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 SeptemberJune 30, 20192020

OR

☐

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)
Maryland25-1811499
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
44 Hersha DriveHarrisburgPA17102
(Address of Registrant’s Principal Executive Offices)(Zip Code)

Registrant’s telephone number, including area code: (717) (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 (i)(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 (ii)(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. (Check one):Act:

Large accelerated filer☒Accelerated filer
☐

Non-accelerated filer
☐

Small 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 NovemberAugust 6, 2019,2020, the number of Class A common shares of beneficial interest outstanding was 38,610,77738,789,371 and there were 0 Class B common shares of beneficial interest outstanding.



 Hersha Hospitality Trust
Table of Contents
PART I.  FINANCIAL INFORMATIONPage
Item 1.Financial Statements.
4
5
7
8
12
14
Item 2.
4340
Item 3.
6054
Item 4.
6155
PART II.  OTHER INFORMATION
Item 1.
6256
Item 1A.
6256
Item 2.
6257
Item 3.
6257
Item 4.
6257
Item 5.
6257
Item 6.
6360
6461

3
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBERJUNE 30, 20192020 (UNAUDITED) AND DECEMBER 31, 20182019
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]





June 30, 2020December 31, 2019
Assets:  
Investment in Hotel Properties, Net of Accumulated Depreciation$1,902,464  $1,975,973  
Investment in Unconsolidated Joint Ventures7,527  8,446  
Cash and Cash Equivalents23,228  27,012  
Escrow Deposits7,374  9,973  
Hotel Accounts Receivable3,801  9,213  
Due from Related Parties2,363  6,113  
Intangible Assets, Net of Accumulated Amortization of $6,705 and $6,5451,876  2,137  
Right of Use Assets44,761  45,384  
Other Assets20,996  38,177  
Hotel Assets Held for Sale40,170  —  
Total Assets$2,054,560  $2,122,428  
  
Liabilities and Equity:  
Line of Credit$95,000  $48,000  
Term Loans, Net of Unamortized Deferred Financing Costs (Note 5)697,597  697,183  
Unsecured Notes Payable, Net of Unamortized Deferred Financing Costs (Note 5)50,763  50,736  
Mortgages Payable, Net of Unamortized Premium and Unamortized Deferred Financing Costs331,771  332,280  
Lease Liabilities54,217  54,548  
Accounts Payable, Accrued Expenses and Other Liabilities74,161  47,626  
Dividends and Distributions Payable—  17,058  
Total Liabilities$1,303,509  $1,247,431  
Redeemable Noncontrolling Interests - Consolidated Joint Venture (Note 1)$—  $3,196  
  
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 June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019; 38,789,371 and 38,652,650 Shares Issued and Outstanding at June 30, 2020 and December 31, 2019, respectively388  387  
Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, NaN Issued and Outstanding at June 30, 2020 and December 31, 2019—  —  
Accumulated Other Comprehensive (Loss) Income(27,097) 1,010  
Additional Paid-in Capital1,149,291  1,144,808  
Distributions in Excess of Net Income(427,393) (338,695) 
Total Shareholders' Equity695,336  807,657  
  
Noncontrolling Interests (Note 1)55,715  64,144  
  
Total Equity751,051  871,801  
  
Total Liabilities and Equity$2,054,560  $2,122,428  
 September 30, 2019 December 31, 2018
Assets:    
Investment in Hotel Properties, Net of Accumulated Depreciation $1,989,982
 $2,026,659
Investment in Unconsolidated Joint Ventures 6,624
 4,004
Cash and Cash Equivalents 31,621
 32,598
Escrow Deposits 10,540
 8,185
Hotel Accounts Receivable, Net of Allowance for Doubtful Accounts of $0 and $188 9,919
 10,241
Due from Related Parties 5,714
 3,294
Intangible Assets, Net of Accumulated Amortization of $6,434 and $7,308 2,248
 13,644
Right of Use Assets 45,688
 —
Other Assets 36,726
 40,005
Total Assets $2,139,062
 $2,138,630
  
  
Liabilities and Equity:  
  
Line of Credit $46,000
 $10,000
Unsecured Term Loans, Net of Unamortized Deferred Financing Costs (Note 5) 696,995
 698,202
Unsecured Notes Payable, Net of Unamortized Deferred Financing Costs (Note 5) 50,723
 50,684
Mortgages Payable, Net of Unamortized Premium and Unamortized Deferred Financing Costs 332,872
 334,145
Lease Liabilities 54,706
 —
Accounts Payable, Accrued Expenses and Other Liabilities 51,882
 70,947
Dividends and Distributions Payable 17,046
 17,129
Total Liabilities $1,250,224
 $1,181,107
     
