jurisdic갇on of Incorpora갇on or Organiza갇on PA Exhibit 21.1 PA PA PA FL PA PA PA CT NY PA DE DE DE DE DE MA 44 Cambridge Associates, LLC 44 Carlisle Associates (LP) 44 Chester Management, LLC 44 Dartmouth, LLC 44 Delaware One, LLC 44 Delaware Three, LLC 44 Duane Street Lessee, LLC 44 Duane Street, LLC 44 Framingham Associates, LLC 44 Franklin Managing Member, LLC 44 Frederick Associates, LP 44 Gaithersburg, LLC 44 Greenbelt One, LLC 44 Greenbelt Two, LLC 44 Harrisburg Friendship Lessee, LLC 44 Hersha Smithﬁeld, LLC 44 LA Westside Lessee, LLC 44 Metro, LLC 44 New England Management Company 44 Norwood Managing Member, LLC 44 Pearl Street Lessee, LLC 44 Pleasant Hill, LLC 100% by HHLP 1% by Hersha Hospitality, LLC 99% by HHLP 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by HHLP 100% by HHLP 100% by HHLP 1% by HH LLC 99% by 3044 Associates, LP 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 99% by HHLP 1% by Hersha Smithﬁeld Managing Member, LLC 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by HHLP 100% by HHLP 100% by 44 New England Management Company 100% by 44 New England Management Company 1 MA PA NY DE DE DE NY DE MA MA PA DE DE DE PA RI DE DE VA DE DE DE Name of En갇ty 44 Pleasanton, LLC 44 Sco姫sdale, LLC 44 Smith Street Lessee, LLC 44 Tyson’s Corner, LLC 44 White Plains, LLC 5444 Associates (LP) 63 RB Holding Company LLC Adriaen’s Landing Hotel, LLC Aﬀordable Hospitality Associates, LP Brentwood Greenbelt, LLC Brisam Management (DE) LLC Cindat Hersha Lessee JV Associates, LLC Cindat Hersha Lessee JV, LLC Cindat Hersha Owner JV Associates, LLC Cindat Hersha Owner JV, LLC Exit 88 Hotel, LLC Golden Triangle Greenbelt, LLC H Metro Delaware, LLC HCIN Chelsea East Associates, LLC HCIN Chelsea East Lessee, LLC HCIN Duo One Associates, LLC HCIN Duo One Lessee, LLC HCIN Duo Three Associates, LLC HCIN Duo Three Lessee, LLC HCIN Duo Two Associates, LLC HCIN Duo Two Lessee, LLC HCIN Herald Square Associates, LLC HCIN Herald Square Lessee, LLC HCIN Maiden Hotel Associates, LLC HCIN Maiden Hotel Lessee, LLC HCIN NYC Lessee, LLC HCIN NYC Owner, LLC HCIN Water Street Associates, LLC HCIN Water Street Lessee, LLC Hersha Conduit Associates, LLC Hersha Hospitality Greenbelt, LLC Hersha Hospitality Limited Partnership (“HHLP”) (the “Opera갇ng Partnership”) Hersha Hospitality Trust Hersha Hospitality, LLC (“HH LLC”) HHLP 52nd Associates, LLC Ownership 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 100% by 44 New England Management Company 99% by HHLP 1% by 44 Duane Street, LLC 100% by Hiren Boston, LLC 95.662% by Mys갇c Partners, LLC 0.651% by HHLP 3.687% by a third party 99% by HHLP 1% by Race Street, LLC 1% by Hersha Hospitality Greenbelt, LLC 99% by HHLP 99% by HHLP 1% by HHLP Brisam 29 Manager, LLC 100% by Cindat Hersha Lessee JV, LLC 70% by Cindat Manha姫an Hotel Por韃olio (US) LLC 30% by HCIN NYC Lessee, LLC 100% by Cindat Hersha Owner JV, LLC 70% by Cindat Manha姫an Hotel Por韃olio (US) LLC 30% by HCIN NYC Owner, LLC 99.9% by Mys갇c Partners, LLC 0.1% by Mys갇c Special Purpose Corp. 74% by Brentwood Greenbelt, LLC 26% by third par갇es 100% by HHLP 100% by Cindat Hersha Owner JV Associates, LLC 100% by Cindat Hersha Lessee JV Associates, LLC 100% by Cindat Hersha Owner JV Associates, LLC 100% by Cindat Hersha Lessee JV Associates, LLC 100% by Cindat Hersha Owner JV Associates, LLC 100% by Cindat Hersha Lessee JV Associates, LLC 100% by Cindat Hersha Owner JV Associates, LLC 100% by Cindat Hersha Lessee JV Associates, LLC 100% by Cindat Hersha Owner JV Associates, LLC 100% by Cindat Hersha Lessee JV Associates, LLC 100% by Cindat Hersha Owner JV Associates, LLC 100% by Cindat Hersha Lessee JV Associates, LLC 100% by 44 New England Management Company 100% by Hersha Hospitality Limited Partnership 100% by Cindat Hersha Owner JV Associates, LLC 