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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 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 DriveHarrisburgPA 17102
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (717) 236-4400

Former name, former address and former fiscal year, if changed since last report: Not applicable

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Shares of Beneficial Interest, par value $.01 per shareHTNew York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per shareHT-PCNew York Stock Exchange
6.500% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per shareHT-PDNew York Stock Exchange
6.500% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per shareHT-PENew York Stock Exchange

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
 



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 filerAccelerated filer
Non-accelerated filerSmaller 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. Yes No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No 

As of April 28, 2022, the number of Class A common shares of beneficial interest outstanding was 39,354,893 and there were no Class B common shares of beneficial interest outstanding.



 Hersha Hospitality Trust
Table of Contents
PART I.  FINANCIAL INFORMATIONPage
Item 1.Financial Statements. 
Item 2.
Item 3.
Item 4.
  
PART II.  OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 

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Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2022 (UNAUDITED) AND DECEMBER 31, 2021
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]





March 31, 2022December 31, 2021
Assets:  
Investment in Hotel Properties, Net of Accumulated Depreciation$1,650,180 $1,665,097 
Investment in Unconsolidated Joint Ventures5,130 5,580 
Cash and Cash Equivalents77,447 72,238 
Escrow Deposits10,997 12,707 
Hotel Accounts Receivable7,121 8,491 
Due from Related Parties153 2,495 
Intangible Assets, Net of Accumulated Amortization of $7,010 and $6,944
1,269 1,335 
Right of Use Assets43,211 43,442 
Other Assets29,366 21,759 
Total Assets$1,824,874 $1,833,144 
  
Liabilities and Equity:  
Line of Credit$118,684 $118,684 
Term Loans, Net of Unamortized Deferred Financing Costs (Note 5)496,306 496,085 
Unsecured Notes Payable, Net of Unamortized Discount and Unamortized Deferred Financing Costs (Note 5)200,855 198,490 
Mortgages Payable, Net of Unamortized Premium and Unamortized Deferred Financing Costs304,248 304,614 
Lease Liabilities53,592 53,691 
Accounts Payable, Accrued Expenses and Other Liabilities39,119 43,207 
Dividends and Distributions Payable6,044 6,044 
Due to Related Parties439 1,723 
Total Liabilities$1,219,287 $1,222,538 
Redeemable Noncontrolling Interests - Consolidated Joint Venture (Note 1)$4,583 $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 March 31, 2022 and December 31, 2021, with Liquidation Preferences of $25.00 Per Share (Note 1)
$147 $147 
Common Shares:  Class A, $.01 Par Value, 104,000,000 Shares Authorized at March 31, 2022 and December 31, 2021; 39,354,893 and 39,325,025 Shares Issued and Outstanding at March 31, 2022 and December 31, 2021, respectively
394 394 
Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at March 31, 2022 and December 31, 2021
  
Accumulated Other Comprehensive Income (Loss)10,908 (2,747)
Additional Paid-in Capital1,153,486 1,155,034 
Distributions in Excess of Net Income(615,740)(595,454)
Total Shareholders' Equity549,195 557,374 
  
Noncontrolling Interests (Note 1)51,809 50,922 
  
Total Equity601,004 608,296 
  
Total Liabilities and Equity$1,824,874 $1,833,144 
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
4

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
Three Months Ended March 31,
20222021
Revenue:  
Hotel Operating Revenues:
Room$65,132 $39,350 
Food & Beverage9,056 3,074 
Other Operating Revenues7,639 4,729 
Other Revenues41 12 
Total Revenues81,868 47,165 
Operating Expenses:  
Hotel Operating Expenses:
Room14,590 9,198 
Food & Beverage8,404 2,873 
Other Operating Expenses26,356 20,109 
Property Losses in Excess of Insurance Recoveries25  
Hotel Ground Rent1,090 1,100 
Real Estate and Personal Property Taxes and Property Insurance8,483 10,071 
General and Administrative (including Share Based Payments of $2,541 and $2,169 for the three months ended March 31, 2022 and 2021, respectively)
5,318 4,944 
Terminated Transaction Costs 354 
Depreciation and Amortization19,276 21,802 
Total Operating Expenses83,542 70,451 
  
Operating Loss(1,674)(23,286)
  