Redeemable Noncontrolling Interests - Consolidated Joint Venture (Note 1) $3,196
 $2,708
    
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 September 30, 2019 and December 31, 2018, with Liquidation Preferences of $25 Per Share (Note 1)

 $147
 $147
Common Shares:  Class A, $.01 Par Value, 104,000,000 Shares Authorized at September 30, 2019 and December 31, 2018; 38,609,902 and 39,458,626 Shares Issued and Outstanding at September 30, 2019 and December 31, 2018, respectively 386
 395
Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at September 30, 2019 and December 31, 2018 —
 —
Accumulated Other Comprehensive (Loss) Income (4,316) 4,227
Additional Paid-in Capital 1,143,764
 1,155,776
Distributions in Excess of Net Income (318,610) (267,740)
Total Shareholders' Equity 821,371
 892,805
    
Noncontrolling Interests (Note 1) 64,271
 62,010
  
  
Total Equity 885,642
 954,815
  
  
Total Liabilities and Equity $2,139,062
 $2,138,630
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

4
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue:  
Hotel Operating Revenues:
Room$15,139  $118,980  $86,222  $210,465  
Food & Beverage136  18,253  10,211  32,481  
Other Operating Revenues2,137  10,280  10,917  19,210  
Other Revenues29  (12) 228  138  
Total Revenues17,441  147,501  107,578  262,294  
Operating Expenses:  
Hotel Operating Expenses:
Room3,622  24,013  22,714  46,103  
Food & Beverage721  13,990  11,342  26,822  
Other Operating Expenses14,035  44,607  49,841  84,796  
Hotel Ground Rent1,058  1,114  2,121  2,224  
Real Estate and Personal Property Taxes and Property Insurance9,969  8,997  19,911  18,394  
General and Administrative (including Share Based Payments of $1,799 and $3,474, and $4,255 and $5,432 for the three and six months ended June 30, 2020 and 2019, respectively)4,187  8,100  10,021  13,700  
Loss on Impairment of Assets1,069  —  1,069  —  
Depreciation and Amortization24,322  23,964  48,510  48,092  
Total Operating Expenses58,983  124,785  165,529  240,131  
  
Operating (Loss) Income(41,542) 22,716  (57,951) 22,163  
Interest Income2  58  38  141  
Interest Expense(13,481) (13,325) (26,488) (26,223) 
Other Expense(385) (124) (457) (83) 
Loss on Debt Extinguishment—  (34) —  (34) 
(Loss) Income Before Results from Unconsolidated Joint Venture Investments and Income Taxes(55,406) 9,291  (84,858) (4,036) 
  
(Loss) Income from Unconsolidated Joint Ventures(502) 299  (1,520) 480  
  
(Loss) Income Before Income Taxes(55,908) 9,590  (86,378) (3,556) 
  
Income Tax (Expense) Benefit(15,872) (4,031) (11,374) 1,233  
  
Net (Loss) Income(71,780) 5,559  (97,752) (2,323) 
Loss Allocated to Noncontrolling Interests - Common Units7,164  49  10,061  1,112  
Loss (Income) Allocated to Noncontrolling Interests - Consolidated Joint Venture3,196  (8) 3,196  152  
Preferred Distributions(6,044) (6,043) (12,088) (12,087) 
Net Loss Applicable to Common Shareholders$(67,464) $(443) $(96,583) $(13,146) 
 Three Months Ended September 30, 
Nine Months Ended
September 30,
 2019 2018 2019 2018
Revenue:        
Hotel Operating Revenues: 
 
    
Room $108,909
 $103,958
 $319,374
 $292,498
Food & Beverage 15,870
 15,628
 48,351
 46,167
Other Operating Revenues 10,140
 8,143
 29,350
 22,341
Other Revenues 76
 147
 214
 321
Total Revenues 134,995
 127,876
 397,289
 361,327
Operating Expenses:        
Hotel Operating Expenses: 
 
    
Room 24,000
 23,615
 70,103
 65,916
Food & Beverage 12,605
 12,475
 39,427
 37,657
Other Operating Expenses 43,476
 40,205
 128,273
 116,163
Hotel Ground Rent 1,228
 1,328
 3,452
 3,605
Real Estate and Personal Property Taxes and Property Insurance 10,717
 8,932
 29,111
 25,353
General and Administrative (including Share Based Payments of $2,009 and $2,068, and $7,441 and $6,797 for the three and nine months ended September 30, 2019 and 2018, respectively) 5,613
 5,841
 19,313
 18,515
Acquisition and Terminated Transaction Costs —
 8
 —
 10
Depreciation and Amortization 24,092
 22,764
 72,184
 66,364
Gain on Insurance Settlement —
 (4,778) —
 (11,141)
Total Operating Expenses 121,731
 110,390
 361,863
 322,442
        