100% by Cindat Hersha Lessee JV Associates, LLC 100% by HHLP 100% by HHLP 96.0% by Hersha Hospitality Trust (General Partnership Interest) 4.0% by Hersha Aﬃliates (Limited Partnership Interest) N/A 100% by HHLP 99% by HHLP 1% by HHLP 52nd Manager, LLC 2 Jurisdic갇on of Incorpora갇on or Organiza갇on DE DE NY DE DE PA MA CT PA VA DE DE DE DE DE CT MD DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE NY VA VA MD VA DE Name of En갇ty HHLP 52nd Lessee, LLC HHLP 52nd Manager, LLC HHLP Ambrose Associates, LLC HHLP Ambrose Lessee, LLC HHLP Ambrose Manager, LLC HHLP Blue Moon Associates, LLC HHLP Blue Moon Lessee, LLC HHLP Blue Moon Manager, LLC HHLP Boston One, LLC HHLP Boston Seaport Associates, LLC HHLP Boston Seaport Lessee, LLC HHLP Boston Seaport Manager, LLC HHLP Boston Two, LLC HHLP Brisam 29 Manager, LLC HHLP Bulﬁnch Associates, LLC HHLP Bulﬁnch Lessee, LLC HHLP Bulﬁnch Manager, LLC HHLP Cambridge Lessee, LLC HHLP Capitol Hill Associates, LLC HHLP Capitol Hill Holding, LLC HHLP Capitol Hill Lessee, LLC HHLP Capitol Hill Manager, LLC HHLP Chester Associates, LLC HHLP Coconut Grove Associates, LLC HHLP Coconut Grove Lessee, LLC HHLP Coconut Grove Manager, LLC HHLP Conduit Lessee, LLC HHLP Coral Gables Associates, LLC HHLP Coral Gables Lessee, LLC HHLP Coral Gables Manager, LLC HHLP Dartmouth One Associates, LLC HHLP DC Conven갇on Center Associates, LLC HHLP DC Conven갇on Center Lessee, LLC HHLP DC Conven갇on Center Manager, LLC HHLP Framingham Lessee, LLC HHLP Franklin Associates, LLC HHLP Gaithersburg Associates, LLC HHLP Georgetown Associates, LLC HHLP Georgetown II Associates, LLC HHLP Georgetown II Lessee, LLC HHLP Georgetown II Manager, LLC HHLP Georgetown Lessee, LLC Ownership 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by HHLP Ambrose Manager, LLC 100% by 44 New England Management Company 100% by HHLP 99% by HHLP, 1% by HHLP Blue Moon Manager, LLC 100% by 44 New England Management Company 100% by HHLP 100% by HHLP 99% by HHLP 1% by HHLP Boston Seaport Manager, LLC 100% by 44 New England Management Company 100% by HHLP 100% by HHLP 100% by HHLP 99% by HHLP 1% by HHLP Bulﬁnch Manager, LLC 100% by 44 New England Management Company 100% by HHLP 100% by 44 New England Management Company 100% by HHLP Capitol Hill Holding, LLC 1% by HHLP Capitol Hill Manager LLC 99% by HHLP 100% by 44 New England Management Company 100% by HHLP 100% by HHLP 99% by HHLP, 1% by HHLP Coconut Grove Manager, LLC 100% by 44 New England Management Company 100% by HHLP 100% by 44 New England Management Company 99% by HHLP 1% by HHLP Coral Gables Manager, LLC 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by 44 Dartmouth One, LLC 1% by HHLP DC Conven갇on Center Manager, LLC 99% by HHLP 100% by 44 New England Management Company 100% by HHLP 100% by 44 New England Management Company 99% by HHLP 1% by Franklin Managing Member, LLC 100% by HHLP 99% by HHLP 1% by HHLP Georgetown Manager, LLC 99% by HHLP 1% by HHLP Georgetown II Manager, LLC 100% by 44 New England Management Company 100% HHLP 100% by 44 New England Management Company 3 Jurisdic갇on of Incorpora갇on or Organiza갇on DE DE DE DE DE DE DE DE MA DE DE DE MA DE DE DE DE DE DE DE DE DE NY DE DE DE NY DE DE DE MA DE DE DE DE MA DE DE DE DE DE DE Name of En갇ty HHLP Georgetown Manager, LLC HHLP Harrisburg Friendship GP, LLC HHLP Harrisburg Friendship, LP HHLP Holdings, LLC HHLP Key West One Associates, LLC HHLP Key West One Lessee, LLC HHLP Key West One Manager, LLC HHLP King of Prussia Associates, LP HHLP King of Prussia, Inc. HHLP LA Westside Associates, LLC HHLP LA Westside Manager, LLC HHLP Langhorne One Associates, LP HHLP Langhorne One, LLC HHLP Langhorne Two Associates, LP HHLP Langhorne Two, LLC HHLP Malvern Associates 2,LP HHLP Miami Beach Associates, LLC HHLP Miami Beach Lessee, LLC HHLP Miami Beach Manager, LLC