Interest Income1 1 
Interest Expense(14,237)(13,429)
Other (Expense) Income (99)461 
Gain on Disposition of Hotel Properties 48,352 
Loss on Debt Extinguishment (2,940)
(Loss) Income Before Results from Unconsolidated Joint Venture Investments and Income Taxes(16,009)9,159 
  
Loss from Unconsolidated Joint Ventures(936)(658)
  
(Loss) Income Before Income Taxes(16,945)8,501 
  
Income Tax (Expense) Benefit(21)589 
  
Net (Loss) Income(16,966)9,090 
  
Loss (Income) Allocated to Noncontrolling Interests - Common Units2,724 (322)
(Income) Loss Allocated to Noncontrolling Interests - Consolidated Joint Venture(2,273)158 
Preferred Distributions(6,044)(6,043)
  
Net (Loss) Income Applicable to Common Shareholders$(22,559)$2,883 
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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

Three Months Ended March 31,
20222021
(Loss) Earnings Per Share:  
BASIC  
(Loss) Income from Continuing Operations Applicable to Common Shareholders$(0.58)$0.07 
  
DILUTED  
(Loss) Income from Continuing Operations Applicable to Common Shareholders$(0.58)$0.07 
  
Weighted Average Common Shares Outstanding:  
Basic39,231,550 38,970,893 
Diluted*39,231,550 39,840,474 
*(Loss) 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 (loss) 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:
 Three Months Ended March 31,
 20222021
Common Units and Vested LTIP Units5,267,258 4,349,730 
Unvested Stock Awards and LTIP Units Outstanding681,150  
Contingently Issuable Share Awards296,157  
Total Potentially Dilutive Securities Excluded from the Denominator6,244,565 4,349,730 
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
6

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS)
Three Months Ended March 31,
20222021
Net (Loss) Income$(16,966)$9,090 
Other Comprehensive Income  
Change in Fair Value of Derivative Instruments15,489 6,465 
Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income 301 
Total Other Comprehensive Income $15,489 $6,766 
  
Comprehensive (Loss) Income(1,477)15,856 
Less:  Comprehensive Loss (Income) Attributable to Noncontrolling Interests - Common Units890 (1,001)
Less:  Comprehensive (Income) Loss Attributable to Noncontrolling Interests - Consolidated Joint Venture(2,273)158 
Less:  Preferred Distributions(6,044)(6,043)
Comprehensive (Loss) Income Attributable to Common Shareholders$(8,904)$8,970 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES)

Redeemable Noncontrolling InterestsShareholders' EquityNoncontrolling Interests
Consolidated Joint Venture ($)Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive (Loss) Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)
Balance at December 31, 20212,310 39,325,025 394  14,703,214 147 1,155,034 (2,747)(595,454)557,374 6,926,253 50,922 608,296 
Issuance Costs/Other— — — — — — (39)— — (39)— — (39)
Dividends and Distributions declared:
Preferred Shares— — — — — — — — (6,044)(6,044)— — (6,044)
Share Based Compensation:
Grants— 29,868  — — — — — —  — —  
Amortization— — — — — — 764 — — 764 1,777 2,541 
Change in Fair Value of Derivative Instruments— — — — — — — 13,655 — 13,655 — 1,834 15,489 
Adjustment to Record Noncontrolling Interest at Redemption Value2,273 — — — — — (2,273)— — (2,273)— — (2,273)
Net Loss— — — — — — — — (14,242)(14,242)— (2,724)(16,966)
Balance at March 31, 20224,583 39,354,893 394  14,703,214 147 1,153,486 10,908 (615,740)549,195 6,926,253 51,809 601,004 

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES)
Redeemable Noncontrolling InterestsShareholders' EquityNoncontrolling Interests
Consolidated Joint Venture ($)Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Loss ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)
Balance at December 31, 2020 38,843,482 389  14,703,214 147 1,150,985 (19,275)(509,243)623,003 5,392,808 49,246 672,249 
Unit Conversion— 225,000 2 — — — 2,870 — — 2,872 (225,000)(2,872)— 
Dividends and Distributions declared:
Preferred Shares— — — — — — — — (30,218)(30,218)— — (30,218)
Share Based Compensation:
Grants— 63,825 — — — — (9)— — (9)775,206 1,614 1,605 
Amortization— — — — — — 733 — — 733 — 862 1,595 
Change in Fair Value of Derivative Instruments— — — — — — — 6,766 — 6,766 — — 6,766 
Equity Contribution to Consolidated Joint Venture158 — — — — — — — — — — — — 
Net Income(158)— — — — — — — 8,926 8,926 322 9,248 
Balance at March 31, 2021 39,132,307 391  14,703,214 147 1,154,579 (12,509)(530,535)612,073 5,943,014 49,172 661,245 