Operating Income 13,264
 17,486
 35,426
 38,885
Interest Income 66
 23
 207
 68
Interest Expense (12,935) (12,407) (39,158) (35,658)
Other Expense (246) (12) (328) (718)
Gain on Disposition of Hotel Properties —
 —
 —
 3,403
Loss on Debt Extinguishment (231) —
 (265) (22)
(Loss) Income Before Results from Unconsolidated Joint Venture Investments and Income Taxes (82) 5,090
 (4,118) 5,958
        
Income from Unconsolidated Joint Ventures 38
 582
 518
 918
        
(Loss) Income Before Income Taxes (44) 5,672
 (3,600) 6,876
        
Income Tax Benefit (Expense) 551
 (2,685) 1,784
 (1,200)
        
Net Income (Loss) 507
 2,987
 (1,816) 5,676
Loss Allocated to Noncontrolling Interests - Common Units 442
 72
 1,554
 676
(Income) Loss Allocated to Noncontrolling Interests - Consolidated Joint Venture (340) (250) (188) 950
Preferred Distributions (6,044) (6,044) (18,131) (18,131)
Net Loss Applicable to Common Shareholders $(5,435) $(3,235) $(18,581) $(10,829)
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

5
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Earnings Per Share:    
BASIC    
Loss from Continuing Operations Applicable to Common Shareholders$(1.75) $(0.02) $(2.50) $(0.35) 
    
DILUTED    
Loss from Continuing Operations Applicable to Common Shareholders$(1.75) $(0.02) $(2.50) $(0.35) 
    
Weighted Average Common Shares Outstanding:    
Basic38,609,922  39,127,385  38,587,011  39,121,421  
Diluted*38,609,922  39,127,385  38,587,011  39,121,421  
*Income (Loss)allocated to noncontrolling interest in Hersha Hospitality Limited Partnership(the “Operating Partnership” or “HHLP”)has been excluded from the numerator andthe Class A common shares issuable upon any redemption of the Operating Partnership’s commonunitsof 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 computingdiluted earnings per share becausethe effect of including theseshares and unitsin 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.
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Earnings Per Share:        
BASIC        
Loss from Continuing Operations Applicable to Common Shareholders $(0.15) $(0.09) $(0.50) $(0.29)
        
DILUTED        
Loss from Continuing Operations Applicable to Common Shareholders $(0.15) $(0.09) $(0.50) $(0.29)
        
Weighted Average Common Shares Outstanding:        
Basic 38,878,818
 39,321,062
 39,039,665
 39,400,237
Diluted* 38,878,818
 39,321,062
 39,039,665
 39,400,237
*
Income (Loss)allocated to noncontrolling interest in Hersha Hospitality Limited Partnership(the “Operating Partnership” or “HHLP”)has been excluded from the numerator andthe Class A common shares issuable upon any redemption of the Operating Partnership’s commonunitsof 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 computingdiluted earnings per share becausethe effect of including theseshares and unitsin 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.
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 June 30,Six Months Ended June 30,
 2020201920202019
Common Units and Vested LTIP Units3,943,319  3,379,354  3,891,032  3,344,178  
Unvested Stock Awards and LTIP Units Outstanding547,315  616,937  267,443  423,399  
Contingently Issuable Share Awards185,754  320,240  680,979  507,006  
Total Potentially Dilutive Securities Excluded from the Denominator4,676,388  4,316,531  4,839,454  4,274,583  
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Common Units and Vested LTIP Units3,379,354
 3,150,256
 3,356,033
 3,142,806
Unvested Stock Awards and LTIP Units Outstanding631,401
 453,008
 543,483
 272,333
Contingently Issuable Share Awards306,073
 312,941
 447,449
 458,966
Total Potentially Dilutive Securities Excluded from the Denominator4,316,828
 3,916,205
 4,346,965
 3,874,105
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

6
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS]

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net (Loss) Income$(71,780) $5,559  $(97,752) $(2,323) 
Other Comprehensive Loss    
Change in Fair Value of Derivative Instruments(2,020) (4,122) (33,146) (5,902) 
Less:  Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income1,228  (1,112) 2,205  (2,253) 
Total Other Comprehensive Loss$(792) $(5,234) $(30,941) $(8,155) 
    
Comprehensive (Loss) Income(72,572) 325  (128,693) (10,478) 
Less:  Comprehensive Loss Attributable to Noncontrolling Interests - Common Units7,270  465  12,895  1,755  
Less:  Comprehensive Loss (Income) Attributable to Noncontrolling Interests - Consolidated Joint Venture3,196  (8) 3,196  152  
Less:  Preferred Distributions(6,044) (6,043) (12,088) (12,087) 
Comprehensive Loss Attributable to Common Shareholders$(68,150) $(5,261) $(124,690) $(20,658) 
Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net Income (Loss)$507
 $2,987
 $(1,816) $5,676
Other Comprehensive (Loss) Income 
  
