Hersha Hospitality Trust

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
For the fiscal year ended December 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 001-14765
HERSHA HOSPITALITY TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland
25-1811499
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
44 Hersha Drive
Harrisburg
PA
17102
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (717) 236-4400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which
registered
Class A Common Shares of Beneficial Interest, par value $.01 per share
HT
New York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01
per share
HT-PC
New York Stock Exchange
6.50% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01
per share
HT-PD
New York Stock Exchange
6.50% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01
per share
HT-PE
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation 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 such files).
☒ Yes ☐ No
1

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐ 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received
by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the outstanding Class A common shares held by non-affiliates of the registrant, computed by reference to the closing sale price
at which Class A common shares were last sold on June 30, 2022, was approximately $387.6 million.
As of February 23, 2023, the number of Class A common shares outstanding was 39,735,400 and there were no Class B common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, to be filed with the Securities and Exchange Commission not later than 120 days after the end of the
registrant’s last fiscal year pursuant to Regulation 14A, are incorporated herein by reference into Part II, Item 5 and Part III.
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HERSHA HOSPITALITY TRUST
Table of Contents
Item No.
Form 10-K
Page
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
PART I
ITEM 1.
Business
6
ITEM 1A.
Risk Factors
13
ITEM 1B.
Unresolved Staff Comments
35
ITEM 2.
Properties
36
ITEM 3.
Legal Proceedings
37
ITEM 4.
Mine Safety Disclosures
37
PART II
ITEM 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
38
ITEM 6.
Reserved
38
ITEM 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
39
ITEM 7A.
Quantitative and Qualitative Disclosures About Mark Risk
48
ITEM 8.
Financial Statements and Supplementary Data
50
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
107
ITEM 9A.
Controls and Procedures
107
ITEM 9B.
Other Information
109
ITEM 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
109
PART III
ITEM 10.
Trustees, Executive Officers and Corporate Governance
110
ITEM 11.
Executive Compensation
110
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
110
ITEM 13.
Certain Relationships and Related Transactions, and Trustee Independence
110
ITEM 14.
Principal Accountant Fees and Services
110
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
111
ITEM 16.
Form 10-K Summary
114
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 operating 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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934 (“Exchange Act”), as amended, including, without limitation, statements containing the words, “believe,” “expect,” “anticipate,”
“estimate,” “plan,” “continue,” “intend,” “should,” “may,” "could," "will," "would," "forecast," "project," "potential," "likely," 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, uncertainties 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 identified in this report and other reports filed by us with the U.S. Securities and Exchange Commission (the "SEC") including, but not limited to
those discussed in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” 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 operating results;
•
our ability to generate positive cash flow from operations;
•
our distribution policy;
•
our liquidity and management's plans with respect thereto;
•
completion of any pending transactions;
•
our ability to maintain existing financing arrangements, including compliance with covenants, and our ability to obtain future financing arrangements or
refinance or extend the maturity of existing financing arrangements as they come due;
•
our ability to negotiate with lenders;
•
our understanding of our competition;
•
market trends;
•
projected capital expenditures;
•
the impact of inflation and the change in interest rates;
•
the effects of COVID-19 and its variants and other infectious disease outbreaks;
•
the supply and demand factors in our markets or sub-markets, or a potential recessionary environment;
•
our access to capital on the terms and timing we expect;
•
the restoration of public confidence in domestic and international travel;
•
permanent structural changes in demand for conference centers by business and leisure clientele; and
•
our ability to dispose of selected hotel properties on the terms and timing we expect, if at all.
Forward-looking statements are based on our beliefs, assumptions and expectations, taking into account all information currently available to us. These
beliefs, assumptions and expectations are subject to risks and uncertainties 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 condition, liquidity and results of operations may vary materially from those expressed in our forward-
looking statements. Readers should not place undue reliance on forward-looking statements.
Important factors that we think could cause our actual results to differ materially from expected results are summarized below. One of the most significant
factors, however, is the ongoing impact of the current outbreak of the novel coronavirus on the United States, regional and global economies, the broader
financial markets, our customers and employees, governmental responses thereto and the operation changes we have and may implement in response thereto.
The current outbreak of COVID-19 has also impacted, and is likely to continue to impact, directly or indirectly, many other important factors below.
New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor
on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-
looking statements.
The following non-exclusive list of factors could also cause actual results to vary from our forward-looking statements:
•
general volatility 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;
4

•
changes in our industry and the market in which we operate, interest rates, or the general economy;
•
decreased international travel because of geopolitical events, including terrorism, and current U.S. government policies, such as immigration policies, border
closings, and travel bans related to COVID-19;
•
widespread adoption of teleconference and virtual meeting technologies could reduce the number of in person business meetings and demand for travel and
our services;
•
uncertainty surrounding the financial stability of the United States, Europe and China;
•
the degree and nature of our competition;
•
financing risks, including (i) the risk of leverage and the corresponding risk of default on our mortgage loans and other debt, including default with respect to
applicable covenants, (ii) potential inability to obtain waivers of covenants or refinance or extend the maturity of existing indebtedness and (iii) our ability to
negotiate with lenders;
•
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 operating metrics;
•
hostilities, including future terrorist attacks, or fear of hostilities that affect travel;
•
financial condition of, and our relationships with, our joint venture partners, third-party property managers, and franchisors;
•
increased interest rates and operating costs and the impact of inflation;
•
ability to complete development and redevelopment projects;
•
risks associated with potential dispositions of hotel properties;
•
availability of and our ability to retain qualified personnel;
•
decreases in tourism due to pandemics, geopolitical instability or changes in foreign exchange rates;
•
our failure to maintain our qualification as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the "Code";
•
environmental uncertainties and risks related to natural disasters and increases in costs to insure against those risks;
•
changes in real estate and zoning laws and increases in real property tax rates;
•
the uncertainty and economic impact of pandemics, epidemics, or other public health emergencies or fear of such events, such as the recent outbreak of
COVID-19, including with respect to New York City;
•
the current COVID-19 pandemic had, and will continue to have, adverse effects on our financial conditions, results of operations, cash flows, and performance
for an indefinite period of time. Future pandemics may also have adverse effects on our financial condition, results of operations, cash flows, and
performance;
•
world events impacting the ability or desire of people to travel may lead to a decline in demand for hotels; and
•
the factors discussed in Item 1A of this Annual Report on Form 10-K for the year ended December 31, 2022 under the headings “Risk Factors” and
"Management's Discussion and Analysis of Financial Conditions and Results of Operations" and in other reports we file with the SEC from time to time.
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 entirety by the cautionary statements set forth above. Forward-looking
statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these statements to reflect
actual results, new information or future events, changes in assumptions or changes in other factors affecting 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 additional updates with
respect to those or other forward-looking statements.
5

PART I
Item 1.    Business
OVERVIEW
Hersha Hospitality Trust is a self-advised Maryland real estate investment trust that was organized in 1998 and completed its initial public offering in January
of 1999. Our common shares are traded on the New York Stock Exchange under the symbol “HT.” We invest primarily in institutional grade hotels in major urban
gateway markets including New York, Washington, DC, Boston, Philadelphia, South Florida and California. Our primary strategy is to continue to own high quality
luxury, upscale, and upper midscale hotels in metropolitan markets with high barriers to entry and independent boutique hotels in markets with similar
characteristics. We have operated and intend to continue to operate so as to qualify as a REIT for federal income tax purposes.
We create value through our ability to source capital and identify high growth acquisition targets.  We seek acquisition candidates located in markets with
economic, demographic and supply dynamics favorable to hotel owners and operators. Through our due diligence process, we select acquisition targets where we
believe selective capital improvements and intensive management will increase the hotel’s ability to attract key demand segments, enhance hotel operations and
increase long-term value. To drive sustainable shareholder value, we also seek to recycle capital from stabilized assets in markets with lower forecasted growth
rates. Capital from these types of transactions may be and has been redeployed into high growth acquisitions, share buybacks and reduction of debt, subject to
compliance with applicable law, our declaration of trust (as amended and supplemented, our "Declaration of Trust") and certain financial covenants.
Our operations and strategy have evolved, and adapted to the ongoing effects of the COVID-19 pandemic. Due to the COVID-19 pandemic and the effects of
travel restrictions and precautions both globally and in the United States, the hospitality industry experienced drastic drops in demand. As such, we have focused
on operating efficiently at reduced occupancies, executing expense mitigation strategies, and shoring up liquidity through strategic capital raising and hotel
dispositions to address our various debt obligations.
As of December 31, 2022, our portfolio consisted of 22 wholly-owned limited and full service properties with a total of 3,392 rooms, 1 hotel owned through a
consolidated joint venture with a total of 115 rooms, and interests in 2 limited service properties owned through joint venture investments with a total of 304
rooms. These 25 properties, with a total of 3,811 rooms, are located in California, Connecticut, District of Columbia, Florida, Maryland, Massachusetts, New York,
and Pennsylvania, and operate under leading brands owned by Marriott International, Inc. (“Marriott”), Hilton Worldwide, Inc. (“Hilton”), InterContinental Hotels
Group (“IHG”), and Hyatt Corporation (“Hyatt”). In addition, some of our hotels operate as independent hotels.
We are structured as an umbrella partnership REIT, or UPREIT, and we own our hotels and our investments in joint ventures through our operating
partnership, Hersha Hospitality Limited Partnership (the "Partnership"), for which we serve as the sole general partner. As of December 31, 2022, we owned an
approximate 85.1% partnership interest in our operating partnership including all of the 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 primarily by other unaffiliated third party investors and in which certain of our trustees and executive officers have a minority investment. Other third
party qualified management companies manage certain hotels that are wholly owned or in which 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 respective joint venture or an entity
owned in part by 44 New England.
Our principal executive office is located at 44 Hersha Drive, Harrisburg, Pennsylvania 17102. Our telephone number is (717) 236-4400. Our website address is
www.hersha.com. The information found on, or otherwise accessible through, our website is not incorporated into, and does not form a part of, this report.
AVAILABLE INFORMATION
We make available free of charge through our website (www.hersha.com) our code of ethics, corporate governance guidelines and the charters of the
committees of our Board of Trustees (Acquisition Committee, Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee
and Risk Sub-Committee of the Audit Committee). We also make available through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably
practicable after such documents are electronically filed with, or furnished to, the SEC. All
6

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.
INVESTMENT IN HOTEL PROPERTIES
Our operating strategy focuses on increasing hotel performance for our portfolio. The key elements of this strategy are:
•
working together with our hotel management companies to increase revenue per available room, or RevPAR, and to maximize the average daily rate, or ADR,
and occupancy levels at each of our hotels through active property-level management, including intensive marketing efforts to tour groups, corporate and
government extended stay customers and other wholesale customers and expanded yield management programs, which are calculated to better match room
rates to room demand; and
•
maximizing our hotel-level earnings by managing hotel-level costs and positioning our hotels to capitalize on increased demand in the high quality, upper-
upscale, upscale and extended-stay lodging segments, which followed from improving economic conditions, and maximizing our operating margins.
ACQUISITIONS
When acquisitions are within our operating strategy, we selectively acquire high quality branded luxury, upper-upscale, upscale, and upper-midscale hotels in
metropolitan and resort markets with high barriers-to-entry and independent boutique hotels in similar markets. Through our due diligence process, we select
those acquisition targets where we believe selective capital improvements and intensive management will increase the hotel’s ability to attract key demand
segments, enhance hotel operations and increase long-term value. In executing our disciplined acquisition program, we will consider acquiring hotels that meet
the following additional criteria:
•
nationally-franchised hotels operating under popular brand families, such as Marriott, Hilton, IHG, Hyatt, Accor, and Four Seasons;
•
hotels in locations with significant barriers-to-entry, such as high development costs, limited availability of land and lengthy entitlement processes;
•
hotels in our target markets where we can realize operating efficiencies and economies of scale; and
•
independent boutique hotels that have strong business generating potential in similar markets.
All asset acquisitions are comprehensively reviewed and approved by the Acquisition Committee of our Board of Trustees, which consists solely of
independent trustees.
We utilize our relationships with entities that are developing or substantially renovating hotels, including entities controlled by certain of our trustees and
executive officers, to identify future hotel acquisitions that we believe may be attractive to us. We may continue to acquire hotels from entities controlled by
certain of our trustees and executive officers if approved by a majority of our independent trustees in accordance with our related party transaction policy.
We acquired no hotel properties in the year ended December 31, 2022 and we intend to invest in additional hotels only as suitable opportunities arise and
adequate sources of financing are available. We expect that future investments in hotels will depend upon and will be financed by, in whole or in part, our existing
cash, the proceeds from additional issuances of common or preferred shares, proceeds from the sale of assets, issuances of Common Units, issuances of preferred
units or other securities or borrowings secured by hotel assets and under our Line of Credit.
DISPOSITIONS
We evaluate our hotels and the markets in which they operate on a periodic basis to determine if these hotels continue to satisfy our investment criteria. We
may sell hotels opportunistically based upon management’s forecast and review of the cash flow potential of each hotel and re-deploy the proceeds into debt
reduction, acquisitions of hotels and, from time to time, share buybacks. We utilize several criteria to determine the long-term potential of our hotels. Hotels are
identified for sale based upon management’s forecast of the strength of each hotel’s cash flows, its ability to remain accretive to our portfolio, and the
expectations for the market in which the hotel operates. Our decision to sell a hotel is often predicated upon the size of the hotel, strength of the franchise,
property condition and related costs to renovate the property, strength of market demand generators, projected supply of hotel rooms in the market, probability
of increased valuation and geographic profile of the hotel. All asset sales are comprehensively reviewed by the Acquisition Committee of our Board of Trustees.
In response to the COVID-19 pandemic, we completed several hotel dispositions to enhance our liquidity to address our various debt obligations and limit
capital expenditures. During the year ended December 31, 2020, we disposed of the
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Sheraton Wilmington. During the year ended December 31, 2021, we sold the Residence Inn Coconut Grove, the Courtyard San Diego, the Capitol Hill Hotel, the
Holiday Inn Express Cambridge Hotel and the Duane Street Hotel. During the year ended December 31, 2022, we sold the Courtyard Brookline, the Hampton Inn
Washington, DC, the Hilton Garden Inn M Street Washington, DC, the Hampton Inn - Philadelphia, the TownePlace Suites Sunnyvale, the Courtyard Sunnyvale, the
Courtyard Los Angeles Westside, Hotel Milo Santa Barabara, Pan Pacific Seattle, and the Gate hotel JFK Airport.
For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Investment in Hotel
Properties.”
FINANCING
We intend to finance our long-term growth with common and preferred equity issuances and debt financing with staggered maturities. Our organizational
documents do not limit the amount of indebtedness that we may incur. Our ability to incur additional debt is dependent upon a number of factors, including the
current state of the overall credit markets, our degree of leverage and borrowing restrictions imposed by debt covenants and existing lenders. Our ability to raise
funds through the issuance of debt and equity securities is dependent upon, among other things, capital market volatility, risk tolerance of investors, general
market conditions for REITs and market perceptions related to the Company's ability to generate cash flow and positive returns on its investments. As discussed
above, we may also pursue hotel dispositions, among other strategic initiatives, in order to bolster our financial position.
Our debt includes secured credit facilities, term loans, mortgage debt on certain hotel properties, and subordinated notes payable. We may use our line of
credit capacity to pay down mortgage debt, repurchase common shares subject to market conditions, and fund future acquisitions, as well as for capital
improvements and working capital requirements. When purchasing hotel properties, we may issue common and preferred limited partnership interests in our
operating partnership as full or partial consideration to sellers.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information on our indebtedness and
financing.
SUSTAINABILITY
Our proprietary sustainability platform, EarthView®, was created in 2010 and is one of the most established sustainability programs in the hospitality industry.
Through EarthView, we incorporate economic, environmental, and social initiatives into our overall business strategy. Our approach to sustainability not only
drives lower operating expenses and higher real estate value, but is also a framework for identifying efficiencies in current practices, areas for hospitality
innovation, and future market trends.
We have been recognized for our approach to driving positive environmental and community impact, and for our leadership in sustainability. In 2021 and 2022,
Hersha ranked first among U.S. lodging peers in the Global Real Estate Sustainability Benchmark (GRESB) Public Disclosure. We have also been selected as “Leader
in the Light” by NAREIT in the Lodging & Resorts sector four times for our superior sustainability practices. Additionally, we were included in America’s Most
Responsible Companies in 2021, 2022, and 2023 by Newsweek.
We are committed to transparent reporting of our ESG results. As such, Hersha publishes an annual sustainability report that is prepared in accordance with
relevant international standards and best practices, specifically the Sustainable Accounting Standards Board (SASB) for the Real Estate Sector and the Task-force
for Climate-related Financial Disclosures (TCFD).
For more information on these and our other sustainability practices, including environmental and community impact results, as well as enterprise-wide policies,
please see our current and historical sustainability reports, available on our website https://www.hersha.com/earthview/. The contents of our website are not
incorporated by reference into this report.
FRANCHISE AGREEMENTS
Franchisors provide a variety of benefits for franchisees, which include national advertising, publicity and other marketing programs designed to increase
brand awareness, training of personnel, continuous review of quality standards and centralized reservation systems. Most of our hotels operate under franchise
licenses from national hotel franchisors, including:
8

Franchisor
Franchises
Marriott International
Ritz-Carlton, Marriott, Westin, Courtyard by Marriott, Autograph Collection
Hilton Hotels Corporation
Hilton Garden Inn, Hampton Inn
Hyatt Hotels Corporation
Hyatt, Hyatt House
IHG
Holiday Inn Express
We anticipate a majority of the hotels in which we invest will be operated pursuant to franchise licenses.
The franchise licenses generally specify certain management, operational, record-keeping, accounting, reporting and marketing standards and procedures
with which the franchisee must comply. The franchise licenses generally obligate our lessees to comply with the franchisors’ standards and requirements with
respect to training of operational personnel, safety, maintaining specified insurance, the types of services and products ancillary to guest room services that may
be provided by our lessees, display of signage, and the type, quality and age of furniture, fixtures and equipment included in guest rooms, lobbies and other
common areas. In general, the franchise licenses require us to pay the franchisor a fee typically ranging between 3.8% and 9.5% of such hotel’s revenues annually.
PROPERTY MANAGEMENT
We work closely with our hotel management companies to operate our hotels and increase hotel performance for our portfolio.
Through our TRS and our investment in joint ventures, we have retained the following management companies to operate our hotels as of December 31,
2022:
Wholly Owned
Joint Ventures
Total
Manager
Hotels
Rooms
Hotels
Rooms
Hotels
Rooms
Hersha Hospitality Management, L.P.
21 
3,306 
— 
— 
21 
3,306 
South Bay Boston Management, Inc.
— 
— 
2 
304 
2 
304 
Marriott Management
1 
86 
1 
115 
2 
201 
Total
22 
3,392 
3 
419 
25 
3,811 
Each management agreement provides for a set term and is subject to early termination upon the occurrence of defaults and certain other events described
therein. As required under the REIT qualification rules, all managers, including HHMLP, must qualify as an “eligible independent contractor” during the term of the
management agreements.
Under the management agreements, the manager generally pays the operating expenses of our hotels. All operating expenses or other expenses incurred by
the manager in performing its authorized duties are reimbursed or borne by our applicable TRS to the extent the operating expenses or other expenses are
incurred within the limits of the applicable approved hotel operating budget. Our managers are not obligated to advance any of their own funds for operating
expenses of a hotel or to incur any liability in connection with operating a hotel.
For their services, the managers receive a base management fee, and if a hotel meets and exceeds certain thresholds, an additional incentive management
fee. 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 condition that complies with their respective
requirements. These capital reserves typically range from 3% to 5% of a hotel’s gross revenues and are included in escrow deposits on the consolidated balance
sheet. In addition, we may upgrade hotels in our portfolio in order to capitalize on opportunities to increase revenue, and, as deemed necessary by our
management, to seek to meet competitive conditions and preserve asset quality. We will also renovate hotels when we believe the investment in renovations will
provide an attractive return to us through increased revenues and profitability and is in the best interests of our shareholders. As hotels are renovated, we may
incorporate certain energy and water efficient improvements as part of our EarthView initiatives discussed above. We maintain a capital expenditures policy by
which replacements and renovations are monitored to determine whether they qualify as capital improvements.
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OPERATING PRACTICES
Our hotel managers utilize centralized accounting and data processing systems, which facilitate financial statement and budget preparation, payroll
management, quality control and other support functions 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 discretion within specific guidelines.
SEASONALITY
Our hotels’ operations historically have been seasonal in nature, reflecting lower revenues and occupancy rates during the first quarter of each year when
compared to the remaining three quarters. This seasonality causes fluctuations in our quarterly operating revenues, profitability, and cash flow.
COMPETITION
The U.S. hotel industry is highly competitive. Our hotels compete with other hotels for guests in each of their markets on the basis of several factors,
including, among others, location, quality of accommodations, convenience, brand affiliation, room rates, service levels and amenities, and level of customer
service. In addition to traditional hotels, our properties also compete with non-traditional accommodations for travelers such as online room sharing services.
Competition is often specific to the individual markets in which our hotels are located and includes competition from existing 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 national brand
families, such as Marriott, Hilton, Hyatt, or IHG, will enjoy the competitive advantages associated with operating under such brands. Increased competition could
harm our occupancy and revenues and may require us to provide additional amenities or make capital improvements that we otherwise would not have to make,
which may materially and adversely affect our operating results and liquidity.
Historically, the upper-upscale and upscale limited service segments of the hotel business have been highly competitive.  There are many competitors in our
markets and new hotels are routinely being constructed. Additions to supply create new competitors, in some cases without corresponding increases in demand
for hotel rooms.
We also compete for (i) hotel acquisitions with entities that have investment objectives similar to ours and (ii) buyers for various hotel dispositions. We face
competition for the acquisition of hotels from institutional pension funds, private equity funds, REITs, hotel companies and others who are engaged in the
acquisition of hotels. Many of these competitors have substantially greater financial and operational resources and access to capital than we have and may have
greater knowledge of the markets in which we seek to invest. This competition may reduce the number of suitable investment opportunities offered to us,
increase the bargaining power of property owners seeking to sell to us and decrease the attractiveness 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 properties on attractive terms. Furthermore, an increase in disposition
activity by other lodging competitors may negatively impact our ability to dispose of certain hotel properties on the terms and timing we expect, if at all.
HUMAN CAPITAL
As of December 31, 2022, we had 27 employees who were principally engaged in managing the affairs of the Company. The hotel management companies we
engage to operate our hotels are responsible for hiring and maintaining the labor force at each of our hotels. Although we do not manage employees at our
hotels, we are still subject to the many costs and risks generally associated with the labor at our hotels.
Hersha's priorities with regard to the human capital aspects of our business are aligned with our core values and focus on supporting our associates, valuing
diversity and inclusion, and embracing health and wellness.
•
Supporting our Associates: We aim to attract, develop, and retain top talent and are committed to creating an environment for our associates
that makes Hersha an exceptional place to work. We provide competitive pay, comprehensive benefit programs, and an inclusive, safe, and open work
environment. We are committed to our Code of Conduct and Code of Ethics and provide opportunities for advancement and personal growth.
•
Diversity and Inclusion: We support and respect the protection of the internationally recognized United Nations Universal Declaration of Human
Rights, as well as labor rights. This approach has led to a diverse workforce at the senior management and workforce levels, with the following
demographics across Hersha Hospitality Trust:
–
33% of our workforce is women
–
30% of our workforce identifies as a member of a minority group
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–
22% of our workforce is under the age of 30, while 56% of our workforce is between the ages of 30 and 50
In 2017, our CEO signed the CEO Action for Diversity and Inclusion Pledge, joining others across all industries, and furthering our commitment to
these essential principles in the workplace and boardroom.
•
Health and Wellness: We support the physical and mental health of our associates by providing access to stress management and healthy living
instruction, as well as providing a physical work environment that is comfortable and safe. We encourage work-life balance and have provided associates
with the flexibility to work from home during the COVID-19 pandemic.
Our efforts have been consistently recognized, with the Company being named in Newsweek's list of America's Most Responsible Companies in 2021, 2022,
and 2023.
TAX STATUS
We elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 1999. As long as we
qualify for taxation as a REIT, we generally will not be subject to federal income tax on the portion of our income that is currently distributed to our shareholders.
If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to federal income tax on our taxable
income at regular corporate tax rates.  Additionally, we will generally be unable to qualify as a REIT for four years following the year in which qualification is
lost.  Even if we qualify for taxation as a REIT, we will be subject to certain state and local taxes on our income and property and to federal income and excise taxes
on our undistributed income.
We own interests in several TRSs. We may own up to 100% of the stock of a TRS. A TRS is a taxable corporation that may lease hotels from our operating
partnership and its subsidiaries under certain circumstances. Overall, no more than 20% of the value of our assets may consist of securities of one or more TRS. In
addition, no more than 25% of our gross income for any year may consist of dividends from one or more TRS and income from certain non-real estate related
sources.
A TRS is permitted to lease hotels from us as long as the hotels are operated on behalf of the TRS by a third party manager that qualifies as an "eligible
independent contractor." To qualify for that treatment, the manager must satisfy the following requirements:
1.
such manager is, or is related to a person who is, actively engaged in the trade or business of operating “qualified lodging facilities” for any person
unrelated to us and the TRS;
2.
such manager does not own, directly or indirectly, more than 35% of our shares;
3.
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
4.
we do not, directly or indirectly, derive any income from such manager.
The deductibility of interest paid or accrued by a TRS to us is limited to assure that the TRS is subject to an appropriate level of corporate taxation, and in
certain circumstances, other limitations on deductions of interest may apply. A 100% excise tax would be imposed on transactions 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 regulations, including regulations relating 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 Disabilities Act
Our hotels must comply with applicable provisions of the Americans with Disabilities Act of 1993, or ADA, to the extent that such hotels are "public
accommodations" as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our
hotels where such removal is readily achievable. We believe that our hotels are in substantial compliance with the ADA and that we will not be required to make
substantial capital expenditures to address the requirements of the ADA. However, non-compliance with the ADA could result in imposition of fines or an award of
damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our hotels and to make
alterations as appropriate in this respect.
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Environmental Matters
Under various laws relating to the protection of the environment, a current or previous owner or operator (including tenants) of real estate may be liable for
contamination resulting from the presence or discharge of hazardous or toxic substances at that property and may be required to investigate and clean up such
contamination at that property or emanating from that property. These costs could be substantial and liability under these laws may attach 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
contamination or the failure to remediate contamination 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 regulations 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 regulations and could be subject to fines and penalties 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 precautions, including removal or other abatement, in the
event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators for failure
to comply with these requirements. In addition, third parties 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 conditions, which could lead to liability for adverse health effects and
costs of remediation. The presence of significant mold or other airborne contaminants at any of our hotels could require us to undertake a costly remediation
program to contain or remove the mold or other airborne contaminants from the affected hotel or increase indoor ventilation. In addition, 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 deductibles. 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. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impracticable to
use insurance proceeds to replace the applicable hotel after 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 position with respect to the applicable hotel. If any of these or similar events occur, it
may reduce the return from the attached property and the value of our investment.
FINANCIAL INFORMATION ABOUT SEGMENTS
We allocate resources and assess operating performance based on individual hotels and consider each one of our hotels to be an operating segment.  No
operating segment, individually, meets the threshold for a reportable segment as defined within ASC Topic 280 – Segment Reporting, nor do they fully satisfy the
requisite aggregation criteria therein.  As a result, the Company does not present separate operating segment information within the Notes to the Consolidated
Financial Statements. See “Note 1 - Organization and Summary of Significant Accounting Policies” in Item 8 of this Annual Report on Form 10-K for segment
financial information.
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Item 1A.    Risk Factors
You should carefully consider the following risks, together with the other information included in this Annual Report on Form 10-K. If any of the following risks
actually occur, our business, financial condition or results of operations may suffer. As a result, the trading price of our securities could decline, and you may lose
all or part of any investment you have in our securities.
SUMMARY
RISKS RELATED TO THE ECONOMY AND CREDIT MARKETS
•
Economic conditions have reduced, and may continue to reduce, demand for hotel properties, which has, and may continue to, adversely affect the
Company’s profitability.
•
A sustained recession could result in declines in our average daily room rates, occupancy and RevPAR.
•
Disruptions in the financial markets could adversely affect our ability to obtain sufficient third-party financing.
•
Changes in interest expense as a result of the phase out of LIBOR.
RISKS RELATED TO THE HOTEL INDUSTRY
•
Our hotels are subject to general hotel industry operating risks.
•
Our hotels are geographically concentrated in a limited number of markets.
•
Difficult economic conditions may continue to adversely affect the hotel industry.
•
The value of our hotels depends on conditions beyond our control.
•
Our investments are concentrated in a single segment of the hotel industry.
•
Operating costs and capital expenditures for hotel renovation may be greater than anticipated.
•
The franchise licenses under which we operate our hotels may be terminated or not renewed.
•
The seasonal and cyclical nature of the hotel industry may cause fluctuations in our operating performance.
•
The increasing use of Internet travel intermediaries by consumers.
•
The need for business-related travel may decline.
•
The growing use of non-franchisor lodging distribution channels could adversely affect the business and profitability.
•
Future terrorist attacks or changes in terror alert levels could adversely affect travel and hotel demand.
•
The COVID-19 pandemic has had, and will continue to have, adverse effects on our business.
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RISKS RELATED TO OUR BUSINESS AND OPERATIONS
•
Noncompliance with environmental laws and regulations could result in fines and liabilities which could adversely affect operating results.
•
Costs of compliance with or liabilities under environmental laws could significantly reduce our profitability.
•
We face risks associated with the use of debt, including covenant compliance and refinancing risk.
•
We may fail to maintain an effective system of internal controls.
•
The impact of the Russian invasion of Ukraine on the global economy is uncertain.
•
We do not operate our hotels or have complete control over implementation of our strategic decisions.
•
Most of our hotels are located in the area from Washington, DC to Boston, MA, including New York City, which may increase the effect of any regional or local
events or conditions.
•
We own a limited number of hotels.
•
Inflation and price volatility in the global economy could negatively impact our business and results of operations.
•
We focus on acquiring hotels operating under a limited number of franchise brands.
•
We depend on key personnel.
•
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial conditions and
disputes between us and our co-venturers.
•
We engage in hedging transactions to limit our exposure to fluctuations in interest rates.
•
Hedging transactions may reduce our shareholders’ equity.
•
We and our hotel managers rely on information technology, which may fail or be inadequate, in our operations.
•
We face possible risks associated with the physical effects of severe weather and climate change.
•
We may be contractually prohibited from paying dividends.
•
Labor shortages and increased employee-related costs may impact operating results.
RISKS RELATED TO REAL ESTATE INVESTMENT GENERALLY
•
Real estate investments can be illiquid.
•
We may suffer losses not covered by insurance or that are in excess of our insurance coverage limits.
•
Real estate is subject to property taxes.
•
Environmental matters could adversely affect our results.
•
Our hotel properties may contain or develop harmful mold, which could lead to liability and remediation costs.
•
Costs associated with complying with the ADA may adversely affect our financial condition and operating results.
RISKS RELATED TO CONFLICTS OF INTEREST
•
Certain agreements may not have been negotiated on an arm’s-length basis.
•
Conflicts of interest with HHMLP may result in decisions that do not reflect our best interests.
•
Sales or refinancing of certain hotels acquired from related parties may lead to decisions not in our best interest.
RISKS RELATED TO OUR STRUCTURE
•
There are no assurances of our ability to make distributions in the future.
•
Holders of our outstanding preferred shares have certain senior rights to the holders of our common shares.
•
Our Board of Trustees may authorize the issuance of additional shares.
•
Our Declaration of Trust contains a provision that creates staggered terms for our Board of Trustees.
•
Certain provisions of Maryland law may discourage a third party from acquiring us.
•
Our Board of Trustees and management make decisions on our behalf and shareholders have limited policymaking and management rights.
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RISKS RELATED TO OUR TAX STATUS
•
If we fail to qualify as a REIT, our dividends will not be deductible, and our income will be subject to taxation.
•
To qualify as a REIT, we must distribute annually a certain percentage of our REIT taxable income.
•
If the leases of our hotels to our TRSs are not respected as true leases, we would fail to qualify as a REIT.
•
Our ownership of our TRSs is limited and our transactions with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if
those transactions are not conducted on arm's-length terms.
•
If our hotel managers do not qualify as “eligible independent contractors,” we would fail to qualify as a REIT.
•
Complying with REIT requirements may force us to sell otherwise attractive investments.
•
The prohibited transactions tax may limit our ability to engage in certain transactions, including dispositions.
•
We may pay taxable dividends partly in shares and partly in cash.
•
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
•
Our share ownership limitation may prevent certain transfers of our shares.
•
We may be subject to adverse legislative or regulatory tax changes.
•
The federal income tax laws governing REITs are complex.
GENERAL RISK FACTORS
•
An increase in market interest rates may have an adverse effect on the market price of our securities.
•
Future offerings of equity securities may adversely affect the market price of our common shares.
•
The market price of our securities has been, and may continue to be, volatile and has declined, and
may continue to decline.
•
Future sales of our securities could depress the market price of our common shares.
RISKS RELATED TO THE ECONOMY AND CREDIT MARKETS
Economic conditions have reduced, and may continue to reduce, demand for hotel properties, which has affected, and may continue to, adversely affect the
Company’s profitability.
The performance of the lodging industry is highly cyclical and has traditionally been closely linked with the performance of the general economy and,
specifically, growth in the U.S. gross domestic product, employment, and investment and travel demand. The Company cannot predict the pace or duration of the
global economic cycle or the cycles of the lodging industry. Furthermore, the Company cannot predict major disruptions in business cycles, including the
development, length and ultimate effects of a global pandemic, such as COVID-19.
As a result of the COVID-19 pandemic, (i) conditions in the lodging industry deteriorated, and (ii) we experienced a period of economic weakness. However,
we have subsequently experienced consistent signs of improvement in the Company’s occupancy rates, revenues and profitability. Other macroeconomic factors,
such as consumer confidence and conditions which negatively shape public perception of travel, may have a negative effect on the lodging industry and the
Company’s business.
Furthermore, some of the Company’s hotels are classified as upper-upscale or upscale. These types of hotels have been, and may continue to be, more
susceptible to a decrease in revenue, as compared to hotels in other categories that have lower room rates. This characteristic may result from the fact that
upper-upscale hotels generally target business and high-end leisure travelers. Furthermore, at the onset of the COVID-19 pandemic, business and leisure travelers
reduced travel costs by limiting travel or seeking to reduce costs on their trips. In the event of a resurgence of COVID-19 or other change in economic conditions,
these travelers may continue to reduce their travel costs by limiting travel or seeking price reductions. In addition, profitability may be negatively affected by the
relatively high fixed costs of operating upper-upscale and upscale hotels.
A sustained 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 operations.
The performance of the hotel industry has traditionally been closely linked with the general economy. For example, during both the recession of 2008 and
2009 and the COVID-19-related downturn, overall travel was reduced, which had a significant effect on our results of operations. While operating results
subsequently improved, the COVID-19 pandemic has
15

depressed economic activity. Certain of our properties’ occupancy and room rates have dropped, and others may drop, such that their revenues are insufficient to
cover their respective operating expenses. As a result, we have been, and may continue to be, required to spend additional funds for such properties’ operating
expenses. Other factors that may also affect our revenues and earnings include, but are not limited to, hindered growth in the economy, changes in
unemployment, underemployment, administration policies and changes in travel patterns. A sustained recession would have a material adverse effect on our
results of operations.
In addition, operating results have declined, and may continue to decline, at our hotels secured by mortgage debt, which has resulted, and may continue to
result, in insufficient operating profit from such hotels to cover the respective debt service on the mortgage. In response, we have been, and may continue to be,
forced to choose from a number of unfavorable options, including using corporate cash, drawing on our revolving credit facility, selling the hotel on
disadvantageous terms, including at an unattractive price, or defaulting on the mortgage debt and permitting the lender to foreclose. Any one of these options
could have a material adverse effect on our business, results of operations, financial condition and ability to pay distributions to our shareholders.
Disruptions in the financial markets could adversely affect our ability to obtain sufficient third-party financing for our capital needs, including expansion,
acquisition and other activities, on favorable terms or at all, which could materially and adversely affect us.
In response to the COVID-19 pandemic, the U.S. stock and credit markets have experienced significant price volatility, dislocations and liquidity disruptions,
which have caused market prices of many stocks, including ours, to fluctuate substantially and the spreads on prospective debt financings to widen considerably.
These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in some cases have
resulted in the unavailability of financing, even for companies which otherwise are qualified to obtain financing. Continued volatility and uncertainty in the stock
and credit markets in the U.S. and abroad have negatively impacted, and may continue to negatively impact, our ability to access additional financing for our
capital needs, including expansion, acquisition activities and other purposes, on favorable terms or at all, which may negatively affect our business. Additionally,
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 existing 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 obligations. A prolonged downturn in the financial markets may cause us to seek
alternative sources of potentially less attractive 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 additional secured or unsecured debt, which could
materially and adversely affect us.
The elimination of LIBOR after June 2023 may affect our financial results.
On March 5, 2021, the United Kingdom Financial Conduct Authority, or FCA, which regulates LIBOR, announced that all LIBOR tenors relevant to us will cease
to be published or will no longer be representative after June 30, 2023. As of December 31, 2021, the IBA ceased publication of most non-USD LIBOR settings. IBA
also previously announced its intention to cease publication of remaining U.S. dollar LIBOR ("USD LIBOR") settings immediately after June 30, 2023; however, in
November 2022 the U.K. Financial Conduct Authority, which regulates IBA, announced a public consultation regarding whether it should compel IBA to continue
publishing “synthetic” USD LIBOR settings from June 2023 to the end of September 2024. Further, on March 15, 2022, the Consolidated Appropriations Act of
2022, which includes the Adjustable Interest Rate (LIBOR) Act, or LIBOR Act, was signed into law in the U.S. This legislation establishes a uniform benchmark
replacement process for financial contracts maturing after June 30, 2023 that do not contain clearly defined or practicable fallback provisions. Under the LIBOR
Act, such contracts will automatically transition as a matter of law to a Secured Overnight Financing Rate, or SOFR, based replacement rate identified by the Board
of Governors of the Federal Reserve System, or Federal Reserve. The legislation also creates a safe harbor that shields lenders from litigation if they choose to
utilize a replacement rate recommended by the Federal Reserve. In July 2022, the Federal Reserve issued a notice of proposed rulemaking implementing the
LIBOR Act. As of December 31, 2022, no regulations have been promulgated. The Federal Reserve, in conjunction with the Alternative Reference Rates Committee,
or ARRC, a steering committee composed of large U.S. financial institutions, identified SOFR, a new index calculated using short-term repurchase agreements
backed by Treasury securities, as its preferred alternative rate for USD LIBOR. According to the ARRC, data from the cash and derivatives markets show continued
momentum in the transition from LIBOR to SOFR, and SOFR is currently predominant across cash and derivatives markets. The FCA's announcement coincides
with the March 5, 2021, announcement of LIBOR's administrator, the ICE Benchmark Administration Limited, or IBA, indicating that, as a result of not having
access to input data necessary to calculate LIBOR tenors relevant to us on a representative basis after June 30, 2023, IBA would have to cease publication of such
LIBOR tenors immediately after the last publication on June 30, 2023. These announcements mean that any of our LIBOR-based borrowings and assets that
mature beyond June 30, 2023 need to be converted to alternative interest rates. In addition, any of our new borrowings after December 31, 2021, will be and
have been done at alternative rates.
16