HHLP Norwood Associates, LLC HHLP Oxford Valley Associates, LP HHLP Oxford Valley, Inc. HHLP Parkside Associates LLC HHLP Parkside Lessee LLC HHLP Parkside Manager LLC HHLP Pearl Street Associates, LLC HHLP Pearl Street Managing Member, LLC HHLP Pleasant Hill Associates, LLC HHLP Pleasanton Associates, LLC HHLP Ri姫enhouse Associates, LLC HHLP Ri姫enhouse Lessee, LLC HHLP Ri姫enhouse Manager, LLC HHLP Saint Gregory Associates, LLC HHLP Saint Gregory Lessee, LLC HHLP Saint Gregory Manager, LLC HHLP San Diego Associates, LLC HHLP San Diego Lessee, LLC HHLP San Diego Manager, LLC HHLP Sanctuary Associates, LLC HHLP Sanctuary Lessee, LLC HHLP Sanctuary Manager, LLC HHLP Santa Barbara I Associates, LLC HHLP Santa Barbara I Lessee, LLC Ownership 100% HHLP 100% by HHLP 99% by HHLP 1% by HHLP Harrisburg Friendship GP, LLC 99.5% by HHLP .5% by Hersha Hospitality Trust 99% by HHLP 1% by HHLP Key West One Manager, LLC 100% by 44 New England Management Company 100% by HHLP 1% by HHLP King of Prussia, Inc. 99% by HHLP 100% by HHLP 1% by HHLP LA Westside Manager LLC 99% by HHLP 100% by HHLP 1% by HHLP Langhorne One, LLC 99% by HHLP 100% by HHLP 1% by HHLP Langhorne Two, LLC 99% by HHLP 100% by HHLP 99% by HHLP 1% by HHLP Malvern 2, LLC 1% by HHLP Miami Beach Manager, LLC 99% by HHLP 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by 44 Norwood Managing Member, LLC 1% by HHLP Oxford Valley, Inc. 99% by HHLP 100% by HHLP 1% by HHLP Parkside Manager LLC 99% by HHLP 100% by 44 New England Management Company 100% by HHLP 1% by HHLP Pearl Street Managing Member, LLC 99% by HHLP 100% by HHLP 100% by HHLP 100% by HHLP 99% by HHLP 1% by HHLP Ri姫enhouse Manager, LLC 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by HHLP Saint Gregory Manager, LLC 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by HHLPSan Diego Manager, LLC 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by HHLP Sanctuary Manager, LLC 100% by 44 New England Management Company 100% HHLP 99% by HHLP, 1% by HHLP Santa Barbara I Manager, LLC 100% by 44 New England Management Company 4 Jurisdic갇on of Incorpora갇on or Organiza갇on DE PA PA DE DE DE DE PA PA DE DE PA PA PA PA PA DE DE DE MA PA PA DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE DE Name of En갇ty HHLP Santa Barbara I Manager, LLC HHLP Sco姫sdale Associates, LLC HHLP Smith Street Associates, LLC HHLP Smith Street Holding, LLC HHLP Smith Street Managing Member, LLC HHLP Sunny Associates, LLC HHLP Sunny Lessee, LLC HHLP Sunny Manager, LLC HHLP Sunnyvale TPS Associates, LLC HHLP Sunnyvale TPS Lessee, LLC HHLP Sunnyvale TPS Manager, LLC HHLP Tyson’s Corner Associates, LLC HHLP Union Square Associates, LLC HHLP Union Square Lessee, LLC HHLP Union Square Manager, LLC HHLP Valley Forge Associates (LP) Ownership 100% by HHLP 100% by HHLP 100% by HHLP Smith Street Holding, LLC 99% by HHLP 1% by HHLP Smith Street Managing Member, LLC 100% by HHLP 99% by HHLP 1% by HHLP Sunny Manager, LLC 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by HHLP Sunnyvale TPS Manager, LLC 100% by 44 New England Management Company 100% by HHLP 100% by HHLP 100% by HHLP 100% by 44 New England Management Company 100% by HHLP 1% by HH LLC 99% by HHLP HHLP White Plains Associates, LLC HHLP Wilmington, Inc. 100% by HHLP 100% by HHLP HHLP Winter Haven Associates, LLC HHLP Winter Haven Lessee, LLC HHLP Winter Haven Manager, LLC HHLP York Street, LLC Hiren Boston, LLC HT‐315 Trumbull Street Associates, LLC HT‐Adriaen’s Landing Hotel TRS, LLC HT‐Exit 88 Hotel TRS, LLC HT‐Norwich Hotel TRS, LLC Market 8 Hotel Associates GP, LLC Metro 29th Sublessee, LLC Metro JFK Associates, LLC Metro JFK Managing Member, LLC Mys갇c Partners Leaseco, LLC Mys갇c Partners, LLC Mys갇c Special Purpose Corp. Norwich Hotel, LLC Philly One TRS, LLC Race Street, LLC Risingsam Hospitality, LLC