  
  
Change in Fair Value of Derivative Instruments(111) 914
 (6,013) 6,273
Less:  Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income(1,010) (813) (3,263) (1,832)
Total Other Comprehensive (Loss) Income$(1,121) $101
 $(9,276) $4,441
 
  
  
  
Comprehensive (Loss) Income(614) 3,088
 (11,092) 10,117
Less:  Comprehensive Loss Attributable to Noncontrolling Interests - Common Units532
 65
 2,289
 348
Less:  Comprehensive (Income) Loss Attributable to Noncontrolling Interests - Consolidated Joint Venture(340) (250) (188) 950
Less:  Preferred Distributions(6,044) (6,044) (18,131) (18,131)
Comprehensive Loss Attributable to Common Shareholders$(6,466) $(3,141) $(27,122) $(6,716)
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

7
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2020 AND 2019 AND 2018[UNAUDITED][UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]

Shareholders' EquityNoncontrolling InterestsRedeemable Noncontrolling Interests
Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)Consolidated Joint Venture ($)
Balance at March 31, 202038,673,242  387  —  14,703,214  147  1,145,450  (26,411) (362,777) 756,796  4,279,946  59,162  815,958  3,196  
Issuance Costs—  —  —  —  —  (10) —  —  (10) —  —  (10) —  
Share Based Compensation:
Grants116,129  1  —  —  —  —  —  —  1  1,101,924  —  1  —  
Amortization—  —  —  —  —  655  —  —  655  3,823  4,478  —  
Change in Fair Value of Derivative Instruments—  —  —  —  —  —  (686) —  (686) —  (106) (792) —  
Adjustment to Record Noncontrolling Interest at Redemption Value—  —  —  —  —  3,196  —  —  3,196  —  —  3,196  (3,196) 
Net Loss—  —  —  —  —  —  —  (64,616) (64,616) —  (7,164) (71,780) —  
Balance at June 30, 202038,789,371  388  —  14,703,214  147  1,149,291  (27,097) (427,393) 695,336  5,381,870  55,715  751,051  —  
 Shareholders' Equity Noncontrolling Interests   Redeemable Noncontrolling Interests
 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 ($) Consolidated Joint Venture ($)
Balance at June 30, 2019 39,240,924
 393
 —
 14,703,214
 147
 1,152,939
 (3,285) (302,705) 847,489
 4,279,946
 64,574
 912,063
 2,856
Repurchase of Common Shares (659,898) (7) —
 —
 —
 (9,563) —
 —
 (9,570) —
 —
 (9,570) —
Dividends and Distributions declared:                  
        
Common Shares ($0.28 per share) —
 —
 —
 —
 —
 —
 —
 (10,810) (10,810) —
 —
 (10,810) —
Preferred Shares —
 —
 —
 —
 —
 —
 —
 (6,044) (6,044) —
 —
 (6,044) —
Common Units ($0.28 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (579) (579) —
LTIP Units ($0.28 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (619) (619) —
Dividend Reinvestment Plan 389
 —
 —
 —
 —
 6
 —
 —
 6
 —
 —
 6
 —
Share Based Compensation:                  
        
Grants 28,487
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Amortization —
 —
 —
 —
 —
 722
 —
 —
 722
 —
 1,427
 2,149
 —
Change in Fair Value of Derivative Instruments —
 —
 —
 —
 —
 —
 (1,031) —
 (1,031) —
 (90) (1,121) —
Adjustment to Record Noncontrolling Interest at Redemption Value —
 —
 —
 —
 —
 (340) —
 —
 (340) —
 —
 (340) 340
Net Income (Loss) —
 —
 —
 —
 —
 —
 —
 949
 949
 —
 (442) 507
 —
Balance at September 30, 2019 38,609,902
 386
 —
 14,703,214
 147
 1,143,764
 (4,316) (318,610) 821,371
 4,279,946
 64,271
 885,642
 3,196
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
















8
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2020 AND 2019 AND 2018[UNAUDITED][UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]