There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an
overnight rate while LIBOR reflects term rates at different maturities. When our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR
and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available, which could have a material
adverse effect on our results.
US regulators and the ARRC have recommended that all LIBOR-based instruments include robust fallback language dictating what rate will apply when LIBOR ends.
The fallbacks recommended by the ARRC are different for various non-derivative instruments, and not all USD-LIBOR-based instruments will incorporate the
recommended fallbacks. The International Swaps and Derivatives Association (“ISDA”) has implemented fallback language and a protocol that will ensure USD-
LIBOR-based derivatives amongst protocol participants fallback to compounded SOFR. However, the variations in fallback language in different financial
instruments and the adoption of different replacement rates or methodologies in such fallback language could result in unexpected differences between our USD-
LIBOR-based assets and our USD-LIBOR-based interest rate hedges. In addition, we may incur costs amending instruments not covered by the ISDA protocol or by
clearinghouse rulebooks to implement fallbacks recommended by the ARRC. We may also decide not to amend, in which case we may bear the cost and risk of
litigation. Some instruments, particularly consumer-facing adjustable-rate mortgages, are impractical to amend. With respect to those instruments, we may bear
the cost and risk of litigation. Our lenders may be less willing to extend credit secured by assets that do not include robust fallbacks.
It is expected that switching existing financial instruments and hedging transactions from LIBOR to SOFR will include a spread adjustment. ISDA has described the
spread calculation methodology that will apply to derivatives that adopt the ISDA recommendations for derivatives, and the ARRC has recommended the same
methodology for all non-consumer financial instruments. The adjustment calculation is intended to minimize value transfer between counterparties, borrowers,
and lenders, but there is no assurance that the calculated spread adjustment will be fair and accurate or that it will not result in higher interest costs.
We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities,
increasing the difficulty of investing, hedging, and risk management. Because the impact of USD-LIBOR cessation is dependent on unknown future facts, the
language of individual contracts, and the outcome of potential future litigation, it is not currently practical for our valuation models to account for the cessation of
LIBOR. We use service providers to validate the fair values of certain financial instruments. We are not aware of those service providers accounting for the
cessation of LIBOR in their pricing models.
The process of transition involves operational risks. References to USD-LIBOR may be embedded in computer code or models, and we may not identify and correct
all of those references. Because compounded SOFR is backward-looking rather than forward-looking, parties making or receiving USD-LIBOR-based payments may
be unable to calculate payment amounts until the day that payment is due. Proposed mechanisms to solve the operational timing issue may result in a payment
amount that does not fully reflect interest rates during the calculation period.
RISKS RELATED TO THE HOTEL INDUSTRY
Our hotels are subject to general hotel industry operating risks, which may impact our ability to make distributions to shareholders.
Our hotels are subject to all operating risks common to the hotel industry. The hotel industry has previously experienced, and is currently experiencing,
volatility, as have, and are, our hotels, and there can be no assurance that such volatility will subside or not occur in the future. These risks include, among other
things: competition from other hotels; over-building in the hotel industry that could adversely affect hotel revenues and hotel values; increases in operating costs
due to inflation, labor shortages and other factors, which may not be offset by increased room rates; reduction in business and commercial travel and tourism,
including as a result of legislation, executive policies or pandemics such as COVID-19; 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 conditions; and adverse political conditions. Certain of these factors
have reduced, and may continue to reduce, revenues of our hotels, or increase operating expenses of our hotels, which has adversely affected, and may continue
to adversely affect, our ability to make distributions to our shareholders.
Our hotels are geographically concentrated in a limited number of markets and, accordingly, we could be disproportionately harmed by adverse changes to
these markets, natural disasters, climate change and related regulations, or terrorist attacks.
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A significant portion of our room count is located in a concentrated number of markets that exposes us to greater risk to local economic or business
conditions, changes in hotel supply in these markets, and other conditions than more geographically diversified hotel companies. An economic downturn, an
increase in hotel supply, a force majeure event, a natural disaster, changing weather patterns and other physical effects of climate change (including supply chain
disruptions), a terrorist attack or similar event in any one of these markets likely would cause a decline in the hotel market and adversely affect occupancy rates,
the financial performance of our hotels in these markets and our overall results of operations, which could be material, and could significantly increase our costs.
Over time, our hotel properties located in coastal markets and other areas that may be impacted by climate change are expected to experience increases in
storm intensity and rising sea-levels causing damage to our hotel properties, while hotels in other markets may experience prolonged variations in temperature or
precipitation that may limit access to the water needed to operate our hotel properties, increasing operating costs at our hotels, such as the cost of water or
energy, and requiring us to expend funds as we seek to repair and protect our hotels against such risks. The effects of climate change may also affect our business
by increasing the cost of (or making unavailable) property insurance on terms we find acceptable in areas most vulnerable to such events. There can be no
assurance that climate change will not have a material adverse effect on our hotels, operations or business.
Difficult economic conditions may continue to adversely affect the hotel industry.
Our financial performance is subject to global and regional economic conditions and their impact on levels of discretionary business and consumer spending.
Some of the factors that have an impact on discretionary spending include general economic conditions, GDP growth, worldwide or regional recession, corporate
earnings and investment, unemployment, consumer debt, reductions in net worth, taxation, inflation, energy prices, interest rates, consumer confidence, tariffs,
and other macroeconomic factors. Downturns in worldwide or regional economic conditions, such as fluctuation in interest rates, have led to a general decrease
in transient business, group business, leisure travel and travel spending, and similar downturns in the future may materially adversely impact demand for our
hotels and resorts. A continuing shift in consumer behavior would materially adversely affect our business, results of operations, and financial condition.
The value of our hotels depends on conditions 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 distributions to our shareholders are dependent upon the operation of the hotels in a manner sufficient to maintain or increase revenues in excess of
operating expenses. Hotel revenues may be adversely affected by adverse changes in national economic conditions, adverse changes in local market conditions
due to changes in general or local economic conditions and neighborhood characteristics, competition from other hotels, changes in interest rates and in the
availability, cost and terms of mortgage funds, the impact of present or future environmental legislation and compliance with environmental laws, the ongoing
need for capital improvements, particularly in older structures, changes in real estate tax rates and other operating 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, pandemics and epidemics such as COVID-19 and other factors that are beyond our control. In particular, general and local economic conditions (i)
have been, and may continue to be, adversely affected by the COVID-19 pandemic and (ii) may be adversely affected by terrorist incidents, which may target cities
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 securities.
Our investments are focused in a concentrated segment of the hotel industry.
Our primary business strategy is to continue to acquire high quality, upper-upscale, and upscale limited service in metropolitan markets with high barriers to
entry including New York, Washington DC, Boston, Philadelphia, South Florida, and California, and other markets with similar characteristics. We are subject to
risks inherent in concentrating investments in a single industry and in a specific market segment within that industry. The adverse effect on amounts available for
distribution to shareholders resulting from a downturn in the hotel industry in general or the mid-scale segment in particular has been, and may continue to be,
more pronounced than if we had diversified our investments outside of the hotel industry or in additional hotel market segments.
Operating costs and capital expenditures for hotel renovation may be greater than anticipated and may adversely impact distributions to shareholders.
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Hotels generally have an ongoing need for renovations and other capital improvements, particularly 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 U.S. generally accepted accounting principles ("GAAP") that are necessary for the continued operation of our hotels.
If these expenses exceed our expectations, the additional cost could have an adverse effect on amounts available for distribution to shareholders. In addition,
we may acquire hotels in the future that require significant renovation. Renovation of hotels involves certain risks, including the possibility of environmental
problems, construction cost overruns and delays, uncertainties as to market demand or deterioration in market demand after commencement of renovation and
the emergence of unanticipated competition from hotels.
Risks of operating hotels under franchise licenses, which may be terminated or not renewed, may impact our ability to make distributions to shareholders.
The continuation of our franchise licenses is subject to specified operating standards and other terms and conditions. All of the franchisors of our hotels
periodically inspect our hotels to confirm adherence to their operating standards. The failure to maintain such standards or to adhere to such other terms and
conditions could result in the loss or cancellation of the applicable franchise license. It is possible that a franchisor could condition the continuation of a franchise
license on the completion of capital improvements that our trustees determine are too expensive or otherwise not economically feasible in light of general
economic conditions, the operating 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 option 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 operations or the underlying value of the related hotel because of the loss of associated name recognition, marketing
support and centralized reservation 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 distribution to shareholders.
The seasonal and cyclical nature of the hotel industry may cause fluctuations in our operating performance, which could have a material adverse effect on us.
The hotel industry is seasonal in nature. Generally, in certain markets we operate, hotel revenues are greater in the second, third quarter, and fourth quarters
than in the first quarter. Revenues for hotels and resorts in tourist areas generally are substantially greater during tourist season than other times of the year. Our
hotels’ operations historically reflect this trend in these markets. As a result, our results of operations may vary on a quarterly basis, impairing comparability of
operating data and financial performance on a quarter to quarter basis.
Additionally, the hotel industry historically has been, and continues to be, highly cyclical in nature. Fluctuations in lodging demand and, therefore, operating
performance, are caused largely by general economic and local market conditions, which subsequently affect levels of business and leisure travel. In addition to
general economic conditions, new hotel room supply is an important factor that can affect the hotel industry's performance, and overbuilding has the potential to
further exacerbate the negative 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 substantially below our expectations 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 negotiated discount from participating 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 attempting 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 identification or quality of product or service. If consumers develop
brand loyalties to Internet reservations systems rather than to the brands under which our hotels are franchised, the value of our hotels
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could deteriorate and our business could be materially and adversely affected. Although most of the business for our hotels is expected to be derived from
traditional channels, if the amount of sales made through Internet intermediaries increases significantly, room revenues may flatten 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 multiple parties from different locations to participate at meetings without traveling to a centralized meeting location, 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.
The growing use of non-franchisor lodging distribution channels could adversely affect the Company's business and profitability.
Although a majority of rooms sold are sold through the hotel franchisors' distribution channels, a growing number of the Company's hotel rooms are sold
through other channels or intermediaries. Rooms sold through non-franchisors' channels are generally less profitable (after associated fees) than rooms sold
through franchisors' channels. Although the Company's franchisors may have established agreements with many of these alternative channels or intermediaries
that limit transaction fees for hotels, there can be no assurance that the Company's franchisors will be able to renegotiate such agreements upon their expiration
with terms as favorable as the provisions that exist today. Moreover, alternative channels or intermediaries may employ aggressive marketing strategies, including
expending significant resources for online and television advertising campaigns to drive consumers to their websites. As a result, consumers may develop brand
loyalties to the intermediaries' offered brands, websites and reservations systems rather than to those of the Company's franchisors. If this happens, the
Company's business and profitability may be materially and adversely affected.
Future terrorist attacks or changes in terror alert levels could adversely affect travel and hotel demand.
Previous terrorist attacks and subsequent terrorist alerts have adversely affected the U.S. travel and hospitality industries in prior years, often
disproportionately to the effect on the overall economy. The impact that terrorist attacks in the U.S. or elsewhere could have on domestic and international travel
and our business in particular cannot be determined but any such attacks or the threat of such attacks could have a material adverse effect on our business, our
ability to finance our business, our ability to insure our properties and our results of operations and financial condition.
The COVID-19 pandemic has had adverse effects on our financial condition, results of operations, cash flows and performance. Future pandemics may also
have adverse effects on our financial condition, results of operations, cash flows and performance.
The global pandemic caused by COVID-19 had a severe and negative impact on both the U.S. economy and the global economy. Financial markets
experienced significant volatility during 2020, 2021, and 2022 which may continue over upcoming quarters. Globally and throughout the United States, federal,
state, and local governments instituted quarantines, domestic and international travel restrictions and advisories, school closings, "shelter in place" orders, social
distancing efforts, limits on gathering size and restrictions on types of businesses that may continue operations. These restrictions had a severe impact on the U.S.
lodging industry. Many of our hotels suspended operations while others operated at a significantly reduced occupancy.
During the first half of 2020 as a result of the impact of the COVID-19 pandemic, we had temporarily closed certain of our hotels while our remaining hotels
operated in a significantly reduced capacity. All of our hotels were reopened or disposed of by the end of the second quarter of 2021; however, future significant
decreases in demand may lead to future closings.
The following factors should be considered because the COVID-19 pandemic significantly adversely affected the ability of our hotel managers to successfully
operate our hotels and had a significant adverse effect on our financial condition, results of operations and cash flows due to, among other factors:
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•
a complete suspension or significant reduction of operations at many of our properties, including our largest concentration of properties in New York
City, which was disproportionately adversely affected by COVID-19;
•
a variety of factors related to the coronavirus caused a sharp decline in group, business and leisure travel, including but not limited to (i) restrictions
on travel mandated by governmental entities or voluntarily imposed by employers, (ii) the postponement or cancellation of conventions and
conferences, music and arts festivals, sporting events and other large public gatherings, (iii) the closure of amusement parks, museums and other
tourist attractions, (iv) the closure of colleges and universities, and (v) negative public perceptions of travel and public gatherings in light of the
perceived risks associated with COVID-19;
•
travelers have been, and may be in the future, wary to travel where, or because, they may view the risk of contagion as increased and contagion or
virus-related deaths linked or alleged to be linked to travel to our properties, whether accurate or not, may injure our reputation;
•
the reduced economic activity could also result in an economic recession, and increased unemployment, which could negatively impact future ability
or desire to travel lodging demand and, therefore, our revenues, even when temporary restrictions are not in place;
•
a decrease in the ancillary revenue from amenities at our properties;
•
the financial impact of the COVID-19 pandemic has (i) negatively impacted our compliance with covenants in certain debt obligations, triggering cash
management provisions provided for in one mortgage;
•
a potential decline in asset values at one or more of our properties encumbered by mortgage debt, which could inhibit our ability to successfully
refinance one or more such properties, result in a default under the applicable mortgage debt agreement and potentially cause the acceleration of
such indebtedness;
•
difficulty in accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or
deteriorations in credit and financing conditions may affect our access to capital;
•
the general decline in business activity and demand for real estate transactions adversely affecting our ability to acquire additional properties;
•
the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, could result in a deterioration
in our ability to ensure business continuity during and after this disruption;
•
we may be subject to increased risks related to employee matters, including increased employment litigation and claims for severance or other
benefits tied to termination or furloughs as a result of hotel closures or reduced operations prompted by the effects of the pandemic;
•
employee or guest assertions that our properties were not adequately cleaned or that adequate safeguards were not in place to prevent contact with
employees or guests may result in liabilities; and
•
the reduction in our cash flows, prohibitions contained in our Credit Agreements (as defined below) and, with respect to our common dividends, the
terms of our declaration of trust designating our preferred shares, previously caused the indefinite suspension of dividends and could impact our
ability to pay dividends to our stockholders at expected levels in the future.
An outbreak of another disease or similar public health threat, similar to the COVID-19 pandemic, or fear of such an event, that affects travel demand, travel
behavior or travel restrictions could have a material adverse impact on the Company's business, financial condition and operating results. Outbreaks of other
diseases could also result in increased government restrictions and regulation, such as those actions described above or otherwise, which could adversely affect
our operations.
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
Noncompliance with environmental laws and regulations could subject us to fines and liabilities which could adversely
affect our operating results.
Our hotel properties are subject to various federal, state and local environmental laws. Under these laws, courts and
government agencies have the authority to require us, as an owner of a contaminated property, to clean up the property, even if we did not know of or were not
responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated, and therefore it is possible we
could incur cleanup costs even after we sell some of the properties we acquire. In addition to cleanup costs, environmental contamination can affect the value of a
property and, therefore, an owner's ability to borrow funds using the property as collateral or to sell the property. Under
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environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill
or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. A person that arranges for the
disposal or transports for disposal or treatment of a hazardous substance at a property owned by another may be liable for the costs of removal or remediation of
hazardous substances released into the environment at that property.
Furthermore, various court decisions have established that third parties may recover damages for injury caused by
property contamination. For instance, a person exposed to asbestos while staying in a hotel may seek to recover damages if they suffer injury from the asbestos.
Also, some of these environmental laws restrict the use of a property or place conditions on various activities. An example would be laws requiring a business to
use chemicals (such as swimming pool chemicals at a hotel property) to manage them carefully and notify local officials that the chemicals are being used.
We could be responsible for any of the costs discussed above. The costs to clean up a contaminated property, to defend
against a claim, or to comply with environmental laws could be material and could adversely affect our financial condition, results of operations, the market price
of our common shares and our ability to make distributions to our shareholders. As a result, we may become subject to material environmental liabilities. We can
make no assurances that future laws or regulations will not impose material environmental liabilities or that the current environmental condition of our hotel
properties will not be affected by the condition of the properties in the vicinity of our hotel properties (such as the presence of leaking underground storage
tanks) or by third parties unrelated to us.
The costs of compliance with or liabilities under environmental laws could significantly reduce our profitability.
Operating expenses at our hotels could be higher than anticipated due to the cost of complying with existing or future environmental laws and regulations. In
addition, an owner of real property can face liability for environmental contamination created by the presence or discharge of hazardous substances on the
property. We may face liability regardless of: our lack of knowledge of the contamination; the timing of the contamination; the cause of the contamination; or the
party responsible for the contamination of the property. Environmental laws also impose ongoing compliance requirements on owners and operators of real
property. Environmental laws potentially affecting us address a wide variety of matters, including, but not limited to, asbestos-containing building materials
("ACBMs"), storage tanks, storm water and wastewater discharges, lead-based paint, mold/mildew and hazardous wastes. Failure to comply with these laws could
result in fines and penalties and/or expose us to third-party liability. Some of our properties may have conditions that are subject to these requirements, and we
could be liable for such fines or penalties and/or liable to third parties. Certain hotel properties we own or may own in the future may contain, or may have
contained, ACBMs. Environmental laws require that ACBMs be properly managed and maintained and may impose fines and penalties on building owners and
operators for failure to comply with these requirements. Also, certain properties may be adjacent or near other properties that have contained or currently
contain storage tanks for the storage of petroleum products or other hazardous or toxic substances. These operations create a potential for the release of
petroleum products or other hazardous or toxic substances. Third parties may be permitted by law to seek recovery from owners or operators for property
damage and/or personal injury associated with exposure to contaminants, including, but not limited to, petroleum products, hazardous or toxic substances and
asbestos fibers. Material environmental conditions, liabilities or compliance concerns may arise after the future laws, ordinances or regulations may impose
material additional environmental liability. We cannot assure you that costs of future environmental compliance will not affect our ability to make distributions to
our shareholders or that such costs or other remedial measures will not be material to us. The presence of hazardous substances on a property may limit our
ability to sell the property on favorable terms or at all, and we may incur substantial remediation costs. The discovery of material environmental liabilities at our
properties could subject us to unanticipated significant costs, which could significantly reduce our profitability and the cash available for distribution to our
shareholders.
We face risks associated with the use of debt, including covenant compliance and refinancing risk.
At December 31, 2022, we had outstanding debt of approximately $633,281. We may borrow additional amounts from the same or other lenders in the
future. Any future repurchases of our own shares may require additional borrowings. Some of these additional borrowings may be secured by our hotels. Our
declaration of trust (as amended and restated, our “Declaration 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 obligations 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 ratios be maintained with respect to the financed properties before we can exercise certain rights under the loan agreements
relating to such properties. If the specified criteria are not satisfied, the lender may be able to escrow cash flow from the applicable hotels.
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It is possible that we could fail certain financial covenants within certain property-level mortgage borrowings or under our Credit Facility within the next
twelve months. For mortgages with financial covenants, the lenders' remedy of a covenant failure would be a requirement to escrow funds for the purpose of
meeting our future debt payment obligations.
Additionally, our indebtedness has had and may continue to have significant effects on our business. For example, it could:
•
increase our vulnerability to general adverse economic and industry conditions;
•
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our
cash flow to fund working capital, capital expenditures, our strategic growth initiatives and development efforts and general corporate purposes;
•
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•
restrict us from exploiting business opportunities;
•
place us at a competitive disadvantage compared to our competitors that have less indebtedness; and
•
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business
strategy or other general corporate purposes.
Our ability to repay the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to
economic, financial, competitive and other factors beyond our control, including the COVID-19 pandemic, the responses thereto and the effects thereof, and our
ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not continue to maintain sufficient cash
reserves, our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital
expenditures, and our cash needs may increase. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as
selling assets (even at unfavorable prices), restructuring debt, obtaining waivers with respect to our debt or obtaining additional debt financing or equity capital
on terms that may be onerous or highly dilutive. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which
could result in a default on our debt obligations. In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from
adopting any of these alternatives. Our failure to comply with our debt covenants, or obtain waivers with respect thereto, could result in an event of default
which, if not cured or waived, could result in acceleration of our debt.
If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our
shareholders could lose confidence in our financial results, which could harm our business and the value of our common shares.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We may in the future discover areas of our
internal controls that need improvement. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial
reporting and have our independent auditors annually issue their own opinion on our internal controls over financial reporting. Although we currently believe that
we have effective internal controls, we cannot be certain that we will be successful in maintaining adequate internal controls over our financial reporting and
financial processes. Furthermore, as we grow our business, our internal controls will become more complex, and we will require significantly more resources to
ensure our internal controls remain effective. If we or our independent auditors discover a material weakness, the disclosure of that fact, even if quickly remedied,
could reduce the market value of our common shares. Additionally, the existence of any material weakness or significant deficiency would require management to
devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to
remediate any such material weaknesses or significant deficiencies in a timely manner.
The impact of the Russian invasion of Ukraine on the global economy is uncertain, but may prove to negatively impact our business and operations.
While the Company does not have any material business, operations or assets in Russia, Belarus or Ukraine, and has not been materially impacted by the
actions of the Russian government at this time, the short and long-term implications of Russia's invasion of Ukraine are difficult to predict. We continue to
monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and several
European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers
and customers. To the extent the war in Ukraine may adversely affect our business, it may also have the
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effect of heightening many of the other risks described herein, such as those relating to information technology and market conditions, any of which could
negatively affect our business and financial condition.
We do not operate our hotels and, as a result, we do not have complete control over implementation of our strategic decisions.
In order for us to satisfy certain REIT qualification 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, 2022, 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 respective hotels for the joint ventures, as
required by the REIT qualification rules. The management companies operating the hotels make and implement strategic business decisions with respect to these
hotels, such as decisions with respect to the repositioning of a franchise or food and beverage operations and other similar decisions. Decisions made by the
management companies operating the hotels may not be in the best interests of a particular 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 addition, the financial condition of the management companies could
impact their future ability to operate our hotels.
Most of our hotels are located in major gateway urban markets in the United States with many located in the area from Washington, DC to Boston, MA,
including New York City, which may increase the effect of any regional or local events or conditions.
Most of our hotels are located in major gateway urban markets in the United States, with many located in the area from Washington, DC to Boston, MA. As a
result, regional or localized adverse events or conditions, such as an economic recession or pandemic, in any of these major gateway urban markets could have a
significant adverse effect on our operations, and ultimately on the amounts available for distribution to shareholders.
Specifically, a significant portion of our portfolio is concentrated in New York City. The operations of our consolidated portfolio of hotels in New York City will
have a material impact on our overall results of operations. Concentration risk with respect to our ownership of hotels in the New York City market may lead to
increased volatility in our overall results of operations. Our overall results of operations may be adversely affected and our ability to pay distributions to our
shareholders could be negatively impacted in the event:
•
downturns in lodging fundamentals may be and in some cases in the past have been more severe or prolonged in New York City compared to the
United States as a whole;
•
negative economic conditions are more severe or prolonged in New York City compared to other areas, due to concentration 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; or
•
New York City is impacted by other unforeseen events beyond our control, including, among others, terrorist attacks and travel related health concerns
including pandemics and epidemics.
[
As of December 31, 2022, New York City continues to be significantly adversely impacted by the COVID-19 pandemic disproportionately compared to other
cities in the U.S. and across the globe. Because of the disproportionate impact, the economic recovery following the COVID-19 pandemic may be delayed more in
New York City than in other parts of the country, which may cause reduced demand for hotels there. Therefore, our concentration of assets in New York City may
have an adverse impact on the fair value of our assets, our results of operations, our financial condition and our ability to pay dividends to our stockholders at
expected levels or at all.
We own a limited number of hotels and significant adverse changes at one hotel may impact our ability to make distributions to shareholders.
As of December 31, 2022, our portfolio consisted of 22 wholly-owned limited and full service properties with a total of 3,811 rooms, 1 hotel owned through a
consolidated joint venture with a total of 115 rooms, and interests in 2 limited service properties owned through joint venture investments with a total of 304
rooms. However, certain larger hotels or hotels in certain locations disproportionately impact our performance. Accordingly, significant adverse changes in the
operations of
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any one of these hotels could have a material adverse effect on our financial performance and on our ability to make expected distributions to our shareholders.
Inflation and price volatility in the global economy could negatively impact our business and results of operations.
General inflation in the United States has risen to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest
rates, wages, and currency volatility and downgrades by rating agencies to the U.S. government's credit rating or concerns about its credit and deficit levels in
general, could cause interest rates and borrowing costs to rise. These increases and any fiscal or other policy interventions by the U.S. government in reaction to
such events could negatively impact our business by increasing our operating costs and our borrowing costs as well as decreasing the capital. Although we have
the ability to pass on these increased costs associated with providing services by adjusting room rates, the cost to operate and maintain the hotel properties could
increase faster or at a rate greater than our ability to increase room rates, which could adversely affect our results of operations. Additionally, the U.S.
government's credit and deficit concerns, the European sovereign debt crisis, and the potential trade war with China, could cause interest rates to be volatile,
which may negatively impact our ability to access the debt markets on favorable terms.
We focus on acquiring hotels operating under a limited number of franchise brands, which creates greater risk as the investments are more concentrated.
We place particular emphasis in our acquisition strategy on hotels similar to our current hotels. We invest in hotels operating under a few select franchises
and therefore will be subject to risks inherent in concentrating investments in a particular franchise brand, which could have an adverse effect on amounts
available for distribution to shareholders. These risks include, among others, the risk of a reduction 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 existing 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 continue to need to attract and retain qualified additional senior management. We have
employment agreements with certain of our senior management; however, the employment agreements may be terminated under certain circumstances. The
termination 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 conditions and
disputes between us and our co-venturers.
As of December 31, 2022, we had several joint ventures in which we shared ownership and decision-making power with one or more parties. 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 contributions when due or otherwise fail to meet its obligations, which may result in certain liabilities to us for guarantees and other commitments;
that our partner might at any time have economic or other business interests or goals that are or become inconsistent with our interests or goals; that we could
become engaged in a dispute with our partner, which could require us to expend additional resources to resolve such disputes and could have an adverse impact
on the operations and profitability of the joint venture; and that our partner may be in a position to take action or withhold consent contrary to our instructions 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 actions, such as budget approvals, acquisitions, sales of assets, debt financing, executing 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 actions that we believe are in our best interests may result in missed opportunities and an ineffective allocation of resources and could have an adverse
effect on the financial performance of the joint venture and our operating results.
We engage in hedging transactions to limit our exposure to fluctuations in interest rates, which can result in recognizing interest expense at rates higher than
the stated rates within our floating rate debt.
We enter into hedging transactions intended to protect us from the effects of interest rate fluctuations on floating rate debt. Our hedging transactions may
include entering into interest rate swaps, caps, and floors, options to purchase such items, and futures and forward contracts. Hedging activities may not have the
desired beneficial impact on our results of operations or financial condition, particularly in a declining rate environment. No hedging activity can completely
insulate us
25

from the risks associated with changes in interest rates. Moreover, interest rate hedging could fail to protect us or could adversely affect our operating results
because, among other things:
•
Available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
•
The duration of the hedge may not match the duration of the related liability;
•
The party at risk in the hedging transaction may default on its obligation 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 transaction; and
•
The value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value.
Hedging transactions may reduce our shareholders’ equity.
Hedging involves risk and typically involves costs, including transaction 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 volatile interest rates. These costs will also limit the amount of cash available for
distribution to shareholders. The REIT qualification rules may also limit our ability to enter into hedging transactions. 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 transactions and the requirements applicable to REITs. If
we are unable to hedge effectively because of the cost of such hedging transactions or the limitations imposed by the REIT rules, we will face greater interest risk
exposure than may be commercially prudent.
We and our hotel managers rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that
technology could harm our business.
We and our hotel managers rely on information technology networks and systems, including the Internet, to process, transmit and store electronic
information, and to manage or support a variety of business processes, including financial transactions and records, personal identifying information, reservations,
billing and operating data. We and our hotel managers purchase some of our information technology from vendors, on whom our systems depend. We and our
hotel managers rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential
operator and other customer information, such as individually identifiable information, including information relating to financial accounts. Although we and our
hotel managers have taken steps we believe are necessary to protect the security of our information 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 functioning or damage, or the improper access or
disclosure of personally identifiable information such as in the event of cyber-attacks. In November 2018, Marriott announced a data security incident involving a
guest reservation database. Security breaches such as the one that occurred at Marriott and, including physical or electronic break-ins, computer viruses, attacks
by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. Any failure to maintain proper
function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory
penalties and could have a material adverse effect on our business, financial condition and results of operations. Some of our hotel managers carry cyber
insurance policies to protect and offset a portion of potential costs incurred from a security breach. Additionally, we currently have cyber insurance policies to
provide supplemental coverage. Despite various precautionary steps to protect our hotels from losses resulting from cyber-attacks, any cyber-attack occurrence
could still result in losses at our properties, which could affect our results of operations. We are not aware of any cyber incidents that we believe to be material or
that could have a material adverse effect on our business, financial condition and results of operations.
We face possible risks associated with the physical effects of severe weather and climate change.
We recognize there are inherent weather and climate risks that may impact our business, including, but not limited to, storms, hurricanes, sea level rise,
floods, extreme temperatures, wildfires, drought, and water stress. Climate change may increase the frequency and severity of such climate phenomenon and
weather events. Should (i) weather events or (ii) the impact of climate change be severe or continue for lengthy periods of times, these risks may be exacerbated
and may directly damage our hotels, disrupt hotel operations and our supply chain, reduce travel demand to affected areas, increase operating costs, and increase
(or make unavailable) property insurance on terms we find acceptable. There can be no assurance that severe weather and climate change will not have a
material adverse effect on our properties, operations, or business. In addition, existing and future environmental regulations may require significant capital
expenditures beyond our planned capital expenditures in order to comply with regulations enacted to address climate change.
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We may be contractually prohibited from paying dividends.
Our Credit Agreements, as amended, contain restrictions against our payment of dividends on common or preferred shares, including, in certain instances
after the enhanced negative covenant period, at any time when there is an event of default under such credit agreement. There are exceptions, however, for
payment of dividends necessary to maintain our REIT status as long as no payment or bankruptcy event of default has occurred and the debt has not been
accelerated. Events of default under the Credit Agreements include failure to comply with various covenants, including reporting obligations and other
nonmonetary obligations, as well as financial conditions that may be beyond our control. An event of default occurs as soon as the failure occurs. If an event of
default has occurred and is continuing on the day when a dividend is otherwise payable on our common or preferred shares, we will be unable to pay the dividend
unless the lenders on these credit agreements waive the event of default or such dividend falls within an exception as noted above. Failure to pay dividends could
jeopardize our continued qualification as a REIT (causing us to be subject to corporate income tax) and could cause us to be subject to a 4% nondeductible excise
tax.
We could experience significant increases to our operating costs or decreases in operating revenues due to labor shortages and increased employee-related
costs.
The Company has experienced and may continue to experience increased operating costs due to increased labor costs. A number of factors contribute to
increased labor costs, which may continue, such as a shortage of hospitality workers, increased dependence on contract workers, the loss of unvaccinated
employees in jurisdictions requiring vaccination, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19
pandemic, and other government regulations, which include laws and regulations related to workers’ health and safety. These labor shortages have become more
pronounced as a result of the COVID-19 pandemic. Further, increased turnover rates within the employee base at the hotels and in our corporate offices can lead
to decreased efficiency and increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees. Significant
labor shortages could prohibit us from operating at our hotels at full capacity which would result in a decrease in operating revenues. Labor cost increases may
continue in the future and, as a result, our profitability could decline.
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 properties and harm our
financial condition.
Real estate investments are relatively illiquid. Our ability to vary our portfolio in response to changes in operating, economic and other conditions 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 anticipated
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 deductibles. 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. Inflation, changes in
building codes and ordinances, environmental considerations and other factors also might make it impracticable to use insurance proceeds to replace the
applicable hotel after 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 position with respect to the applicable hotel. If any of these or similar events occur, it may reduce the return from the attached
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 properties in which we invest may increase as
property tax rates change and as the properties are assessed or reassessed by taxing authorities. 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 operating results may be
negatively affected.
Environmental matters could adversely affect our results.
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Operating costs may be affected by the obligation to pay for the cost of complying with existing environmental laws, ordinances and regulations, as well as the
cost of future legislation. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws often 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 distribution 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 liabilities or that there are material environmental liabilities of
which we are unaware.
Our hotel properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains
undiscovered or is not addressed over a period of time. 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 reactions. As a result, the presence of
mold to which hotel guests or employees could be exposed at any of our properties could require us to undertake a remediation program to contain or remove
the mold from the affected property, which could be costly. In addition, 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 condition and operating results.
Under the ADA, all public accommodations are required to meet certain federal requirements related to access and use by disabled persons. While we believe
that our hotels are substantially in compliance with these requirements, a determination that we are not in compliance with the ADA could result in imposition of
fines or an award of damages to private litigants. In addition, changes in governmental rules and regulations or enforcement policies affecting the use and
operation of the hotels, including changes to building codes and fire and life-safety codes, may occur. If we were required to make substantial modifications at the
hotels to comply with the ADA or other changes in governmental rules and regulations, our ability to make expected distributions to our shareholders could be
adversely affected.
RISKS RELATED TO CONFLICTS OF INTEREST
Due to conflicts of interest, many of our existing agreements may not have been negotiated on an arm’s-length basis and may not be in our best interest.
Some of our officers and trustees have minority ownership interests in HHMLP and in entities with which we have entered into transactions, including hotel
acquisitions and dispositions and certain financings. Consequently, the terms of our agreements with those entities, including hotel contribution or purchase
agreements, the Option Agreement (as defined below) between our operating partnership and some of the trustees and officers and our property management
agreements with HHMLP, while intended to be negotiated 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 negotiated on an arm’s-length basis. Transactions 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 transaction to
excuse himself or herself from any consideration of the related person transaction 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 “Option Agreement”) with each of our officers and certain trustees such that we obtain a right
of first refusal to purchase any hotel owned or developed in the future by these individuals or entities controlled by them at fair market value. This right of first
refusal would apply to each party until one year after such party ceases to be an officer or trustee of the Company. Our Acquisition Committee of the Board of
Trustees is comprised solely of independent trustees, and the purchase prices and all material terms of the purchase of hotels from related parties are approved
by the Acquisition Committee.
The following officers and trustees own collectively approximately 11% of HHMLP: Jay H. Shah, Neil H. Shah and Ashish R. Parikh. Conflicts of interest may
arise with respect to the ongoing operation of our hotels including, but not limited to, the enforcement of the contribution and purchase agreements, the Option
Agreement and our property management agreements with HHMLP. These officers and trustees also make decisions for our company with respect to property
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management. Consequently, these officers and trustees may not act solely in the best interests of our shareholders relating to property management by HHMLP.
Conflicts of interest relating 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 connection with the disposition or
refinancing of these hotels.
RISKS RELATED TO OUR STRUCTURE
There are no assurances of our ability to make distributions in the future.
Our ability to pay dividends has been, and may continue to be, adversely affected by the risk factors described herein and in other reports filed by us with the
SEC. All distributions will be made at the discretion of our Board of Trustees and will depend upon our earnings, our financial condition, maintenance of our REIT
status and such other factors as our Board of Trustees may deem relevant from time to time. There are no assurances of our ability to pay dividends in the future.
Furthermore, our Credit Agreements, as amended, contain prohibitions against our payment of any dividend on common or preferred shares, including at any
time when there is an event of default under such credit agreement. As a result, our inability to pay dividends to our shareholders may cause us to fail the 90%
distribution requirement causing us to be subject to corporate income tax and the 4% nondeductible excise tax.
Holders of our outstanding preferred shares have dividend, liquidation 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 liquidation, dividend and other rights that are senior to those of our
common shares. As of December 31, 2022, 3,000,000 Series C Preferred Shares, 7,701,700 Series D Preferred Shares and 4,001,514 Series E Preferred Shares were
issued and outstanding. Holders of our outstanding preferred shares are entitled to cumulative dividends before any dividends may be declared or set aside on
our common shares. Upon our voluntary or involuntary liquidation, dissolution or winding up, before any payment is made to holders of our common shares,
holders of our preferred shares are entitled to receive a liquidation preference of $25.00 per share plus any accrued and unpaid distributions. This will reduce the
remaining amount of our assets, if any, available to distribute to holders of our common shares. In addition, holders of our preferred shares have the right to elect
two additional 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 consecutive.
Our Board of Trustees may authorize the issuance of additional shares that may cause dilution or prevent a transaction that is in the best interests of our
shareholders.
Our Declaration of Trust authorizes the Board of Trustees, without shareholder approval, to:
•
amend the Declaration 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 additional 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 additional common shares or preferred shares that have preference rights over the common shares with respect to dividends,
liquidation, voting and other matters.
Any one of these events could cause dilution to our common shareholders, delay, deter or prevent a transaction 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.
Our Declaration 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
expiration of their current terms and each year one class of trustees will be elected by
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the shareholders. The staggered terms of trustees may delay, deter or prevent a tender offer, a change in control of us or other transaction, even though such a
transaction 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 Corporation Law, as amended (the "MGCL"), as applicable to REITs, certain “business combinations” (including certain issuances
of equity securities) between a Maryland REIT and any person who beneficially owns ten percent or more of the voting power of the trust’s shares, or an affiliate
thereof, are prohibited for five years after the most recent date on which such shareholder acquired at least ten percent of the voting power of the trust’s shares.
Thereafter, any such business combination must be approved by two super-majority shareholder votes unless, among other conditions, the trust’s common
shareholders receive a minimum price (as defined in the MGCL) for their shares and the consideration 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 transaction in which holders of our
equity securities 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 exempting acquisitions of our shares from the control share acquisition legislation referenced above, there
can be no assurance that this provision will not be amended or eliminated at any time in the future.
Our Board of Trustees and management make decisions on our behalf, and shareholders have limited policymaking and management rights.
Our major policies, including our policies with respect to acquisitions, financing, growth, operations, debt limitation and distributions, are determined by our
Board of Trustees. The Trustees may amend or revise these and other policies from time to time without a vote of the holders of the common shares.
Under Maryland law, generally, a trustee’s actions will be upheld if he or she performs his or her duties in good faith, in a manner he or she reasonably
believes to be in our best interests and with the care that an ordinary prudent person in a like position would use under similar circumstances. Our shareholders
have no right or power to take part in our management except through the exercise of voting rights on certain specified matters. The Board of Trustees is
responsible for our management and strategic business direction, and our management is responsible for our day-to-day operations. Certain policies of our Board
of Trustees may not be consistent with the short-term best interests of our shareholders.
RISKS RELATED TO OUR TAX STATUS
If we fail to maintain our qualification as a REIT, our dividends will not be deductible to us, and our income will be subject to taxation, which would reduce the
cash available for distribution to our shareholders.
We have operated and intend to continue 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 interpretations of the federal income tax laws governing REITs are limited. Our continued qualification as a REIT will
depend on our continuing 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 distributions to our shareholders. Moreover, new tax legislation, administrative
guidance or court decisions, in each instance potentially with retroactive 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 deduction for distributions to our
shareholders in computing our taxable income and would be subject to federal income tax on our taxable income at regular corporate rates. Any such corporate
tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact
on the value of, and trading prices for, our shares. Unless entitled 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 qualification was lost. As a result, amounts available for distribution to shareholders would be reduced
for each of the years involved. Although we currently intend to continue to operate in a manner so as to qualify as a REIT, it is possible that future economic,
market, legal, tax or other considerations may cause our Board of Trustees, with the consent of holders of two-thirds of the outstanding shares, to revoke our REIT
election.
To maintain our qualification as a REIT and avoid corporate income tax and excise tax, we must distribute annually a certain percentage of our REIT taxable
income, which could require us to raise capital on terms or sell properties at prices or at times that are unfavorable.
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In order to maintain our qualification as a REIT, each year we must distribute to our shareholders at least 90% of our REIT taxable income, determined without
regard to the deduction for dividends paid and excluding net capital gain. To the extent that we satisfy the 90% distribution requirement, but distribute less than
100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise
tax on the amount, if any, by which our actual distributions 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.
Historically, we have distributed our taxable income to our shareholders in a manner intended to satisfy the 90% distribution requirement and to avoid
corporate income tax and the 4% nondeductible excise tax. Differences in timing between the recognition of income and the related cash receipts, limitations on
our ability or the ability of our subsidiaries to deduct interest expense from borrowings under Section 163(i) of the Code or the effect of required debt
amortization payments could require us to borrow or raise capital on terms we regard as unfavorable, or sell assets at prices or at times we regard as unfavorable
to distribute out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax in a
particular year. In the past we have borrowed, and in the future we may borrow, to pay distributions to our shareholders and the limited partners of our operating
partnership. Such borrowings subject us to risks from borrowing as described herein. Additionally, we may, if necessary and allowable, pay taxable dividends of
our shares to meet the distribution 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 qualification as a REIT, we must satisfy 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 operating partnership by our TRSs pursuant to the lease of our hotels constitute substantially
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 transactions with our TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if
those transactions 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 operating income from hotel operations pursuant to hotel management contracts. Both the subsidiary and the REIT must
jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will
automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT's assets may consist of stock or securities of one or more TRSs. In addition, the
TRS rules limit the deductibility 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
taxation, and in certain circumstances, other limitations on the deductibility of interest may apply. The rules also impose a 100% excise tax on certain transactions
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 after-tax net income will be available for
distribution to us but is not required to be distributed to us. We believe that the aggregate value of the stock and securities of our TRSs is and will continue to be
less than 20% of the value of our total assets (including our TRS stock and securities). Furthermore, we will monitor the value of our respective investments in our
TRSs for the purpose of ensuring compliance with TRS ownership limitations. In addition, we will scrutinize all of our transactions 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 20% limitation discussed above or to avoid application of the 100% excise tax discussed above.
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
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will not be treated as directly operating a lodging facility, which is prohibited, to the extent the TRS leases properties 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 satisfy the asset tests applicable to REITs
and substantially all of our income would fail to qualify for the gross income tests. If we failed to satisfy either the asset or gross income tests, we would likely lose
our REIT qualification 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 attribution rules apply for purposes of these
35% thresholds. Although we intend to continue 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.
Complying with REIT requirements may force us to sell otherwise attractive investments.
To maintain our qualification as a REIT, we must satisfy 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 after 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 after the last day of the quarter in which we identified the failure, (c) we file a schedule with the
IRS, describing each asset that caused the failure, and (d) we pay an additional tax of the greater of $50,000 or the product of the highest applicable tax rate
multiplied by the net income generated on those assets. As a result, we may be required to liquidate otherwise attractive investments.
The prohibited transactions tax may limit our ability to engage in transactions, including dispositions of assets that would be treated as sales for federal
income tax purposes.
A REIT's net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions 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 transaction tax upon a
disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction 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.
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. Under IRS Revenue Procedure 2017-45, as a publicly offered REIT, as long
as at least 20% of the total dividend is available in cash and certain other requirements are satisfied, the IRS will treat the share distribution as a dividend (to the
extent applicable rules treat such distribution as being made out of our earnings and profits). This threshold has been temporarily reduced in the past and may be
reduced in the future by IRS guidance. 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 time 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 portion of such dividend
that is payable in shares. If we pay dividends in our own shares and a significant number of our shareholders sell our shares in order to pay taxes owed on
dividends, it may put downward pressure on the trading price of our shares.
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Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to qualified dividend income payable to certain non-corporate U.S. holders is 20%. Dividends payable by
REITs, however, generally are not eligible for the reduced qualified dividend rates. For taxable years beginning before January 1, 2026, non-corporate taxpayers
may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are
not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S. federal income tax
rate of 29.6% on such income. Although the reduced U.S. federal income tax rate applicable to qualified dividend income does not adversely affect the taxation of
REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends and the reduced corporate tax rate (currently
21%) could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT
corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our shares.
Our share ownership limitation may prevent certain transfers of our shares.
In order to maintain our qualification 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 entities). Our Declaration 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 Limitation. Generally, the shares of beneficial interest owned by related owners will be aggregated for purposes of the Ownership Limitation. The
Board of Trustees, upon receipt of advice of counsel or other evidence satisfactory to the Board of Trustees, in its sole and absolute discretion, may exempt a
shareholder from the Ownership Limitation. The Ownership Limitation could have the effect of delaying, deterring or preventing a change in control or other
transaction 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 Limitation, cause us to have fewer than 100
shareholders, cause us to be “closely held” within the meaning of Section 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 Declaration of Trust) on the date we accept the offer and the price per share in the transaction that created such shares-in-trust
(or, in the case of a gift, devise or non-transfer event (as defined in the Declaration of Trust), the market price on the date of such gift, devise or non-transfer
event). Therefore, the holder of shares of beneficial interest in excess of the Ownership Limitation 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 redemption.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.
At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if
any new federal income tax law, regulation, or administrative interpretation, or any amendment to any existing federal income tax law, regulation or
administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively.
Additional changes to the tax laws are likely to continue to occur. We cannot predict the long-term effect of any recent changes or any future law changes on REITs
and their shareholders. We and our shareholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or
administrative interpretation.
The federal income tax laws governing REITs are complex.
The REIT qualification requirements are extremely complex and interpretations of the federal income laws governing qualification as a REIT are limited.
Accordingly, we cannot be certain that we will be successful in operating so we can continue to qualify as a REIT. At any time, new laws, interpretations, or court
decisions may change the federal tax laws or the federal income tax consequences of our qualification as a REIT.
GENERAL RISK FACTORS
An increase in market interest rates may have an adverse effect on the market price of our securities.
33