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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS)
Three Months Ended March 31,
20222021
Operating Activities:  
Net (Loss) Income$(16,966)$9,090 
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Operating Activities:  
Gain on Disposition of Hotel Properties (48,352)
Property Losses in Excess of Insurance Recoveries 25  
Junior Note PIK Interest Added to Principal1,855  
Deferred Taxes (606)
Depreciation19,195 21,708 
Amortization1,484 1,330 
Loss on Debt Extinguishment 634 
Equity in Loss of Unconsolidated Joint Ventures936 658 
Loss Recognized on Change in Fair Value of Derivative Instrument 301 
Share Based Compensation Expense2,541 2,169 
Change in Assets and Liabilities:  
(Increase) Decrease in:  
Hotel Accounts Receivable1,370 (629)
Other Assets194 (3,063)
Due from Related Parties2,342 688 
Increase (Decrease) in:  
Due to Related Parties(1,284) 
Accounts Payable, Accrued Expenses and Other Liabilities3,304 2,279 
Net Cash Provided by (Used in) Operating Activities$14,996 $(13,793)
  
Investing Activities:  
Capital Expenditures(4,219)(2,731)
Proceeds from Disposition of Hotel Properties 149,384 
Contributions to Unconsolidated Joint Ventures(485)(275)
Net Cash (Used in) Provided by Investing Activities$(4,704)$146,378 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
10

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS)
Three Months Ended March 31,
20222021
Financing Activities:  
Repayments on Line of Credit$ $(11,634)
Payments on Term Loans (175,559)
Proceeds from Mortgages and Notes Payable 144,750 
Principal Repayment of Mortgages(553)(704)
Deferred Financing Costs(196)(5,529)
Dividends Paid on Preferred Shares(6,044)(24,172)
Net Cash Used in Financing Activities$(6,793)$(72,848)
  
Net Increase in Cash, Cash Equivalents, and Restricted Cash$3,499 $59,737 
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period84,945 23,607 
  
Cash, Cash Equivalents, and Restricted Cash - End of Period$88,444 $83,344 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)






NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Hersha Hospitality Trust (“we,” “us,” “our” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) for interim financial information and with the general instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any future period. Accordingly, readers of these consolidated interim financial statements should refer to the Company’s audited financial statements prepared in accordance with US GAAP, and the related notes thereto, for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as certain footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from this report pursuant to the rules of the Securities and Exchange Commission.

We are a self-administered Maryland real estate investment trust that was organized in May 1998 and completed our initial public offering in January 1999. Our common shares are traded on the New York Stock Exchange (the “NYSE”) under the symbol “HT.” We own our hotels and our investments in joint ventures through our operating partnership, Hersha Hospitality Limited Partnership (“HHLP” or “the Partnership”), for which we serve as the sole general partner. As of March 31, 2022, we owned an approximate 85.0% partnership interest in HHLP, including a 1.0% general partnership interest.

Principles of Consolidation and Presentation

The accompanying consolidated financial statements have been prepared in accordance with US GAAP and include all of our accounts as well as accounts of the Partnership, subsidiary partnerships and our wholly owned Taxable REIT Subsidiary Lessee (“TRS Lessee”), 44 New England Management Company. 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 consolidated if the determination is made that we are the primary beneficiary in a variable interest entity (“VIE”) or we maintain control of the asset through our voting interest in the entity.
 