 Shareholders' Equity Noncontrolling Interests   Redeemable Noncontrolling Interests
 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 ($) Consolidated Joint Venture ($)
Balance at June 30, 2018 39,379,211
 394
 —
 14,703,214
 147
 1,156,604
 7,769
 (241,776) 923,138
 3,766,540
 63,117
 986,255
 2,186
Unit Conversion 16,875
 1
 —
 —
 —
 400
 —
 —
 401
 (16,875) (401) —
 —
ATM Issuance Costs —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Dividends and Distributions declared:                          
Common Shares ($0.28 per share) —
 —
 —
 —
 —
 —
 —
 (11,039) (11,039) —
 —
 (11,039) —
Preferred Shares —
 —
 —
 —
 —
 —
 —
 (6,044) (6,044) —
 —
 (6,044) —
Common Units ($0.28 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (578) (578) —
LTIP Units ($0.28 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (471) (471) —
Dividend Reinvestment Plan 943
 —
 —
 —
 —
 20
 —
 —
 20
 —
 —
 20
 —
Share Based Compensation:                          
Grants 25,707
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Amortization —
 —
 —
 —
 —
 607
 —
 —
 607
   994
 1,601
 —
Equity Contribution to Consolidated Joint Venture —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 16
Change in Fair Value of Derivative Instruments —
 —
 —
 —
 —
 —
 93
 —
 93
 —
 8
 101
 —
Adjustment to Record Noncontrolling Interest at Redemption Value —
 —
 —
 —
 —
 (2,358) —
 —
 (2,358) —
 —
 (2,358) 2,358
Net Income (Loss) —
 —
 —
 —
 —
 —
 —
 5,167
 5,167
 —
 (72) 5,095
 (2,108)
Balance at September 30, 2018 39,422,736
 395
 —
 14,703,214
 147
 1,155,273
 7,862
 (253,692) 909,985
 3,749,665
 62,597
 972,582
 2,452











9
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Shareholders' EquityNoncontrolling InterestsRedeemable Noncontrolling Interests
Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)Consolidated Joint Venture ($)
Balance at March 31, 201939,213,269  392  —  14,703,214  147  1,151,654  1,534  (291,282) 862,445  4,279,946  64,808  927,253  2,848  
Issuance Costs—  —  —  —  —  (21) —  —  (21) —  —  (21) —  
Dividends and Distributions declared:
Common Shares ($0.28 per share)—  —  —  —  —  —  —  (10,987) (10,987) —  —  (10,987) —  
Preferred Shares—  —  —  —  —  —  —  (6,044) (6,044) —  —  (6,044) —  
Common Units ($0.28 per share)—  —  —  —  —  —  —  —  —  —  (580) (580) —  
LTIP Units ($0.28 per share)—  —  —  —  —  —  —  —  —  —  (620) (620) —  
Dividend Reinvestment Plan1,231  —  —  —  —  21  —  —  21  —  —  21  —  
Share Based Compensation:
Grants26,424  1  —  —  —  400  —  —  401  —  —  401  —  
Amortization—  —  —  —  —  893  —  —  893  —  1,430  2,323  —  
Change in Fair Value of Derivative Instruments—  —  —  —  —  —  (4,819) —  (4,819) —  (415) (5,234) —  
Adjustment to Record Noncontrolling Interest at Redemption Value—  —  —  —  —  (8) —  —  (8) —  —  (8) 8  
Net Income—  —  —  —  —  —  —  5,608  5,608  (49) 5,559  —  
Balance at June 30, 201939,240,924  393  —  14,703,214  147  1,152,939  (3,285) (302,705) 847,489  4,279,946  64,574  912,063  2,856  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]

 Shareholders' Equity Noncontrolling Interests   Redeemable Noncontrolling Interests
 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 ($) Consolidated Joint Venture ($)
Balance at December 31, 2018 39,458,626
 395
 —
 14,703,214
 147
 1,155,776
 4,227
 (267,740) 892,805
 3,749,665
 62,010
 954,815
 2,708
Repurchase of Common Shares (933,436) (10) —
 —
 —
 (14,255) —
 —
 (14,265) —
 —
 (14,265) —
ATM Issuance Costs —
 —
 —
 —
 —
 (21) —
 —
 (21) —
 —
 (21) —
Dividends and Distributions declared:                  
        
Common Shares ($0.84 per share) —
 —
 —
 —
 —
 —
 —
 (32,777) (32,777) —
 —
 (32,777) —
Preferred Shares —
 —
 —
 —
 —
 —
 —
 (18,131) (18,131) —
 —
 (18,131) —
Common Units ($0.84 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (1,736) (1,736) —
LTIP Units ($0.84 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (1,982) (1,982) —
Dividend Reinvestment Plan 2,885
 —
 —
 —
 —
 48
 —
 —
 48
 —
 —
 48
 —
Share Based Compensation:                  
        