One of the factors that investors may consider in deciding whether to buy or sell our securities is our dividend rate as a percentage of our share or unit price,
relative to market interest rates. If market interest rates increase, prospective investors may desire a higher dividend or interest rate on our securities or seek
securities 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 properties and our related distributions to shareholders, and not from the market value or underlying
appraised value of the properties or investments themselves. The market price of our preferred shares is based in large part on prevailing interest rates. As a
result, interest rate fluctuations and capital market conditions can affect the market price of our common shares and preferred shares. For instance, if interest
rates rise without an increase in our dividend rate, the market price of our common shares could decrease because potential investors may require a higher
dividend yield on our common shares as market rates on interest-bearing securities, such as bonds, rise. In addition, rising interest rates would result in increased
interest expense on our variable rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and pay dividends.
Future offerings of equity securities, which would dilute our existing shareholders and may be senior to our common shares for the purposes of dividend
distributions, may adversely affect the market price of our common shares.
In the future, we may attempt to increase our capital resources by making additional offerings of equity securities, including classes of preferred or common
shares. Upon liquidation, holders of our preferred shares and lenders with respect to other borrowings will receive a distribution of our available assets prior to
the holders of our common shares. Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common
shares, or both. Our preferred shares could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to
make a dividend distribution to the holders of our common shares. Because our decision to issue securities in any future offering will depend on market
conditions and other factors beyond our control, we cannot predict or estimate the amount, timing 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 diluting their share holdings in us.
The market price of our securities has been, and may continue to be, volatile and has declined, and may continue to decline, which may result in a substantial
or complete loss of your investment in our securities.
The stock markets have previously and recently experienced significant price and volume fluctuations. As a result, the market price of our securities has been
and could be similarly volatile in the future, and investors in our securities may experience a decrease in the value of their investments, including decreases
unrelated to our operating performance or prospects. The market price of our securities could be subject to wide fluctuations in response to a number of factors,
including:
•
our operating performance and the performance of other similar companies;
•
actual or anticipated differences in our operating results;
•
changes in our revenues or earnings estimates or recommendations by securities analysts; publication of research reports about us or our industry
by securities analysts;
•
additions and departures of key personnel;
•
strategic decisions by us or our competitors, such as mergers and acquisitions, divestments, spin-offs, joint ventures, strategic investments or
changes in business strategy;
•
the passage of legislation or other regulatory developments or executive policies that adversely affect us or our industry;
•
speculation in the press or investment community; actions by institutional shareholders;
•
changes in accounting principles;
•
terrorist acts;
•
general market conditions, including factors unrelated to our performance; and
•
pandemics and epidemics, such as the COVID-19 pandemic, and the related governmental and economic responses thereto.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of
litigation could result in substantial costs and divert our management’s attention and resources.
Future sales of our common shares, preferred shares, or securities convertible into or exchangeable or exercisable for our common shares could depress the
market price of our common shares.
34

We cannot predict whether future sales of our common shares, preferred shares, or securities convertible into or exchangeable or exercisable for our
common shares or the availability of these securities for resale in the open market will decrease the market price of our common shares. Sales of a substantial
number of these securities in the public market, including sales upon the redemption of Common Units held by the limited partners of our operating partnership,
(other than us and our subsidiaries) or the perception that these sales might occur, may cause the market price of our common shares to decline and you could
lose all or a portion of your investment.
Future issuances of our common shares, preferred shares, or other securities convertible into or exchangeable or exercisable for our common shares,
including, without limitation, common units of beneficial interest in our Operating Partnership (“Common Units”), in connection with property, portfolio or
business acquisitions and issuances of equity-based awards to participants in our equity incentive plans, could have an adverse effect on the market price of our
common shares. Future issuances of these securities also could adversely affect the terms upon which we obtain additional capital through the sale of equity
securities. In addition, future sales or issuances of our common shares may be dilutive to existing shareholders.
Item 1B.    Unresolved Staff Comments
None.
35

Item 2.    Properties
The following table sets forth certain information with respect to the 22 hotels we wholly-owned and 1 hotel owned within our consolidated joint venture as
of December 31, 2022, all of which are consolidated on the Company’s financial statements.
Market
Name
Location
Year Opened
Number of Rooms
Boston Urban and Metro
The Envoy, Boston Seaport
Boston, MA
2015
136 
The Boxer, Boston
Boston, MA
2004
80 
Mystic Marriott Hotel & Spa
Groton, CT
2001
285 
 
 
   
California
The Ambrose Hotel, Santa Monica
Santa Monica, CA
2015
77 
The Sanctuary Beach Resort
Monterey Bay, CA
2014
60 
 
 
   
NYC Urban
Hyatt Union Square
Union Square, New York, NY
2013
178 
Hilton Garden Inn Manhattan Midtown East
Midtown East, New York, NY
2014
206 
Hilton Garden Inn TriBeCa
TriBeCa, New York, NY
2009
151 
Hampton Inn Seaport
Seaport, New York, NY
2006
65 
Holiday Inn Express Chelsea
Madison Square Garden, New York, NY
2006
228 
Hilton Garden Inn JFK
JFK Airport, New York, NY (1)
2005
192 
Nu Hotel, Brooklyn
Brooklyn, New York, NY
2008
93 
NY-NJ Metro
Hyatt House White Plains
White Plains, NY
2000
187 
Philadelphia
The Rittenhouse Hotel
Philadelphia, PA
2004
118 
Philadelphia Westin
Philadelphia, PA
1990
294 
South Florida
Cadillac Hotel & Beach Club
Miami, FL
2004
357 
The Ritz-Carlton, Coconut Grove
Coconut Grove, FL
2002
115 
The Blue Moon Hotel, Miami Beach
Miami, FL
2013
75 
The Winter Haven Hotel, Miami Beach
Miami, FL
2013
70 
Parrot Key Hotel & Villas
Key West, FL
2013
148 
Washington D.C.
The Ritz-Carlton, Georgetown
Georgetown, DC
2014
86 
The St. Gregory Hotel, Dupont Circle
Washington, DC
2014
156 
Annapolis Waterfront Hotel
Annapolis, MD (1)
1968
150 
TOTAL ROOMS
3,507 
(1) Our interests in these hotels are subject to ground leases which require monthly rental payment as determined by the applicable ground lease agreement. The
Hilton Garden Inn JFK and Annapolis Waterfront Hotel ground lease agreements have initial terms of 99 and 50 years, including extension options, respectively,
and have remaining lease terms of 78 and 42 years, respectively.
The following table sets forth certain information with respect to the 2 hotels we owned through unconsolidated joint ventures with third parties as of
December 31, 2022.
Market
Name
Location
Year Opened
Number of
Rooms
HHLP Ownership
in Asset
Boston
Holiday Inn Express
South Boston, MA (1)
1998
174 
50 %
Home2 Suites
South Boston, MA (1)
2020
130 
50 %
TOTAL ROOMS
304 
(1) The joint ventures interests in these hotels are subject to ground leases which require monthly rental payment as determined by the applicable ground lease
agreements. The Holiday Inn Express South Boston and Home2 Suites South Boston ground lease agreements both have an initial term of 90 years, including
extension options. The Holiday Inn Express South Boston has a remaining lease term of 69 years and the Home2 Suites South Boston has a remaining lease term
of 88 years.
36

Item 3.    Legal Proceedings
We are not presently subject to any material litigation nor, to our knowledge, is any other litigation threatened against us, other than routine actions for
negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability
insurance and all of which collectively are not expected to have a material adverse effect on our liquidity, results of operations or business or financial condition.
Item 4.    Mine Safety Disclosures
Not applicable.
37

PART II
Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares trade on the New York Stock Exchange under the symbol “HT.”
SHAREHOLDER INFORMATION
At December 31, 2022 we had approximately 153 shareholders of record of our common shares. Common Units (which are redeemable by holders for cash
or, at our option, for common shares on a one for one basis, subject to certain limitations) were held by approximately 28 entities and persons, including our
company.
Our Declaration of Trust, subject to certain exceptions, provides that no person may own, or be deemed to own by virtue of the attribution 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 Section
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 limitation, result in the common and preferred shares being owned by fewer than 100 persons (determined without reference
to any rules of attribution), result in our being “closely held” within the meaning of Section 856(h) of the Code, or cause us to own, actually or constructively, 10%
or more of the ownership interests in a tenant (other than a TRS) of our or our operating partnership’s real property, within the meaning of Section 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 attempts to acquire common or preferred shares in violation of the foregoing restrictions, or any person who owned common or
preferred shares that were transferred to a trust, will be required to give written notice immediately to us of such event and provide us with such other
information as we may request in order to determine the effect, if any, of such transfer on our status as a REIT.
In addition, our trustees, upon receipt of advice of counsel or other evidence satisfactory to the trustees, in their sole and absolute discretion, may, in their
sole and absolute discretion, exempt a person from the ownership limitation under certain circumstances. The foregoing restrictions continue to apply until the
trustees determine that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT and there is an affirmative vote of two-thirds
of the number of common and preferred shares entitled to vote on such matter at a regular or special meeting of our shareholders.
All certificates representing common or preferred shares bear a legend referring to the restrictions described above.
The restrictions on ownership and transfer described above could have the effect of delaying, deterring or preventing a change in control or other transaction
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 description of securities authorized for issuance under our Amended and Restated 2012 Equity Incentive Plan.
DISTRIBUTION INFORMATION
Future distributions, if any, will be at the discretion of our Board of Trustees and will depend on our actual cash flow, financial condition, capital requirements,
the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as we may deem relevant. Our ability to make
distributions will depend on our receipt of distributions from our operating partnership and lease payments from our lessees with respect to the hotels. We rely
on the profitability and cashflows of our hotels to generate sufficient cash flow for distributions. Additionally, we may, if necessary and allowable, pay taxable
dividends of our shares to meet the distribution requirements.
Item 6.    
Reserved.
38

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto. This section includes discussion of
financial information as of and for the year ended December 31, 2022 and provides comparisons to the same information as of and for the year ended December
31, 2021. Comparisons of 2021 financial information to the same information for 2020 can be found in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the
Securities and Exchange Commission on February 24, 2022.
Certain statements appearing in this Item 7 are forward-looking statements within the meaning of the federal securities laws. Our actual results may differ
materially. We caution you not to place undue reliance on any such forward-looking statements. See “Cautionary Factors That May Affect Future Results” for
additional information regarding our forward-looking statements.
BACKGROUND
As of December 31, 2022, we owned interests in 25 hotels in major urban gateway markets including New York, Washington DC, Boston, Philadelphia, and
Miami, as well as Santa Monica, Monterey Bay, and Key West. Our portfolio consists of 22 wholly-owned hotels, 1 hotel through our interest in a consolidated
joint venture, and interests in 2 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 qualification rules, we cannot directly operate any of our hotels. Instead, we
must lease our hotels to a third party lessee or to a TRS, provided that the TRS engages an eligible independent contractor, as defined under the REIT rules, to
manage the hotels. As of December 31, 2022, we have leased all of our hotels to a wholly-owned TRS, a joint venture owned TRS, or an entity owned by our
wholly-owned TRS. Each of these TRS entities will pay qualifying rent, and the TRS entities have entered into management contracts with qualified independent
managers, including HHMLP, with respect to our hotels. We intend to lease all newly acquired hotels to a TRS. The TRS structure enables us to participate more
directly in the operating performance of our hotels. Each TRS directly receives all revenue from, and funds all expenses relating to, hotel operations of the hotels
that it leases. Each TRS is also subject to income tax on its earnings.
COVID-19
We believe the ongoing effects of the COVID-19 pandemic on our operations have had, and will continue to have, a material negative impact on our
financial results and liquidity, and such negative impact may continue beyond the containment of the pandemic. We have remained focused on executing expense
mitigation measures and shoring up our liquidity position as we continue to face a challenging operating environment. In February 2021, the Company entered
into an unsecured notes facility that provided net proceeds of $144.8 million at closing. The initial net proceeds of $144.8 million provided by this facility, along
with a portion of the proceeds from asset sales, were used to repay amounts outstanding under our credit agreements, allowing us to amend our credit
agreements on February 17, 2021, eliminating maturities under the credit agreements until August of 2022. On August 4, 2022, we entered into a new credit
agreement which provided for a secured term loan of $400.0 million and revolving line of credit with capacity of $100,000. The proceeds from the $400.0 million
term loan were used to pay off and terminate the previous credit agreement. Also on August 4, 2022, using a portion of the proceeds from hotel dispositions
discussed below, we paid off the unsecured notes facility, payable at a redemption price of 104%.
The manner in which the ongoing COVID-19 pandemic will be resolved or the manner that the hospitality and tourism industries will return to historical
performance norms, and whether the economy will contract or grow are not reasonably predictable. As a result, there can be no assurances that we will be able
to achieve the hotel operating metrics or the results at our properties we have forecasted. Factors that might contribute to less-than-anticipated performance
include those described under the heading "Risk Factors" in this report and other documents that we may file with the SEC in the future. We will continue to
cautiously monitor lodging demand and rates, our third-party hotel managers, and our performance generally.
39

SUMMARY OF OPERATING RESULTS
The following tables outline operating results for the Company’s portfolio of wholly owned hotels and those owned through joint venture interests that are
consolidated in our financial statements for the years ended December 31, 2022, and 2021. Common key performance metrics utilized by the lodging industry are
occupancy, average daily rate ("ADR"), and revenue per available room ("RevPAR"). Occupancy is calculated as the percentage total rooms sold compared to
rooms available to be sold, while ADR measures the average rate earned per occupied room, calculated as total room revenue divided by total rooms sold. RevPAR
is a derivative of these two metrics which shows the total room revenue earned per room available to be sold. Management uses these metrics in comparison to
other hotels in our self-defined competitive peer set within proximity to each of our hotel properties.
We define a comparable consolidated hotel as one that is currently consolidated, that we have owned in whole or in part for the entirety of the periods being
presented, and is deemed fully operational as of the end of the period reported. Based on this definition, for the year ended December 31, 2022, there are 23
comparable consolidated hotels.
For the comparison of December 31, 2022 to December 31, 2021, comparable hotel operating results contain results from our consolidated hotels owned as
of December 31, 2022, excluding the results of all hotels sold during the years ended December 31, 2022 and 2021.
COMPARABLE CONSOLIDATED HOTELS:
(Includes 23 hotels in both years)
Year Ended December 31,
2022
Year Ended December 31,
2021
2022 vs. 2021
Change
(dollars in thousands except ADR and RevPAR)
Occupancy
68.7 %
57.6 %
1,111 bps
Average Daily Rate (ADR)
$
295.65 
$
242.62 
21.9%
Revenue Per Available Room (RevPAR)
$
203.24 
$
139.82 
45.4%
Room Revenues
$
260,152 
$
178,982 
45.4%
Hotel Operating Revenues
$
339,837 
$
229,247 
48.2%
Overall, our comparable hotel portfolio experienced meaningful recovery in 2022 from the significant disruptions in 2021 and 2020 as a result of the COVID-
19 pandemic. This increase in demand across the entire hotel industry resulted in 2022 operating results far above 2021. RevPAR for the year ended December 31,
2022 increased 45.4% for our comparable consolidated hotels when compared to 2021.
Comparison of the Year Ended December 31, 2022 to December 31, 2021
(dollars in thousands)
Revenue
Our total revenues for the years ended December 31, 2022 and 2021 consisted of hotel operating revenues and other revenue. Hotel operating revenues are
recorded for wholly-owned hotels that are leased to our wholly owned TRS and one hotel owned through a joint venture that is consolidated in our financial
statements. Hotel operating revenues increased $109,679, or 37.1%, to $405,545 for the year ended December 31, 2022 compared to $295,866 for the same
period in 2021. This increase is attributable to an increase in RevPAR across our portfolio in 2022 as compared to 2021 as our hotels continue to recover from the
decrease in demand caused by the COVID-19 pandemic. The increase in demand is partially offset by a reduction in hotel operating revenue attributable to the
sale of ten hotels during the year ended December 31, 2022 and the sale of five hotels during the year ended December 31, 2021.
Expenses
Total hotel operating expenses were $237,221 for the year ended December 31, 2022 compared to $178,156 for the year ended December 31, 2021. The
increase in hotel operating expenses is due to increased operations at our hotels for the year ended December 31, 2022 as a result of the increase in demand as
the markets in which we have operations continue to
40

recover from the decrease in demand caused by the COVID-19 pandemic. This increase in hotel operating expense is partially offset by a reduction of hotel
operating expenses of $4,525 as a result of the sale of hotels noted above.
Real estate and personal property tax and property insurance decreased $6,155, or 16.7%, for the year ended December 31, 2022 when compared to 2021.
Real estate and personal property taxes decreased $5,710, which is primarily due to the sale of hotels noted above, as well as a decrease in real estate tax
assessments, specifically in the New York City market. In general, our property insurance costs continue to rise annually, which was partially offset by a reduction
in expense due to the dispositions noted above.
Depreciation and amortization decreased by 22.0%, or $18,343, to $64,966 for the year ended December 31, 2022 from $83,309 for the year ended
December 31, 2021. The decrease in depreciation and amortization is primarily as a result of the 2022 and 2021 hotel dispositions noted above, as well as assets
that fully depreciated during 2021.
General and administrative expense increased by $3,450 to $26,477 for the year ended December 31, 2022 from $23,027 for the year ended December 31,
2021.  General and administrative expense includes expenses related to payroll, rents, and other corporate level administrative costs as well as non-cash share
based payments issued as compensation to the Company’s trustees, executives, and employees. Expenses related to non-cash share based compensation
increased $2,351 when comparing the year ended December 31, 2022 to 2021. This increase resulted primarily from an increase in the valuation of certain market
based award programs and a difference in the timing of share based compensation recognition.  Please refer to “Note 9 – Share Based Payments” of the notes to
the consolidated financial statements for more information about our stock based compensation.
Loss on Impairment of Assets
During the year ended December 31, 2022, the Company determined that the carrying value of the Gate hotel JFK Airport exceeded the anticipated net
proceeds from sale, resulting in a $10,113 loss on impairment of assets recorded during the year ended December 31, 2022. During the year ended December 31,
2021, we incurred an impairment charge of $222 which primarily relates to an impairment charge incurred prior to the disposition of the Duane Street hotel
during the year ended December 31, 2021.
Insurance Recoveries in Excess of Property Loss
During the year ended December 31, 2022, the Company recorded a gain from insurance recoveries in the amount of $933 compared to a gain from
insurance recoveries of $711 during the comparable period in 2021. During the year ended December 31, 2022, the Company received net proceeds of $958
related to property damage incurred for a 2021 claim at our Hampton Inn Philadelphia hotel. During the year ended December 31, 2021, we received net
proceeds of $961 from COVID-19 business interruption claims, which was partially offset by a $250 deductible at our Hampton Inn Philadelphia hotel.
Operating Income (Loss)
Operating income for the year ended December 31, 2022 was $33,045, which is an improvement of $62,637 compared to operating loss of $29,592 during
the same period in 2021. The change in operating income (loss) is primarily due to an increase in demand during the year ended December 31, 2022 as compared
to the same period in 2021. Increases in hotel operating revenues during the period outpaced increases in hotel operating expense, contributing to improvement
in operating margins, as the markets in which we operate continued to recover from the decrease in demand caused by the COVID-19 pandemic.
Interest Income
Interest income increased $1,501 from $15 for the year ended December 31, 2021 to $1,516 for the year ended December 31, 2022. The increase in interest
income is primarily driven by an increase in cash and cash equivalents as a result of the hotel dispositions noted above, and a corresponding increase in interest
rates on the interest income earned on cash and cash equivalents.
Interest Expense
Interest expense decreased $7,636 from $56,059 for the year ended December 31, 2021 to $48,423 for the year ended December 31, 2022. The balance of
our borrowings, excluding discounts and deferred costs, have decreased by $496,749 in total between December 31, 2021 and December 31, 2022. The decrease
in interest expense is primarily driven by the pay down of the amount drawn under the prior Line of Credit of $118,684 on August 4, 2022, the decrease in the
principal term loan balance of $97,481 after the credit refinancing on August 4, 2022, and the pay off of the Junior Notes on August 4, 2022 which had a principal
balance of $158,094.
41

Gain on Disposition of Hotel Properties
During the year ended December 31, 2022, we closed on the sale of the seven urban select service hotels, Hotel Milo Santa Barbara, and the Pan Pacific
hotel, resulting in gains of $197,505 for the year ended December 31, 2022. During the year ended December 31, 2021, the Company sold the Residence Inn
Coconut Grove, the Courtyard San Diego, the Capitol Hill Hotel, the Holiday Inn Express Cambridge Hotel and the Duane Street Hotel. The sale of these hotels,
excluding the Duane Street Hotel, resulted in gains totaling $48,352 for the year ended December 31, 2021.
Loss on Debt Extinguishment
During the year ended December 31, 2022, we incurred a loss on debt extinguishment of $18,049. This consists primarily of $13,726 of debt extinguishment
losses upon redemption of the Junior Notes on August 4, 2022, and $4,302 of debt modification and extinguishment losses as a result of refinancing our credit
facilities on August 4, 2022. During the year ended December 31, 2021, we incurred a loss on debt extinguishment of $3,069, which is primarily related to the
February 2021 amendments to the prior credit facilities.
Unconsolidated Joint Venture Investments
The loss from unconsolidated joint ventures consists of our interest in the operating results of the properties we own in joint ventures. Loss from our
unconsolidated joint ventures decreased by $2,239 to a loss of $53 for the year ended December 31, 2022 compared to loss of $2,292 during the same period in
2021. This reduction in losses relates to the net operating losses of our joint venture properties for the year ended December 31, 2022 compared to 2021. In
addition, on November 30, 2022, we sold our membership interest in the Hiren Boston, LLC joint venture, and recognized a gain of $5,167 as the net proceeds
exceeded our investment in the joint venture.
Income Tax Expense
During the year ended December 31, 2022, the Company recorded income tax expense of $4,800 compared to income tax expense of $838 for the year
ended December 31, 2021.  The increase is primarily driven by state income tax incurred as a result of gains on hotel dispositions recognized for the year ended
December 31, 2022.
After considering various factors, including future reversals of existing taxable temporary differences, future taxable income and tax planning strategies, we
believe that as of December 31, 2022, it is not more likely than not that we will be able to realize our net deferred tax asset and therefore, maintained the full
valuation allowance that was established during the second quarter of 2020. As a result, the balance of our net deferred tax asset at December 31, 2022 is $0.
Absent the valuation allowance, the amount of income tax expense or benefit that the Company typically records depends mostly on the amount of taxable
income or loss that is generated by our consolidated taxable REIT subsidiaries (“TRS”).
Net Income (Loss) Applicable to Common Shareholders
Net income applicable to common shareholders for the year ended December 31, 2022 was $122,548 compared to a net loss of $63,005 during the
same period in 2021.  This improvement is primarily related to an increase in gain on hotel dispositions of $149,153, as well as an improvement in operating
income of $62,637, partially offset by an increase in loss on debt extinguishment of $14,980.
Comprehensive Income (Loss) Applicable to Common Shareholders
Comprehensive income applicable to common shareholders for the year ended December 31, 2022 was $144,972 compared to comprehensive loss of
$47,819 for the same period in 2021. This change can be attributed to the items affecting Net Loss Applicable to Common Shareholders as more fully described
above, as well as an increase in Other Comprehensive Income of $8,531 which is driven by an increase in the change of the fair value of our derivative
instruments.
LIQUIDITY, CAPITAL RESOURCES, AND EQUITY OFFERINGS
(dollars in thousands, except share data)
Potential Sources of Capital
Our organizational documents do not limit the amount of indebtedness that we may incur. Our ability to incur additional debt is dependent upon a number of
factors, including the current state of the overall credit markets, our degree of leverage and borrowing restrictions imposed by debt covenants and existing
lenders. Our ability to raise funds through the issuance of debt and equity securities is dependent upon, among other things, capital market volatility, risk
tolerance of investors, general
42

market conditions for REITs and market perceptions related to the Company’s ability to generate cash flow and positive returns on its investments.
In addition, our mortgage indebtedness contains various financial and non-financial covenants customarily found in secured, nonrecourse financing
arrangements. If the specified criteria are not satisfied, the lender may be able to escrow cash flow generated by the property securing the applicable mortgage
loan. Future deterioration in market conditions could cause restrictions in our access to the cash flow of additional properties.
In addition to the incurrence of debt and the offering of equity securities, dispositions of property may serve as additional capital resources and sources of
liquidity. We may recycle capital from stabilized assets or from sales of non-core hotels in secondary and tertiary markets. Capital from these types of transactions
is intended to be redeployed into high growth acquisitions, share buybacks, or to pay down existing debt.
Junior Unsecured Notes Facility
In February 2021, the Company entered into a junior unsecured notes facility (“Junior Notes”) that provided net proceeds of $144,750 at closing. The Junior
Notes bore interest at a rate of 9.50%, of which half, or 4.75%, was paid in cash through March 31, 2022, with the remaining half added to the principal of the
note through March 31, 2022. During the three months ended June 30, 2022, interest at a rate of 9.50% was paid in cash. The original maturity date under the
Junior Notes was February of 2026 and the notes were non-callable through February 2022. The Junior Notes were callable at 104% beginning February of 2022.
On August 4, 2022, using the proceeds from the disposition of the Courtyard Brookline, MA; the Hampton Inn Washington, DC; Hilton Garden Inn M Street,
Washington, DC; Hampton Inn Philadelphia, PA; TownePlace Suites Sunnyvale, CA and the Courtyard Los Angeles Westside, CA, we paid off the Junior Notes at a
redemption price of 104%, or $164,418, as well as the Prior Facilities, discussed below.
Credit Facility and Term Loans
Prior to the credit refinancing on August 4, 2022, our secured debt facilities aggregated to $747,481 and were comprised of a $442,404 senior credit facility
and two term loans totaling $305,077. The credit facility (“Prior Credit Facility”) contained a $192,404 term loan (“Prior First Term Loan”) and a $250,000 revolving
line of credit (“Prior Line of Credit”), and was set to expire on August 10, 2022. Prior to the refinancing, we had $118,684 outstanding under the Line of Credit.
Our two additional term loan balances were $278,846 (“Prior Second Term Loan”) and $26,231 (“Prior Third Term Loan”) with an original maturity date of
September 10, 2024 and August 10, 2022, respectively.
On August 4, 2022, we entered into a credit agreement (the "Credit Agreement"), with certain lenders, for whom Citibank, N.A. ("Citibank") acted as the
administrative agreement and collateral agent, Wells Fargo Bank, N.A. and Manufacturers and Traders Trust Company acted as the co-syndication agents, and
Citibank, Wells Fargo Securities, LLC, and Manufacturers and Traders Trust Company acted as joint lead arrangers and joint book running managers. The Credit
Agreement provided for a new secured term loan of $400,000 and secured revolving line of credit with capacity of $100,000 which mature in August of 2024.
Immediately upon entering into the Credit Agreement, proceeds from the $400,000 new term loan, along with a portion of the proceeds from the dispositions
discussed in Note 2 – Investment in Hotel Properties, were used to pay off and terminate all borrowings under the Prior Facilities.
All borrowings under the Credit Agreement bear interest at a rate per annum equal to, at the option of the Company, either (i) 2.50% plus Adjusted Term
SOFR (defined as the forward-looking term rate based on SOFR plus 0.10%), or (ii) 1.50% plus the Base Rate (defined as the highest of (a) the rate of interest
announced publicly by Citibank, as its base rate, (b) ½ of 1% per annum above the Federal Funds Rate and (c) the Adjusted Term SOFR for a one-month Interest
Period in effect on such day plus 1.00% per annum). The Credit Agreement provides for a 0.00% floor for borrowings at Adjusted Term SOFR and a 1.00% floor for
borrowings at the Base Rate. The Credit Agreement also permits the issuance of letters of credit.
Common Share Repurchase Plan
There was no share repurchase program for the year-ended December 31, 2022.
Acquisitions
During the year ended December 31, 2022, we acquired no hotel properties. We intend to invest in additional hotels only as suitable opportunities arise and
adequate sources of financing are available. We expect that future investments in hotels
43

will depend upon and will be financed by, in whole or in part, our existing cash, the proceeds from additional issuances of common or preferred shares, proceeds
from the sale of assets, issuances of Common Units, issuances of preferred units or other securities or borrowings secured by hotel assets and under our Line of
Credit.
Dispositions
On August 4, 2022 and October 26, 2022, we closed in two related closings on the sale of a total of seven hotels to an unaffiliated buyer for a purchase price
of $505,000. These seven hotels included the Courtyard Brookline; the Hampton Inn Washington, DC; Hilton Garden Inn M Street Washington, DC; Hampton Inn
Philadelphia; TownePlace Suites Sunnyvale; Courtyard Sunnyvale; and the Courtyard Los Angeles Westside. The proceeds from the sale were used to pay off the
Junior Notes at a redemption price of 104%, or $164,418, and the Prior Facilities. The mortgage loan amount of $39,309 secured by the Courtyard Sunnyvale hotel
was assumed by the buyer and we paid off the Courtyard Los Angeles mortgage with a principal balance of $35,000 at closing.
On October 6, 2022, we closed on the sale of the Hotel Milo Santa Barbara for a sales price of $55,000 and paid off the outstanding mortgage of $20,696 at
closing. On October 19, 2022, we closed on the sale of the Pan Pacific Seattle for a sales price of $70,000, and a portion of the proceeds were used to pay down
the Term Loan in the amount of $22,380. On November 2, 2022, we closed on the sale of the Gate hotel JFK Airport for a sales price of $11,000, and a portion of
the proceeds were used to pay down the Term Loan in the amount of $4,767.
Operating Liquidity and Capital Expenditures
Our short-term liquidity requirements generally consist of funds necessary to pay our scheduled debt service and operating expenses and capital
expenditures directly associated with our hotels. We expect to meet our short-term liquidity requirements generally through net cash provided by operations,
existing cash balances and, if necessary, short-term borrowings under the Line of Credit.
To qualify as a REIT, we must distribute annually at least 90% of our taxable income. This distribution requirement limits our ability to retain earnings and
requires us to raise additional capital in order to grow our business and acquire additional hotel properties. However, there is no assurance that we will be able to
borrow funds or raise additional equity capital on terms acceptable to us, if at all. In addition, we cannot guarantee that we will be able to make distributions to
our shareholders.
At December 31, 2022, we were in compliance with our debt service coverage ratio ("DSCR") requirements for our mortgage borrowings. It is possible that we
could fail certain financial covenants within certain property-level mortgage borrowings. The lenders' remedy of a covenant failure would be a requirement to
escrow funds for the purpose of meeting our future debt payment obligations.
Spending on capital improvements during the year ended December 31, 2022 increased when compared to spending on capital improvements during the
year ended December 31, 2021. During the year ended December 31, 2022, we spent $23,587 on capital expenditures to renovate, improve or replace assets at
our hotels. This compares to $10,873 during the same period in 2021. These capital expenditures were undertaken to comply with brand mandated
improvements and to initiate projects that we believe will generate a return on investment. We may spend additional 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 operating cash flow, and if necessary, borrowings under the Line of Credit, proceeds from issuances of our securities and hotel dispositions,
to pay for the cost of capital improvements and furniture, fixture and equipment requirements.
CASH FLOW ANALYSIS 
(dollars in thousands)
Comparison of the Years Ended December 31, 2022 and December 31, 2021
Net cash provided by operating activities increased by $59,336 from net cash provided by operating activities of $16,232 for the year ended December 31,
2021 to net cash provided by operating activities of $75,568 for the year ended December 31, 2022. The increase in cash flow is primarily attributable to an
increase in hotel property cash flow as a result of an increase in demand since the onset of the COVID-19 pandemic.
44