SB Partners, LLC Seaport Hospitality, LLC Seaport TRS, LLC South Bay Boston, LLC 99% by HHLP, 1% by HHLP Winterhaven Manager, LLC 100% by 44 New England Management Company 100% by HHLP 100% by HHLP 49.9% by HHLP Boston One, LLC 50.1% by third par갇es 88% by Mys갇c Partners Leaseco, LLC 12% by a third party 95.662% by Mys갇c Partners Leaseco, LLC 0.651% by 44 New England Management Company 3.687% by a third party 100% by Mys갇c Partners Leaseco, LLC 99% by Mys갇c Partners Leaseco, LLC 1% by Mys갇c Special Purpose Corp. 100% by 44 New England Management Company 100% by 44 New England Management Company 1% by Metro JFK Managing Member, LLC 99%by HHLP 100% by HHLP Varying Percentages (based on certain assets owned by Mys갇c Partners Leaseco, LLC) by 44 New England Management Company and third par갇es Varying Percentages (based on certain assets owned by Mys갇c Partners, LLC) by HHLP and by third par갇es 100% by Mys갇c Partners, LLC 99% by Mys갇c Partners, LLC 1% by Mys갇c Special Purpose Corp. 100% by 44 New England Management Company 100% by HHLP 99% by HHLP 1% by Hersha Conduit Associates, LLC 49.9% by HHLP Boston Two, LLC 50.1% by third par갇es 99% by HHLP 1% 320 Pearl Street, Inc. 100% by 44 New England Management Company 49.9% by 44 New England Management Company 50.1% by third par갇es 5 Jurisdic갇on of Incorpora갇on or Organiza갇on DE DE NY NY NY DE DE DE DE DE DE DE DE DE DE PA DE DE DE DE DE DE MA DE DE DE DE DE NY NY NY DE DE DE CT PA PA NY MA NY DE DE Name of En갇ty South Bay Sandeep, LLC The Village on Roosevelt Property Owners' Associa갇on, Inc. York Street Lessee DE, LLC York Street LLC 100% by SB Partners, LLC 100% by HHLP Key West One Associates, LLC Ownership 100% by 44 New England Management Company 100% by HHLP York Street, LLC Jurisdic갇on of Incorpora갇on or Organiza갇on MA FL DE DE 6 (Back To Top) Section 5: EX23.1 (EX23.1) The Board of Trustees of Hersha Hospitality Trust: Consent of Independent Registered Public Accoun갇ng Firm Exhibit 23.1 We consent to the incorpora갇on by reference in the registra갇on statements (No. 333‐82666, No. 333‐113058, No. 333‐142073, No. 333‐142075, No. 333‐147113, No. 333‐156661, No. 333‐163123, No. 333‐167891, No. 333‐169658, No. 333‐187239, No. 333‐196175) on Form S‐3 and (No. 333‐122657, No. 333‐151314, No. 333‐179847, No. 333‐196181) on Form S‐8 of Hersha Hospitality Trust and subsidiaries of our reports dated February 23, 2017, with respect to the consolidated balance sheets of Hersha Hospitality Trust and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of opera갇ons, comprehensive income, equity, and cash ﬂows for each of the years in the three‐year period ended December 31, 2016, and the related ﬁnancial statement schedule, and the eﬀec갇veness of internal control over ﬁnancial repor갇ng as of December 31, 2016, which reports appear in the annual report on Form 10‐K of Hersha Hospitality Trust. /s/ KPMG LLP Philadelphia, Pennsylvania February 23, 2017 1 (Back To Top) Section 6: EX31.1 (EX31.1) CERTIFICATION Exhibit 31.1 I, Jay H. Shah, cer갇fy that: 1. I have reviewed this Annual Report on Form 10‐K for the period ended December 31, 2016 of Hersha Hospitality Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the ﬁnancial statements, and other ﬁnancial informa갇on included in this report, fairly present in all material respects the ﬁnancial condi갇on, results of opera갇ons and cash ﬂows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other cer갇fying oﬃcer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as deﬁned in Exchange Act Rules 13a‐15(e) and 15d‐15(e)) and internal control over ﬁnancial repor갇ng (as deﬁned in Exchange Act Rules 13a‐15(f) and 15d‐15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material informa갇on rela갇ng to the registrant, including its consolidated subsidiaries, is made known to