Variable Interest Entities

We evaluate each of our investments and contractual relationships to determine whether they meet the guidelines for consolidation. To determine if we are the primary beneficiary of a VIE, we evaluate whether we have a controlling financial interest in that VIE. An enterprise is deemed to have a controlling financial interest if it has i) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be significant to the VIE. Control can also be demonstrated by the ability of a member to manage day-to-day operations, refinance debt and sell the assets of the partnerships without the consent of the other member and the inability of the members to replace the managing member.  Based on our examination, there have been no changes to the operating structure of our legal entities during the three months ended March 31, 2022 and, therefore, there are no changes to our evaluation of VIE's as presented within our annual report presented on Form 10-K for the year ended December 31, 2021.


12

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)


NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

Noncontrolling Interest

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. The noncontrolling interest of Common Units and LTIP Units totaled $51,809 as of March 31, 2022 and $50,922 as of December 31, 2021. As of March 31, 2022, there were 6,926,253 Common Units and LTIP Units outstanding with a fair market value of $62,890, based on the price per share of our common shares on the NYSE on such date. In accordance with the partnership agreement of HHLP, holders of these Common 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 is included in net income or loss but excluded from net income or loss applicable to common shareholders in the consolidated statements of operations.

We are party to a joint venture that owns the Ritz-Carlton Coconut Grove, FL, in which our joint venture partner has a noncontrolling equity interest of 15% in the property. Hersha Holding RC Owner, LLC, the owner entity of the Ritz-Carlton Coconut Grove joint venture ("Ritz Coconut Grove"), will distribute income based on cash available for distribution which will be distributed 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, the noncontrolling interest 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 sheets and financial results of the Ritz Coconut Grove are included in our consolidated financial statements and the book value of the noncontrolling interest in the Ritz Coconut Grove is classified as temporary equity within our Consolidated Balance Sheets.

For Ritz Coconut Grove, income or loss is allocated using Hypothetical Liquidation at Book Value ("HLBV method") as the liquidation rights and priorities, as defined by the venture's governing agreement, differs from the underlying percentage ownership in the venture. The Company applies the HLBV method using a balance sheet approach. A calculation is prepared at each balance sheet date to determine the amount that we would receive if the venture entity were to liquidate all of its assets at carrying value and distribute that cash to the joint venture based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is our share of the earnings or losses and the remainder is allocated to noncontrolling interest.

The noncontrolling interest in the Ritz Coconut Grove is measured at the greater of historical cost or the put option redemption value. For the three months ended March 31, 2022 and 2021, based on the income allocation methodology described above, the noncontrolling interest in this joint venture was allocated losses of $0 and $158, respectively. This is recorded as part of the Loss (Income) Allocated to Noncontrolling Interests line item within the Consolidated Statements of Operations. During the three months ended March 31, 2022, we reclassified $2,273 from Additional Paid in Capital to Redeemable Noncontrolling Interests - Consolidated Joint Venture to value the noncontrolling interest at the put option redemption value of $4,583.











13

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)


NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

Shareholders’ Equity

Terms of the Series C, Series D, and Series E Preferred Shares outstanding at March 31, 2022 and December 31, 2021 are summarized as follows:
    Dividend Per Share  (1)
Shares Outstanding  Three Months Ended March 31,
SeriesMarch 31, 2022December 31, 2021Aggregate Liquidation PreferenceDistribution Rate20222021
Series C3,000,000 3,000,000 $75,000 6.875 %$0.4297 $2.1485 
Series D7,701,700 7,701,700 $192,500 6.500 %$0.4063 $2.0313 
Series E4,001,514 4,001,514 $100,000 6.500 %$0.4063 $2.0313 
Total14,703,214 14,703,214     

During the three months ended March 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 declared a cash dividend for the first dividend period ending April 15, 2021, which was paid on April 15, 2021 to holders of record as of April 1, 2021.

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.

In February of 2021, we entered into an unsecured notes facility that provided net proceeds of $144,750. The proceeds, along with a portion of the proceeds from asset sales, were used to repay amounts outstanding under our senior secured credit facility and our secured term loans and allowed us to negotiate amendments to this senior facility. The amendments to the senior secured credit facility and secured term loans eliminated term loan maturities until August of 2022, waived all financial covenants through March 31, 2022, established accommodative covenant testing methodology through December 31, 2022, enabled the Company to pay down the accrual of the Company's preferred dividends, allow the ongoing preferred dividend accrual to be kept current, and provided additional liquidity to be used at the Company's discretion.