Net cash provided by investing activities for the year ended December 31, 2022 was $510,241 compared to net cash provided by investing activities of
$151,471 for the year ended December 31, 2021. The increase is primarily attributable to proceeds of $526,828 received during the year ended December 31,
2022 for the sale of the seven urban select service hotels, Hotel Milo Santa Barbara, Pan Pacific Seattle, and the Gate JFK Airport, compared to proceeds of
$163,583 from the sale of the Courtyard San Diego, the Capitol Hill Hotel, the Holiday Inn Express Cambridge, the Residence Inn Coconut Grove, and the Duane
Street Hotel during the year ended December 31, 2021. This was partially offset by an increase of $12,714 for capital expenditures for the year ended December
31, 2022 compared to 2021 as we have resumed certain selective capital expenditure projects during the year ended December 31, 2022. We had a decrease of
$1,004 in contributions related to unconsolidated joint ventures as we contributed a total of $485 to the Hiren Boston and SB Partners joint ventures during the
year ended December 31, 2022 compared to contributions of $1,489 to the Hiren Boston and SB Partners unconsolidated joint ventures during the year ended
December 31, 2021. We received insurance proceeds of $1,294 during the year ended December 31, 2022 related to property damage incurred for a 2021 claim
at our Hampton Inn Philadelphia hotel. Lastly, we received proceeds of $6,191 related to the sale of our membership interest in Hiren Boston, LLC during the year
ended December 31, 2022.
Net cash used in financing activities for the year ended December 31, 2022 was $440,734 compared to net cash used in financing activities for the year ended
December 31, 2021 of $106,365. The following items are the major contributing factors for the change in financing cash flow:  
•
The primary use of cash in 2021 was the payment of $187,024 of outstanding borrowings under the Prior Term Loan agreements and net
repayments of $14,369 on our Prior Line of Credit. We received net proceeds of $144,750 from the issuance of the Junior Notes, a portion of
which, in addition to the proceeds received from the hotel dispositions noted above, were used to pay down the Term Loans. Our primary use of
cash in 2022 was the repayment of the Prior Term Loans of $497,481 and the Prior Line of Credit of $118,684, as well as the pay down of the
Junior Notes of $158,094. We used proceeds from the hotel dispositions noted above, as well as proceeds of $400,000 from the new Term Loan
to repay these debt obligations;
•
Payment of $10,636 of deferred financing costs and debt extinguishment for the year ended December 31, 2022 which primarily relates to the
new Credit Agreement and premium paid to redeem the junior notes, as compared to the payment of $6,231 during the year ended December
31, 2021 which primarily relates to the Junior Notes issuance noted above;
•
A decrease in cash payments of $15,806 related to dividends paid. During the year ended December 31, 2021, our executed amendments to the
Prior Facilities allowed for the payment of the total arrearage of unpaid cash dividends for the periods ended April 15, 2020, July 15, 2020,
October 15, 2020 and January 15, 2021 due on each of our 6.875% Series C Cumulative Redeemable Preferred Shares, 6.50% Series D
Cumulative Redeemable Preferred Shares and 6.50% Series E Cumulative Redeemable Preferred Shares, which was paid on March 26, 2021, as
the well as the dividends paid on April 15, 2021 and July 15, 2021. During the year ended December 31, 2022 we paid dividends of $24,174 on
these preferred shares and $2,325 on our Common Shares, Common Units and LTIP Units.
45

FUNDS FROM OPERATIONS
(in thousands, except share data)
The National Association of Real Estate Investment Trusts (“NAREIT”) developed Funds from Operations (“FFO”) as a non-GAAP financial measure of
performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. We
calculate FFO applicable to common shares and Common Units in accordance with the December 2018 Financial Standards White Paper 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 depreciation and amortization related to
real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate
assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Our
interpretation of the NAREIT definition is that noncontrolling interest in net income (loss) should be added back to (deducted from) net income (loss) as part of
reconciling net income (loss) to FFO. Our FFO computation may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with
the NAREIT definition, or that interpret the NAREIT definition differently than we do.
The GAAP measure that we believe to be most directly comparable to FFO, net income (loss) applicable to common shareholders, includes loss from the
impairment of certain depreciable assets, our investment in unconsolidated joint ventures and land, depreciation and amortization expenses, gains or losses on
property sales, noncontrolling interest and preferred dividends. In computing FFO, we eliminate these items because, in our view, they are not indicative of the
results from our property operations.
FFO does not represent cash flows from operating activities in accordance with GAAP and should not be considered an alternative to net income as an
indication of the Company’s performance or to cash flow as a measure of liquidity or ability to make distributions. We consider FFO to be a meaningful, additional
measure of operating performance because it excludes the effects of the assumption that the value of real estate assets diminishes predictably over time, and
because it is widely used by industry analysts as a performance measure. We show both FFO from consolidated hotel operations and FFO from unconsolidated
joint ventures because we believe it is meaningful for the investor to understand the relative contributions from our consolidated and unconsolidated hotels. The
display of both FFO from consolidated hotels and FFO from unconsolidated joint ventures allows for a detailed analysis of the operating performance of our hotel
portfolio by management and investors. We present FFO applicable to common shares and Common Units because our Common Units are redeemable for
common shares. We believe it is meaningful for the investor to understand FFO applicable to all common shares and Common Units.
46

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):
Year Ended
December 31, 2022
December 31, 2021
December 31, 2020
Net income (loss) applicable to common shareholders
$
122,548 
$
(63,005)
$
(189,165)
Income (loss) allocated to noncontrolling interests
19,338 
(4,524)
(19,560)
(Income) loss from unconsolidated joint ventures
(5,114)
2,292 
2,938 
Gain on disposition of hotel properties
(197,505)
(48,352)
(1,158)
Loss from impairment of depreciable assets
10,113 
222 
1,069 
Depreciation and amortization
64,966 
83,309 
96,958 
Funds from consolidated hotel operations
applicable to common shareholders and Partnership units
14,346 
(30,058)
(108,918)
Income (loss) from Unconsolidated Joint Ventures
5,114 
(2,292)
(2,938)
Gain from sale of interest in unconsolidated joint ventures
(5,167)
— 
— 
Unrecognized pro rata interest in loss (1)
(436)
(1,053)
(1,417)
Depreciation and amortization of difference between purchase price
and historical cost (2)
82 
94 
83 
Interest in depreciation and amortization of unconsolidated joint ventures (3)
2,466 
2,508 
1,828 
Funds from unconsolidated joint ventures operations
applicable to common shareholders and Partnership units
2,059 
(743)
(2,444)
Funds from Operations
applicable to common shareholders and Partnership units
$
16,405 
$
(30,801)
$
(111,362)
Weighted Average Common Shares and Units Outstanding
Basic
39,368,952 
39,089,987 
38,613,563 
Diluted
46,393,487 
44,172,521 
44,066,289 
(1) For U.S. GAAP reporting purposes, our interest in the joint venture's loss is not recognized since our U.S. GAAP basis in the joint venture has been reduced to
$0. Our interest in FFO from the joint venture equals our percentage ownership in the venture.
(2)    Adjustment made to add depreciation of purchase price in excess of historical cost of the assets in the unconsolidated joint venture at the time of our
investment.
(3)    Adjustment made to add our interest in real estate related depreciation and amortization of our unconsolidated joint ventures. Allocation of depreciation
and amortization is consistent with allocation of income and loss.
INFLATION
Operators of hotel properties, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. However, competitive pressures may
limit the ability of our management companies to raise room rates. The Company’s largest expenses are labor related costs. Wage and other expenses increase
during periods of inflation and when labor shortages occur in the marketplace. There can be no guarantee we will not experience increases in the cost of labor, as
the need for hospitality employees is expected to grow. In addition, suppliers pass along rising costs to us in the form of higher prices. We have the ability to pass
on these increased costs associated with providing services by adjusting room rates.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates are those that management believes are the most important to the portrayal of our financial condition and results of operations
and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently
uncertain, especially in light of the current economic environment due to the COVID-19 pandemic. The estimates and assumptions made by management in
applying critical accounting policies have not changed materially during 2022 and 2021 and none of the estimates or assumptions have proven to be materially
incorrect or resulted in our recording any significant adjustments relating to prior periods.
47

Investment in Hotel Properties
We review our portfolio on an on-going basis to evaluate the existence of any of the aforementioned events or changes in circumstances that would require
us to test for recoverability. In general, our review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges,
expected to result from the property’s use and eventual disposition.
Our impairment evaluation contains uncertainties because it requires management to make assumptions and to apply judgment to estimate future cash flows
and asset fair values. Key assumptions used in estimating future cash flows and asset fair values include expected future operating income, as well as the holding
period and the expected terminal capitalization rate. Estimates of revenue growth and operating expenses are based on third-party market data, where available
and applicable to the hotel evaluated, and internal projections which consider the hotel’s historical performance, hotel demand, competition and other factors
that impact the hotel’s performance. The terminal capitalization rate is selected based on third-party market data, recent dispositions, and what we believe a
buyer would assume when determining a purchase price for the hotel. These estimates are subjective and our ability to realize future cash flows and asset fair
values is affected by factors such as ongoing maintenance and improvement of the assets, changes in economic conditions and changes in operating performance.
If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value
exceeds the estimated fair value of the property. As of December 31, 2022, we have determined that the estimated future cash flow of each of the properties in
our portfolio is sufficient to recover its carrying value. Asset impairment charges are discussed in Note 2, Investment in Hotel Properties, to the consolidated
financial statements included in Item 8 of Part II of this 10-K.
RELATED PARTY TRANSACTIONS
We have entered into a number of transactions and arrangements that involve related parties. For a description of the transactions and arrangements, please
see Note 7, “Commitments and Contingencies and Related Party Transactions,” to the consolidated financial statements.
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk (in thousands, except per share data)
Our primary market risk exposure is to changes in interest rates on our variable rate debt which has not been effectively hedged with interest swaps or
interest rate caps. As of December 31, 2022, we are exposed to interest rate risk with respect to variable rate borrowings under our Credit Agreement and certain
variable rate mortgages and notes payable. As of December 31, 2022, we had total variable rate debt outstanding of $173,846 with a weighted average interest
rate of 6.73%. The effect of a 100 basis point increase or decrease in the interest rate on our variable rate debt outstanding as of December 31, 2022 would be an
increase or decrease in our interest expense for the twelve months ended December 31, 2022 of $1,878.
Our interest rate risk objectives are to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To
achieve these objectives, we manage our exposure to fluctuations in market interest rates for a portion of our borrowings through the use of fixed rate debt
instruments to the extent that reasonably favorable rates are obtainable with such arrangements. We have also entered into derivative financial instruments such
as interest rate swaps or caps, and in the future may enter into treasury options or locks, to mitigate our interest rate risk on a related financial instrument or to
effectively lock the interest rate on a portion of our variable rate debt. As of December 31, 2022, we have an interest rate cap related to the debt on Hilton Garden
Inn, 52nd Street, New York, NY, and we have five interest rate swaps related to debt on Hyatt Union Square, New York, NY; Hilton Garden Inn Tribeca, New York,
NY; and our Credit Agreements. We do not intend to enter into derivative or interest rate transactions for speculative purposes.
As of December 31, 2022, approximately 73% of our outstanding consolidated long-term indebtedness is subject to fixed rates or effectively capped, while
27% of our outstanding long term indebtedness is subject to floating rates. The majority of our floating rate debt and any corresponding derivative instruments
are indexed to various tenors of LIBOR or SOFR.
On March 5, 2021, the Financial Conduct Authority (“FCA”) announced that USD LIBOR will no longer be published after June 30, 2023. This announcement
has several implications, including setting the spread that may be used to automatically convert contracts from LIBOR to the Secured Overnight Financing Rate
("SOFR"). Additionally, banks discontinued new LIBOR debt issuances by December 31, 2021. However, the ICE Benchmark Administration, in its capacity as
administrator of LIBOR,
48

has announced that it intends to extend publication of LIBOR (other than one-week and two-month tenors) by 18 months to June 2023.
Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or
decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes
may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form. In anticipation of the cessation of
LIBOR, we may need to renegotiate credit facilities and any credit agreements extending beyond 2022 that utilize LIBOR as a factor in determining the interest rate
or rely on certain fallback provisions that could cause interest rates to shift to a base rate plus a margin. Any such renegotiations may have a material adverse
effect on our business.
Changes in market interest rates on our fixed-rate debt impact the fair value of the debt, but such changes have no impact on interest expense incurred. If
interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our debt to decrease. The sensitivity analysis
related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from their December 31, 2022 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, 2022 to be
approximately $604,657 and a 100 basis point decrease in market interest rates would cause the fair value of our fixed-rate debt outstanding at December 31,
2022 to be approximately $616,241.
We regularly review interest rate exposure on our outstanding borrowings in an effort to minimize the risk of interest rate fluctuations. For debt obligations
outstanding as of December 31, 2022, the following table presents expected principal repayments and related weighted average interest rates by expected
maturity dates:
2023
1 - 3 years
4 - 5 years
Thereafter
Total
 
 
 
 
 
Fixed Rate Debt
$
100,622 
$
358,813 
$
— 
$
— 
$
459,435 
Weighted Average Interest Rate
3.99 %
3.93 %
N/A
N/A
3.96 %
 
 
 
 
 
Floating Rate Debt
$
23,372 
$
98,926 
$
— 
$
51,548 
$
173,846 
Weighted Average Interest Rate
7.01 %
7.11 %
N/A
7.33 %
7.29 %
 
 
 
 
 
$
123,994 
$
457,739 
$
— 
$
51,548 
$
633,281 
The table incorporates only those exposures that existed as of December 31, 2022, and does not consider exposure or positions that could arise after that
date. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the future period,
prevailing interest rates, and our hedging strategies at that time.
49

Item 8.    Financial Statements and Supplementary Data
Hersha Hospitality Trust
Page
Report of Independent Registered Public Accounting Firm (KPMG LLP, Philadelphia, Pennsylvania,
Auditor Firm ID: 185)
51
Consolidated Balance Sheets
53
Consolidated Statement of Operations
54
Consolidated Statements of Comprehensive Income
56
Consolidated Statements of Equity
57
Consolidated Statements of Cash Flows
60
Notes to Consolidated Financial Statements
62
Schedule III - Real Estate and Accumulated Depreciation
104
50

Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
Hersha Hospitality Trust:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Hersha Hospitality Trust and subsidiaries (the Company) as of December 31, 2022 and 2021,
the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December
31, 2022, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal
control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2023 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
51

Assessment of estimated holding periods for hotel properties
As discussed in Notes 1 and 2 to the consolidated financial statements, the Company tests its hotel properties for impairment whenever events or
changes in circumstances indicate that the carrying value of any of the hotel properties may not be recoverable. Investment in hotel properties, net of
accumulated depreciation, was $1,189 million, or 80% of total assets at December 31, 2022.
We identified the assessment of the estimated holding periods for the Company’s hotel properties as a critical audit matter. A high degree of subjective
and complex auditor judgment was required in assessing the events or changes in circumstances used by the Company to evaluate the estimated holding
periods. A shortened estimated holding period could indicate a potential impairment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating
effectiveness of an internal control related to the Company’s determination of the estimated holding periods for its hotel properties. We evaluated the
relevant events or changes in circumstances that the Company used to evaluate its estimated holding periods by:
•
inspecting documents such as meeting minutes of the board of trustees to assess the likelihood that a property will be sold before the end of its
previously estimated holding period
•
reading certain publicly available information to identify information regarding potential sales of the Company’s hotel properties
•
inquiring of Company officials, including those in the organization who are responsible for, and have authority over, disposition activities
•
obtaining representations from the Company regarding the status of potential plans to dispose of hotel properties.
/s/ KPMG LLP
We have served as the Company’s auditor since 2004.
Philadelphia, Pennsylvania
February 23, 2023
52

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
December 31, 2022
December 31, 2021
Assets:
Investment in Hotel Properties, Net of Accumulated Depreciation
$
1,189,239 
$
1,665,097 
Investment in Unconsolidated Joint Ventures
4,989 
5,580 
Cash and Cash Equivalents
224,955 
72,238 
Escrow Deposits
5,065 
12,707 
Hotel Accounts Receivable
8,922 
8,491 
Due from Related Parties
245 
2,495 
Intangible Assets, Net of Accumulated Amortization of $1,211 and $6,944
684 
1,335 
Right of Use Assets
16,226 
43,442 
Other Assets
38,552 
21,759 
Total Assets
$
1,488,877 
$
1,833,144 
Liabilities and Equity:
Line of Credit
$
— 
$
118,684 
Secured Term Loans, Net of Unamortized Deferred Financing Costs (Note 5)
370,636 
496,085 
Unsecured Notes Payable, Net of Unamortized Deferred Financing Costs (Note 5)
50,895 
198,490 
Mortgages Payable, Net of Unamortized Premium and Unamortized Deferred Financing Costs
208,354 
304,614 
Lease Liabilities
19,003 
53,691 
Accounts Payable, Accrued Expenses and Other Liabilities
44,148 
43,207 
Dividends and Distributions Payable
31,694 
6,044 
Due to Related Parties
2,610 
1,723 
Total Liabilities
$
727,340 
$
1,222,538 
Redeemable Noncontrolling Interests - Consolidated Joint Venture (Note 12)
5,076 
2,310 
Equity:
Shareholders' Equity:
Preferred Shares: $.01 Par Value, 29,000,000 Shares Authorized, 3,000,000 Series C, 7,701,700 Series D and 4,001,514 Series E
Shares Issued and Outstanding at December 31, 2022 and December 31, 2021, with Liquidation Preferences of $25 Per Share
(Note 1)
$
147 
$
147 
Common Shares: Class A, $.01 Par Value, 104,000,000 Shares Authorized at December 31, 2022 and December 31, 2021;
39,697,451 and 39,325,025 Shares Issued and Outstanding at December 31, 2022 and December 31, 2021, respectively
398 
394 
Common Shares: Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at December 31, 2022 and
December 31, 2021
— 
— 
Accumulated Other Comprehensive Income (Loss)
16,213 
(6,211)
Additional Paid-in Capital
1,157,057 
1,155,034 
Distributions in Excess of Net Income
(490,815)
(592,314)
Total Shareholders' Equity
683,000 
557,050 
Noncontrolling Interests (Note 1):
73,461 
51,246 
Total Equity
756,461 
608,296 
Total Liabilities, Redeemable Noncontrolling Interests, and Equity
$
1,488,877 
$
1,833,144 
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
53

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
Year Ended December 31,
2022
2021
2020
Revenue:
Hotel Operating Revenues:
Room
$
317,640 
$
237,988 
$
142,260 
Food & Beverage
55,813 
31,778 
15,418 
Other Operating Revenues
32,092 
26,100 
18,765 
Other Revenues
329 
123 
217 
Total Revenues
405,874 
295,989 
176,660 
Operating Expenses:
Hotel Operating Expenses:
Room
67,740 
51,885 
38,787 
Food & Beverage
44,133 
24,756 
16,199 
Other Operating Expenses
125,348 
101,515 
85,270 
Hotel Ground Rent
4,353 
4,400 
4,301 
Real Estate and Personal Property Taxes and Property Insurance
30,632 
36,787 
40,928 
General and Administrative (including Share Based Payments of $14,384, $12,033, and $9,488 for the years
ended December 31, 2022, 2021, and 2020, respectively)
26,477 
23,027 
20,078 
Acquisition and Terminated Transaction Costs
— 
391 
4,419 
Loss on Impairment of Assets
10,113 
222 
1,069 
Depreciation and Amortization
64,966 
83,309 
96,958 
Insurance Recoveries in Excess of Property Loss
(933)
(711)
(8,960)
Total Operating Expenses
372,829 
325,581 
299,049 
Operating Income (Loss)
33,045 
(29,592)
(122,389)
Interest Income
1,516 
15 
39 
Interest Expense
(48,423)
(56,059)
(51,785)
Other Income (Expense)
152 
128 
(522)
Gain on Disposition of Hotel Properties
197,505 
48,352 
1,158 
Loss on Debt Extinguishment
(18,049)
(3,069)
— 
Income (Loss) Before Results from Unconsolidated Joint Venture Investments and Income Taxes
165,746 
(40,225)
(173,499)
Loss from Unconsolidated Joint Ventures
(53)
(2,292)
(2,938)
Gain from Sale of Interest in Unconsolidated Joint Venture
5,167 
— 
— 
Income (Loss) from Unconsolidated Joint Venture Investments
5,114 
(2,292)
(2,938)
Income (Loss) Before Income Taxes
170,860 
(42,517)
(176,437)
Income Tax Expense
(4,800)
(838)
(11,329)
Net Income (Loss)
166,060 
(43,355)
(187,766)
(Income) Loss Allocated to Noncontrolling Interests - Common Units
(16,572)
6,676 
19,560 
(Income) Loss Allocated to Noncontrolling Interests - Consolidated Joint Venture
(2,766)
(2,152)
3,217 
Preferred Distributions
(24,174)
(24,174)
(24,176)
Net Income (Loss) Applicable to Common Shareholders
$
122,548 
$
(63,005)
$
(189,165)
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
54

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
Year Ended December 31,
2022
2021
2020
Earnings Per Share:
BASIC
Loss from Continuing Operations Applicable to Common Shareholders
$
3.08 
$
(1.61)
$
(4.90)
DILUTED
Loss from Continuing Operations Applicable to Common Shareholders
$
2.95 
$
(1.61)
$
(4.90)
Weighted Average Common Shares Outstanding:
Basic
39,368,952 
39,089,987 
38,613,563 
Diluted*
41,190,628 
39,089,987 
38,613,563 
*    Income allocated to noncontrolling interest in Hersha Hospitality Limited Partnership (the “Operating Partnership” or “HHLP”) has been excluded from the
numerator and the Class A common shares issuable upon any redemption of the Operating Partnership’s common units of limited partnership interest
(“Common Units”) and the Operating Partnership’s vested LTIP units (“Vested LTIP Units”) have been omitted from the denominator for the purpose of
computing diluted earnings per share because the effect of including these shares and units in the numerator and denominator would have no impact.  In
addition, potentially dilutive common shares, if any, have been excluded from the denominator if they are anti-dilutive to income applicable to common
shareholders.
The following table summarizes potentially dilutive securities that have been excluded from the denominator for the purpose of computing diluted earnings
per share:
 
Year Ended December 31,
 
2022
2021
2020
Common Units and Vested LTIP Units
5,202,859 
4,298,045 
3,926,767 
Unvested Stock Awards and LTIP Units Outstanding
— 
395,446 
971,287 
Contingently Issuable Share Awards
— 
389,043 
554,672 
Total Potentially Dilutive Securities Excluded from the Denominator
5,202,859 
5,082,534 
5,452,726 
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
55

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS)
Year Ended December 31,
2022
2021
2020
Net Income (Loss)
$
166,060 
$
(43,355)
$
(187,766)
Change in Fair Value of Derivative Instruments
26,651 
17,980 
(26,431)
Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income (Loss)
(1,264)
(1,124)
2,589 
Total Other Comprehensive Income (Loss)
$
25,387 
$
16,856 
$
(23,842)
Comprehensive Income (Loss)
191,447 
(26,499)
(211,608)
Less: Comprehensive (Income) Loss Applicable to Noncontrolling Interests - Common Units
(19,535)
5,006 
21,761 
Less: Comprehensive (Income) Loss Applicable to Noncontrolling Interests - Consolidated Joint Venture
(2,766)
(2,152)
3,217 
Less: Preferred Distributions
(24,174)
(24,174)
(24,176)
Comprehensive Income (Loss) Applicable to Common Shareholders
$
144,972 
$
(47,819)
$
(210,806)
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
56

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
Redeemable
Noncontrolling
Interests
 
Shareholders' Equity
Noncontrolling Interests
Consolidated
Joint Venture
($)
Common
Shares
Class A
Common
Shares ($)
Class B
Common
Shares ($)
Preferred
Shares
Preferred
Shares ($)
Additional
Paid-In
Capital ($)
Accumulated
Other
Comprehensive
(Loss) Income
($)
Distributions
in Excess of
Net Income
($)
Total
Shareholders'
Equity ($)
Common
Units and
LTIP Units
Common
Units and
LTIP Units
($)
Total Equity
($)
Balance at December
31, 2021
2,310  39,325,025 
394 
—  14,703,214 
147 
1,155,034 
(6,211)
(592,314)
557,050 
6,926,253 
51,246 
608,296 
Unit Conversions
— 
180,627 
1 
— 
— 
— 
1,375 
— 
— 
1,376 
(180,627)
(1,376)
— 
Issuance Costs/Other
— 
— 
— 
— 
— 
— 
(57)
— 
— 
(57)
— 
— 
(57)
Dividends and
Distributions declared:
Common Shares
($0.60 per share)
— 
— 
— 
— 
— 
— 
— 
— 
(23,815)
(23,815)
— 
— 
(23,815)
Preferred Shares
— 
— 
— 
— 
— 
— 
— 
— 
(24,174)
(24,174)
— 
— 
(24,174)
Common Units ($0.60
per share)
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
(1,053)
(1,053)
LTIP Units ($0.60 per
share)
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
(3,113)
(3,113)
Dividend Reinvestment
Plan
— 
847 
— 
— 
— 
— 
6 
— 
— 
6 
— 
— 
6 
Share Based
Compensation:
Grants (Forfeitures)
— 
190,952 
3 
— 
— 
— 
(154)
— 
— 
(151)
194,427 
(506)
(657)
Amortization
— 
— 
— 
— 
— 
— 
3,619 
— 
— 
3,619 
— 
8,728 
12,347 
Change in Fair Value of
Derivative Instruments
— 
— 
— 
— 
— 
— 
— 
22,424 
— 
22,424 
— 
2,963 
25,387 
Adjustment to Record
Noncontrolling Interest
at Redemption Value
2,766 
— 
— 
— 
— 
— 
(2,766)
— 
— 
(2,766)
— 
— 
(2,766)
Net Income
— 
— 
— 
— 
— 
— 
— 
— 
149,488 
149,488 
— 
16,572 
166,060 
Balance at December
31, 2022
5,076  39,697,451 
398 
—  14,703,214 
147 
1,157,057 
16,213 
(490,815)
683,000 
6,940,053 
73,461 
756,461 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
57

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
Redeemable
Noncontrolling
Interests
Shareholders' Equity
Noncontrolling
Interests
Consolidated
Joint Venture
($)
Common
Shares
Class A
Common
Shares ($)
Class B
Common
Shares ($)
Preferred
Shares
Preferred
Shares ($)
Additional
Paid-In
Capital ($)
Accumulated
Other
Comprehensive
Income ($)
Distributions
in Excess of
Net Income
($)
Total
Shareholders'
Equity ($)
Common
Units and
LTIP Units
Common
Units and
LTIP Units
($)
Total
Equity ($)
Balance at December 31, 2020
—  38,843,482 
389 
—  14,703,214 
147  1,150,985 
(21,249)
(507,445)
622,827 
5,392,808 
49,422 
672,249 
Unit Conversion
— 
241,545 
2 
— 
— 
— 
3,024 
— 
— 
3,026 
(241,545)
(3,026)
— 
Dividends and Distributions
declared:
Preferred Shares
— 
— 
— 
— 
— 
— 
— 
— 
(48,348)
(48,348)
— 
— 
(48,348)
Share Based Compensation:
Grants
— 
239,998 
3 
— 
— 
— 
355 
— 
— 
358 
1,774,990 
— 
358 
Amortization
— 
— 
— 
— 
— 
— 
2,980 
— 
— 
2,980 
— 
9,708 
12,688 
Equity Contribution to
Consolidated Joint Venture
158 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
Change in Fair Value of
Derivative Instruments
— 
— 
— 
— 
— 
— 
— 
15,038 
— 
15,038 
— 
1,818 
16,856 
Adjustment to Record
Noncontrolling Interest at
Redemption Value
2,310 
— 
— 
— 
— 
— 
(2,310)
— 
— 
(2,310)
— 
— 
(2,310)
Net Loss
(158)
— 
— 
— 
— 
— 
— 
— 
(36,521)
(36,521)
— 
(6,676)
(43,197)
Balance at December 31, 2021
2,310  39,325,025 
394 
—  14,703,214 
147  1,155,034 
(6,211)
(592,314)
557,050 
6,926,253 
51,246 
608,296 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
58

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
Redeemable
Noncontrolling
Interests
Shareholders' Equity
Noncontrolling
Interests
 
Consolidated
Joint Venture
($)
Common
Shares
Class A
Common
Shares ($)
Class B
Common
Shares ($)
Preferred
Shares
Preferred
Shares ($)
Additional
Paid-In
Capital ($)
Accumulated
Other
Comprehensive
Income ($)
Distributions
in Excess of
Net Income
($)
Total
Shareholders'
Equity ($)
Common
Units and
LTIP Units
Common
Units and
LTIP Units
($)
Total
Equity ($)
Balance at December 31,
2019
3,196  38,652,650 
387 
—  14,703,214 
147  1,144,808 
530 
(338,253)
807,619 
4,279,946 
64,182 
871,801 
Issuance Costs
— 
— 
— 
— 
— 
— 
(137)
— 
— 
(137)
— 
— 
(137)
Dividends and Distributions
declared:
Preferred Shares
— 
— 
— 
— 
— 
— 
— 
— 
(1,007)
(1,007)
— 
— 
(1,007)
Dividend Reinvestment Plan
— 
1,094 
— 
— 
— 
— 
14 
— 
— 
14 
— 
— 
14 
Share Based Compensation:
Grants
— 
189,738 
2 
— 
— 
— 
(2)
— 
— 
— 
1,112,862 
— 
— 
Amortization
— 
— 
— 
— 
— 
— 
3,106 
— 
— 
3,106 
— 
6,863 
9,969 
Equity Contribution to
Consolidated Joint Venture
21 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
Change in Fair Value of
Derivative Instruments
— 
— 
— 
— 
— 
— 
— 
(21,779)
— 
(21,779)
— 
(2,063)
(23,842)
Adjustment to Record
Noncontrolling Interest at
Redemption Value
(3,196)
— 
— 
— 
— 
— 
3,196 
— 
— 
3,196 
— 
— 
3,196 
Net Loss
(21)
— 
— 
— 
— 
— 
— 
— 
(168,185)
(168,185)
— 
(19,560)
(187,745)
Balance at December 31,
2020
—  38,843,482 
389 
—  14,703,214 
147  1,150,985 
(21,249)
(507,445)
622,827 
5,392,808 
49,422 
672,249 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statement
59

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS)
Year Ended December 31,
2022
2021
2020
Operating Activities:
Net Income (Loss)
$
166,060 
$
(43,355)
$
(187,766)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:
Gain on Disposition of Hotel Properties
(197,505)
(48,352)
(1,158)
Gain from Sale of Interest in Unconsolidated Joint Ventures
(5,167)
— 
— 
Loss on Impairment of Assets
10,113 
222 
5,488 
Insurance Recoveries in Excess of Property Loss
(933)
(711)
(8,960)
Junior Note PIK Interest Added to Principal
1,855 
6,239 
— 
Deferred Taxes
— 
— 
11,290 
Depreciation
64,715 
82,973 
96,527 
Amortization
4,657 
5,314 
3,540 
Loss on Debt Extinguishment
14,312 
634 
— 
Equity in Loss of Unconsolidated Joint Ventures
53 
2,292 
2,938 
(Gain) Loss Recognized on Change in Fair Value of Derivative Instrument
(1,264)
(1,124)
2,590 
Share Based Compensation Expense
14,384 
12,033 
9,488 
Proceeds Received for Business Interruption Insurance Claims, net
— 
— 
4,411 
Change in Assets and Liabilities:
(Increase) Decrease in:
Hotel Accounts Receivable
(431)
(2,801)
3,523 
Other Assets
(9,328)
(6,781)
7,738 
Due from Related Parties
2,250 
146 
3,472 
(Decrease) Increase in:
Due to Related Parties
887 
1,723 
— 
Accounts Payable, Accrued Expenses and Other Liabilities
10,910 
7,780 
(10,586)
Net Cash Provided by (Used in) Operating Activities
$
75,568 
$
16,232 
$
(57,465)
Investing Activities:
Capital Expenditures
(23,587)
(10,873)
(26,340)
Cash Paid for Hotel Development Projects
— 
— 
21 
Proceeds from Disposition of Hotel Properties
526,828 
163,583 
19,591 
Contributions to Unconsolidated Joint Ventures
(485)
(1,489)
(1,125)
Proceeds from Insurance Claims
1,294 
— 
6,338 
Proceeds from the Sale of Joint Venture Interests
6,191 
— 
— 
Distributions from Unconsolidated Joint Ventures
— 
250 
— 
Net Cash Provided by (Used in) Investing Activities
$
510,241 
$
151,471 
$
(1,515)
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
60

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS)
Year Ended December 31,
2022
2021
2020
Financing Activities:
Borrowings on Line of Credit and Term Loans
$
400,000 
$
13,500 
$
88,000 
Repayments on Line of Credit
(118,684)
(27,869)
(2,947)
Payments on Term Loans
(524,628)
(187,024)
(16,395)
Principal Repayment of Mortgages and Notes Payable
(160,287)
(24,186)
(1,684)
Proceeds from Mortgages and Notes Payable
— 
167,750 
— 
Deferred Financing Costs
(4,139)
(6,231)
(3,188)
Cash Paid for Debt Extinguishment
(6,497)
— 
— 
Dividends Paid on Common Shares
(1,975)
— 
(10,809)
Dividends Paid on Preferred Shares
(24,174)
(42,305)
(6,044)
Distributions Paid on Common Units and LTIP Units
(350)
— 
(1,198)
Other Financing Activities
— 
— 
(133)
Net Cash (Used in) Provided by Financing Activities
$
(440,734)
$
(106,365)
$
45,602 
Net Increase (Decrease) in Cash and Cash Equivalents
$
145,075 
$
61,338 
$
(13,378)
Cash, Cash Equivalents, and Restricted Cash - Beginning of Year
84,945 
23,607 
36,985 
Cash, Cash Equivalents, and Restricted Cash - End of Year
$
230,020 
$
84,945 
$
23,607 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
61

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hersha Hospitality Trust (“we” or the “Company”) was formed in May 1998 as a self-administered, Maryland real estate investment trust. We have elected to be
taxed and expect to continue to elect to be taxed as a real estate investment trust, or REIT, for federal income tax purposes.
The Company owns a controlling general partnership interest in Hersha Hospitality Limited Partnership (“HHLP” or the “Partnership”), which owns a 99% limited
partnership interest in various subsidiary partnerships. Hersha Hospitality, LLC (“HHLLC”), a Virginia limited liability company, owns a 1% general partnership
interest in the subsidiary partnerships and the Partnership is the sole member of HHLLC.
The Partnership owns a taxable REIT subsidiary (“TRS”), 44 New England Management Company (“44 New England” or “TRS Lessee”), which leases certain of the
Company’s hotels.
Hersha’s common shares of beneficial interest trade on the New York Stock Exchange (“the NYSE”) under the ticker symbol "HT," its 6.875% Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest trade on the NYSE under the ticker symbol “HT PRC,” its 6.500% Series D Cumulative Redeemable Preferred
Shares of Beneficial Interest trade on the NYSE under the ticker symbol “HT PRD,” and its 6.500% Series E Cumulative Redeemable Preferred Shares of Beneficial
Interest trade on the NYSE under the ticker symbol “HT PRE.”
As of December 31, 2022, the Company, through the Partnership and subsidiary partnerships, wholly owned 22 limited and full service hotels. All of the wholly
owned hotel facilities are leased to the Company’s TRS, 44 New England.
In addition to the wholly owned hotel properties, as of December 31, 2022, the Company owned a consolidated joint venture interest in one property and an
unconsolidated joint venture interest in two properties. The properties owned by the joint ventures are leased to a TRS owned by the joint venture or to an entity
owned by the joint venture partners and 44 New England. The following table lists the properties owned by these joint ventures:
Joint Venture
Ownership
Interest
Property
Location
Lessee/Sublessee
Consolidated Joint Ventures
Hersha Holding RC Owner, LLC
85%
Ritz-Carlton
Coconut Grove, FL
Hersha Holding RC Lessee, LLC
Unconsolidated Joint Ventures
SB Partners, LLC
50%
Holiday Inn Express
South Boston, MA
South Bay Sandeep, LLC
SB Partners Three, LLC
50%
Home2 Suites
South Boston, MA
SB Partners Three Lessee, LLC
Our properties are managed by eligible independent management companies, including Hersha Hospitality Management, LP (“HHMLP”). HHMLP is owned in part
by certain of our trustees and executive officers and other unaffiliated third party investors as defined by the Internal Revenue Code.
62