us by others within those en갇갇es, par갇cularly during the period in which this report is being prepared; b) Designed such internal control over ﬁnancial repor갇ng, or caused such internal control over ﬁnancial repor갇ng to be designed under our supervision, to provide reasonable assurance regarding the reliability of ﬁnancial repor갇ng and the prepara갇on of ﬁnancial statements for external purposes in accordance with generally accepted accoun갇ng principles; c) Evaluated the eﬀec갇veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the eﬀec갇veness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evalua갇on; and d) Disclosed in this report any change in the registrant’s internal control over ﬁnancial repor갇ng that occurred during the registrant’s most recent ﬁscal quarter (the registrant's fourth ﬁscal quarter in the case of an annual report) that has materially aﬀected, or is reasonably likely to materially aﬀect, the registrant’s internal control over ﬁnancial repor갇ng; and 5. The registrant’s other cer갇fying oﬃcer(s) and I have disclosed, based on our most recent evalua갇on of internal control over ﬁnancial repor갇ng, to the registrant’s auditors and the audit commi姫ee of the registrant’s board of directors (or persons performing the equivalent func갇ons): a) All signiﬁcant deﬁciencies and material weaknesses in the design or opera갇on of internal control over ﬁnancial repor갇ng which are reasonably likely to adversely aﬀect the registrant’s ability to record, process, summarize and report ﬁnancial informa갇on; and b) Any fraud, whether or not material, that involves management or other employees who have a signiﬁcant role in the registrant’s internal control over ﬁnancial repor갇ng. Date: February 23, 2017 /s/ Jay H. Shah Jay H. Shah Chief Execu갇ve Oﬃcer (Back To Top) Section 7: EX31.2 (EX31.2) CERTIFICATION Exhibit 31.2 I, Ashish R. Parikh, cer갇fy that: 1. I have reviewed this Annual Report on Form 10‐K for the period ended December 31, 2016 of Hersha Hospitality Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the ﬁnancial statements, and other ﬁnancial informa갇on included in this report, fairly present in all material respects the ﬁnancial condi갇on, results of opera갇ons and cash ﬂows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other cer갇fying oﬃcer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as deﬁned in Exchange Act Rules 13a‐15(e) and 15d‐15(e)) and internal control over ﬁnancial repor갇ng (as deﬁned in Exchange Act Rules 13a‐15(f) and 15d‐15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material informa갇on rela갇ng to the registrant, including its consolidated subsidiaries, is made known to us by others within those en갇갇es, par갇cularly during the period in which this report is being prepared; b) Designed such internal control over ﬁnancial repor갇ng, or caused such internal control over ﬁnancial repor갇ng to be designed under our supervision, to provide reasonable assurance regarding the reliability of ﬁnancial repor갇ng and the prepara갇on of ﬁnancial statements for external purposes in accordance with generally accepted accoun갇ng principles; c) Evaluated the eﬀec갇veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the eﬀec갇veness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evalua갇on; and d) Disclosed in this report any change in the registrant’s internal control over ﬁnancial repor갇ng that occurred during the registrant’s most recent ﬁscal quarter (the registrant's fourth ﬁscal quarter in the case of an annual report) that has materially aﬀected, or is reasonably likely to materially aﬀect, the registrant’s internal control over ﬁnancial repor갇ng; and 5. The registrant’s other cer갇fying oﬃcer(s) and I have disclosed, based on our most recent evalua갇on of internal control over ﬁnancial repor갇ng, to the registrant’s