Grants 81,827
 1
 —
 —
 —
 400
 —
 —
 401
 530,281
 —
 401
 —
Amortization —
 —
 —
 —
 —
 2,304
 —
 —
 2,304
 —
 8,266
 10,570
 —
Equity Contribution to Consolidated Joint Venture —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 300
Change in Fair Value of Derivative Instruments —
 —
 —
 —
 —
 —
 (8,543) —
 (8,543) —
 (733) (9,276) —
Adjustment to Record Noncontrolling Interest at Redemption Value —
 —
 —
 —
 —
 (488) —
 —
 (488) —
 —
 (488) 488
Net Income (Loss) —
 —
 —
 —
 —
 —
 —
 38
 38
   (1,554) (1,516) (300)
Balance at September 30, 2019 38,609,902
 386
 —
 14,703,214
 147
 1,143,764
 (4,316) (318,610) 821,371
 4,279,946
 64,271
 885,642
 3,196







10
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]


 Shareholders' Equity Noncontrolling Interests  Redeemable Noncontrolling Interests
 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 ($) Consolidated Joint Venture ($)
Balance at December 31, 2017 39,916,661
 399
 —
 14,701,700
 147
 1,164,946
 3,749
 (335,373) 833,868
 3,223,366
 54,286
 888,154
 —
Cumulative Effect of Adoption of ASC 610-20 —
 —
 —
 —
 —
 —
 —
 123,228
 123,228
 —
 5,793
 129,021
 —
Adjusted balance at January 1, 2018 39,916,661
 399
 —
 14,701,700
 147
 1,164,946
 3,749
 (212,145) 957,096
 3,223,366
 60,079
 1,017,175
 —
Unit Conversion 62,807
 1
 —
 —
 —
 1,172
 —
 —
 1,173
 (62,807) (1,173) —
 —
Preferred Shares ATM issuance, Net of Costs —
 —
 —
 1,514
 —
 (115) —
 —
 (115) —
 —
 (115) —
Repurchase of Common Shares (635,590) (6) —
 —
 —
 (10,827) —
 —
 (10,833) —
 —
 (10,833) —
Common Units Issued —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Dividends and Distributions declared:                  
       
Common Shares ($0.84 per share) —
 —
 —
 —
 —
 —
 —
 (33,076) (33,076) —
 —
 (33,076) —
Preferred Shares —
 —
 —
 —
 —
 —
 —
 (18,131) (18,131) —
 —
 (18,131) —
Common Units ($0.84 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (1,752) (1,752) —
LTIP Units ($0.84 per share) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 (1,508) (1,508) —
Dividend Reinvestment Plan 3,105
 —
 —
 —
 —
 57
 —
 —
 57
 —
 —
 57
 —
Share Based Compensation:                  
       
Grants 75,753
 1
 —
 —
 —
 733
 —
 —
 734
 589,106
 —
 734
 —
Amortization —
 —
 —
 —
 —
 1,665
 —
 —
 1,665
   7,299
 8,964
 —
Change in Fair Value of Derivative Instruments —
 —
 —
 —
 —
 —
 4,113
 —
 4,113
 —
 328
 4,441
 —
Equity Contribution to Consolidated Joint Venture —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 3,402
Adjustment to Record Noncontrolling Interest at Redemption Value —
 —
 —
 —
 —
 (2,358) —
 —
 (2,358) —
 —
 (2,358) 2,358
Net Income (Loss) —
 —
 —
 —
 —
 —
 —
 9,660
 9,660
 —
 (676) 8,984
 (3,308)
Balance at September 30, 2018 39,422,736
 395
 —
 14,703,214
 147
 1,155,273
 7,862
 (253,692) 909,985
 3,749,665
 62,597
 972,582
 2,452
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.




9
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]


Shareholders' EquityNoncontrolling InterestsRedeemable Noncontrolling Interests
Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)Consolidated Joint Venture ($)
Balance at December 31, 201938,652,650  387  —  14,703,214  147  1,144,808  1,010  (338,695) 807,657  4,279,946  64,144  871,801  3,196  
Issuance Costs—  —  —  —  —  (30) —  —  (30) —  —  (30) —  
Dividends and Distributions declared:
Preferred Shares—  —  —  —  —  —  —  (1,007) (1,007) —  —  (1,007) —  
Dividend Reinvestment Plan1,094  —  —  —  —  14  —  —  14  —  —  14  —  
Share Based Compensation:
Grants135,627  1  —  —  —  —  —  —  1  1,101,924  —  1  —  
Amortization—  —  —  —  —  1,303  —  —  1,303  4,466  5,769  —  
Change in Fair Value of Derivative Instruments—  —  —  —  —  —  (28,107) —  (28,107) —  (2,834) (30,941) —  
Adjustment to Record Noncontrolling Interest at Redemption Value—  —  —  —  —  3,196  —  —  3,196  —  —  3,196  (3,196) 
Net Loss—  —  —  —  —  —  —  (87,691) (87,691) —  (10,061) (97,752) —  
Balance at June 30, 202038,789,371  388  —  14,703,214  147  1,149,291  (27,097) (427,393) 695,336  5,381,870  55,715  751,051  —  