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of Consolidation and Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") 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 properties are either wholly owned or owned less than 100% by the Partnership and are controlled by the Company as general partner of the
Partnership. Properties owned in joint ventures are also evaluated for consolidation. Entities are consolidated if the determination is made that we are the
primary beneficiary in a variable interest entity ("VIE") or we maintain control of the asset through our voting interest or other rights in the operation of the entity.
To determine if we are the primary beneficiary of a VIE, we evaluate whether we have a controlling financial interest in that VIE. An enterprise is deemed to have a
controlling financial interest if it has i) the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic
performance, and ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be
significant to the VIE. Control can also be demonstrated by the ability of a member to manage day-to-day operations, refinance debt and sell the assets of the
partnerships without the consent of the other member and the inability of the members to replace the managing member. Based on our examination, the
following entities were determined to be VIE’s:  HHLP; SB Partners Three Lessee, LLC; Hersha Holding RC Owner, LLC; Hersha Statutory Trust I; and Hersha
Statutory Trust II.  The Company’s most significant asset is its investment in HHLP, and consequently, substantially all of the Company’s assets and liabilities
represent those assets and liabilities of HHLP.  SB Partners Three Lessee, LLC, is consolidated by the lessor, the primary beneficiary. Hersha Holding RC Owner, LLC
is the owner entity of the Ritz Carlton Coconut Grove and is a VIE. HHLP is considered the primary beneficiary of the VIE and consolidates the joint venture with
the minority owner interest presented as part of redeemable noncontrolling interest within the Consolidated Balance Sheets. Hersha Statutory Trust I and Hersha
Statutory Trust II are VIEs but HHLP is not the primary beneficiary in these entities. Accordingly, the accounts of Hersha Statutory Trust I and Hersha Statutory
Trust II are not consolidated.
Segment Reporting
We allocate resources and assess operating performance based on individual hotels and consider each one of our hotels to be an operating segment. No
operating segment, individually, meets the threshold for a reportable segment as defined within ASC Topic 280 – Segment Reporting, nor do they fully satisfy the
requisite aggregation criteria therein. As a result, the Company does not present separate operating segment information within the Notes to the Consolidated
Financial Statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.
Although we believe the assumptions and estimates we made are reasonable and appropriate, as discussed in the applicable sections throughout these
Consolidated Financial Statements, different assumptions and estimates could materially impact our reported results.
63

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment in Hotel Properties
Investment purchases of hotel properties and identifiable intangible assets that are not businesses are accounted for as asset acquisitions and recorded at relative
fair value based upon total accumulated cost of the acquisition. Direct acquisition-related costs are capitalized as a component of the acquired assets. Property
and equipment purchased after the hotel acquisition date is recorded at cost. The Company’s investments in hotel properties are carried at cost and are
depreciated using the straight-line method over the following estimated useful lives:
Building and Improvements
7 to 40 years
Furniture, Fixtures and Equipment
2 to 7 years
Based on the occurrence of certain events or changes in circumstances, we review the recoverability of each hotel property's carrying value. Such events or
changes in circumstances include the following:
•
a significant decrease in the market price of a long-lived asset;
•
a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition;
•
a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or
assessment by a regulator;
•
an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;
•
a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates
continuing losses associated with the use of a long-lived asset; and
•
a current expectation that, it is more likely than not that, a long-lived asset will be sold or otherwise disposed of significantly before the end of its
previously estimated useful life.
We review our portfolio on an ongoing basis to evaluate the existence of any of the aforementioned events or changes in circumstances that would require us to
test for recoverability. In general, our review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected
to result from the property's use and eventual disposition. These estimates consider factors such as expected future operating income, market and other
applicable trends and residual value expected, as well as the effects of hotel demand, competition and other factors. Other assumptions used in the review of
recoverability include the holding period and expected terminal capitalization rate. If impairment exists due to the inability to recover the carrying value of a
property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make
subjective assessments as to whether there are impairments in the values of our investments in hotel properties.
We consider a hotel to be held for sale when management and our independent trustees commit to a plan to sell the property, the property is available for sale,
management engages in an active program to locate a buyer for the property and it is probable the sale will be completed within a year of the initiation of the
plan to sell.
64

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment in Unconsolidated Joint Ventures
If it is determined that we do not have a controlling interest in a joint venture, either through our financial interest in a VIE or our voting interest in a voting
interest entity, and we have the ability to exercise significant influence over the operating and financial policies of the joint venture, the equity method of
accounting is used. Under this method, the investment, originally recorded at cost, is adjusted to recognize our share of net earnings or losses of the affiliates as
they occur, limited to the extent of our investment in, advances to and commitments for the investee. Pursuant to our joint venture agreements, allocations of
profits and losses of some of our investments in unconsolidated joint ventures may be allocated disproportionately as compared to nominal ownership
percentages due to specified preferred return rate thresholds.  See Note 3 – Investment in Unconsolidated Joint Ventures for a more detailed explanation of the
methodology used in determining the allocation 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 estimate the fair value of the investment. Our
estimate of fair value takes into consideration factors such as expected future operating income, trends and prospects, as well as the effects of demand,
competition and other factors. This determination requires significant estimates by management, including the expected cash flows to be generated by the assets
owned and operated by the joint venture. To the extent impairment has occurred and the impairment is considered other than temporary, the loss will be
measured as the excess of the carrying amount over the fair value of our investment in the unconsolidated joint venture.
Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand and in banks plus short-term investments with an initial maturity of three months or less when purchased.
Escrow Deposits
Escrow deposits include reserves for debt service, working capital, real estate taxes, and insurance and reserves for furniture, fixtures, and equipment
replacements, as required by certain mortgage debt agreement restrictions and provisions.
Hotel Accounts Receivable
Hotel accounts receivable consists primarily of meeting and banquet room rental and hotel guest receivables. The Company generally does not require collateral.
Ongoing credit evaluations are performed and potential losses from uncollectible accounts are written off against revenue when they are estimated to be
uncollectible.
Deferred Financing Costs
Deferred financing costs are recorded at cost and amortized over the terms of the related indebtedness using the effective interest method. Deferred financing
costs associated with our line of credit are recorded within the Other Assets line item in our Consolidated Balance Sheets. Deferred financing costs associated with
our term loans, mortgage debt, and unsecured notes are recorded as contra-liabilities within each respective line item on our Consolidated Balance Sheets. All
amortization of deferred financing costs is presented within the Interest Expense line on our Consolidated Statements of Operations.
65

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Due from/to Related Parties
Due from/to Related Parties represents current receivables and payables resulting from transactions related to hotel management and project management with
affiliated entities. Amounts due from related parties result primarily from advances of shared costs incurred. Amounts due to related parties result primarily from
hotel management and project management fees incurred. Both due to and due from related parties are generally settled within a period not to exceed one year.
Intangible Assets and Liabilities
Intangible assets primarily consist of leasehold intangibles for in-place leases at the time of hotel acquisition and deferred franchise fees. The leasehold
intangibles are amortized over the remaining lease term. Deferred franchise fees are amortized using the straight-line method over the life of the franchise
agreement. 
Intangible liabilities consist of leasehold intangibles for in-place leases at the time of hotel acquisition. The leasehold intangibles are amortized over the remaining
lease term. Intangible liabilities are included in the accounts payable, accrued expenses and other liabilities on the Company’s consolidated balance sheets.
Development Project Capitalization
We have opportunistically engaged in the development and re-development of hotel assets. We capitalize expenditures related to hotel development projects and
renovations, including indirect costs such as interest expense, real estate taxes and utilities related to hotel development projects and renovations.
Preferred Shares
The Declaration of Trust authorizes our Board of Trustees to classify any unissued preferred shares and to reclassify any previously classified but unissued
preferred shares of any series from time to time in one or more series, as authorized by the Board of Trustees. Prior to issuance of shares of each series, the Board
of Trustees is required by Maryland REIT Law and our Declaration of Trust to set for each such series, subject to the provisions of our Declaration of Trust
regarding the restriction on transfer of shares of beneficial interest, the terms, the preferences, conversion or other rights, voting powers, restrictions, limitations
as to dividends or other distributions, qualifications and terms or conditions of redemption for each such series. Thus, our Board of Trustees could authorize the
issuance of additional preferred shares with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in
control in us that might involve a premium price for holders of common shares or otherwise be in their best interest.
Noncontrolling Interest
We define a noncontrolling interest as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. Such noncontrolling interests are
reported on the consolidated balance sheets within equity, but separately from the shareholders’ equity. Revenues, expenses and net income or loss attributable
to both the Company and noncontrolling interests are reported on the consolidated statements of operations.
Noncontrolling interest in the Partnership represents the limited partner’s proportionate share of the equity of the Partnership. Income (loss) is allocated to
noncontrolling interest in accordance with the weighted average percentage ownership of the Partnership during the period. At the end of each reporting period
the appropriate adjustments to the income (loss) are made based upon the weighted average percentage ownership of the Partnership during the period. Our
ownership interest in the Partnership as of December 31, 2022, 2021 and 2020 was 85.1%, 85.0%, and 87.8%, respectively.
Securities that are redeemable for cash or other assets at the option of the holder, or not solely within the control of the issuer, are classified outside of
permanent equity in the consolidated balance sheet and have been adjusted to their approximate redemption values, after the attribution of net income or loss.
The Company makes this determination based on terms in applicable agreements, specifically in relation to redemption provisions. Additionally, with respect to
noncontrolling interests for which the Company has a choice to settle the contract by delivery of its own shares, the Company considers the guidance in US GAAP
to evaluate whether the Company controls the actions or events necessary to issue the maximum number of common shares that could be required to be
delivered at the time of settlement of the contract.
66

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
We classify the noncontrolling interests of our common units of limited partnership interest in HHLP ("Common Units"), and Long Term Incentive Plan Units ("LTIP
Units") as equity. LTIP Units are a separate class of limited partnership interest in the Operating Partnership that are convertible into Common Units under certain
circumstances. In accordance with the partnership agreement of the Partnership, holders of these units may redeem them for cash unless we, in our sole and
absolute discretion, elect to issue common shares on a one-for-one basis in lieu of paying cash.
Net income or loss attributed to Common Units and LTIP Units, as well as the net income or loss related to the noncontrolling interests of our consolidated
variable interest entity, is included in net income or loss in the consolidated statements of operations. Net income or loss attributed to the Common Units, LTIP
Units, and the noncontrolling interests of our consolidated joint ventures is excluded from net income or loss applicable to common shareholders in the
consolidated statements of operations.
Stock Based Compensation
We measure the cost of employee service received in exchange for an award of equity instruments based on the grant-date fair value of the award. The
compensation cost is amortized on a straight line basis over the period during which an employee is required to provide service in exchange for the award. The
compensation cost related to performance awards that are contingent upon market-based criteria being met is recorded at the fair value of the award on the date
of the grant and amortized over the performance period.
Derivatives and Hedging
The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this
objective, the Company primarily uses interest rate swaps and interest rate caps as part of its cash flow hedging strategy. Interest rate swaps designated as cash
flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying
principal amount. Interest rate caps designated as cash flow hedges limit the Company’s exposure to increased cash payments due to increases in variable interest
rates.
67

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Liquidity and Management's Plan
Due to the COVID-19 pandemic and the effects of travel restrictions both globally and in the United States, the hospitality industry has experienced drastic drops
in demand as a result of government mandates, health official recommendations, corporate policy changes and individual responses. We believe the ongoing
effects of the COVID-19 pandemic on our operations have had, and will continue to have a material negative impact on our financial results and liquidity, and such
negative impact may continue beyond the containment of the pandemic.
During the year ended December 31, 2022, we closed on the sale of ten hotel dispositions to unaffiliated buyers for total consideration of $641,000. These hotels
included the Courtyard Brookline, the Hampton Inn Washington, DC, Hilton Garden Inn M Street Washington, DC, Hampton Inn - Philadelphia, TownePlace Suites
Sunnyvale, Courtyard Sunnyvale, the Courtyard Los Angeles Westside, Hotel Milo Santa Barbara, the Pan Pacific Seattle, and the Gate hotel JFK Airport. A portion
of the proceeds from the sales were used to pay off the Company's junior subordinated notes (the "Junior Notes"), which the Company entered into on February
17, 2021, at a redemption price of 104%, or $164,418. Proceeds from the sales were also used to pay down amounts borrowed under the Company’s line of credit
and term loans.
On August 4, 2022, the Company entered into a new credit agreement for a senior secured credit facility which provided for a $100,000 revolving line of credit
and a $400,000 term loan. The Company made an initial draw of $400,000 on the facility’s term loan, using the proceeds to pay off the remaining balances under
the Company’s prior line of credit and term loans, effectively reducing the Company’s borrowings and moving the maturity of borrowings under the Company’s
credit facility to August of 2024. The $100,000 line of credit provided by the new credit facility remains undrawn. See Note 5 – Debt for additional information
regarding borrowings under the Company’s prior credit facility, new credit facility, notes payable, and mortgages.
After considering the reduction in debt from proceeds of the hotel dispositions noted above, the effective extension of maturities of borrowings under our new
credit agreement noted above, and forecasted cash flows, the Company believes that it has sufficient liquidity to meet its obligations for the next twelve months.
We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because the lodging industry has not previously
experienced such an abrupt and drastic reduction in hotel demand, and as a consequence, our ability to be predictive is uncertain and we cannot estimate when
travel demand will fully recover.
68

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
We recognize revenue for all consolidated hotels as hotel operating revenue when earned. Revenues are recorded net of any sales or occupancy tax collected
from our guests. We participate in frequent guest programs sponsored by the brand owners of our hotels and we expense the charges associated with those
programs, as incurred. Hotel operating revenues are disaggregated on the face of the consolidated statement of operations into the categories of rooms revenue,
food and beverage revenue, and other to demonstrate how economic factors affect the nature, amount, timing, and uncertainty of revenue and cash flows.
Room revenue is generated through contracts with customers whereby the customers agree to pay a daily rate for the right to use a hotel room. The customer is
provided the room and revenue is recognized daily at the contract rate. Payment from the customer is generally secured at the end of the contract upon check-out
by the customer from our hotel. The Company records advanced deposits when a customer or group of customers provides a deposit for a future stay at our
hotels. Advanced deposits for room revenue are included in the balance of Accounts Payable, Accrued Expenses and Other Liabilities on the Consolidated Balance
Sheet. Advanced deposits are recognized as revenue at the time of the guest's stay. The Company notes no significant judgments regarding the recognition of
room revenue.
Food and beverage revenue is generated through contracts with customers whereby the customer agrees to pay a contract rate for restaurant dining services or
banquet services. The Company's contract performance obligations are fulfilled at the time that the meal is provided to the customer or when the banquet
facilities and related dining amenities are provided to the customer. The Company recognizes food and beverage revenue upon the fulfillment of the contract with
the customer. The Company records contract liabilities in the form of advanced deposits when a customer or group of customers provides a deposit for a future
banquet event at our hotels. Advanced deposits for food and beverage revenue are included in the balance of Accounts Payable, Accrued Expenses and Other
Liabilities on the Consolidated Balance Sheet. Advanced deposits for banquet services are recognized as revenue following the completion of the banquet
services. The Company notes no significant judgments regarding the recognition of food and beverage revenue.
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.
69

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
continue to qualify as a REIT. In general, under such provisions, a trust which has made the required election and, in the taxable year, meets certain requirements
and distributes to its shareholders at least 90% of its REIT taxable income, determined without regard to the deduction 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 reporting purposes due primarily to differences in depreciation of hotel properties for
federal income tax purposes.
Deferred income taxes relate primarily to the TRS Lessee and are accounted for using the asset and liability method. Under this method, deferred income taxes
are recognized for temporary differences between the financial reporting bases of assets and liabilities of the TRS Lessee and their respective tax bases and for
their operating loss and tax credit carry forwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However,
deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence,
including tax planning strategies and other factors.
The Company may recognize a tax benefit from an uncertain tax position when it is more-likely-than-not (defined as a likelihood of more than 50%) that the
position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. If a tax position
does not meet the more-likely-than-not recognition threshold, despite the Company’s belief that its filing position is supportable, the benefit of that tax position is
not recognized in the statements of operations. The Company recognizes interest and penalties, as applicable, related to unrecognized tax benefits as a
component of income tax expense. The Company recognizes unrecognized tax benefits in the period that the uncertainty is eliminated by either affirmative
agreement of the uncertain tax position by the applicable taxing authority, or by expiration of the applicable statute of limitation. For the years ended December
31, 2022, 2021 and 2020, the Company did not record any uncertain tax positions. As of December 31, 2022, with few exceptions, the Company is subject to tax
examinations by federal, state, and local income tax authorities for years 2004 through 2022.
New Accounting Pronouncements 
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting and in January 2021, the FASB issued 2021-01, Reference Rate Reform (Topic 848), Scope, which further clarified
the scope of the reference rate reform optional practical expedients and exceptions outlined in Topic 848. As a result of identified structural risks of interbank
offered rates, in particular, the London Interbank Offered Rate (LIBOR), reference rate reform is underway to identify alternative reference rates that are more
observable or transaction based. The update provides guidance in accounting for changes in contracts, hedging relationships, and other transactions as a result of
this reference rate reform. The provisions of these updates that will most likely affect our financial reporting process related to modifications of contracts with
lenders and the related hedging contracts associated with each respective modified borrowing contract. In general, the provisions of these updates would impact
the Company by allowing, among other things, the following:
•
Allowing modifications of debt contracts with lenders that fall under the guidance of ASC Topic 470 to be accounted for as a non-substantial modification
and not be considered a debt extinguishment.
•
Allowing a change to contractual terms of a hedging instrument in conjunction with reference rate reform to not require a dedesignation of the hedging
relationship.
•
Allowing a change to the interest rate used for margining, discounting, or contract price alignment for a derivative that is a cash flow hedge to not be
considered a change to the critical terms of the hedge and will not require a dedesignation of the hedging relationship.
As disclosed in Note 8, Fair Value Measurements and Derivative Instruments, we modified interest rate swap contracts, which serve as cash flow hedges with total
notional amounts of $300,000, to replace LIBOR with an alternative reference rate that matches the reference rate of the underlying hedged debt. We did not
apply optional expedients and exceptions contained within these updates in the modifications of these contracts. For our remaining borrowing and hedging
contracts, we have not entered into modifications as it directly relates to reference rate reform but we anticipate having to undertake such modifications in the
future as a majority of our contracts with lenders and hedging counterparties are indexed to LIBOR. Some
70

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
debt contract modifications will occur in the normal course of business and will include other changes in the terms, for which we do not anticipate that this
accounting relief will not be applicable. However, we anticipate that other debt contract modifications will occur prior to the phase of LIBOR on June 30, 2023
specifically to address the LIBOR transition, for which we will be able to apply the accounting relief.
Revision of Prior Period Financial Statements
During 2022, the Company identified immaterial errors in its previously issued financial statements resulting from the incorrect amortization of accumulated other
comprehensive income related to interest rate hedges. This occurred over the periods from 2019 through 2021, thereby overstating interest expense in those
periods as well as impacting certain captions in the equity section of the consolidated balance sheet, including accumulated other comprehensive income,
distributions in excess of net income, and noncontrolling interests.
In accordance with Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements,” the Company assessed the materiality of these misstatements both quantitatively and
qualitatively and determined that these errors and the related impact did not, either individually or in the aggregate, materially misstate previously issued
consolidated financial statements. To reflect the correction of these immaterial errors, the Company is revising the previously issued consolidated financial
statements for the years ended December 31, 2021 and December 31, 2020 in this Form 10-K. As a result, the Company has corrected the immaterial
misstatements as disclosed in the following tables for all impacted financial statement line items in prior periods.
As of December 31, 2021
As Previously
Reported
Adjustment
As Revised
Consolidated Balance Sheet:
Accumulated Other Comprehensive Income
$
(2,747)
$
(3,464)
$
(6,211)
Distributions in Excess of Net Income
(595,454)
3,140 
(592,314)
Total Shareholders' Equity
557,374 
(324)
557,050 
Noncontrolling Interests
50,922 
324 
51,246 
Total Equity
608,296 
— 
608,296 
71

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
For the Year Ended December 31, 2021
For the Year Ended December 31, 2020
As Previously
Reported
Adjustment
As Revised
As Previously
Reported
Adjustment
As Revised
Consolidated Statement of Operations:
Interest Expense
$
(57,549)
$
1,490 
$
(56,059)
$
(53,279)
$
1,494 
$
(51,785)
Loss Before Results from Unconsolidated Joint Venture
Investments and Income Taxes
(41,715)
1,490 
(40,225)
(174,993)
1,494 
(173,499)
Loss Before Income taxes
(44,007)
1,490 
(42,517)
(177,931)
1,494 
(176,437)
Net Loss
(44,845)
1,490 
(43,355)
(189,260)
1,494 
(187,766)
Loss Allocated to Noncontrolling Interests - Common
Units
6,824 
(148)
6,676 
19,698 
(138)
19,560 
Net Loss Applicable to Common Shareholders
(64,347)
1,342 
(63,005)
(190,521)
1,356 
(189,165)
Net Income (Loss) Per Share:
Basic - Loss from Continuing Operations Applicable to
Common Shareholders
$
(1.65)
$
0.04 
$
(1.61)
$
(4.93)
$
0.03 
$
(4.90)
Diluted - Loss from Continuing Operations Applicable to
Common Shareholders
$
(1.65)
$
0.04 
$
(1.61)
$
(4.93)
$
0.03 
$
(4.90)
Consolidated Statement of Comprehensive Income (Loss):
Net Loss
$
(44,845)
$
1,490 
$
(43,355)
$
(189,260)
$
1,494 
$
(187,766)
Reclassification Adjustment for Change in Fair Value of
Derivative Instruments Included in Net Loss
366 
(1,490)
(1,124)
4,083 
(1,494)
2,589 
Total Other Comprehensive Income
18,346 
(1,490)
16,856 
(22,348)
(1,494)
(23,842)
Consolidated Statement of Cash Flows:
Operating Activities:
Net Loss
$
(44,845)
$
1,490 
$
(43,355)
$
(189,260)
$
1,494 
$
(187,766)
Loss (Gain) Recognized on Change in Fair Value of
Derivative Instrument
366 
(1,490)
(1,124)
4,084 
(1,494)
2,590 
72

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 2 – INVESTMENT IN HOTEL PROPERTIES
Investment in hotel properties consists of the following at December 31, 2022 and December 31, 2021:
December 31, 2022
December 31, 2021
Land
$
390,532 
$
478,412 
Buildings and Improvements
1,093,575 
1,560,768 
Furniture, Fixtures and Equipment
203,369 
274,802 
Construction in Progress
7,105 
1,784 
1,694,581 
2,315,766 
Less Accumulated Depreciation
(505,342)
(650,669)
Total Investment in Hotel Properties*
$
1,189,239 
$
1,665,097 
*The net book value of investment in hotel property at Ritz Coconut Grove, which is a variable interest entity, is $37,303 and $39,577 at December 31, 2022 and
December 31, 2021, respectively.
Depreciation expense on hotel properties was $64,442, $82,668 and $96,216 for the years ended December 31, 2022, 2021 and 2020, respectively.
During the years ended December 31, 2022 and December 31, 2021, we acquired no hotel properties.
Property Damage from Natural Disaster
During September 2017, all six of our hotels located in South Florida incurred property damage and an interruption of business operations as a result of Hurricane
Irma. During the year ended December 31, 2020, we closed our remaining open claim and recorded a net gain in excess of estimated insurance recoveries of
$8,147.
During the year ended December 31, 2021, we received net proceeds of $961 for a business interruption claim as a result of COVID-19.
During the year ended December 31, 2022, we received net proceeds of $958 for a business interruption claim as a result fire damage at one of our properties.
73

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED)
Hotel Dispositions
During the years ended December 31, 2022, December 31, 2021, and December 31, 2020, we had the following hotel dispositions:
Hotel
Acquisition
Date
Disposition
Date
Consideration
Gain on
Disposition
Non-Core Urban Select Service (7 properties)
June 2005 - October 2016
August 4, 2022, October 26,
2022
$
505,000 
$
170,193 
Hotel Milo Santa Barbara
2/28/2014
10/6/2022
55,000 
25,784 
Pan Pacific Seattle
2/21/2017
10/19/2022
70,000 
1,532 
Gate hotel JFK Airport (2)
6/13/2008
11/2/2022
11,000 
— 
2022 Total
$
197,509 
Courtyard San Diego, CA
5/30/2013
2/19/2021
$
64,500 
$
5,032 
The Capitol Hill Hotel Washington, DC
4/15/2011
3/9/2021
51,000 
12,975 
Holiday Inn Express Cambridge, MA
5/3/2006
3/9/2021
32,000 
20,280 
Residence Inn Miami Coconut Grove, FL
6/12/2013
3/10/2021
31,000 
9,996 
Duane Street Hotel (1)
1/4/2008
5/13/2021
18,000 
— 
2021 Total
$
48,283 
Sheraton Wilmington South, DE
12/21/2010
12/1/2020
$
19,500 
$
1,158 
2020 Total
$
1,158 
(1) During 2020, the Company determined that the carrying value of the Duane Street hotel exceeded the anticipated net proceeds from sale, resulting in a $1,069
impairment charge recorded during the year ended December 31, 2020. We recorded an additional impairment charge of $147 prior to the disposition of the
hotel property during the year ended December 31, 2021.
(2) During 2022, the Company determined that the carrying value of the Gate JFK hotel exceeded the anticipated net proceeds from sale, resulting in a $10,113
impairment charge recorded during the year ended December 31, 2022.
Assets Held For Sale
There were no assets held for sale as of December 31, 2022 and December 31, 2021.
74

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
As of December 31, 2022 and December 31, 2021 our investment in unconsolidated joint ventures consisted of the following:
Joint Venture
Hotel Properties
Percent
Owned
December 31, 2022
December 31, 2021
Cindat Hersha Owner JV, LLC
Hilton and IHG branded hotels in NYC
31 %
* $
— 
$
— 
Hiren Boston, LLC
Courtyard by Marriott, South Boston, MA
50 %
**
— 
189 
SB Partners, LLC
Holiday Inn Express, South Boston, MA
50 %
— 
— 
SB Partners Three, LLC
Home2 Suites, South Boston, MA
50 %
4,989 
5,391 
$
4,989 
$
5,580 
*On February 7, 2021, all of the assets of the properties owned by this joint venture were transferred to the mezzanine lender of Cindat Hersha Owner JV, LLC. As
a result, the venture was dissolved and we no longer maintain an interest in this venture.
**On November 30, 2022, we sold our 50% membership interest in Hiren Boston, LLC. We recognized a gain of $5,167 as the net proceeds received exceeded our
investment in the unconsolidated joint venture.
Effective August 1, 2021, HHLP entered into Asset Management Agreements with the joint venture investments at the Courtyard by Marriott, South Boston,
Holiday Inn Express, South Boston, and Home2 Suites, South Boston properties whereby it provides asset management services. Fees for these services are
calculated as 1.0% of operating revenues, which we recognize as income in other revenues on the consolidated statements of operations.
Income/Loss Allocation
Prior to February 7, 2021, based on the income allocation methodology within Cindat Hersha Owner JV, LLC, the Company had absorbed cumulative losses equal
to our accounting basis in the joint venture resulting in a $0 investment balance in the table above as of December 31, 2022 and December 31, 2021.
For SB Partners, LLC, Hiren Boston, LLC, and SB Partners Three, LLC, income or loss is allocated to us and our joint venture partners consistent with the allocation
of cash distributions in accordance with the joint venture agreements. This results in an income allocation consistent with our percentage of ownership interests.
When we absorb cumulative losses equal to our accounting basis in the joint venture, our investment balance is $0 as presented in the table above.
Any difference between the carrying amount of any of our investments noted above and the underlying equity in net assets is amortized over the expected useful
lives of the properties and other intangible assets.
75

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)
Loss (income) recognized during the years ended December 31, 2022, 2021 and 2020, for our investments in unconsolidated joint ventures is as follows:
Year Ended December 31,
2022
2021
2020
Cindat Hersha Owner JV, LLC
$
— 
$
(229)
$
— 
Hiren Boston, LLC
659 
(1,104)
(1,741)
SB Partners, LLC
(310)
(185)
(600)
SB Partners Three, LLC
(402)
(774)
(597)
Loss from Unconsolidated Joint Venture Investments
$
(53)
$
(2,292)
$
(2,938)
The following tables set forth the total assets, liabilities, equity and components of net income or loss, including the Company’s share, related to the
unconsolidated joint ventures as of December 31, 2022 and December 31, 2021 and for the years ended December 31, 2022, 2021 and 2020. The total assets,
liabilities and equity of Hiren Boston, LLC are not included as of December 31, 2022; however, the components of net income are included for the period of
January 1, 2022 to November 30, 2022, the period in which we owned a membership interest in Hiren Boston, LLC.
Balance Sheets
December 31, 2022
December 31, 2021
Assets
Investment in Hotel Properties, Net
$
47,356 
$
64,096 
Other Assets
11,803 
15,649 
Total Assets
$
59,159 
$
79,745 
Liabilities and Equity
Mortgages and Notes Payable
$
50,236 
$
65,723 
Other Liabilities
10,012 
15,656 
Equity:
Hersha Hospitality Trust
2,630 
3,328 
Joint Venture Partners
(3,719)
(4,962)
Total Equity
(1,089)
(1,634)
Total Liabilities and Equity
$
59,159 
$
79,745 
Statements of Operations
Year Ended December 31,
2022
2021
2020
Room Revenue
$
23,252 
$
11,790 
$
25,011 
Other Revenue
1,201 
731 
1,020 
Operating Expenses
(13,641)
(8,451)
(18,695)
Lease Expense
(1,138)
(1,019)
(770)
Property Taxes and Insurance
(2,229)
(3,095)
(12,906)
General and Administrative
— 
(87)
(2,638)
Depreciation and Amortization
(4,929)
(6,065)
(16,200)
Interest Expense
(3,329)
(4,619)
(23,908)
Loss on Dissolution of Joint Venture
— 
(112,371)
— 
Net Loss
$
(813)
$
(123,186)
$
(49,086)
76

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)
The following table is a reconciliation of our share in the unconsolidated joint ventures’ equity to our investment in the unconsolidated joint ventures as
presented on our balance sheets as of December 31, 2022 and December 31, 2021.
December 31, 2022
December 31, 2021
Our share of equity recorded on the joint ventures' financial statements
$
2,630 
$
3,328 
Adjustment to reconcile our share of equity recorded on the joint ventures' financial statements to our
investment in unconsolidated joint ventures(1)
2,359 
2,252 
Investment in Unconsolidated Joint Ventures
$
4,989 
$
5,580 
(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:
•
the difference between our basis in the investment in joint ventures and the equity recorded on the joint ventures' financial statements;
•
accumulated amortization of our equity in joint ventures that reflects the difference in our portion 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 amortized over the life of the properties, and the amortization is included in Income (Loss) from Unconsolidated Joint Venture Investments on our
consolidated statement of operations); and
•
cumulative impairment of our investment in joint ventures not reflected on the joint ventures' financial statements, if any. 
77

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 4 – OTHER ASSETS
Other Assets
Other Assets consisted of the following at December 31, 2022 and December 31, 2021:
December 31, 2022
December 31, 2021
Derivative Asset
$
18,709 
$
92 
Deferred Financing Costs
1,197 
1,070 
Prepaid Expenses
10,481 
11,632 
Investment in Statutory Trusts
1,548 
1,548 
Investment in Non-Hotel Property and Inventories
2,026 
2,193 
Deposits with Unaffiliated Third Parties
597 
2,663 
Deferred Tax Asset, Net of Valuation Allowance of $14,414 and $21,612, respectively
— 
— 
Other
3,994 
2,561 
$
38,552 
$
21,759 
Derivative Asset - This category represents the Company’s gross asset fair value of interest rate swaps and interest rate caps. Any swaps and caps resulting in a
liability to the Company are accounted for separately within Other Liabilities on the Balance Sheet.
Deferred Financing Costs - This category represents financing costs paid by the Company to establish our Line of Credit.  These costs have been capitalized and will
amortize to interest expense over the life of the Line of Credit.
Prepaid Expenses - Prepaid expenses include amounts paid for property tax, insurance and other expenditures that will be expensed in the next twelve months.
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.
Investment in Non-Hotel Property and Inventories - This category represents the costs paid and capitalized by the Company for items such as office leasehold
improvements, furniture and equipment, and property inventories.
Deposits with Unaffiliated Third Parties - These deposits represent deposits made by the Company with unaffiliated third parties for items such as lease security
deposits, utility deposits, and deposits with unaffiliated third party management companies.
Deferred Tax Asset - We have $0 of net deferred tax assets as of December 31, 2022.  We have considered various factors, including future reversals of existing
taxable temporary differences, future projected taxable income and tax planning strategies in determining a valuation allowance for our deferred tax assets, and
we believe that it is more likely than not that we will not be able to realize the net deferred tax assets in the future, and a valuation allowance for the entire
deferred tax asset has been recorded.
Other - This category includes other receivables for amounts due from counterparties under our swap agreements and amounts due from buyers for final
prorations for hotels sold in 2022.
78

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 5 – DEBT
Mortgages
Mortgages payable at December 31, 2022 and December 31, 2021 consisted of the following:
December 31, 2022
December 31, 2021
Mortgage Indebtedness
$
208,880 
$
306,078 
Net Unamortized Premium
7 
13 
Net Unamortized Deferred Financing Costs
(533)
(1,477)
Mortgages Payable
$
208,354 
$
304,614 
On August 4, 2022, using the proceeds from the dispositions discussed in Note 2 - Investment in Hotel Properties, we paid off the Courtyard Los Angeles mortgage
with a principal balance of $35,000. On October 6, 2022, we paid off the Hotel Milo mortgage balance of $20,696 using the proceeds from the disposition of the
property. On October 26, 2022, the buyer assumed the Courtyard Sunnyvale mortgage which had an outstanding principal balance of $39,309.
Net Unamortized Deferred Financing Costs associated with entering into mortgage indebtedness are deferred and amortized over the life of the mortgages. Net
Unamortized Premiums are also amortized over the remaining life of the loans. Mortgage indebtedness balances are subject to fixed and variable interest rates,
which ranged from 4.02% to 8.50% as of December 31, 2022.
Our mortgage indebtedness contains various financial and non-financial covenants customarily found in secured, non-recourse financing arrangements. Our
mortgage loans payable typically require that specified debt service coverage ratios be maintained with respect to the financed properties before we can exercise
certain rights under the loan agreements relating to such properties. If the specified criteria are not satisfied, the lender may be able to escrow cash flow
generated by the property securing the applicable mortgage loan. We have determined that all debt covenants contained in the loan agreements securing our
consolidated hotel properties were met as of December 31, 2022.
As of December 31, 2022, the maturity dates for the outstanding mortgage loans ranged from June 2023 to July 2024. For mortgages with maturity dates within
the next twelve months, we plan to refinance each mortgage before their maturities, or use available cash on hand or capacity under our revolving line of credit to
pay the obligation.
During the year ended December 31, 2022, we refinanced the outstanding mortgage secured by the Hilton Garden Inn 52nd Street, which resulted in $21 of debt
modification expense.
During the year ended December 31, 2021, we refinanced the outstanding mortgages secured by the Hilton Garden Inn 52nd Street, the Courtyard Los Angeles
Westside, the Hilton Garden Inn Tribeca, the Hyatt Union Square, and the St. Gregory Hotel, which resulted in $90 of debt modification expense.
79

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 5 – DEBT (CONTINUED)
Credit Facilities
2022 Credit Facility
On August 4, 2022, we entered into a credit agreement (the "2022 Credit Agreement"), which provided for a secured term loan of $400,000 and secured revolving
line of credit with capacity of $100,000, both of which mature on August 4, 2024. Borrowings under the Credit Agreement bear interest at a rate of Term Secured
Overnight Financing Rate ("SOFR") plus a 250 basis point spread.
Immediately upon entering into the 2022 Credit Agreement, proceeds from the $400,000 new term loan, along with a portion of the proceeds from the
dispositions discussed in Note 2 – Investment in Hotel Properties, were used to pay off and terminate all borrowings under our previous credit facility agreement
("the Prior Facilities"), which consisted of three secured credit arrangements which had an aggregate principal balance of $497,481, discussed below.
The Company incurred debt extinguishment expense of $4,302 related to the 2022 Credit Agreement and termination of the Prior Facilities on August 4, 2022.
We made principal payments on the term loan totaling $27,147 upon the disposition of the Pan Pacific hotel and the Gate hotel JFK airport as required by the
2022 Credit Agreement upon the disposition of hotels designated as borrowing based assets. The following table summarizes the balances outstanding at
December 31, 2022:
Outstanding Balance
Borrowing
December 31, 2022
Line of Credit
$
— 
Secured Term Loan:
Principal
372,853 
Deferred Financing Costs
(2,217)
Total Secured Term Loan
$
370,636 
The Credit Agreement contains financial covenants including a fixed charge coverage ratio of not less than 1.35 to 1.00 for the December 31, 2022 and March 31,
2023 test dates, and 1.50 to 1.00 for the June 30, 2023 test date and subsequent test dates; and a maximum leverage ratio of not more than 60%. We have
determined that we are in compliance with all covenants contained in the 2022 Credit Agreement as of December 31, 2022.
The amount that we can borrow at any given time under our Line of Credit, and 2022 Credit Agreement is governed by certain operating metrics of designated
unencumbered hotel properties known as borrowing base assets. As of December 31, 2022, the following hotel properties secure the Credit Agreement:
- The Envoy Boston Seaport, Boston, MA
- Ritz-Carlton Georgetown, Washington, DC
- The Boxer, Boston, MA
- The Winter Haven Hotel Miami Beach, Miami, FL
- Hampton Inn Seaport, Seaport, New York, NY
- The Blue Moon Hotel Miami Beach, Miami, FL
- Holiday Inn Express Chelsea, 29th Street, New York, NY
- Cadillac Hotel & Beach Club, Miami, FL
- NU Hotel, Brooklyn, New York, NY
- The Parrot Key Hotel & Villas, Key West, FL
- Hyatt House White Plains, White Plains, NY
- The Ambrose Hotel, Santa Monica, CA
- The Rittenhouse, Philadelphia, PA
- Mystic Marriott Hotel & Spa, Groton, CT
- Philadelphia Westin, Philadelphia, PA
- Hilton Garden Inn JFK Airport, New York, NY
80