auditors and the audit commi姫ee of the registrant’s board of directors (or persons performing the equivalent func갇ons); a) All signiﬁcant deﬁciencies and material weaknesses in the design or opera갇on of internal control over ﬁnancial repor갇ng which are reasonably likely to adversely aﬀect the registrant’s ability to record, process, summarize and report ﬁnancial informa갇on: and b) Any fraud, whether or not material, that involves management or other employees who have a signiﬁcant role in the registrant’s internal control over ﬁnancial repor갇ng. Date: February 23, 2017 /s/ Ashish R. Parikh Ashish R. Parikh Chief Financial Oﬃcer (Back To Top) Section 8: EX32.1 (EX32.1) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES‐OXLEY ACT OF 2002 Exhibit 32.1 In connec갇on with the Annual Report on Form 10‐K of Hersha Hospitality Trust (the “Company”) for the period ended December 31, 2016 as ﬁled with the Securi갇es and Exchange Commission on the date hereof (the “Report”), I, Jay H. Shah, Chief Execu갇ve Oﬃcer of the Company, cer갇fy, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes‐Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Sec갇on 13(a) or 15(d) of the Securi갇es Exchange Act of 1934, as amended; and (2) the informa갇on contained in the Report fairly presents, in all material respects, the ﬁnancial condi갇on and results of opera갇ons of the Company. February 23, 2017 /s/ Jay H. Shah Jay H. Shah Chief Execu갇ve Oﬃcer (Back To Top) Section 9: EX32.2 (EX32.2) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES‐OXLEY ACT OF 2002 Exhibit 32.2 In connec갇on with the Annual Report on Form 10‐K of Hersha Hospitality Trust (the “Company”) for the period ended December 31, 2016 as ﬁled with the Securi갇es and Exchange Commission on the date hereof (the “Report”), I, Ashish R. Parikh, Chief Financial Oﬃcer of the Company, cer갇fy, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes‐ Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Sec갇on 13(a) or 15(d) of the Securi갇es Exchange Act of 1934, as amended; and (2) the informa갇on contained in the Report fairly presents, in all material respects, the ﬁnancial condi갇on and results of opera갇ons of the Company. 7 February 23, 2017 /s/ Ashish R. Parikh Ashish R. Parikh Chief Financial Oﬃcer (Back To Top) 85404_Layout 1 4/12/17 12:01 PM Page 16 board of trustees Hasu P. Shah Chairman, Hersha Hospitality Trust Jay H. Shah Chief Executive Officer, Hersha Hospitality Trust HERSHA Thomas J. Hutchison III Former CEO, CNL Hotels & Resorts and CNL Retirement Properties, Inc. Donald J. Landry Lead Director, Hersha Hospitality Trust Former President & CEO, Sunburst Hospitality Inc. Dianna F. Morgan Former Senior Vice President, Walt Disney World Co. Michael A. Leven Former President and Chief Operating Officer, Las Vegas Sands Corp. 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 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 registered public accounting firm KPMG LLP Registrant Address 44 Hersha Drive Harrisburg, PA 17102 Telephone: (717) 236-4400 Fax: (717) 774-7383 registrar & stock transfer agent American Stock Transfer & Trust Company common stock 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, 2016. In addition, as required by Section 303A.12(a) of the New York Stock Exchange (NYSE) Listed Company Manual, on June 27, 2016 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 Investor Relations Manager, Hersha Hospitality Trust, 510 Walnut Street, 9th Floor, Philadelphia, PA 19106; 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 Thursday, June 1, 2017. The annual shareholders meeting will take place at The Ritz-Carlton, Boston, 10 Avery Street, Boston, MA 02111, in The Avery Room. 85404_Layout 1 4/10/17 3:22 PM Page 1 HERSHA www.hersha.com

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