The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

10
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARES]

Shareholders' EquityNoncontrolling InterestsRedeemable Noncontrolling Interests
Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)Consolidated Joint Venture ($)
Balance at December 31, 201839,458,626  395  —  14,703,214  147  1,155,776  4,227  (267,740) 892,805  3,749,665  62,010  954,815  2,708  
Repurchase of Common Shares(273,538) (3) —  —  —  (4,693) —  —  (4,696) —  —  (4,696) —  
Issuance Costs—  —  —  —  —  (21) —  —  (21) —  —  (21) —  
Dividends and Distributions declared:
Common Shares ($0.56 per share)—  —  —  —  —  —  —  (21,967) (21,967) —  —  (21,967) —  
Preferred Shares—  —  —  —  —  —  —  (12,087) (12,087) —  —  (12,087) —  
Common Units ($0.56 per share)—  —  —  —  —  —  —  —  —  —  (1,158) (1,158) —  
LTIP Units ($0.56 per share)—  —  —  —  —  —  —  —  —  —  (1,362) (1,362) —  
Dividend Reinvestment Plan2,496  —  —  —  —  42  —  —  42  —  —  42  —  
Share Based Compensation:
Grants53,340  1  —  —  —  400  —  —  401  530,281  —  401  —  
Amortization—  —  —  —  —  1,583  —  —  1,583  —  6,839  8,422  —  
Equity Contribution to Consolidated Joint Venture—  —  —  —  —  —  —  —  —  —  —  —  300  
Change in Fair Value of Derivative Instruments—  —  —  —  —  —  (7,512) —  (7,512) —  (643) (8,155) —  
Adjustment to Record Noncontrolling Interest at Redemption Value—  —  —  —  —  (148) —  —  (148) —  —  (148) 148  
Net Loss—  —  —  —  —  —  —  (911) (911) (1,112) (2,023) (300) 
Balance at June 30, 201939,240,924  393  —  14,703,214  147  1,152,939  (3,285) (302,705) 847,489  4,279,946  64,574  912,063  2,856  

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.



11
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS]

Six Months Ended June 30,
20202019
Operating Activities:  
Net Loss$(97,752) $(2,323) 
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:  
Loss from Impairment of Assets1,069  —  
Deferred Taxes11,390  (1,348) 
Depreciation48,273  47,791  
Amortization1,116  1,107  
Loss on Debt Extinguishment—  17  
Equity in Loss (Income) of Unconsolidated Joint Ventures1,520  (480) 
Distributions from Unconsolidated Joint Ventures—  478  
Loss Recognized on Change in Fair Value of Derivative Instrument2,205  163  
Share Based Compensation Expense4,255  5,432  
Change in Assets and Liabilities:  
(Increase) Decrease in:  
Hotel Accounts Receivable5,412  (325) 
Other Assets4,884  (1,317) 
Due from Related Parties3,750  (2,453) 
(Decrease) Increase in:  
Accounts Payable, Accrued Expenses and Other Liabilities(2,479) 129  
Net Cash Provided by (Used in) Operating Activities$(16,357) $46,871  
  
Investing Activities:  
Capital Expenditures(15,612) (21,230) 
Cash Paid for Hotel Development Projects21  (467) 
Contributions to Unconsolidated Joint Ventures(600) (4,000) 
Distributions from Unconsolidated Joint Ventures—  1,022  
Net Cash Used in Investing Activities$(16,191) $(24,675) 
 Nine Months Ended September 30,
 2019 2018
Operating Activities:    
Net (Loss) Income $(1,816) $5,676
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:  
  
Gain on Disposition of Hotel Properties, Net —
 (3,403)
Gains from Insurance Recoveries —
 (11,141)
Deferred Taxes (2,126) 1,200
Depreciation 71,760
 65,656
Amortization 1,613
 2,118
Loss on Debt Extinguishment 265
 22
Equity in Income of Unconsolidated Joint Ventures (518) (918)
Distributions from Unconsolidated Joint Ventures 556
 1,000
Loss Recognized on Change in Fair Value of Derivative Instrument 226
 147
Share Based Compensation Expense 7,441
 6,797
Proceeds Received for Business Interruption Insurance Claims —
 8,614
Change in Assets and Liabilities:  
  
(Increase) Decrease in:  
  
Hotel Accounts Receivable 322
 2,576
Other Assets 76
 (3,091)
Due from Related Parties (2,420) 191
(Decrease) Increase in:  
  
Accounts Payable, Accrued Expenses and Other Liabilities (905) 7,623
Net Cash Provided by Operating Activities $74,474
 $83,067
    