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 5 – DEBT (CONTINUED)
Prior Credit Facilities
Prior to the 2022 Credit Facility, we maintained three secured credit agreements which aggregated to $747,481 with Citigroup Global Markets Inc., Wells Fargo
Bank, Inc. and various other lenders. One credit agreement ("Credit Agreement") provided for a senior secured credit facility of $442,404 (“Credit Facility”). The
Credit Facility consisted of a $250,000 senior secured revolving line of credit (“Line of Credit”), and a $192,404 senior secured term loan (“First Term Loan”).
The Credit Facility was set to expire on August 10, 2022 prior to the refinancing discussed above.
We maintained another credit agreement which provided for a $278,846 senior secured loan agreement (“Second Term Loan”) and was set to expire on
September 10, 2024 prior to the refinancing.
A separate credit agreement provided for a $26,231 senior secured term loan agreement (“Third Term Loan” and collectively with the Credit Agreement and the
Second Term Loan, the "Credit Agreements") and was set to expire on August 10, 2022 prior to the refinancing.
On February 17, 2021, the Company signed amendments to the Credit Agreements which resulted in debt extinguishment expense $2,977. Debt extinguishment
expense consists of $635 of debt extinguishment losses and $2,342 of debt modification losses. The signed amendments to the Credit Agreements, among other
things, provided for:
•
an extension of the maturity date of the Third Term Loan to August 10, 2022;
•
a limited waiver of financial covenants through March 31, 2022; and
•
the ability to borrow up to $174,729, inclusive of amounts already outstanding, under the Line of Credit, the proceeds of which may only be used to fund
certain costs and expenses.
Certain conditions, such as minimum liquid assets in an aggregate amount of at least $30,000, and certain negative covenants and restrictions that are considered
normal and customary, were required to be met on a recurring basis as outlined within the amendments.
The amendments to the Credit Agreements made certain other amendments to financial covenants in place for the second quarter of 2022:
•
a fixed charge coverage ratio of not less than 1.20 to 1.00 (was 1.50 to 1.00);
•
a maximum leverage ratio of not more than 65% (was 60%); and
•
a new financial covenant that requires the borrowing base leverage ratio to not exceed 60% at any time.
81

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 5 – DEBT (CONTINUED)
The interest rate for borrowings under the Line of Credit and Term Loans were 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 as of December 31, 2021:
Outstanding Balance
Borrowing
Spread
December 31, 2021
Line of Credit
1.50% to 2.25%
$
118,684 
Secured Term Loan:
First Term Loan
1.45% to 2.20%
192,404 
Second Term Loan
1.35% to 2.00%
278,846 
Third Term Loan
1.45% to 2.20%
26,231 
Deferred Financing Costs
(1,396)
Total Secured Term Loan
$
496,085 
The weighted average interest rate on our credit facilities was 3.62%, 3.47% and 3.88% for the years ended December 31, 2022, 2021 and 2020, respectively.
82

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 5 – DEBT (CONTINUED)
Notes Payable
Notes payable at December 31, 2022 and December 31, 2021 consisted of the following:
December 31, 2022
December 31, 2021
Statutory Trust I and Statutory Trust II Notes Payable Indebtedness
$
51,548 
$
51,548 
Net Unamortized Deferred Financing Costs
(653)
(706)
Statutory Trust I and Statutory Trust II Notes Payable
50,895 
50,842 
Junior Notes Payable Indebtedness
$
— 
$
156,239 
Net Unamortized Deferred Financing Costs
— 
(4,209)
Net Unamortized Discount
— 
(4,382)
Junior Notes Payable
— 
147,648 
Total Notes Payable
$
50,895 
$
198,490 
Statutory Trust I and Statutory Trust II Notes Payable
We have two junior subordinated notes payable in the aggregate amount of $51,548 to the Hersha Statutory Trusts                      pursuant to indenture
agreements which will mature on July 30, 2035, but may be redeemed at our option, in whole or in part, prior to maturity in accordance with the provisions of the
indenture agreements.  The $25,774 notes issued to Hersha Statutory Trust I and Hersha Statutory Trust II, bear interest at a variable rate of LIBOR plus 3% per
annum.  This rate resets two business days prior to each quarterly payment.  The weighted average interest rate on our two junior subordinated notes payable
during the years ended December 31, 2022, 2021 and 2020 was 4.91%, 3.21% and 3.95%, respectively.  
Junior Notes Payable
On February 17, 2021, the Company entered into a note purchase agreement (the “Purchase Agreement”) with several purchasers (the “Purchasers”).
The Company issued and sold to the Purchasers $150,000 aggregate principal amount of the Company’s 9.50% Unsecured PIK Toggle Notes due 2026 (the
“Notes”) on February 23, 2021. The Notes were set to mature on February 23, 2026. The Notes bore interest at a rate of 9.50% per year, payable in arrears on
June 30, September 30, December 31 and March 31 of each year, beginning on June 30, 2021. We elected the option to pay interest (a) in cash at a rate per
annum equal to 4.75% per annum, and (b) in kind at a rate per annum equal to 4.75% per annum (“PIK Interest”) for the interest periods ended June 30, 2021,
September 30, 2021, December 31, 2021, and March 31, 2022, increasing the principal balance by $8,094 to $158,094 prior to the payoff.
On August 4, 2022, using a portion of the proceeds from the dispositions discussed in Note 2 - Investment in Hotel Properties, we paid off the Junior Notes,
payable at a redemption price of 104%, or $164,418. We incurred debt extinguishment expense of $13,726 to redeem the Junior Notes on August 4, 2022.
83

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 5 – DEBT (CONTINUED)
Debt Maturities
Aggregate annual principal payments for the Company’s credit facility and secured term loans, as amended, mortgages, Statutory Trust I and Statutory Trust II
notes for the five years following December 31, 2022 and thereafter are as follows:
Year Ending December 31,
Amount
2023
$
123,994 
2024
84,886 
2025
372,853 
2026
— 
2027
— 
Thereafter
51,548 
$
633,281 
Interest Expense
The table below shows the interest expense incurred by the Company during the years ended December 31, 2022, 2021, and 2020:
Years Ended December 31,
2022
2021
2020
Mortgage Loans Payable
12,495 
10,537 
12,277 
Interest Rate Swap Contracts on Mortgages
105 
2,477 
1,895 
Unsecured Notes Payable
12,159 
15,073 
2,037 
Credit Facility and Term Loans
19,593 
15,587 
21,927 
Interest Rate Swap Contracts on Credit Facility and Term Loans*
(433)
7,376 
9,524 
Deferred Financing Costs Amortization
4,013 
4,628 
3,551 
Other
491 
381 
574 
     Total Interest Expense
$
48,423  $
56,059  $
51,785 
*Negative amount indicates decrease to interest expense.
84

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 6 – LEASES
We own two hotels within our consolidated portfolio of hotels where we do not own the land on which the hotels reside, rather we lease the land from an
unrelated third-party lessor. All of our land leases are classified as operating leases and have initial terms, with extension options that range from August 2064 to
October 2103. Based on the nature of these leases, the Company assumed that all extension options would be fully executed in the measurement of the right of
use assets and lease liabilities. Some of our land leases include variable payments, which are tied to an index such as the consumer price index or include rental
payments based partially on the hotel revenues. Lease costs for our land leases are presented as Hotel Ground Rent in the Consolidated Statements of Operations.
We disposed of the following hotels during the year ended December 31, 2022 which had ground leases that were assumed by the buyers: the Courtyard
Brookline, the Gate JFK Airport, Hotel Milo, and Towneplace Suites Sunnyvale. Right of Use Assets totaling $24,094 and Lease Liabilities totaling $33,829 were
written off upon disposition.
Two additional office space leases are also factored into the lease liability and are classified as operating leases with terms ranging from March 2023 to December
2027. Our office space leases include variable payments for the Company's proportionate share of the building's property taxes, insurance, and common area
maintenance. Lease costs for our office spaces are included in General and Administrative Expense in the Consolidated Statements of Operations.
The components of lease costs for the years ended December 31, 2022, 2021, and 2020 were as follows:
For the Year Ended December 31, 2022
Ground Lease
Office Lease
Total
Operating lease costs
$
3,391 
$
483 
$
3,874 
Variable lease costs
962
260
1,222
Total lease costs
$
4,353 
$
743 
$
5,096 
For the Year Ended December 31, 2021
Ground Lease
Office Lease
Total
Operating lease costs
$
4,228 
$
483 
$
4,711 
Variable lease costs
172 
298 
470 
Total lease costs
$
4,400 
$
781 
$
5,181 
For the Year Ended December 31, 2020
Ground Lease
Office Lease
Total
Operating lease costs
$
4,153 
$
483 
$
4,636 
Variable lease costs
139 
253 
392 
Total lease costs
$
4,292 
$
736 
$
5,028 
85

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 6 – LEASES (CONTINUED)
Other information related to leases as of and for the years ended December 31, 2022 and 2021 is as follows:
December 31, 2022
December 31, 2021
Cash paid from operating cash flows for operating leases
$
4,834 
$
4,657 
Weighted average remaining lease term in years
50.3
63.5
Weighted average discount rate
7.83 %
7.86 %
Maturities of lease liabilities as of December 31, 2022 are as follows:
Amount
2023
$
2,140 
2024
1,991 
2025
2,011 
2026
2,030 
2027
2,051 
Thereafter
70,676 
     Total undiscounted lease payments
80,899
Less imputed interest
(61,896)
     Total lease liability
$
19,003 
86

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 7 – COMMITMENTS AND CONTINGENCIES AND RELATED PARTY TRANSACTIONS
Management Agreements
Our wholly-owned TRS, 44 New England Management Company, and certain of our joint venture entities engage eligible independent contractors in accordance
with the requirements for qualification as a REIT under the Internal Revenue Code of 1986, as amended, including Hersha Hospitality Management Limited
Partnership (“HHMLP”), as the property managers for hotels it leases from us pursuant to management agreements. Certain executives and trustees of the
Company own a minority interest in HHMLP. Our management agreements with HHMLP provide for five-year terms and are subject to early termination upon the
occurrence of defaults and certain other events described therein. As required under the REIT qualification rules, HHMLP must qualify as an “eligible independent
contractor” during the term of the management agreements. Under the management agreements, HHMLP generally pays the operating expenses of our hotels.
All operating expenses or other expenses incurred by HHMLP in performing its authorized duties are reimbursed or borne by our TRS to the extent the operating
expenses or other expenses are incurred within the limits of the applicable approved hotel operating budget. HHMLP is not obligated to advance any of its own
funds for operating expenses of a hotel or to incur any liability in connection with operating a hotel. Management agreements with other unaffiliated hotel
management companies have similar terms.
For its services, HHMLP receives a base management fee and, if a hotel exceeds certain thresholds, an incentive management fee. The base management fee for a
hotel is due monthly and is equal to 3% of gross revenues associated with each hotel managed for the related month. The incentive management fee, if any, for a
hotel is due annually in arrears on the ninetieth day following the end of each fiscal year and is based upon the financial performance of the hotels. For the years
ended December 31, 2022, 2021 and 2020, base management fees incurred totaled $10,227, $7,423 and $4,795 respectively, and are recorded as Other Hotel
Operating Expenses. For the years ended December 31, 2022, 2021 and 2020, incentive management fees incurred totaled $418, $347 and $0 respectively.
Franchise Agreements
Our branded hotel properties are operated under franchise agreements assumed by the hotel property lessee. The franchise agreements have 10 to 20 year
terms, but may be terminated by either the franchisee or franchisor on certain anniversary dates specified in the agreements. The franchise agreements require
annual payments for franchise royalties, reservation, and advertising services, and such payments are based upon percentages of gross room revenue. These
payments are paid by the hotels and charged to expense as incurred. Franchise fee expenses for the years ended December 31, 2022, 2021 and 2020 were
$16,077, $11,262 and $7,237 respectively, and are recorded in Other Hotel Operating Expenses. The initial fees incurred to enter into the franchise agreements
are amortized over the life of the franchise agreements.
Accounting, Revenue Management and Information Technology Fees
Each of the wholly-owned hotels and consolidated joint venture hotel properties managed by HHMLP incurs a monthly accounting and information technology
fee. Monthly fees for accounting services are between $2 and $3 per property and monthly information technology fees range from $1 to $2 per property. For the
years ended December 31, 2022, 2021 and 2020, the Company incurred accounting fees of $996, $1,144 and $1,298 respectively. For the years ended December
31, 2022, 2021 and 2020, the Company incurred information technology fees of $324, $370 and $419 respectively. For the years ended December 31, 2022, 2021
and 2020, the Company incurred revenue management service fees of $2,092, $1,635 and $1,940. Accounting fees, revenue management fees, information
technology fees, and revenue management service fees are included in Other Hotel Operating Expenses.
Capital Expenditure Fees
HHMLP charges a fee between 3%-5% on certain capital expenditures and pending renovation projects at the properties as compensation for procurement
services related to capital expenditures and for project management of renovation projects. For the years ended December 31, 2022, 2021 and 2020, we incurred
fees of $794, $509 and $1,148 respectively, which were capitalized with the cost of the related capital expenditures.
87

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 7 – COMMITMENTS AND CONTINGENCIES AND RELATED PARTY TRANSACTIONS (CONTINUED)
Acquisitions from Affiliates
We have entered into an option agreement with certain of our officers and trustees such that we obtain a right of first refusal to purchase any hotel owned or
developed in the future by these individuals or entities controlled by them at fair market value. This right of first refusal would apply to each party until one year
after such party ceases to be an officer or trustee of the Company. Our Acquisition Committee of the Board of Trustees is comprised solely of independent
trustees, and the purchase prices and all material terms of the purchase of hotels from related parties are approved by the Acquisition Committee.
Hotel Supplies
For the years ended December 31, 2022, 2021 and 2020, we incurred charges for hotel supplies of $—, $3 and $82 respectively. For the years ended December
31, 2022, 2021 and 2020, we incurred charges for capital expenditure purchases of $7,575, $1,034 and $1,212 respectively. These purchases were made from
Hersha Purchasing and Design, a hotel supply company owned, in part, by certain executives and trustees of the Company. Hotel supplies are expensed and
included in Hotel Operating Expenses on our consolidated statements of operations, and capital expenditure purchases are included in investment in hotel
properties on our consolidated balance sheets.
Insurance Services
Prior to January 1, 2021, the Company utilized the services of the Hersha Group, a risk management business owned, in part, by certain executives and trustees of
the Company. The Hersha Group provided consulting and procurement services to the Company related to the placement of property and casualty insurance,
placement of general liability insurance, and for claims handling for our hotel properties. Beginning January 1, 2021, these services were provided by a third-party
service provider. The total costs of property insurance that we paid through the Hersha Group was $6,968 for the year ended December 31, 2020. This amount
paid to the Hersha Group includes insurance premiums and brokerage fees as compensation for brokerage services.
Restaurant Lease Agreements with Independent Restaurant Group
The Company has entered into management agreements with Independent Restaurant Group (“IRG”), subject to the supervision of HHMLP, as property manager,
for restaurants at two of its hotel properties.  Jay H. Shah and Neil H. Shah, executive officers and/or trustees of the Company, collectively own a 70.0% interest in
IRG. Management fees incurred to IRG were $233 and $163 for the years ended December 31, 2022 and 2021, respectively.
Due From Related Parties
The due from related parties balance as of December 31, 2022 and December 31, 2021 was $245 and $2,495, respectively. The balances primarily consisted of
working capital deposits made to HHMLP and other entities owned, in part, by certain executives and trustees of the Company.
Due to Related Parties
The balance due to related parties as of December 31, 2022 and December 31, 2021 was $2,610 and $1,723, respectively. The balance at December 31, 2022
primarily consists of amounts due to HHMLP for monthly management fees discussed above.
Litigation
We are not presently subject to any material litigation nor, to our knowledge, is any other litigation threatened against us, other than routine actions for
negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability
insurance and all of which collectively are not expected to have a material adverse effect on our liquidity, results of operations or business or financial condition.
88

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 8 – FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS
Fair Value Measurements
Our determination of fair value measurements are based on the assumptions that market participants would use in pricing the asset or liability. As a basis for
considering market participant assumptions in fair value measurements, we utilize a fair value hierarchy that distinguishes between market participant
assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the
hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are
inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted
prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest
rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liabilities,
which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value
measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value
measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance
of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
As of December 31, 2022, the Company’s derivative instruments represented the only financial instruments measured at fair value. Currently, the Company uses
derivative instruments, such as interest rate swaps and caps, to manage its interest rate risk. The valuation of these instruments is determined using widely
accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms
of the derivatives, including the period to maturity, and uses observable market-based inputs.
We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in
the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, we have considered the impact of netting
and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.
Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation
adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and the
counterparties. However, as of December 31, 2022 we have assessed the significance of the effect of the credit valuation adjustments on the overall valuation of
our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we
have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Derivative Instruments
The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this
objective, the Company primarily uses interest rate swaps and interest rate caps as part of its cash flow hedging strategy. Interest rate swaps designated as cash
flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying
principal amount. Interest rate caps designated as cash flow hedges limit the Company’s exposure to increased cash payments due to increases in variable interest
rates. The table on the following page presents our derivative instruments as of December 31, 2022 and 2021.
89

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 8 – FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS (CONTINUED)
Estimated Fair Value
Asset / (Liability) Balance
Hedged Debt
Type
Strike Rate
Index
Effective Date
Derivative Contract
Maturity Date
Notional
Amount
December 31,
2022
December 31,
2021
Term Loan Instruments:
Credit Facility
Swap
1.824 % 1-Month LIBOR + 2.20%
September 3, 2019
August 10, 2022
103,500 
— 
(970)
Credit Facility
Swap
1.824 % 1-Month LIBOR + 2.20%
September 3, 2019
August 10, 2022
103,500 
— 
(970)
Credit Facility (1)
Swap
1.460 % 1-Month LIBOR + 2.00%
September 10, 2019
September 10, 2024
300,000 
— 
(3,729)
Credit Facility
Swap
1.341 % 1-Month SOFR + 2.50%
August 30, 2022
September 10, 2024
270,000 
14,123 
— 
Credit Facility
Swap
1.279 % 1-Month SOFR + 2.50%
September 6, 2022
August 4, 2024
30,000 
1,533 
— 
Mortgages:
Hyatt, Union Square, New York,
NY
Swap
1.870 % 1-Month LIBOR + 2.30%
June 7, 2019
June 7, 2023
56,000 
699 
(987)
Hilton Garden Inn Tribeca, New
York, NY
Swap
1.768 % 1-Month LIBOR + 2.25%
July 25, 2019
July 25, 2024
22,725 
1,007 
(460)
Hilton Garden Inn Tribeca, New
York, NY
Swap
1.768 % 1-Month LIBOR +2.25%
July 25, 2019
July 25, 2024
22,725 
1,007 
(460)
Hilton Garden Inn 52nd Street,
New York, NY
Cap
4.000 % 1-Month SOFR
December 4, 2022
December 1, 2023
44,325 
340 
— 
Hilton Garden Inn 52nd Street,
New York, NY
Swap
1.540 % 1-Month LIBOR + 2.30%
December 4, 2019
December 4, 2022
44,325 
— 
(458)
Courtyard, LA Westside, Culver
City, CA (2)
Cap
2.500 % 1-Month LIBOR
August 1, 2021
August 1, 2024
35,000 
— 
92 
$
18,709  $
(7,942)
(1) This swap was amended on August 26, 2022 to replace the 1-month LIBOR index with a 1-month SOFR index, and $30,000 of the notional amount was
terminated.
(2) This cap was terminated during the year ended December 31, 2022 as the hotel was sold and the underlying debt was paid off.
The fair value of the interest rate swaps and caps with an asset balance are included in Other Assets and the fair value of the interest rate swaps and caps with a
liability balance are included in Accounts Payable, Accrued Expenses and Other Liabilities on our Consolidated Balance Sheets at December 31, 2022 and
December 31, 2021.
The net change related to derivative instruments designated as cash flow hedges recognized as unrealized gains and losses reflected on our consolidated balance
sheet in accumulated other comprehensive income was a gain of $25,387, a gain of $16,856, and a loss of $23,842 for the years ended December 31, 2022, 2021
and 2020, respectively.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on
the Company’s variable-rate derivatives. The change in net unrealized gains/losses on cash flow hedges reflects a reclassification of $(1,264), $(1,124) and $2,589
of net unrealized gains/losses from accumulated other comprehensive income as an increase/decrease to interest expense during 2022, 2021 and 2020,
respectively. During 2023, the Company estimates that an additional $12,518 will be reclassified as a decrease to interest expense.
90

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 8 – FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS (CONTINUED)
Fair Value of Debt
The Company estimates the fair value of its fixed rate debt and the credit spreads over variable market rates on its variable rate debt by discounting the future
cash flows of each instrument at estimated market rates or credit spreads consistent with the maturity of the debt obligation with similar credit policies. Credit
spreads take into consideration general market conditions and maturity. The inputs utilized in estimating the fair value of debt are classified in Level 2 of the fair
value hierarchy.  As of December 31, 2022, the carrying value and estimated fair value of the Company’s debt were $629,885 and $610,401, respectively.  As of
December 31, 2021, the carrying value and estimated fair value of the Company’s debt were $1,117,873 and $1,146,699, respectively.
91

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 9 – SHARE BASED PAYMENTS
We measure the cost of employee service received in exchange for an award of equity instruments based on the grant-date fair value of the award. The
compensation cost is amortized on a straight-line basis over the period during which an employee is required to provide service in exchange for the award. The
compensation cost related to performance awards that are contingent upon market-based criteria being met is recorded at the fair value of the award on the date
of the grant and amortized over the performance period.  As discussed in Note 1, forfeitures of share-based awards are expensed as they occur.
Our shareholders approved the Hersha Hospitality Trust 2012 Equity Incentive Plan, as amended, (the “2012 Plan”) for the purpose of attracting and retaining
executive officers, employees, trustees and other persons and entities that provide services to the Company.
Summary of Share Based Compensation Programs
Executives
The Compensation Committee of our Board of Trustees implements executive compensation strategies that align the interests of the Company’s executives with
those of shareholders. It does so through a mix of base salary, the Short Term Incentive Program ("STIP"), and the Long-Term Incentive Program ("LTIP"). The STIP
and LTIP are incentive compensation programs that align executive compensation with the performance of the Company.
•
Short Term Incentive Program - On May 26, 2022, the Compensation Committee approved the 2022 STIP, pursuant to which the executive
officers are eligible to earn cash and equity awards based on achieving a threshold, target or maximum level of defined performance objectives at the
end of the performance period, December 31, 2022. Any amounts earned are satisfied 50% in cash and 50% in equity awards. The Compensation
Committee provided the option to the executive officers to elect equity awards in lieu of cash payment for amounts earned under the 2022 STIP. As of
December 31, 2022, no LTIP Units have been issued to the executive officers in settlement of the 2022 STIP.
The Company accounts for grants earned under the STIP as performance awards for which the Company assesses the probability of achievement of the
performance conditions at the end of each period. Estimates of amounts earned under the STIP are recorded in general and administrative expense on
the consolidated statement of operations and a liability is recorded in accounts payable, accrued expenses and other liabilities on the consolidated
balance sheet.
•
Long Term Incentive Program - On May 26, 2022, the Compensation Committee approved the 2022 LTIP in which 60% are issuable based on the
Company's achievement of a certain level of (1) absolute total shareholder return (37.5% of the award), (2) relative total shareholder return as compared
to the Company’s peer group (37.5% of the award), and (3) relative growth in revenue per available room ("RevPar") compared to the Company’s peer
group (25.0% of the award) and the remaining 40% of the awards provide for time-based vesting. On May 26, 2022, the Compensation Committee
awarded 194,427 LTIP Units related to the time-based portion of the plan. These Units will vest over a three year period from January 1, 2022 to
December 31, 2024. The LTIP Units awarded were determined by dividing the dollar amount of award earned by $9.04, the per share volume weighted
average trading price of the Company's common shares on the NYSE for the 20 trading days prior to December 31, 2021. The 60% market-based portion
of the 2022 LTIP has a three-year performance period which commenced on January 1, 2022 and ends December 31, 2024.
The Company accounts for the total shareholder return components of these grants as market based awards where     the Company estimates unearned
compensation at the grant date fair value which is then amortized into compensation cost over the vesting period of each individual plan.  The Company
accounts for the RevPAR component of the grants as performance-based awards for which the Company assesses the probable achievement of the
performance conditions at the end of the reporting period. As of December 31, 2022, no shares or LTIP Units have been issued to the executive officers in
settlement of the 2022 market-based LTIP awards.
92

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)
Remaining unearned compensation for LTIP Units issued to executives in settlement of awards under the STIP, LTIP or the Company’s legacy incentive
compensation programs is recorded in noncontrolling interests on the Company’s consolidated balance sheets and is amortized in general and administrative
expense on the consolidated statement of operations over the remaining vesting period.
Trustees
To align the interests of the Company’s trustees with those of shareholders, our trustees receive equity as a component of the compensation for their service on
our board of trustees.
•
Share Awards - Trustees receive biennial share awards that vest immediately upon issuance.
•
Trustee Long Term Incentive Program - Trustees receive grants of restricted shares which vest over a three-year period subject to continued
service to the Company’s board of trustees.
•
Board Fee Compensation Elected in Equity - Trustees can make a voluntary election to receive any portion of their board fee compensation in
the form of common equity valued at a 25% premium to the cash that would have been received. Shares issued for board retainer elected in equity vest
over the year of service covered by the retainer and shares issued for service as lead director, committee chair and committee membership vest
immediately upon issuance.
For shares issued that are subject to vesting, unearned compensation is recorded in additional paid in capital on the consolidated balance sheet and is amortized
in general and administrative expense on the consolidated statement of operations over the vesting period. Share based compensation for shares issued that
immediately vest is recorded in general and administrative expense on the consolidated statement of operations.
Employees and Non-Employees
Grants of restricted shares are issued to attract, retain and reward employees and non-employees that are critical to the Company’s success. These restricted
shares typically vest over a period of between one and four years, subject to continued service to the Company.
93

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)
Share Based Compensation Activity
A summary of our share based compensation activity from January 1, 2020 to December 31, 2022 is as follows:
LTIP Unit Awards
Restricted Share Awards
Share Awards
Number of Units
Weighted
Average Grant
Date Fair Value
Number of
Restricted Shares
Weighted
Average Grant
Date Fair Value
Number of
Shares
Weighted
Average Grant
Date Fair Value
Unvested Balance as of January 1,
2020
441,201 
$
17.99 
92,102 
$
17.07 
— 
Granted
1,112,862 
5.24 
189,851 
5.34 
— 
N/A
Vested
(655,937)
12.56 
(78,962)
12.49 
— 
N/A
Forfeited
— 
N/A
(113)
18.00 
— 
N/A
Unvested Balance as of December
31, 2020
898,126 
6.15 
202,878 
7.87 
— 
Granted
1,774,990 
10.82 
207,748 
9.88 
32,460 
11.31 
Vested
(1,014,121)
6.84 
(239,736)
7.73 
(32,460)
11.31 
Forfeited
— 
N/A
(150)
11.31 
— 
N/A
Unvested Balance as of December
31, 2021
1,658,995 
10.73 
170,740 
10.52 
— 
Granted
194,427 
11.25 
119,745 
9.90 
71,832 
10.57 
Vested
(747,849)
12.46 
(126,019)
10.82 
(71,832)
10.57 
Forfeited
— 
N/A
(300)
11.25 
— 
N/A
Unvested Balance as of December
31, 2022
1,105,573 
9.65 
164,166 
9.83 
— 
94

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)
The following table summarizes share based compensation expense and unearned compensation for the years ended December 31, 2022, 2021 and 2020 and as
of December 31, 2022 and 2021:
Share Based
Compensation Expense
Unearned
Compensation
For the Year Ended December 31,
As of December 31,
2022
2021
2020
2022
2021
Issued Awards
LTIP Unit Awards
10,910 
8,952 
6,105 
5,311 
11,344 
Restricted Share Awards
1,027 
1,215 
2,063 
683 
834 
Share Awards
1,068 
367 
— 
— 
— 
Unissued Awards
Market Based
1,379 
1,499 
1,320 
2,541 
2,230 
Total
$
14,384 
$
12,033 
$
9,488 
$
8,535 
$
14,408 
The weighted-average period of which the unrecognized compensation expense will be recorded is approximately 0.7 years for LTIP Unit Awards and 0.5 years for
Restricted Share Awards.
The remaining unvested target units are expected to vest as follows:
2023
2024
2025
LTIP Unit Awards
1,046,441
59,132
— 
Restricted Share Awards
125,190
35,976
3,000
1,171,631 
95,108 
3,000 
95

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 10 – EARNINGS PER SHARE
The following table is a reconciliation of the income or loss (numerator) and the weighted average shares (denominator) used in the calculation of basic and
diluted earnings per common share. The computation of basic and diluted earnings per share is presented below.
Twelve Months Ended December 31,
2022
2021
2020
NUMERATOR:
Basic and Diluted*
Net Income (Loss)
$
166,060 
$
(43,355)
$
(187,766)
Income (loss) allocated to Noncontrolling Interests
(19,338)
4,524 
22,777 
Distributions to Preferred Shareholders
(24,174)
(24,174)
(24,176)
Dividends Paid on Unvested Restricted Shares and LTIP Units
(1,209)
— 
— 
Net Income (Loss) from Continuing Operations attributable to Common Shareholders
$
121,339 
$
(63,005)
$
(189,165)
DENOMINATOR:
Weighted average number of common shares - basic
39,368,952 
39,089,987 
38,613,563 
Effect of dilutive securities:
Restricted Stock Awards and LTIP Units (unvested)
1,271,812 
— 
— 
Contingently Issued Shares and Units
549,864 
— 
— 
Weighted average number of common shares - diluted
41,190,628 
39,089,987 
38,613,563 
*    Income (loss) allocated to noncontrolling interest in HHLP has been excluded from the numerator and Common Units and Vested LTIP Units have been omitted
from the denominator for the purpose of computing diluted earnings per share since including these amounts in the numerator and denominator would have
no impact.  In addition, potentially dilutive common shares, if any, have been excluded from the denominator if they are anti-dilutive to income (loss)
applicable to common shareholders.
96

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 11 – CASH FLOW DISCLOSURES AND NON CASH INVESTING AND FINANCING ACTIVITIES
Interest paid during 2022, 2021 and 2020 totaled $40,888, $34,661 and $38,170 respectively. Net Cash paid on Interest Rate Derivative contracts during 2022,
2021 and 2020 totaled $2,544, $11,822 and $7,635, respectively.  Cash paid for income taxes during 2022, 2021 and 2020 was $1,412, $113 and $79, respectively. 
The following non-cash investing and financing activities occurred during 2022, 2021 and 2020:
2022
2021
2020
Common Shares issued as part of the Dividend Reinvestment Plan
$
6 
$
— 
$
14 
Conversion of Common Units and LTIP Units to Common Shares
1,376 
3,026 
— 
Issuance of share based payments
5,239 
22,955 
7,259 
Accrued payables for fixed assets placed into service
— 
835 
658 
Increase in accrued liabilities related to insurance premium financing agreements
4,839 
5,820 
— 
Adjustment to Record Non-Controlling Interest at Redemption Value
2,766 
2,310 
(3,196)
Right of Use Assets obtained in exchange for Lease Liabilities
— 
699 
— 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total
of the same such amounts shown in the consolidated statements of cash flows for the years ended December 31, 2022, 2021 and 2020:
2022
2021
2020
Cash and cash equivalents
$
224,955  $
72,238  $
16,637 
Escrowed cash
5,065 
12,707 
6,970 
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows
$
230,020  $
84,945  $
23,607 
Amounts included in restricted cash represent those required to be set aside in escrow by contractual agreements with various lenders for the payment of specific
items such as property insurance, property tax, and capital expenditures.
97

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 12 – SHAREHOLDERS’ EQUITY, NONCONTROLLING INTERESTS IN PARTNERSHIP, AND REDEEMABLE NON-CONTROLLING INTERESTS
Common Shares
The Company’s outstanding common shares have been duly authorized, and are fully paid and non-assessable. Common shareholders are entitled to receive
dividends if and when authorized and declared by the Board of Trustees of the Company out of assets legally available and to share ratably in the assets of the
Company legally available for distribution to its shareholders in the event of its liquidation, dissolution or winding up after payment of, or adequate provision for,
all known debts and liabilities of the Company.
Preferred Shares
As of December 31, 2022, we have 14,703,214 Cumulative Redeemable Preferred Shares outstanding consisting of three separate Series issuances. Terms of the
Series C, Series D and Series E Preferred Shares outstanding at December 31, 2022 and 2021 are summarized as follows:
Dividend Per Share 
Shares Outstanding
Year Ended December 31,
Series
December 31, 2022
December 31, 2021
Aggregate Liquidation
Preference
Distribution Rate
2022
2021
Series C
3,000,000 
3,000,000 
$
75,000 
6.875 %
$
1.7188 
$
3.4376 
Series D
7,701,700 
7,701,700 
192,543 
6.500 %
1.6250 
3.2500 
Series E
4,001,514 
4,001,514 
100,038 
6.500 %
1.6250 
3.2500 
Total
14,703,214 
14,703,214 
 We suspended the payment of our preferred dividends in 2020. The total arrearage as of December 31, 2020 of approximately $24,176 was paid on March 26,
2021. During the year ended December 31, 2021, the Company paid cash dividends on the Company's Series C, Series D and Series E cumulative redeemable
preferred stock reflecting accrued and unpaid dividends for the dividend periods ended April 15, 2020, July 15, 2020, October 15, 2020 and January 15, 2021. In
addition, the Company paid a cash dividend on all Series of cumulative redeemable preferred stock for the dividend periods ending April 15, 2021, July 15, 2021,
October 15, 2021, and declared a similar cash dividend for the fourth dividend period ending January 15, 2021, which was paid on January 18, 2022 to holders of
record as of December 31, 2021. The Company is current on dividend obligations on all Series of cumulative redeemable preferred stock as of December 31, 2022.
Our Board of Trustees authorized a share repurchase program for up to $50,000 of common shares which expired on December 31, 2020. For the year ended
December 31, 2020, we repurchased 933,436 common shares for an aggregate purchase price of $14,194. Upon repurchase by the Company, these common
shares ceased to be outstanding and became authorized but unissued common shares. There was no share repurchase program for the years ended December
31, 2021 and December 31, 2022.
(1)
(1)
98

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 12 – SHAREHOLDERS’ EQUITY, NONCONTROLLING INTERESTS IN PARTNERSHIP, AND REDEEMABLE NON-CONTROLLING INTERESTS (CONTINUED)
Common Units and LTIP Units
The noncontrolling interest of Common Units and LTIP Units totaled $73,461 as of December 31, 2022 and $51,246 as of December 31, 2021. As of December 31,
2022, there were 6,940,053 Common Units and LTIP Units collectively outstanding with a fair market value of $59,129, based on the price per share of our
common shares on the NYSE on such date.
Common Units are issued in connection with the acquisition of wholly owned hotels and joint venture interests in hotel properties. The total number of Common
Units outstanding as of December 31, 2022, 2021 and 2020 was 1,755,193, 1,835,820 and 2,066,615, respectively. These units can be redeemed for cash or
converted to common shares, at the Company’s option, on a one-for-one basis. The number of common shares issuable upon exercise of the redemption rights
will be adjusted upon the occurrence of stock splits, mergers, consolidation or similar pro rata share transactions, that otherwise would have the effect of diluting
the ownership interest of the limited partners or our shareholders. During December 31, 2022 and 2021, 80,627 and 241,545 Common Units were converted to
common shares, respectively, and there were no conversions of Common Units during the year ended December 31, 2020. In addition, as noted in “Note 9 –
Share Based Payments,” during 2022, the Company issued 194,427 LTIP Units. During December 31, 2022, 100,000 LTIP Units were converted to common shares.
Redeemable Non-controlling Interest
Our joint venture partner has a noncontrolling equity interest of 15% in the Ritz-Carlton Coconut Grove, FL. Hersha Holding RC Owner, LLC, the owner entity of the
Ritz-Carlton Coconut Grove joint venture ("Ritz Coconut Grove"), distributes income based on cash available for distribution as follows: (1) to us until we receive a
cumulative return on our contributed senior common equity interest, currently at 8%, and (2) then to the owner of the noncontrolling interest until they receive a
cumulative return on their contributed junior common equity interest, currently at 8%, and (3) then 75% to us and 25% to the owner of the noncontrolling
interest until we both receive a cumulative return on our contributed senior common equity interest, currently at 12%, and (4) finally, any remaining operating
profit shall be distributed 70% to us and 30% to the owner of the noncontrolling interest. Additionally, our joint venture partner in the Ritz Coconut Grove has the
right to put their ownership interest to us for cash consideration at any time during the life of the venture.
The balance sheet and financial results of the Ritz Coconut Grove are included in our consolidated financial statements and the noncontrolling interest in the Ritz
Coconut Grove is classified as temporary equity within our Consolidated Balance Sheet. The noncontrolling interest in the Ritz Coconut Grove is measured at the
put option redemption value, which is defined in the joint venture agreement. For the years ended December 31, 2022, 2021 and 2020, based on the income
allocation methodology described above, the noncontrolling interest in this joint venture was allocated losses of $0, $158 and $21, respectively, and is recorded as
part of the (Income) Loss Allocated to Noncontrolling Interests line item within the Consolidated Statements of Operations. We reclassified $2,766 and $2,310
from Additional Paid in Capital to Noncontrolling Joint Venture Interest to recognize the minority interest at the put option redemption value of $5,076 and
$2,310, at December 31, 2022 and December 31, 2021, respectively.
99