Two of our secured term loans totaling $218,635, as well as our Line of Credit (as defined below in Note 5, “Debt—Credit Facilities”), which has $118,684 drawn as of March 31, 2022, will mature in August of 2022. In addition, it is possible that we could breach certain of our Credit Agreement (as defined below in Note 5, “Debt—Credit Facilities”) covenants in 2022, which could lead to potential acceleration of amounts due under our Credit Agreements. Management is exploring options including, but not limited to, additional asset sales, the refinancing of debt and the offering of equity or equity-linked securities prior to the maturity of these term loans in August of 2022, or an event of default. The Company believes that we will be able to refinance this debt, obtain a waiver, or generate the cash necessary to pay off the debt through asset sales or an equity offering prior to a default. However, given the unpredictable nature of the recovery from the impact of COVID-19, there can be no assurance that we will be able to obtain a waiver or amendment in a timely manner, or on acceptable terms, if at all, or generate the cash necessary to pay off this debt through an equity offering or asset sales prior to the debt maturity. The failure to obtain a waiver or amendment, or otherwise repay the debt, could lead to an event of default, which would have a material adverse effect on our financial condition, which gives rise to substantial doubt about our ability to continue as a going concern.

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. In addition, the magnitude, duration, and speed of the pandemic is uncertain and we cannot estimate when travel demand will recover.

14

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)


NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

Investment in Hotel Properties

Investments in hotel properties are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful life of up to 40 years for buildings and improvements, two to seven years for furniture, fixtures and equipment. We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in hotel properties. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in hotel properties we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

Identifiable assets, liabilities, and noncontrolling interests related to hotel properties acquired are recorded at fair value. Estimating techniques and assumptions used in determining fair values involve significant estimates and judgments. These estimates and judgments have a direct impact on the carrying value of our assets and liabilities which can directly impact the amount of depreciation expense recorded on an annual basis and could have an impact on our assessment of potential impairment of our investment in hotel properties.

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. We evaluate each disposition to determine whether we need to classify the disposition as discontinued operations. We generally include the operations of a hotel that was sold or a hotel that has been classified as held for sale in continuing operations unless the sale represents a strategic shift that will have a major impact on our future operations and financial results. We anticipate that most of our hotel dispositions will not be classified as discontinued operations as most will not fit this definition.

Based on the occurrence of certain events or changes in circumstances, we review the recoverability of the property’s carrying value. Such events or changes in circumstances include the following:

a significant decrease in the market price of a long-lived asset;
a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition; 
a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;
an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;
a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and
a current expectation that, it is more likely than not that, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
We review our portfolio on an 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.

As of March 31, 2022, based on our analysis, we have determined that the estimated future cash flow of each of the properties in our portfolio is sufficient to recover its respective carrying value.

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)


NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-4, 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 optional expedients and exceptions contained within these updates, in general, only apply to contract amendments and modifications entered into prior to January 1, 2023. 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.

We have not entered into any contract modifications yet, 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 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 be applicable. However, we anticipate that other debt contract modifications will occur prior to the phase out of LIBOR on June 30, 2023 specifically to address the LIBOR transition, for which we will be able to apply the accounting relief.

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)

NOTE 2 - INVESTMENT IN HOTEL PROPERTIES
Investment in hotel properties consists of the following at March 31, 2022 and December 31, 2021:
  
March 31, 2022December 31, 2021
  
Land$478,412 $478,412 
Buildings and Improvements1,562,851 1,560,768 
Furniture, Fixtures and Equipment276,974 274,802 
Construction in Progress1,739 1,784 
2,319,976 2,315,766 
  
Less Accumulated Depreciation(669,796)(650,669)
  
Total Investment in Hotel Properties *$1,650,180 $1,665,097 
* The net book value of investment in hotel property at Ritz Coconut Grove, which is a variable interest entity, is $38,939 and $39,577 at March 31, 2022 and December 31, 2021, respectively.

Acquisitions
For the three months ended March 31, 2022 and 2021, we acquired no hotel properties.