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 13 – INCOME TAXES
The Company elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with its taxable year ended December 31, 1999. To qualify as
a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its
REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, to its shareholders. It is the Company’s current
intention to adhere to these requirements and maintain the Company’s qualification for taxation as a REIT. As a REIT, the Company generally will not be subject to
federal corporate income tax on that portion of its net income that is currently distributed to shareholders. If the Company fails to qualify for taxation as a REIT in
any taxable year, it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax for taxable years prior to
2018) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject
to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income.
Taxable income from non-REIT activities managed through 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 (21%) to pretax
income from continuing operations as a result of the following differences:
For the year ended December 31,
2022
2021
2020
Statutory federal income tax provision
$
35,881 
$
(9,241)
$
(37,365)
Adjustment for nontaxable income for Hersha Hospitality Trust 
(32,658)
13,065 
29,636 
State income taxes, net of federal income tax effect
8,128 
(1,367)
(2,720)
Non-deductible expenses, tax credits, and other, net
647 
361 
(1,317)
Changes in valuation allowance
(7,198)
(1,980)
23,095 
Total income tax expense
$
4,800 
$
838 
$
11,329 
100

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 13 – INCOME TAXES (CONTINUED)
The components of the Company’s income tax expense (benefit) for the years ended December 31, 2022, 2021 and 2020 were as follows:
For the year ended December 31,
2022
2021
2020
Income tax expense (benefit):
Current:
Federal
$
— 
$
— 
$
(51)
State
4,800 
838 
(10)
Deferred:
Federal
— 
— 
7,688 
State
— 
— 
3,702 
Total
$
4,800 
$
838 
$
11,329 
The components of consolidated TRS’s net deferred tax asset as of December 31, 2022 and 2021 were as follows:
As of December 31,
2022
2021
Deferred tax assets:
 
 
Net operating loss carryforwards
$
13,245 
$
19,084 
Accrued expenses and other
773 
2,002 
Tax credit carryforwards
289 
355 
Depreciation and amortization
107 
171 
Total gross deferred tax assets
14,414 
21,612 
Valuation allowance
(14,414)
(21,612)
Total Net deferred tax assets
$
— 
$
— 
In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Based on the level of historical taxable income and projections for future taxable income over which the deferred tax assets are deductible
and limitations related to the utilization of certain tax attribute carryforwards, Management believes it is more likely than not that the remaining deferred tax
assets will not be realized.
As of December 31, 2022, we have gross federal net operating loss carryforwards of $42,920 of which $2,365 expire over various periods from 2023 through 2029
and $40,555 carries forward indefinitely.  As of December 31, 2022, we have gross state net operating loss carryforwards of $67,616 of which $56,853 expire over
various periods from 2023 to 2040 and $10,763 carries forward indefinitely.  The Company has tax credits of $289 available which begin to expire in 2032.
101

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 13 – INCOME TAXES (CONTINUED)
Earnings and profits, which will determine the taxability of distributions to shareholders, will differ from net income reported for financial reporting purposes due
to the differences for federal tax purposes in the estimated useful lives and methods used to compute depreciation. The following table sets forth certain per
share information regarding the Company’s common and preferred share distributions for the years ended December 31, 2022, 2021 and 2020.
2022
2021
2020
Preferred Shares - 6.875% Series C
Ordinary income
2.17 %
0.00 %
0.00 %
Return of Capital
0.00 %
0.00 %
100.00 %
Capital Gain Distribution
97.83 %
100.00 %
0.00 %
Preferred Shares - 6.5% Series D
Ordinary income
2.17 %
0.00 %
0.00 %
Return of Capital
0.00 %
0.00 %
100.00 %
Capital Gain Distribution
97.83 %
100.00 %
0.00 %
Preferred Shares - 6.5% Series E
Ordinary income
2.17 %
0.00 %
0.00 %
Return of Capital
0.00 %
0.00 %
100.00 %
Capital Gain Distribution
97.83 %
100.00 %
0.00 %
Common Shares - Class A
Ordinary income
2.17 %
N/A
0.00 %
Return of Capital
0.00 %
N/A
100.00 %
Capital Gain Distribution
97.83 %
N/A
0.00 %
102

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
NOTE 14 – SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Year Ended December 31, 2022
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Hotel Operating Revenues:
Room
$
65,132 
$
98,242 
$
81,473 
$
72,793 
Food & Beverage
9,056 
15,710 
14,405 
16,642 
Other
7,639 
9,247 
8,263 
6,943 
Other Revenues
41 
91 
107 
90 
Hotel Operating Expenses:
Room
14,590 
19,447 
17,892 
15,811 
Food & Beverage
8,404 
11,607 
11,342 
12,780 
Other
26,356 
36,039 
33,425 
29,528 
Other Expenses
48,160 
46,877 
(99,524)
2,227 
Loss from Unconsolidated Joint Ventures
(936)
357 
478 
48 
Income (Loss) Before Income Taxes
(16,578)
9,677 
141,591 
36,170 
Income Tax Benefit (Expense)
(21)
(93)
(5,402)
716 
Net Income (Loss)
(16,599)
9,584 
136,189 
36,886 
Income (loss) Allocated to Noncontrolling Interests
(2,681)
423 
15,283 
3,547 
(Loss) Income Allocated to Noncontrolling Interests - Consolidated Joint Venture
2,273 
691 
(615)
417 
Preferred Distributions
6,044 
6,043 
6,044 
6,043 
Net Income (Loss) applicable to Common Shareholders
$
(22,235)
$
2,427 
$
115,477 
$
26,879 
Earnings per share:
Basic Net Income (Loss) applicable to Common Shareholders
$
(0.57)
$
0.06 
$
2.92 
$
0.65 
Diluted Net Income (Loss) applicable to Common Shareholders
$
(0.57)
$
0.06 
$
2.82 
$
0.62 
Weighted Average Common Shares Outstanding - Basic
39,231,550 
39,277,269 
39,465,645 
39,497,268 
Weighted Average Common Shares Outstanding - Diluted
39,231,550 
40,453,785 
40,962,773 
41,534,541 
Year Ended December 31, 2021
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Hotel Operating Revenues:
Room
$
39,350 
$
56,539 
$
68,302 
$
73,797 
Food & Beverage
3,074 
7,230 
9,616 
11,858 
Other
4,729 
6,314 
7,289 
7,768 
Other Revenues
12 
13 
44 
54 
Hotel Operating Expenses:
Room
9,198 
12,350 
14,706 
15,631 
Food & Beverage
2,873 
5,409 
7,123 
9,351 
Other
20,109 
23,551 
28,160 
29,695 
Other Expenses
5,459 
51,198 
49,930 
51,471 
Loss from Unconsolidated Joint Ventures
(658)
(589)
(611)
(434)
Loss Before Income Taxes
8,868 
(23,001)
(15,279)
(13,105)
Income Tax Benefit (Expense)
589 
(151)
(277)
(999)
Net Loss
9,457 
(23,152)
(15,556)
(14,104)
Loss Allocated to Noncontrolling Interests
358 
(2,907)
(2,130)
(1,997)
Loss Allocated to Noncontrolling Interests - Consolidated Joint Ventures
(158)
1,968 
— 
342 
Preferred Distributions
6,043 
6,044 
6,044 
6,043 
Net Loss applicable to Common Shareholders
$
3,214 
$
(28,257)
$
(19,470)
$
(18,492)
Earnings per share:
Basic Net Loss applicable to Common Shareholders
$
0.08 
$
(0.72)
$
(0.50)
$
(0.47)
Diluted Net Loss applicable to Common Shareholders
$
0.08 
$
(0.72)
$
(0.50)
$
(0.47)
Weighted Average Common Shares Outstanding - Basic
38,970,893 
39,097,820 
39,139,610 
39,149,120 
Weighted Average Common Shares Outstanding - Diluted
39,840,474 
39,097,820 
39,139,610 
39,149,120 
103

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2022
(IN THOUSANDS)
 
Initial Costs
Costs Capitalized
Subsequent to
Acquisition (1)
Gross Amounts at Close of Period
Accumulated
Depreciation
Net Book
Value
Description
Encumbrances
Land
Buildings &
Improvements
Land
Buildings &
Improvements
Land
Buildings &
Improvements
Total
Buildings &
Improvements*
Land, Buildings
&
Improvements
Date of
Acquisition
Annapolis Waterfront Hotel,
Annapolis, MD
(26,444)
— 
43,251 
— 
4,434 
— 
47,685 
47,685 
(6,824)
40,861 
3/28/2018
Hilton Garden Inn JFK,
JFK Airport, NY
— 
— 
25,018 
— 
4,326 
— 
29,344 
29,344 
(14,002)
15,342 
2/16/2006
Hyatt House White Plains,
White Plains, NY
— 
8,823 
30,273 
— 
14,075 
8,823 
44,348 
53,171 
(21,264)
31,907 
12/28/2006
Hampton Inn Seaport,
Seaport, NY
— 
7,816 
19,040 
— 
1,762 
7,816 
20,802 
28,618 
(9,043)
19,575 
2/1/2007
NU Hotel Brooklyn,
Brooklyn, NY
— 
— 
22,042 
— 
2,435 
— 
24,477 
24,477 
(9,811)
14,666 
1/14/2008
Hilton Garden Inn Tribeca,
Tribeca, NY
(45,450)
21,077 
42,955 
— 
1,524 
21,077 
44,479 
65,556 
(15,843)
49,713 
5/1/2009
Cadillac Hotel & Beach Club,
Miami, FL
— 
35,700 
55,805 
— 
46,325 
35,700 
102,130 
137,830 
(37,540)
100,290 
11/16/2011
The Rittenhouse
Hotel, Philadelphia, PA
— 
7,108 
29,556 
— 
27,638 
7,108 
57,194 
64,302 
(31,570)
32,732 
3/1/2012
The Boxer Boston,
Boston, MA
— 
1,456 
14,954 
— 
2,268 
1,456 
17,222 
18,678 
(5,791)
12,887 
5/7/2012
Holiday Inn Express Chelsea,
Manhattan, NY
— 
30,329 
57,016 
— 
3,010 
30,329 
60,026 
90,355 
(16,754)
73,601 
6/18/2012
Hyatt Union Square,
Union Square, NY
(56,000)
32,940 
79,300 
— 
4,685 
32,940 
83,985 
116,925 
(22,767)
94,158 
4/9/2013
Hilton Garden Inn Manhattan
Midtown East,
Midtown East, NY
(44,325)
45,480 
60,762 
— 
662 
45,480 
61,424 
106,904 
(13,467)
93,437 
5/27/2014
104

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2022 (CONTINUED)
(IN THOUSANDS)
Initial Costs
Costs Capitalized
Subsequent to
Acquisition (1)
Gross Amounts at Close of Period
Accumulated
Depreciation
Net Book
Value
Description
Encumbrances
Land
Buildings &
Improvements
Land
Buildings &
Improvements
Land
Buildings &
Improvements
Total
Buildings &
Improvements*
Land, Buildings
&
Improvements
Date of
Acquisition
Parrot Key Hotel & Villas,
Key West, FL
— 
57,889 
33,959 
— 
14,271 
57,889 
48,230 
106,119 
(18,578)
87,541 
5/7/2014
The Winter Haven Hotel Miami
Beach,
Miami Beach, FL
— 
5,400 
18,147 
— 
1,090 
5,400 
19,237 
24,637 
(4,808)
19,829 
12/20/2013
The Blue Moon Hotel Miami
Beach,
Miami Beach, FL
— 
4,874 
20,354 
— 
3,200 
4,874 
23,554 
28,428 
(5,775)
22,653 
12/20/2013
The St. Gregory Hotel, Dupont
Circle, Washington D.C.
(23,000)
23,764 
33,005 
— 
7,905 
23,764 
40,910 
64,674 
(12,073)
52,601 
6/16/2015
The Ritz-Carlton Georgetown,
Washington D.C.
— 
17,825 
29,584 
— 
4,115 
17,825 
33,699 
51,524 
(7,844)
43,680 
12/29/2015
The Sanctuary Beach Resort,
Marina, CA
(13,661)
20,278 
17,319 
— 
7,442 
20,278 
24,761 
45,039 
(8,053)
36,986 
1/28/2016
The Envoy Boston Seaport,
Boston, MA
— 
25,264 
75,979 
— 
4,019 
25,264 
79,998 
105,262 
(14,676)
90,586 
7/21/2016
Mystic Marriott Hotel & Spa,
Groton, CT
— 
1,420 
40,440 
— 
10,277 
1,420 
50,717 
52,137 
(12,217)
39,920 
1/3/2017
The Ritz-Carlton Coconut Grove,
Coconut Grove, FL
— 
5,185 
30,825 
— 
10,506 
5,185 
41,331 
46,516 
(10,353)
36,163 
2/1/2017
Philadelphia Westin,
Philadelphia, PA
— 
19,154 
103,406 
— 
6,084 
19,154 
109,490 
128,644 
(16,278)
112,366 
6/29/2017
The Ambrose Hotel, Santa
Monica, CA
— 
18,750 
26,839 
— 
1,693 
18,750 
28,532 
47,282 
(5,089)
42,193 
12/1/2016
Total Investment in Real Estate
$
(208,880)
$390,532 
$
909,829 
$
— 
$
183,746 
$390,532 
$
1,093,575 
$1,484,107 
$
(320,420)
$
1,163,687 
(1)
Costs capitalized subsequent to acquisition include reductions of asset value due to impairment.    
*    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, 2022, 2021 and 2020 is
approximately $1,023,829, $1,450,092 and $1,633,467, respectively.
Depreciation is computed for buildings and improvements using a useful life for these assets of 7 to 40 years.
See Accompanying Report of Independent Registered Public Accounting Firm
105

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 2022 (CONTINUED)
(IN THOUSANDS)
2022
2021
2020
Reconciliation of Real Estate
Balance at beginning of year
$
2,039,180  $
2,220,936  $
2,228,864 
Additions during the year
1,460 
5,322 
17,967 
Dispositions
(556,533)
(187,078)
(25,895)
Total Real Estate
$
1,484,107  $
2,039,180  $
2,220,936 
Reconciliation of Accumulated Depreciation
Balance at beginning of year
$
406,710  $
396,016  $
340,499 
Depreciation for year
48,286 
57,768 
64,083 
Accumulated depreciation on assets sold
(134,576)
(47,074)
(8,566)
Balance at the end of year
$
320,420  $
406,710  $
396,016 
106

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.    Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable
assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A control system cannot provide absolute assurance,
however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within a company have been detected.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined within Exchange
Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the processes designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and
includes policies and procedures that:
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management
and directors of the Company; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria contained in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on that
evaluation, management has concluded that, as of December 31, 2022, the Company’s internal control over financial reporting was effective based on those
criteria. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by KPMG LLP, an independent registered
public accounting firm, as stated in their attestation report which is included herein.
107

Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
Hersha Hospitality Trust:
Opinion on Internal Control Over Financial Reporting
We have audited Hersha Hospitality Trust and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance
sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, equity, and cash flows for
each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement schedule III (collectively, the consolidated
financial statements), and our report dated February 23, 2023 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 23, 2023
108

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.    Other Information
None
Item 9C.    Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
109

PART III
Item 10.    Trustees, Executive Officers and Corporate Governance
The required information is incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission
within 120 days after the end of the year covered by this Annual Report on Form 10-K with respect to our 2023 Annual Meeting of Shareholders.
Item 11.    Executive Compensation
The required information is incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission
within 120 days after the end of the year covered by this Annual Report on Form 10-K with respect to our 2023 Annual Meeting of Shareholders.
Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain of the required information is incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange
Commission within 120 days after the end of the year covered by this Annual Report on Form 10-K with respect to our 2023 Annual Meeting of Shareholders.
SECURITIES ISSUABLE PURSUANT TO EQUITY COMPENSATION PLANS
As of December 31, 2022, no options or warrants to acquire our securities pursuant to equity compensation plans were outstanding. The following table sets
forth the number of securities to be issued upon exercise of outstanding options, warrants and rights; weighted average exercise price of outstanding options,
warrants and rights; and the number of securities remaining available for future issuance under our equity compensation plans as of December 31, 2022:
Plan Category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance
under equity
compensation plans(1)
Equity compensation plans approved by security holders
-
-
1,297,507
Equity compensation plans not approved by security holders
-
-
-
Total
-
-
1,297,507
(1)    Represents shares issuable under the Company’s 2012 Amended and Restated Equity Incentive Plan. On January 1, 2012, the Company’s 2008 Equity
Incentive Plan (the “2008 EIP”) was terminated. Termination of the 2008 EIP does not impact awards issued under the 2008 EIP prior its termination.
Item 13.    Certain Relationships and Related Transactions, and Trustee Independence
The required information is incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission
within 120 days after the end of the year covered by this Annual Report on Form 10-K with respect to our 2023 Annual Meeting of Shareholders.
Item 14.    Principal Accountant Fees and Services
The required information is incorporated herein by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission
within 120 days after the end of the year covered by this Annual Report on Form 10-K with respect to our 2023 Annual Meeting of Shareholders.
110

PART IV
Item 15.    Exhibits and Financial Statement Schedules
(a)    Documents filed as part of this report.
1.    Financial Statements:
The following financial statements are included in this report on pages 51 to 101:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Equity and Comprehensive Income for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
2.    Financial Statement Schedules:
The following financial statement schedule is included in this report on pages 102 to 104: Schedule III - Real Estate and Accumulated Depreciation for the year
ended December 31, 2022.
3.    Exhibits
111

The following exhibits listed are filed as a part of this report:
Exhibit No.
 
3.1 
Articles of Amendment and Restatement of the Declaration of Trust of Hersha Hospitality Trust, as amended and supplemented (filed as
Exhibit 3.1 to the Annual Report on Form 10-K filed by Hersha Hospitality Trust on February 23, 2018 and incorporated by reference
herein).   
3.2 
Amended and Restated Bylaws of Hersha Hospitality Trust (filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q, filed by Hersha
Hospitality Trust on April 27, 2017 and incorporated by reference herein).
4.1 
Form of Common Shares Certificate (filed as Exhibit 4.1 to the Annual Report on Form 10-K, filed by Hersha Hospitality Trust on
February 23, 2018 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,
National Association, 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, National Association, as property trustee, Chase Bank USA, National Association, as
Delaware trustee, the Administrative 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 Certificate (included in Exhibit C).
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).
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 Administrative 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 Certificate (included in Exhibit C).
4.10 
Form of specimen certificate representing the 6.875% Series C Cumulative Redeemable Preferred Shares, $0.01 par value per share
(incorporated by reference to Exhibit 4.1 to Hersha Hospitality Trust's Registration Statement on Form 8-A filed on March 1, 2013).
4.11 
Form of specimen certificate representing the 6.50% Series D Cumulative Redeemable Preferred Shares, $0.01 par value per share
(incorporated by reference to Exhibit 4.1 to Hersha Hospitality Trust's Registration Statement on Form 8-A filed on May 27, 2016).
4.12 
Form of specimen certificate representing the 6.50% Series E Cumulative Redeemable Preferred Shares, $0.01 par value per share
(incorporated by reference to Exhibit 4.1 to Hersha Hospitality Trust's Registration Statement on Form 8-A filed on November 4, 2016).
4.13 
Description of Securities (filed as Exhibit 4.13 to the Annual Report on Form 10-K, filed by Hersha Hospitality Trust on February 25, 2020
and incorporated by reference herein).
10.1 
Amended and Restated Agreement of Limited Partnership of Hersha Hospitality Limited Partnership (filed as Exhibit 10.1 to the
Registration Statement on Form S-11 filed by Hersha Hospitality Trust on June 5, 1998 and incorporated by reference herein).
112

Exhibit No.
 
10.2 
Option 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 Registration Statement on Form S-11 filed by Hersha Hospitality Trust on June 5, 1998 and incorporated by reference
herein).
10.3 
Amendment to Option Agreement, dated December 4, 1998 (filed as Exhibit 10.19(a) to the Registration Statement on Form S-11/A
filed by Hersha Hospitality Trust on December 7, 1998 and incorporated by reference herein).
10.4 
Administrative Services Agreement, dated January 26, 1999, between Hersha Hospitality Trust and Hersha Hospitality Management, L.P.
(filed as Exhibit 10.21 to the Registration Statement on Form S-11 filed by Hersha Hospitality Trust on June 5, 1998 and incorporated by
reference herein).
10.5 
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).
10.6 
Second Amendment to Option Agreement (filed as Exhibit 10.15 to the Registration Statement on Form S-3 filed by Hersha Hospitality
Trust on February 24, 2004 and incorporated by reference herein).
10.7 
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).
10.8 
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).
10.9 
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).
10.10 
Form of Fifth 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).
10.11 
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).
10.12 
Amended and Restated Hersha Hospitality Trust 2012 Equity Incentive Plan, amended as of May 27, 2021 (incorporated by reference to
Appendix A to Hersha Hospitality Trust's Definitive Proxy Statement filed on April 16, 2021).
10.13 
Form of LTIP Unit Vesting Agreement (incorporated by reference to Exhibit 10.3 to Hersha Hospitality Trust's Current Report on 8-K filed
on December 23, 2014).
10.14 
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).
10.15 
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).
10.16 
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).
10.17 
Equity Distribution Agreement, dated April 26, 2017, by and among Hersha Hospitality Trust, Hersha Hospitality Limited Partnership and
Citigroup Global Markets Inc. (filed as Exhibit 1.1 to the Current Report on Form 8-K filed by Hersha Hospitality Trust on May 2, 2017).
113

Exhibit No.
10.18 
Equity Distribution Agreement, dated April 26, 2017, by and among Hersha Hospitality Trust, Hersha Hospitality Limited Partnership and
Robert W. Baird & Co. Incorporated (filed as Exhibit 1.2 to the Current Report on Form 8-K filed by Hersha Hospitality Trust on May 2,
2017). 
10.19 
Equity Distribution Agreement, dated April 26, 2017, by and among Hersha Hospitality Trust, Hersha Hospitality Limited Partnership and
JonesTrading Institutional Services LLC (filed as Exhibit 1.3 to the Current Report on Form 8-K filed by Hersha Hospitality Trust on May 2,
2017).
10.20 
Equity Distribution Agreement, dated April 26, 2017, by and among Hersha Hospitality Trust, Hersha Hospitality Limited Partnership and
Raymond James & Associates, Inc. (filed as Exhibit 1.4 to the Current Report on Form 8-K filed by Hersha Hospitality Trust on May 2,
2017).
10.21 
Tenth Amendment to the Agreement of Limited Partnership of Hersha Hospitality Limited Partnership (filed as Exhibit 10.1 to the
Current Report on Form 8-K filed by Hersha Hospitality Trust on May 2, 2017).
10.22 
Eleventh Amendment to Agreement of Limited Partnership, Dated July 31, 2019 (filed as Exhibit 10.1 to the Quarterly Report on Form
10-Q for the quarter ended June 30, 2019 and incorporated by reference herein).
10.23 
Form of Third Amended and Restated Employment Agreement, dated August 3, 2020 (filed as Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2020 and incorporated by reference herein).
10.24 
Purchase Agreement, dated as of February 17, 2021, by and among the Company, the Operating Partnership and Goldman Sachs & Co.
LLC, as representatives of the several initial purchasers listed on Schedule I attached thereto (filed as Exhibit 10.4 to the Current Report
on Form 8-K filed by Hersha Hospitality Trust on February 22, 2021).
10.25 
Credit Agreement, dated as of August 4, 2022, by and among Hersha Hospitality Limited Partnership, as borrower, Hersha Hospitality
Trust, as parent guarantor, the subsidiary guarantors named therein, as guarantors, the initial lenders and initial issuing banks named
therein, Citibank, N.A., as administrative agent and collateral agent, Wells Fargo Bank, N.A. and Manufacturers and Traders Trust
Company, as co-syndication agents, Manufacturers and Traders Trust Company, Fifth Third Bank and Wilmington Savings Fund Society,
FSB, as co-documentation agents, and Citibank, N.A., Wells Fargo Securities, LLC, and Manufacturers and Traders Trust Company, as
joint lead arrangers and joint book running managers (as filed Exhibit 10.1 to the Current Report on Form 8-K filed by Hersha Hospitality
Trust on August 8, 2022).
10.26 
Security Agreement, dated as of August 4, 2022, by and among Hersha Hospitality Limited Partnership, as Borrower and a Grantor, the
other Grantors party thereto, and Citibank, N.A., as collateral agent (as filed Exhibit 10.2 to the Current Report on Form 8-K filed by
Hersha Hospitality Trust on August 8, 2022).
21.1 
List of Subsidiaries of the Registrant.*
23.1 
Consent of KPMG LLP.*
31.1 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Exhibit No.
 
101.INS
Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document*
104
Cover Page Interactive Data File.
*
Filed herewith.
Item 16. Form 10-K Summary
None.
114

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HERSHA HOSPITALITY TRUST
February 23, 2023
/s/ Neil H. Shah
Neil H. Shah
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature
 
Title
 
Date
 
 
 
 
 
/s/ Jay H. Shah
 
Chairman and Trustee
 
February 23, 2023
Jay H. Shah
 
 
 
 
 
 
 
 
 
/s/ Neil H. Shah
 
Chief Executive Officer and Trustee
(Principal Executive Officer)
 
February 23, 2023
Neil H. Shah
 
 
 
 
 
 
 
 
 
/s/ Ashish R. Parikh
 
Chief Financial Officer
(Principal Financial Officer)
 
February 23, 2023
Ashish R. Parikh
 
 
 
 
 
 
 
 
 
/s/ Michael R. Gillespie
 
Chief Accounting Officer
(Principal Accounting Officer)
 
February 23, 2023
Michael R. Gillespie
 
 
 
 
 
 
 
 
 
/s/ Donald J. Landry
 
Trustee
 
February 23, 2023
Donald J. Landry
 
 
 
 
 
 
 
 
/s/ Jackson Hsieh
 
Trustee
 
February 23, 2023
Jackson Hsieh
 
 
 
 
 
 
 
 
/s/ Thomas J. Hutchison III
 
Trustee
 
February 23, 2023
Thomas J. Hutchison III
 
 
 
 
 
 
 
 
 
/s/ Michael A. Leven
 
Trustee
 
February 23, 2023
Michael A. Leven
 
 
 
 
/s/ Dianna F. Morgan
 
Trustee
 
February 23, 2023
Dianna F. Morgan
 
 
 
 
 
 
 
 
 
/s/ John M. Sabin
 
Trustee
 
February 23, 2023
John M. Sabin
 
 
 
 
115

Exhibit 4.13
DESCRIPTION OF THE COMPANY’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
The following descriptions of the material terms of the securities of Hersha Hospitality Trust (“we,” “our,” “our company” and “us”) registered under
Section 12 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are only a summary and are subject to, and qualified in their entirety by
reference to, Maryland law and our declaration of trust, including the applicable articles supplementary, and our amended and restated bylaws, or our bylaws. We
have incorporated by reference our declaration of trust and bylaws as exhibits to the Annual Report on Form 10-K of which this Exhibit 4.13 is a part.
Overview
Our declaration of trust provides that we may issue up to 104,000,000 Priority Class A common shares of beneficial interest, $0.01 par value per share, or
our common shares, 1,000,000 Class B common shares of beneficial interest, $0.01 par value per share, and 29,000,000 preferred shares of beneficial interest,
$0.01 par value per share, of which (i) 3,000,000 shares have been designated as 6.875% Series C cumulative redeemable preferred shares of beneficial interest,
$0.01 par value per share, (ii) 9,050,000 shares are classified as 6.50% Series D cumulative redeemable preferred shares of beneficial interest, $0.01 par value per
share, and (iii) 5,600,000 shares are classified as 6.50% Series E cumulative redeemable preferred shares of beneficial interest, $0.01 par value per share.
Our common shares currently trade on the NYSE under the symbol “HT”, our Series C preferred shares currently trade on the NYSE under symbol
“HTPRC”, our Series D preferred shares currently trade on the NYSE under symbol “HTPRD” and our Series E preferred shares currently trade on the NYSE under
symbol “HTPRE”. The transfer agent for these shares is American Stock Transfer & Trust Company. Our common shares, our Series C preferred shares, our Series D
preferred shares and our Series E preferred shares are subject to certain restrictions on ownership and transfer which were adopted for the purpose of enabling
us to preserve our status as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code, among other purposes.
As permitted by the Maryland statute governing real estate investment trusts formed under the laws of that state, which is referred to as the Maryland
REIT Law, our declaration of trust authorizes our board of trustees, without any action by our shareholders, to amend our declaration of trust to increase or
decrease the aggregate number of shares of beneficial interest or the number of shares of any class of shares of beneficial interest that we have authority to issue.
Maryland law and our declaration of trust provide that our shareholders are not personally liable for any of our debts, claims, demands, judgments or obligations
solely by reason of their status as a shareholder.
Common Shares
The common shares we may offer from time to time, upon issuance against full payment of the applicable purchase price, will be duly authorized, validly
issued, fully paid and nonassessable.
Voting Rights of Common Shares
Subject to the provisions of our declaration of trust regarding the restrictions on the transfer and ownership of shares of beneficial interest, each
outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders, including the election of trustees. Except as may be
provided with respect to any class or series of our preferred shares, including our Series C preferred shares, our Series D preferred shares and our Series E
preferred shares, only holders of our common shares possess voting rights. Our bylaws provide for the election of trustees in uncontested elections by a majority
of the votes cast at a meeting of shareholders at which a quorum is present. Under this standard, a majority of the votes cast means the number of votes cast for
a trustee’s election exceeds the number of votes cast against that trustee’s election. Our bylaws provide for the election of trustees by a plurality of the votes cast
at a meeting of shareholders at which a quorum is present if the number of nominees exceeds the number of trustees to be elected (a contested election).
Dividends, Liquidation and Other Rights
Holders of our common shares are entitled to receive dividends when authorized by our board of trustees and declared by us out of assets legally
available for the payment of dividends, and the holders of common shares are entitled to

share ratably in our assets legally available for distribution to our shareholders in the event of our liquidation, dissolution or winding up, after payment of or
adequate provision for all of our known debts and liabilities. These rights are subject to the preferential rights of the holders of our outstanding Series C preferred
shares, our outstanding Series D preferred shares and our outstanding Series E preferred shares, as well as the rights of the holders of any other series of our
preferred shares that may be created in the future, and to the provisions of our declaration of trust regarding restrictions on transfer of our shares.
The holders of our common shares have no preference, conversion, exchange, sinking fund, redemption or appraisal rights and have no preemptive rights
to subscribe for any additional common shares. Subject to the restrictions on transfer of shares contained in our declaration of trust and to the ability of the board
of trustees to create common shares with differing voting rights, all common shares will have equal dividend, liquidation and other rights.
Preferred Shares
We may offer and sell preferred shares from time to time, in one or more classes or series (including additional Series C preferred shares, additional
Series D preferred shares and additional Series E preferred shares), as authorized by our board of trustees. The preferred shares we may offer from time to time,
upon issuance against payment of the full purchase price, will be duly authorized, validly issued, fully paid and nonassessable. Our declaration of trust authorizes
our board of trustees to classify any unissued preferred shares and to reclassify any previously classified but unissued preferred shares of any class or series from
time to time in one or more class or series, as authorized by our board of trustees. Prior to issuance of shares of each class or series, our board of trustees is
required by the Maryland REIT Law and our declaration of trust to set for each such class or series, subject to the provisions of our declaration of trust regarding
the restrictions on ownership and transfer of shares of beneficial interest, the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each such class or series. Our board of trustees could
authorize the issuance of preferred shares with terms and conditions that could have the effect of delaying, deterring or preventing a transaction or a change in
control that might involve a premium price for holders of common shares or otherwise be in their best interest.
The prospectus supplement governing the offering of any preferred shares will describe the specific terms of such securities, including:
•
the title and stated value of the preferred shares;
•
the number of preferred shares offered and the offering price of the preferred shares;
•
the dividend rate(s), period(s) and/or payment date(s) or method(s) of calculation of any of those terms that apply to the preferred shares;
•
the date from which dividends on the preferred shares will accumulate, if applicable;
•
any limitations on the payment of dividends or other distributions;
•
the terms and amount of a sinking fund, if any, for the purchase or redemption of the preferred shares;
•
the redemption rights, including conditions and the redemption price(s), if applicable, of the preferred shares;
•
any listing of the preferred shares on any securities exchange;
•
the terms and conditions, if applicable, upon which the preferred shares will be convertible into common shares or any of our other securities,
including the conversion price or rate (or manner of calculation thereof);
•
the relative ranking and preference of the preferred shares as to dividend rights and rights upon liquidation, dissolution or the winding up of our
affairs;
•
any limitations on issuance of any class or series of preferred shares ranking senior to or on a parity with that series of preferred shares as to
dividend rights and rights upon liquidation, dissolution or the winding up of our affairs;
•
the procedures for any auction and remarketing, if any, for the preferred shares;
•
any other specific terms, preferences, rights, limitations or restrictions of the preferred shares;
•
a discussion of any additional federal income tax consequences applicable to the preferred shares; and
•
any limitations on direct or beneficial ownership and restrictions on transfer in addition to those described in “Restrictions on Ownership and
Transfer,” in each case as may be appropriate to preserve our status as a real estate investment trust.
The terms of any preferred shares we issue will be set forth in articles supplementary or an amendment to our declaration of trust. We will file the
articles supplementary or amendment as an exhibit to the registration statement, or as an exhibit to a filing with the SEC that is incorporated by reference into the
prospectus. The description of preferred shares in

any prospectus supplement will not describe all of the terms of the preferred shares in detail. You should read the applicable articles supplementary or
amendment to our declaration of trust for a complete description of all of the terms.
Rank
Unless otherwise indicated in the accompanying prospectus supplement, the preferred shares offered through that supplement will, with respect to
dividend rights and rights upon our liquidation, dissolution or winding up, rank:
•
senior to all classes or series of our common shares, and to all other equity securities ranking junior to those preferred shares;
•
on a parity with all of our equity securities ranking on a parity with the preferred shares; and
•
junior to all of our equity securities ranking senior to the preferred shares.
The term “equity securities” does not include convertible debt securities.
Dividends
Subject to any preferential rights of any outstanding shares or series of shares, and to the provisions of our declaration of trust regarding ownership of
shares in excess of the ownership limitation described in “Restrictions on Ownership and Transfer,” holders of our preferred shares are entitled to receive
dividends, when authorized by our board of trustees and declared by us out of assets legally available for payment of dividends.
Redemption
If we provide for a redemption right in a prospectus supplement relating to an offering of preferred shares, the preferred shares offered through that
supplement will be subject to mandatory redemption or redemption at our or the holder’s option, in whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in that supplement.
Liquidation Preference
As to any preferred shares we may offer from time to time, the applicable prospectus supplement will provide that, upon the voluntary or involuntary
liquidation, dissolution or winding up of our affairs, the holders of those preferred shares will receive, before any distribution or payment is made to the holders of
any other class or series of shares ranking junior to those preferred shares with respect to rights upon any liquidation, dissolution or winding up, and after
payment or provision for payment of our debts and other liabilities, out of our assets legally available for distribution to shareholders, liquidating distributions in
the amount of any liquidation preference per share (set forth in the applicable prospectus supplement), plus an amount, if applicable, equal to all distributions
accrued and unpaid thereon (not including any accumulation in respect of unpaid distributions for prior distribution periods if those preferred shares do not have
a cumulative distribution). After payment of the full amount of the liquidating distributions to which they are entitled, the holders of those preferred shares will
have no right or claim to any of our remaining assets. In the event that, upon our voluntary or involuntary liquidation, dissolution or winding up, the legally
available assets are insufficient to pay the amount of the liquidating distributions on all of those outstanding preferred shares and the corresponding amounts
payable on all other preferred shares ranking on a parity with those preferred shares with respect to rights upon liquidation, dissolution or winding up, then the
holders of those preferred shares and all other preferred shares will share ratably in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
If the liquidating distributions are made in full to all holders of preferred shares entitled to receive those distributions prior to any other classes or series
of equity security ranking junior to the preferred shares upon our liquidation, dissolution or winding up, then our remaining assets will be distributed among the
holders of those junior classes or series of equity shares, in each case according to their respective rights and preferences and their respective number of shares.
The liquidation preference is not indicative of the price at which the preferred shares will actually trade on or after the date of issuance.
Voting Rights
Unless otherwise indicated in the applicable supplement, holders of our preferred shares will not have any voting rights, except as may be required by
the applicable rules and regulations of the NYSE or any other securities exchange on which the preferred shares are listed.

Conversion Rights
The terms and conditions, if any, upon which any class or series of preferred shares is convertible into common shares will be set forth in the prospectus
supplement relating to the offering of those preferred shares. These terms typically will include:
•
the number of common shares into which the preferred shares are convertible;
•
the conversion price (or manner of calculation thereof);
•
the conversion period;
•
provisions as to whether conversion will be at the option of the holders of the preferred shares or at our option;
•
the events requiring an adjustment of the conversion price; and
•
provisions affecting conversion in the event of the redemption of that class or series of preferred shares.
Series C Preferred Shares
The Series C preferred shares generally provide for the following rights, preferences and obligations:
•
Dividend Rights. The Series C preferred shares accrue a cumulative cash dividend at an annual rate of 6.875% on the $25.00 per share liquidation
preference, equivalent to a fixed annual amount of $1.71875 per share per year.
•
Liquidation Rights. Upon any voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of Series C preferred
shares will be entitled to receive a liquidation preference of $25.00 per share, plus an amount equal to all accrued and unpaid dividends to the
date of payment, before any payment or distribution will be made or set aside for holders of any junior shares, including our common shares.
•
Redemption Provisions. The Series C preferred shares are not redeemable prior to March 6, 2018, except in certain limited circumstances. On
and after March 6, 2018, the Series C preferred shares may be redeemed for cash at our option, in whole or in part, at any time and from time to
time upon not less than 30 days’ nor more than 60 days’ written notice, at a redemption price equal to $25.00 per share plus an amount equal
to all accrued and unpaid dividends to and including the date fixed for redemption, except in certain limited circumstances. The Series C
preferred shares have no stated maturity and are not subject to any sinking fund or mandatory redemption provisions.
•
Voting Rights. Holders of Series C preferred shares generally have no voting rights. Whenever dividends on any Series C preferred shares shall be
in arrears for six or more quarterly periods, whether or not consecutive, the number of trustees then constituting 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 Series C Parity Preferred (as
defined below), and the holders of Series C preferred shares (voting 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 liquidation, including the Series D preferred shares and the
Series E preferred shares (“Series C Parity Preferred”), upon which like voting rights have been conferred and are exercisable) will be entitled to
vote for the election of a total of two trustees, if not already elected by the holders of Series C Parity Preferred by reason of similar types of
provisions with respect to preferred share trustees, at a special meeting 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 Series C Parity Preferred so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of shareholders), and at each subsequent annual meeting until 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. In addition, the issuance of senior shares or certain changes to the terms of the Series C preferred
shares that would be materially adverse to the rights of holders of Series C preferred shares cannot be made without the affirmative vote of
holders of at least two-thirds of the outstanding Series C preferred shares voting separately as a single class.
•
Conversion and Preemptive Rights. Except in connection with certain changes in control of our company and in accordance with certain
provisions in our declaration of trust related to restrictions on ownership and transfer of our shares, the Series C preferred shares are not
convertible or exchangeable for any of our other

securities or property, and holders of our Series C preferred shares have no preemptive rights to subscribe for any securities of our company.
For additional information regarding our Series C preferred shares, see our Registration Statement on Form 8-A filed with the SEC on March 1, 2013.
Series D Preferred Shares
The Series D preferred shares generally provide for the following rights, preferences and obligations:
•
Dividend Rights. The Series D preferred shares accrue a cumulative cash dividend at an annual rate of 6.50% on the $25.00 per share liquidation
preference, equivalent to a fixed annual amount of $1.625 per share per year.
•
Liquidation Rights. Upon any voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of Series D preferred
shares will be entitled to receive a liquidation preference of $25.00 per share, plus an amount equal to all accrued and unpaid dividends to the
date of payment, before any payment or distribution will be made or set aside for holders of any junior shares, including our common shares.
•
Redemption Provisions. The Series D preferred shares are not redeemable prior to May 31, 2021, except in certain limited circumstances. On and
after May 31, 2021, the Series D preferred shares may be redeemed for cash at our option, in whole or in part, at any time and from time to
time upon not less than 30 days’ nor more than 60 days’ written notice, at a redemption price equal to $25.00 per share plus an amount equal
to all accrued and unpaid dividends to and including the date fixed for redemption, except in certain limited circumstances. The Series D
preferred shares have no stated maturity and are not subject to any sinking fund or mandatory redemption provisions.
•
Voting Rights. Holders of Series D preferred shares generally have no voting rights. Whenever dividends on any Series D preferred shares shall be
in arrears for six or more quarterly periods, whether or not consecutive, the number of trustees then constituting 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 Series D Parity Preferred (as
defined below), and the holders of Series D preferred shares (voting 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 liquidation, including the Series C preferred shares and the
Series E preferred shares (“Series D Parity Preferred”), upon which like voting rights have been conferred and are exercisable) will be entitled to
vote for the election of a total of two trustees, if not already elected by the holders of Series D Parity Preferred by reason of similar types of
provisions with respect to preferred share trustees, at a special meeting 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 Series D Parity Preferred so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of shareholders), and at each subsequent annual meeting until 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. In addition, the issuance of senior shares or certain changes to the terms of the Series D preferred
shares that would be materially adverse to the rights of holders of Series D preferred shares cannot be made without the affirmative vote of
holders of at least two-thirds of the outstanding Series D preferred shares voting separately as a single class.
•
Conversion and Preemptive Rights. Except in connection with certain changes in control of our company and in accordance with certain
provisions in our declaration of trust related to restrictions on ownership and transfer of our shares, the Series D preferred shares are not
convertible or exchangeable for any of our other securities or property, and holders of our Series D preferred shares have no preemptive rights
to subscribe for any securities of our company.
For additional information regarding our Series D preferred shares, see our Registration Statement on Form 8-A filed with the SEC on May 27, 2016.

Series E Preferred Shares
The Series E preferred shares generally provide for the following rights, preferences and obligations:
•
Dividend Rights. The Series E preferred shares accrue a cumulative cash dividend at an annual rate of 6.50% on the $25.00 per share liquidation
preference, equivalent to a fixed annual amount of $1.625 per share per year.
•
Liquidation Rights. Upon any voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of Series E preferred
shares will be entitled to receive a liquidation preference of $25.00 per share, plus an amount equal to all accrued and unpaid dividends to the
date of payment, before any payment or distribution will be made or set aside for holders of any junior shares, including our common shares.
•
Redemption Provisions. The Series E preferred shares are not redeemable prior to November 7, 2021, except in certain limited circumstances.
On and after November 7, 2021, the Series E preferred shares may be redeemed for cash at our option, in whole or in part, at any time and from
time to time upon not less than 30 days’ nor more than 60 days’ written notice, at a redemption price equal to $25.00 per share plus an amount
equal to all accrued and unpaid dividends to and including the date fixed for redemption, except in certain limited circumstances. The Series E
preferred shares have no stated maturity and are not subject to any sinking fund or mandatory redemption provisions.
•
Voting Rights. Holders of Series E preferred shares generally have no voting rights. Whenever dividends on any Series E preferred shares shall be
in arrears for six or more quarterly periods, whether or not consecutive, the number of trustees then constituting 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 Series E Parity Preferred (as
defined below), and the holders of Series E preferred shares (voting 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 liquidation, including the Series C preferred shares and the
Series D preferred shares (“Series E Parity Preferred”), upon which like voting rights have been conferred and are exercisable) will be entitled to
vote for the election of a total of two trustees, if not already elected by the holders of Series E Parity Preferred by reason of similar types of
provisions with respect to preferred share trustees, at a special meeting 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 Series E Parity Preferred so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of shareholders), and at each subsequent annual meeting until all
dividends accrued on such Series E 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. In addition, the issuance of senior shares or certain changes to the terms of the Series E preferred
shares that would be materially adverse to the rights of holders of Series E preferred shares cannot be made without the affirmative vote of
holders of at least two-thirds of the outstanding Series E preferred shares voting separately as a single class.
•
Conversion and Preemptive Rights. Except in connection with certain changes in control of our company and in accordance with certain
provisions in our declaration of trust related to restrictions on ownership and transfer of our shares, the Series E preferred shares are not
convertible or exchangeable for any of our other securities or property, and holders of our Series E preferred shares have no preemptive rights
to subscribe for any securities of our company.
For additional information regarding our Series E preferred shares, see our Registration Statement on Form 8-A filed with the SEC on November 4, 2016.
Classification or Reclassification of Common Shares or Preferred Shares
Our declaration of trust authorizes our board of trustees to classify or reclassify any unissued common shares or preferred shares into one or more
classes or series of shares of beneficial interest by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to
dividends or distributions, qualifications or terms or conditions of redemption of such new class or series of shares of beneficial interest.

Classification of Our Board of Trustees
In accordance with our declaration of trust, our bylaws provide that the number of our trustees may be established by our board of trustees but may not
be fewer than three nor more than nine. The trustees may increase or decrease the number of trustees by a vote of at least 80% of the members of our board of
trustees, provided that the number of trustees shall never be less than the number required by Maryland law and that the tenure of office of a trustee shall not
be affected by any decrease in the number of trustees. Except as may be provided by our board of trustees in setting the terms of any class or series of preferred
shares, any vacancy, including a vacancy created by an increase in the number of trustees, will be filled at a regular or special meeting of our board of trustees
called for that purpose, by a majority of the remaining trustees or, if no trustees remain, by a plurality of the votes cast by our shareholders at an annual or special
meeting of our shareholders at which a quorum is present. Any individual appointed or elected to fill such vacancy will serve for the remainder of the full term of
the class in which the vacancy occurred.
Pursuant to our declaration of trust, our board of trustees is divided into two classes of trustees. Trustees of each class are chosen for two-year terms and
each year one class of trustees will be elected by the shareholders. We believe that classification of our board of trustees helps to assure the continuity and
stability of our business strategies and policies as determined by the trustees. Holders of common shares have no right to cumulative voting in the election of
trustees.
The classification of our board of trustees could have the effect of making the replacement of incumbent trustees more time consuming and difficult. The
staggered terms of trustees may delay, defer or prevent a tender offer or an attempt to change control in us or other transaction that might involve a premium
price for holders of common shares that might be in the best interests of the shareholders.
Removal of Trustees
Our declaration of trust provides that, subject to the rights of holders of one or more class or series of preferred shares, a trustee may be removed, with
or without cause, upon the affirmative vote of at least two-thirds of the votes entitled to be cast in the election of trustees. This provision, when coupled with the
provision in our bylaws authorizing our board of trustees to fill vacant trusteeships, may preclude shareholders from removing incumbent trustees, except upon a
substantial affirmative vote, and filling the vacancies created by such removal with their own nominees.
Business Combinations
Maryland law prohibits “business combinations” between us and an interested shareholder or an affiliate of an interested shareholder for five years after
the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation,
share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Maryland law defines an
interested shareholder as:
•
any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our shares; or
•
an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of our then outstanding voting shares.
A person is not an interested shareholder if our board of trustees approved in advance the transaction by which the person otherwise would have
become an interested shareholder.
After the five-year prohibition, any business combination between us and an interested shareholder generally must be recommended by our board of
trustees and approved by the affirmative vote of at least:
•
80% of the votes entitled to be cast by holders of our then outstanding shares of beneficial interest; and
•
two-thirds of the votes entitled to be cast by holders of our voting shares other than shares held by the interested shareholder with whom or
with whose affiliate the business combination is to be effected or shares held by an affiliate or associate of the interested shareholder.
These super-majority vote requirements do not apply if our common shareholders receive a minimum price, as defined under Maryland law, for their
shares in the form of cash or other consideration in the same form as previously paid by the interested shareholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are approved or exempted by our board of trustees
before the time that the interested shareholder becomes an interested shareholder. Pursuant to the statute, our board of trustees has adopted a resolution
exempting any business combination to which we are a party. As a result, any person may be able to enter into a business combination with us that may not be in
the best interest of our shareholders, without compliance by us with the supermajority vote requirements and other provisions of the statute. There is no
assurance that our board of trustees will not amend, alter or repeal this resolution in the future.
The provisions of the business combination statute could delay, deter or prevent a change of control or other transaction in which holders of our equity
securities 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.
Control Share Acquisitions
Maryland law provides that a holder of “control shares” of a Maryland real estate investment trust acquired in a “control share acquisition” has no voting
rights with respect to those shares unless approved by a vote of at least two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, or
by officers or by trustees who are employees of the Maryland real estate investment trust are excluded from the shares entitled to vote on the matter. “Control
shares” are voting shares which, if aggregated with all other shares previously acquired by the acquiring person, or in respect of which the acquiring person is able
to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiring person to exercise voting power in
electing trustees within one of the following ranges of voting power:
•
one-tenth or more but less than one-third;
•
one-third or more but less than a majority; or
•
a majority or more of all voting power.
Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A
“control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition may compel the board of trustees of a Maryland real estate investment trust to
call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special
meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the
Maryland real estate investment trust may present the question at any shareholders meeting.
If voting rights are not approved at the shareholders meeting or if the acquiring person does not deliver the statement required by Maryland law, then,
subject to certain conditions and limitations, the Maryland real estate investment trust may redeem any or all of the control shares, except those for which voting
rights have previously been approved, for fair value. Fair value is determined without regard to the absence of voting rights for the control shares and as of the
date of the last control share acquisition or of any meeting of shareholders at which the voting rights of the shares were considered and not approved. If voting
rights for control shares are approved at a shareholders meeting and the acquiror may then vote a majority of the shares entitled to vote, then all other
shareholders may exercise appraisal rights. The fair value of the shares for purposes of these appraisal rights may not be less than the highest price per share paid
by the acquiror in the control share acquisition. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share
exchange if we are a party to the transaction, nor does it apply to acquisitions approved or exempted by our declaration of trust or bylaws.
Our bylaws contain a provision exempting from the control share acquisition act any and all acquisitions by any person of our shares. There can be no
assurance that this provision will not be amended or eliminated at any time in the future.
Extraordinary Actions, Amendment of Declaration of Trust
Under the Maryland REIT Law, a Maryland real estate investment trust generally cannot amend its declaration of trust or merge, convert, or consolidate
unless advised by its board of trustees and approved by the affirmative vote of shareholders holding at least two-thirds of the shares entitled to vote on the
matter unless a different percentage (but not less than a majority of all the votes entitled to be cast on the matter) is set forth in its declaration of trust. In
accordance with Maryland REIT Law, except as noted below, our declaration of trust allows the amendment of our declaration of trust, our

merger or consolidation, our conversion or sale or disposition of all or substantially all of our assets if our board of trustees declares such action advisable and if
such action is approved by the affirmative vote of a majority of all the votes entitled to be cast on the matter. Our declaration of trust provides for approval of the
following actions by two-thirds of the votes entitled to be cast on the matter:
•
our intentional disqualification as a REIT or revocation of our election to be taxed as a REIT;
•
the removal of trustees;
•
the amendment or repeal of certain designated sections of our declaration of trust; and
•
our termination.
Under the Maryland REIT Law, a declaration of trust may permit the trustees by a two-thirds vote to amend the declaration of trust from time to time to
qualify as a REIT or the Maryland REIT Law without the affirmative vote or written consent of the shareholders. Our declaration of trust permits such action by a
majority vote of the trustees. As permitted by the Maryland REIT Law, our declaration of trust contains a provision permitting our trustees, without any action by
our shareholders, to amend our declaration of trust to increase or decrease the aggregate number of shares of beneficial interest or the number of shares of any
class of shares of beneficial interest that we have authority to issue.
Amendment to Our Bylaws
Our board of trustees has the power to adopt, alter or repeal any provision of our bylaws and to make new bylaws, provided that certain amendments to
our bylaws require the affirmative vote of at least 80% of the members of our board of trustees, including a majority of the independent trustees. Additionally,
our bylaws may be amended by the affirmative vote of the holders of a majority of all votes entitled to be cast on the matter pursuant to a binding proposal
submitted for approval at any annual or special meeting of shareholders by a shareholder that satisfies the ownership and other eligibility requirements of our
bylaws and Rule 14a-8 under the Exchange Act.
Limitation of Liability and Indemnification
Our declaration of trust limits the liability of our trustees and officers for money damages, except for liability resulting from:
•
actual receipt of an improper benefit or profit in money, property or services; or
•
a final judgment based upon a finding of active and deliberate dishonesty by the trustees or officers that was material to the cause of action
adjudicated.
Our declaration of trust authorizes us, and our bylaws obligate us, to the maximum extent permitted by Maryland law, to indemnify, and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to, any of our present or former trustees or officers who is made a party to, or
witness in, a proceeding by reason of his or her service in that capacity or any individual who, while a trustee or officer and at our request, serves or has served
another entity, employee benefit plan or any other enterprise as a trustee, director, officer, partner or otherwise and who is made a party to, or witness in, a
proceeding by reason of his or her service in that capacity. Our bylaws and Maryland law require us to indemnify each trustee or officer who has been successful,
on the merits or otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service to us. Our declaration of trust
permits us to indemnify and advance expenses to any person who served any predecessor of ours in any of the capacities described above and to any employee
or agent of ours or a predecessor of ours, and our bylaws permit us to indemnify and advance expenses to any employee or agent of ours.
Maryland law permits a Maryland real estate investment trust to indemnify its present and former trustees and officers against liabilities and reasonable
expenses actually incurred by them in any proceeding unless:
•
the act or omission of the trustee or officer was material to the matter giving rise to the proceeding and
◦
was committed in bad faith or
◦
was the result of active and deliberate dishonesty;
•
the trustee or officer actually received an improper personal benefit in money, property or services; or
•
in a criminal proceeding, the trustee or officer had reasonable cause to believe that the act or omission was unlawful.
Maryland law prohibits us from indemnifying our present and former trustees and officers for an adverse judgment in a derivative action or for a
judgment of liability on the basis that personal benefit was improperly received, unless in either

case a court orders indemnification and then only for expenses. Our bylaws require us to advance expenses to the maximum extent permitted by Maryland law.
Our bylaws and Maryland law require us, as a condition to advancing expenses, to obtain:
•
a written affirmation by the trustee or officer of his or her good faith belief that he or she has met the standard of conduct necessary for
indemnification; and
•
a written undertaking to repay the amount reimbursed if the standard of conduct is not met.
Term and Termination
Our declaration of trust provides that we have perpetual existence, unless terminated. See “-Extraordinary Actions, Amendment of Declaration of Trust”
for more information.
Meetings of Shareholders
Under our bylaws, annual meetings of shareholders are to be held in May of each year or at a date and time as determined by our board of trustees in
accordance with our bylaws. Special meetings of shareholders may be called only by the chairman of our board of trustees, our chief executive officer or one-third
of the trustees then in office. Subject to the provisions of our bylaws, a special meeting of our shareholders to act on any matter that may properly be considered
by our shareholders will also be called by our secretary upon the written request of the shareholders entitled to cast not less than a majority of all the votes
entitled to be cast at such meeting. Only matters set forth in the notice of the special meeting may be considered and acted upon at such a meeting.
Advance Notice of Trustee Nominations and New Business
Our bylaws provide that, with respect to an annual meeting of shareholders, nominations of persons for election to our board of trustees and the
proposal of business to be considered by shareholders at the annual meeting may be made only:
•
pursuant to our notice of the meeting;
•
by or at the direction of our board of trustees; or
•
by a shareholder who was a shareholder of record at the time of the provision of notice and at the time of the meeting, who is entitled to vote
at the meeting and has complied with the advance notice procedures set forth in our bylaws.
With respect to special meetings of shareholders, only the business specified in our notice of meeting may be brought before the meeting of
shareholders and nominations of persons for election to our board of trustees may be made pursuant to our notice of meeting only:
•
by or at the direction of our board of trustees;
•
by shareholders at a special meeting requested by shareholders in accordance with our bylaws; or
•
provided that our board of trustees has determined that trustees shall be elected at such meeting, by a shareholder who was a shareholder of
record at the time of the provision of notice and at the time of the meeting, who is entitled to vote at the meeting and has complied with the
advance notice provisions set forth in our bylaws.
The purpose of requiring shareholders to give advance notice of nominations and other proposals is to afford our board of trustees the opportunity to
consider the qualifications of the proposed nominees or the advisability of the other proposals and, to the extent considered necessary by our board of trustees,
to inform shareholders and make recommendations regarding the nominations or other proposals. The advance notice procedures also permit a more orderly
procedure for conducting our shareholder meetings. Although the bylaws do not give our board of trustees the power to disapprove timely shareholder
nominations and proposals, they may have the effect of precluding a contest for the election of trustees or proposals for other action if the proper procedures are
not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of trustees to our board of trustees or to
approve its own proposal.

Subtitle 8
Maryland law permits a Maryland real estate investment trust with a class of equity securities registered under the Exchange Act, and at least three
independent trustees to elect to be subject, by provision in its declaration of trust or bylaws or a resolution of its board of trustees and notwithstanding any
contrary provision in the declaration of trust or bylaws, to any or all of five provisions:
•
a classified board;
•
a two-thirds vote requirement for removing a trustee;
•
a requirement that the number of trustees be fixed only by vote of the trustees;
•
a requirement that a vacancy on the board be filled only by the remaining trustees and for the remainder of the full term of the class of trustees
in which the vacancy occurred; and
•
a majority requirement for the calling of a special meeting of shareholders.
Through provisions in our declaration of trust and bylaws unrelated to Subtitle 8, we already (1) have a classified board of two classes, (2) require the
affirmative vote of the shareholders entitled to cast at least two-thirds of all of the votes entitled to be cast generally in the election of trustees to remove any
trustee from the board, (3) vest in the board the exclusive power to fix the number of trusteeships, (4) require that a vacancy on the board be filled only by any
remaining trustees and for the remainder of the full term of the class of trustees in which the vacancy occurred (unless no trustees remain) and (5) require, unless
called by the chairman of our board of trustees, our chief executive officer or one-third of the board of trustees then in office, the request of shareholders entitled
to cast not less than a majority of the votes entitled to be cast at such meeting on such matter to call a special meeting of shareholders to consider and vote on
any matter that may properly be considered by our shareholders.
Possible Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our Declaration of Trust and Bylaws
If the board resolution opting out of the business combination act is amended, the business combination provisions and, if the applicable exemption in
our bylaws is rescinded, the control share acquisition provisions applicable under Maryland law, the provisions of our declaration of trust on classification of our
board of trustees, removal of trustees, restrictions on the ownership and transfer of shares of beneficial interest and the advance notice provisions of our bylaws
could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of the common
shares or otherwise be in their best interest.
Restrictions on Ownership and Transfer
Our declaration of trust, subject to certain exceptions described below, provides that no person may (i) beneficially or constructively own common shares
in excess of 9.9% of the number of outstanding common shares of any class or series of common shares, (ii) beneficially or constructively own preferred shares in
excess of 9.9% of the number of outstanding preferred shares of any class or series of preferred shares, (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 attribution), (iv) beneficially own equity shares
that would result in our company being “closely held” under Section 856(h) of the Code, or (v) constructively own equity shares that would cause our company to
constructively own 10% or more of the ownership interests in a tenant (other than a taxable REIT subsidiary) of our company’s or our operating partnership’s real
property, within the meaning of Section 856(d)(2)(B) of the Code. If any restrictions above are violated, such person’s equity shares will be transferred
automatically to a share trust and shall be designated shares-in-trust for the benefit of one or more charitable beneficiaries. In addition, upon the occurrence of
certain events, attempted transfers in violation of the restrictions described above may be void ab initio.
The record holder of the common or preferred shares that are designated as shares-in-trust will be required to submit such number of common shares or
preferred shares to us for registration in the name of the trust. The trustee will be designated by us, but will not be affiliated with us. The beneficiary of a trust will
be one or more charitable organizations that are named by us.
Shares-in-trust will remain issued and outstanding common shares or preferred shares and will be entitled to the same rights and privileges as all other
shares of the same class or series. The trust, as record holder of shares-in-trust, will receive all dividends and distributions on the shares-in-trust and will hold
such dividends or distributions in trust for the benefit of the beneficiary. The trust will vote all shares-in-trust. The trust will designate a permitted transferee of
the shares-in-trust, provided that the permitted transferee purchases such shares-in-trust for valuable consideration and acquires such shares-in-trust without
such acquisition resulting in a transfer to another trust.

The prohibited owner with respect to shares-in-trust will be required to repay to the record holder the amount of any dividends or distributions received
by the prohibited owner that (i) are attributable to any shares-in-trust and (ii) the record date of which was on or after the date that such shares became shares-
in-trust. The prohibited owner generally will receive from the record holder following the sale or other disposition of such shares-in-trust the lesser of (i) the price
per share such prohibited owner paid for the common shares or preferred shares that were designated as shares-in-trust (or, in the case of a gift or devise, the
market price (as defined in our declaration of trust) per share on the date of such transfer), and (ii) the price per share received by the record holder from the sale
of such shares-in-trust. Any amounts received by the record holder in excess of the amounts to be paid to the prohibited owner will be distributed to the
beneficiary.
The shares-in-trust will be deemed to have been offered for sale to us, or its designee, at a price per share equal to the lesser of the price per share in the
transaction that created such shares-in-trust (or, in the case of a gift or devise, the market price per share on the date of such transfer), or the market price per
share on the date that we, or our designee, accepts such offer. We will have the right to accept such offer for a period of 90 days after the later of the date of the
purported transfer which resulted in such shares-in-trust, or the date we determine in good faith that a transfer resulting in such shares-in-trust occurred.
Any person who acquires or attempts to acquire common or preferred shares in violation of the foregoing restrictions, or any person who owned
common or preferred shares that were transferred to a trust, will be required to give written notice immediately to us of such event and provide us with such
other information as we may request in order to determine the effect, if any, of such transfer on our status as a REIT.
All persons who own, directly or indirectly, more than 5% (or such lower percentages as required pursuant to regulations under the Code) of the
outstanding common and preferred shares must, within 30 days after December 31 of each year, provide to us a written statement or affidavit stating the name
and address of such direct or indirect owner, the number of common and preferred shares owned directly or indirectly, and a description of how such shares are
held. In addition, each direct or indirect shareholder shall provide to us such additional information as we may request in order to determine the effect, if any, of
such ownership on our status as a REIT and to ensure compliance with the ownership limitation.
The ownership limitation generally does not apply to the acquisition of common or preferred shares by an underwriter that participates in a public
offering of such shares.
In addition, the board of trustees, upon receipt of advice of counsel or other evidence satisfactory to the board of trustees, in its sole and absolute
discretion, may exempt a person from the ownership limitation under certain circumstances.
The foregoing restrictions continue to apply until the board of trustees determines that it is no longer in our best interests to attempt to qualify, or to
continue to qualify, as a REIT and such action is approved by the affirmative vote of two-thirds of the shares entitled to vote on such matter.
All certificates evidencing common or preferred shares bear a legend referring to the restrictions described above.
   The restrictions on ownership and transfer described above could have the effect of delaying, deterring or preventing a change in control or other transaction 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.

Name of Entity
Ownership
Jurisdiction of Incorporation or
Organization
2144 Associates - Hershey (LP)
1% by Hersha Hospitality Limited Liability Company - Hershey
99% by HHLP
PA
2144 Associates - New Columbia
1% by Hersha Hospitality Limited Liability Company - New Columbia
99% by HHLP
PA
2144 Associates - Selinsgrove (LP)
1% by Hersha Hospitality Limited Liability Company - Selinsgrove
99% by HHLP
PA
2801 Roosevelt Development Master Property Owners'
Association, Inc.
100% by HHLP Key West One Associates, LLC
FL
2844 Associates, LP
1% by HH LLC
99% by HHLP
PA
3044 Associates, LP
1% by HH LLC
99% by HHLP
PA
3144 Associates, LP
1% by HH LLC
99% by HHLP
PA
320 Pearl Street, Inc.
100% by HHLP
NY
44 Aarti Associates, LP
1% by HH LLC
99% by HHLP
PA
44 Brookline Hotel, LLC
1% by 44 Brookline Manager, LLC
99% by HHLP
DE
44 Brookline Management, LLC
100% by 44 New England Management Company
DE
44 Brookline Manager, LLC
100% by HHLP
DE
44 Delaware One, LLC
100% by 44 New England Management Company
DE
44 Delaware Three, LLC
100% by 44 New England Management Company
DE
44 Frederick Associates, LP
1% by HH LLC
99% by HHLP
PA
44 LA Westside Lessee, LLC
100% by 44 New England Management Company
DE
44 Metro, LLC
100% by 44 New England Management Company
DE
44 New England Management Company
100% by HHLP
VA
44 Smith Street Lessee, LLC
100% by 44 New England Management Company
NY
44 White Plains, LLC
100% by 44 New England Management Company
DE
5444 Associates (LP)
99% by HHLP
1% by 44 Duane Street, LLC
PA
63 RB Holding Company LLC
100% by Hiren Boston, LLC
MA
Affordable Hospitality Associates, LP
99% by HHLP
1% by Race Street, LLC
PA
Brisam Management (DE) LLC
99% by HHLP
1% by HHLP Brisam 29 Manager, LLC
DE
Chimes of Freedom, LLC
89% by HHLP Liberty Associates, LLC
11% by Of Freedom I, LLC
DE
Exit 88 Hotel Manager, LLC
100% by HHLP
DE
Exit 88 Hotel, LLC
99% by HHLP
1% by Exit 88 Hotel Manager, LLC
CT
Hersha Conduit Associates, LLC
100% by HHLP
NY
Hersha Holding RC Lessee, LLC
85% by 44 New England Management Company
15% by GenCom
DE
Hersha Holding RC Owner, LLC
85% by HHLP
15% by GenCom
DE
Hersha Hospitality Limited Partnership
  (“HHLP”) (the “Operating Partnership”)
86.9% by Hersha Hospitality Trust (General Partnership Interest)
13.1% by Hersha Affiliates (Limited Partnership Interest)
VA
Hersha Hospitality Trust
N/A
MD
Hersha Hospitality, LLC (“HH LLC”)
100% by HHLP
VA
HHLP 52nd Associates, LLC
99% by HHLP
1% by HHLP 52nd Manager, LLC
DE
HHLP 52nd Lessee, LLC
100% by 44 New England Management Company
DE

Name of Entity
Ownership
Jurisdiction of Incorporation or
Organization
HHLP 52nd Manager, LLC
100% by HHLP
DE
HHLP Ambrose Associates, LLC
99% by HHLP
1% by HHLP Ambrose Manager, LLC
DE
HHLP Ambrose Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Ambrose Manager, LLC
100% by HHLP
DE
HHLP Annapolis Associates, LLC
99% by HHLP
1% by HHLP Annapolis Manager, LLC
DE
HHLP Annapolis Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Annapolis Liquor Holder, LLC
98% by 44 New England Management Company
1% by Elizabeth Werner, 1% by Ashish Parikh
DE
HHLP Annapolis Manager, LLC
100% by HHLP
DE
HHLP Blue Moon Associates, LLC
99% by HHLP, 1% by HHLP Blue Moon Manager, LLC
DE
HHLP Blue Moon Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Blue Moon Manager, LLC
100% by HHLP
DE
HHLP Boston One, LLC
100% by HHLP
MA
HHLP Boston Seaport Associates, LLC
99% by HHLP
1% by HHLP Boston Seaport Manager, LLC
DE
HHLP Boston Seaport Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Boston Seaport Manager, LLC
100% by HHLP
DE
HHLP Boston Two, LLC
100% by HHLP
MA
HHLP Brisam 29 Manager, LLC
100% by HHLP
DE
HHLP Bulfinch Associates, LLC
99% by HHLP
1% by HHLP Bulfinch Manager, LLC
DE
HHLP Bulfinch Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Bulfinch Manager, LLC
100% by HHLP
DE
HHLP Coconut Grove RC Associates, LLC
99% by Hersha Holding RC Owner, LLC
1% by HHLP Coconut Grove RC Manager, LLC
DE
HHLP Coconut Grove RC Lessee, LLC
100% by Hersha Holding RC Lessee, LLC
DE
HHLP Coconut Grove RC Manager, LLC
100% by Hersha Holding RC Owner, LLC
DE
HHLP Conduit Lessee, LLC
100% by 44 New England Management Company
NY
HHLP DC Convention Center Associates, LLC
1% by HHLP DC Convention Center Manager, LLC
99% by HHLP
DE
HHLP DC Convention Center Lessee, LLC
100% by 44 New England Management Company
DE
HHLP DC Convention Center Manager, LLC
100% by HHLP
DE
HHLP Georgetown Associates, LLC
99% by HHLP
1% by HHLP Georgetown Manager, LLC
DE
HHLP Georgetown II Associates, LLC
99% by HHLP
1% by HHLP Georgetown II Manager, LLC
DE
HHLP Georgetown II Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Georgetown II Manager, LLC
100% HHLP
DE
HHLP Georgetown Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Georgetown Manager, LLC
100% HHLP
DE
HHLP Harrisburg Friendship GP, LLC
100% by HHLP
PA
HHLP Harrisburg Friendship, LP
99% by HHLP
1% by HHLP Harrisburg Friendship GP, LLC
PA

Name of Entity
Ownership
Jurisdiction of Incorporation or
Organization
HHLP Holdings, LLC
99.5% by HHLP
.5% by Hersha Hospitality Trust
DE
HHLP Key West One Associates, LLC
99% by HHLP
1% by HHLP Key West One Manager, LLC
DE
HHLP Key West One Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Key West One Manager, LLC
100% by HHLP
DE
HHLP King of Prussia Associates, LP
1% by HHLP King of Prussia, Inc.
99% by HHLP
PA
HHLP LA Westside Associates, LLC
1% by HHLP LA Westside Manager LLC
99% by HHLP
DE
HHLP LA Westside Manager, LLC
100% by HHLP
DE
HHLP Langhorne One Associates, LP
1% by HHLP Langhorne One, LLC
99% by HHLP
PA
HHLP Langhorne Two Associates, LP
1% by HHLP Langhorne Two, LLC
99% by HHLP
PA
HHLP Liberty Associates, LLC
100% by HHLP
DE
HHLP Liberty Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Malvern Associates 2,LP
99% by HHLP
1% by HHLP Malvern 2, LLC
PA
HHLP Miami Beach Associates, LLC
1% by HHLP Miami Beach Manager, LLC
99% by HHLP
DE
HHLP Miami Beach Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Miami Beach Manager, LLC
100% by HHLP
DE
HHLP Oxford Valley Associates, LP
1% by HHLP Oxford Valley, Inc.
99% by HHLP
PA
HHLP Rittenhouse Associates, LLC
99% by HHLP
1% by HHLP Rittenhouse Manager, LLC
DE
HHLP Rittenhouse Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Rittenhouse Manager, LLC
100% by HHLP
DE
HHLP Saint Gregory Associates, LLC
99% by HHLP
1% by HHLP Saint Gregory Manager, LLC
DE
HHLP Saint Gregory Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Saint Gregory Manager, LLC
100% by HHLP
DE
HHLP Sanctuary Associates, LLC
99% by HHLP
1% by HHLP Sanctuary Manager, LLC
DE
HHLP Sanctuary Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Sanctuary Manager, LLC
100% HHLP
DE
HHLP Santa Barbara I Associates, LLC
99% by HHLP, 1% by HHLP Santa Barbara I Manager, LLC
DE
HHLP Santa Barbara I Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Santa Barbara I Manager, LLC
100% by HHLP
DE
HHLP SB Three Associates LLC
100% by HHLP
DE
HHLP Seattle Associates, LLC
99% by HHLP
1% by HHLP Seattle Manager, LLC
DE
HHLP Seattle Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Seattle Manager, LLC
100% by HHLP
DE
HHLP Smith Street Associates, LLC
100% by HHLP Smith Street Holding, LLC
NY
HHLP Smith Street Holding, LLC
99% by HHLP
1% by HHLP Smith Street Managing Member, LLC
NY
HHLP Smith Street Managing Member, LLC
100% by HHLP
NY
HHLP Sunny Associates, LLC
99% by HHLP
1% by HHLP Sunny Manager, LLC
DE
HHLP Sunny Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Sunny Manager, LLC
100% by HHLP
DE

Name of Entity
Ownership
Jurisdiction of Incorporation or
Organization
HHLP Sunnyvale TPS Associates, LLC
99% by HHLP
1% by HHLP Sunnyvale TPS Manager, LLC
DE
HHLP Sunnyvale TPS Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Sunnyvale TPS Manager, LLC
100% by HHLP
DE
HHLP Union Square Associates, LLC
100% by HHLP
DE
HHLP Union Square Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Union Square Manager, LLC
100% by HHLP
DE
HHLP Valley Forge Associates (LP)
1% by HH LLC
99% by HHLP
PA
HHLP White Plains Associates, LLC
100% by HHLP
DE
HHLP Winter Haven Associates, LLC
99% by HHLP, 1% by HHLP Winterhaven Manager, LLC
DE
HHLP Winter Haven Lessee, LLC
100% by 44 New England Management Company
DE
HHLP Winter Haven Manager, LLC
100% by HHLP
DE
HHLP York Street, LLC
100% by HHLP
DE
Hiren Boston, LLC
49.9% by HHLP Boston One, LLC
50.1% by third parties
MA
HT-Exit 88 Hotel TRS, LLC
100% by 44 New England Management Company
DE
Market 8 Hotel Associates GP, LLC
100% by 44 New England Management Company
DE
Metro 29th Sublessee, LLC
100% by 44 New England Management Company
NY
Metro JFK Associates, LLC
1% by Metro JFK Managing Member, LLC 99%by HHLP
NY
Metro JFK Managing Member, LLC
100% by HHLP
NY
Of Freedom I, LLC
100% by HHLP Liberty Associates, LLC
DE
Philly One TRS, LLC
100% by 44 New England Management Company
PA
Race Street, LLC
100% by HHLP
PA
Risingsam Hospitality, LLC
99% by HHLP
1% by Hersha Conduit Associates, LLC
NY
SB Partners Three Lessee, LLC
50% by 44 New England Management Company
50% by JHM SB Three Member LLC
DE
SB Partners Three, LLC
50% by HHLP SB Three Associates, LLC
50% by JHM SB Three Member LLC
DE
SB Partners, LLC
49.9% by HHLP Boston Two, LLC
50.1% by third parties
MA
Seaport Hospitality, LLC
99% by HHLP
1% 320 Pearl Street, Inc.
NY
Seaport TRS, LLC
100% by 44 New England Management Company
DE
South Bay Boston, LLC
49.9% by 44 New England Management Company
50.1% by third parties
MA
South Bay Sandeep, LLC
100% by SB Partners, LLC
MA
The Tower and Executive Residences
100% HHLP Coconut Grove RC Associates, LLC
FL
The Village on Roosevelt Property Owners' Association, Inc.
100% by HHLP Key West One Associates, LLC
FL
York Street Lessee DE, LLC
100% by 44 New England Management Company
DE
York Street LLC
100% by HHLP York Street, LLC
DE

Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333‐82666, 333‐113058, 333‐142073, 333‐142075, 333‐147113, 333‐156661,
333‐163123, 333‐167891, 333‐169658, 333‐187239, 333‐236758) on Form S-3 and (Nos. 333‐122657, 333‐151314, 333‐179847, 333‐196181, 333-236763, 333-
262975) on Form S-8 of our reports dated February 23, 2023, with respect to the consolidated financial statements of Hersha Hospitality Trust and the
effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Philadelphia, Pennsylvania
February 23, 2023

Exhibit 31.1
 
CERTIFICATION
 
I, Neil H. Shah, certify that:
1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2022 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 information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying 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 reporting (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 information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting 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 reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; 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
reporting.
Date: February 23, 2023
 
 
 
 
/s/ Neil H. Shah
 
Neil H. Shah
 
Chief Executive Officer

Exhibit 31.2
 
CERTIFICATION
 
I, Ashish R. Parikh, certify that:
1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2022 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 information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying 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 reporting (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 information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting 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 reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; 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
reporting.
Date: February 23, 2023
 
 
 
 
/s/ Ashish R. Parikh
 
Ashish R. Parikh
 
Chief Financial Officer

Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Hersha Hospitality Trust (the “Company”) for the period ended December 31,
2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Neil H. Shah, Chief Executive Officer of the Company, certify,
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 Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
February 23, 2023
/s/ Neil H. Shah
 
Neil H. Shah
 
Chief Executive Officer

Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Hersha Hospitality Trust (the “Company”) for the period ended December 31,
2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ashish R. Parikh, Chief Financial Officer of the Company, certify,
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 Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
February 23, 2023
/s/ Ashish R. Parikh
 
Ashish R. Parikh
 
Chief Financial Officer