Hotel Dispositions
For the three months ended March 31, 2022, we had no hotel dispositions. During the three months ended March 31, 2021, we had the following hotel dispositions:
HotelAcquisition
Date
Disposition
Date
ConsiderationGain on
Disposition
Courtyard San Diego, CA05/30/201302/19/2021$64,500 $5,032 
The Capitol Hill Hotel Washington, DC04/15/201103/09/202151,000 12,975 
Holiday Inn Express Cambridge, MA05/03/200603/09/202132,000 20,280 
Residence Inn Miami Coconut Grove, FL06/12/201303/10/202131,000 9,996 
2021 Total$48,283 

On April 27, 2022, we entered into a purchase and sale agreement to sell the Courtyard Brookline, MA, the Hampton Inn Washington, DC, Hilton Garden Inn M Street, DC, Hampton Inn - Philadelphia, PA, Courtyard Sunnyvale, CA, TownePlace Suites Sunnyvale, CA and the Courtyard Los Angeles Westside, CA to an unaffiliated buyer for a purchase price of $505,000. The transaction is expected to close in the third quarter of 2022, subject to customary closing conditions.

Assets Held For Sale

As of March 31, 2022 and December 31, 2021, there were no assets held for sale.

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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)

NOTE 3 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
As of March 31, 2022 and December 31, 2021, our investment in unconsolidated joint ventures consisted of the following:
Joint VentureHotel PropertiesPercent OwnedMarch 31, 2022December 31, 2021
Hiren Boston, LLCCourtyard by Marriott, South Boston, MA50 %106 189 
SB Partners, LLCHoliday Inn Express, South Boston, MA50 %  
SB Partners Three, LLCHome2 Suites, South Boston, MA50 %5,024 5,391 
  $5,130 $5,580 

Income/Loss Allocation

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. 

Loss recognized during the three months ended March 31, 2022 and 2021, for our investments in unconsolidated joint ventures is as follows:
Three Months Ended March 31,
20222021
Hiren Boston, LLC$(258)$(335)
SB Partners, LLC(310) 
SB Partners Three, LLC(368)(323)
Loss from Unconsolidated Joint Venture Investments$(936)$(658)

The following tables set forth the total assets, liabilities, equity and components of net income or loss, including the Company’s share, related to the unconsolidated joint ventures discussed above as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021.















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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)

NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)
Balance Sheets
March 31, 2022December 31, 2021
Assets
Investment in Hotel Properties, Net$62,860 $64,096 
Other Assets15,186 15,649 
Total Assets$78,046 $79,745 
Liabilities and Equity
Mortgages and Notes Payable$65,622 $65,723 
Other Liabilities15,481 15,656 
Equity:
Hersha Hospitality Trust2,679 3,328 
Joint Venture Partner(s)(5,736)(4,962)
Accumulated Other Comprehensive Loss  
Total Equity(3,057)(1,634)
Total Liabilities and Equity$78,046 $79,745 

Statements of Operations
Three Months Ended March 31,
20222021
Room Revenue$2,647 $2,255 
Other Revenue186 117 
Operating Expenses(2,455)(1,864)
Lease Expense(257)(270)
Property Taxes and Insurance(572)(1,565)
General and Administrative(20)(222)
Depreciation and Amortization(1,253)(2,312)
Interest Expense(668)(2,692)
Loss on Dissolution of Joint Venture (112,429)
Income Tax Benefit125 54 
Net Loss$(2,267)$(118,928)













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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(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 March 31, 2022 and December 31, 2021.

March 31, 2022December 31, 2021
Our share of equity recorded on the joint ventures' financial statements$2,679 $3,328 
Adjustment to reconcile our share of equity recorded on the joint ventures' financial statements to our investment in unconsolidated joint ventures(1)
2,451 2,252 
Investment in Unconsolidated Joint Ventures$5,130 $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 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. 
 
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HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)

NOTE 4 - OTHER ASSETS
Other Assets

Other Assets consisted of the following at March 31, 2022 and December 31, 2021:

March 31, 2022December 31, 2021
Derivative Asset$8,232 $92 
Deferred Financing Costs736 1,070 
Prepaid Expenses11,390 11,632 
Investment in Statutory Trusts1,548 1,548 
Investment in Non-Hotel Property and Inventories2,108 2,193 
Deposits with Unaffiliated Third Parties2,668 2,663 
Deferred Tax Asset, Net of Valuation Allowance of $22,259 and $21,612, respectively
  
Property Insurance Receivable575 693 
Other2,109 1,868 
$29,366