Investing Activities:    
Purchase of Hotel Property Assets $—
 $(41,230)
Capital Expenditures (33,706) (53,573)
Cash Paid for Hotel Development Projects (149) (29,606)
Proceeds from Disposition of Hotel Properties —
 49,580
Contributions to Unconsolidated Joint Ventures (4,000) (1,000)
Proceeds from Insurance Claims —
 13,624
Distributions from Unconsolidated Joint Ventures 1,342
 47,738
Net Cash Used in Investing Activities $(36,513) $(14,467)
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

12
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS]

Six Months Ended June 30,
20202019
Financing Activities:  
Borrowings Under Line of Credit, Net$47,000  $27,000  
Principal Repayment of Mortgages and Notes Payable(650) (56,636) 
Proceeds of Paycheck Protection Program ("PPP") Loans18,936  —  
Repayment of PPP Loans(18,936) —  
Cash Paid for Deferred Financing Costs(2,104) (643) 
Repurchase of Common Shares—  (4,624) 
Dividends Paid on Common Shares(10,809) (21,980) 
Dividends Paid on Preferred Shares(6,044) (12,087) 
Distributions Paid on Common Units and LTIP Units(1,198) (2,371) 
Other Financing Activities(30) (91) 
Net Cash Provided by (Used in) Financing Activities$26,165  $(15,432) 
  
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash$(6,383) $6,764  
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period36,985  40,783  
  
Cash, Cash Equivalents, and Restricted Cash - End of Period$30,602  $47,547  
 Nine Months Ended September 30,
 2019 2018
Financing Activities:    
Borrowings Under Line of Credit, Net $36,000
 $9,900
Repayment of Borrowings Under Unsecured Term Loan —
 (18,000)
Proceeds of Mortgages and Notes Payable 56,469
 28,000
Principal Repayment of Mortgages and Notes Payable (57,033) (1,237)
Cash Paid for Deferred Financing Costs (2,878) (409)
Cash Paid for Debt Extinguishment (194) —
Repurchase of Common Shares (14,196) (10,833)
Dividends Paid on Common Shares (32,960) (33,158)
Dividends Paid on Preferred Shares (18,130) (18,130)
Distributions Paid on Common Units and LTIP Units (3,570) (3,114)
Other Financing Activities (91) (193)
Net Cash Used in Financing Activities $(36,583) $(47,174)
  
  
Net Increase in Cash, Cash Equivalents, and Restricted Cash $1,378
 $21,426
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period 40,783
 25,586
  
  
Cash, Cash Equivalents, and Restricted Cash - End of Period $42,161
 $47,012
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

13
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 2018 [UNAUDITED]2019[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 and ninesix months ended SeptemberJune 30, 20192020 are not necessarily indicative of the results that may be expected for the year ending December 31, 20192020 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, 2018,2019, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, 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 SeptemberJune 30, 2019,2020, we owned an approximate 90.0%87.8% 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% byby 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 ninesix months ended SeptemberJune 30, 20192020 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, 2018.2019.


14
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 2018 [UNAUDITED]2019[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 $64,271$55,715 as of SeptemberJune 30, 20192020 and $62,010$64,144 as of December 31, 2018.2019. As of SeptemberJune 30, 2019,2020, there were 4,279,9465,381,870 Common Units and LTIP Units outstanding with a fair market value of $63,686,$31,000, 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.

On April 2, 2018, weWe entered into a joint venture with the party from which we acquiredthat owns the Ritz-Carlton Coconut Grove, FL. By exercising an option provided to the sellerFL, in connection with our purchase of the property in 2017,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 book value of the noncontrolling interest in the Ritz Coconut Grove is classified as temporary equity within our Consolidated Balance Sheets. The noncontrolling interest in the Ritz Coconut Grove was initially measured at fair value upon formation of the joint venture and will be subsequently measured at the greater of historical cost or the put option redemption value. For the three and ninesix months ended SeptemberJune 30, 2019,2020, based on the income allocation methodology described above, the noncontrolling interest in this joint venture was allocated losses of $0$0. For the three and six months ended June 30, 2019, the noncontrolling interest in the joint venture was allocated losses of$0 and$300, respectively, andrespectively. This is recorded as part of the Loss Allocated to Noncontrolling Interests line item within the Consolidated Statements of Operations. On SeptemberJune 30, 2019,2020 we reclassified $488$3,196 from Noncontrolling Joint Venture Interest to Additional Paid in Capital to Noncontrolling Joint Venture Interest to recognize the noncontrolling interest at the put option redemption value of $3,196.$0.

15
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 [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 SeptemberJune 30, 20192020 and December 31, 20182019 are summarized as follows:
         Dividend Per Share  
 Shares Outstanding     Nine Months Ended September 30,
Series September 30, 2019 December 31, 2018 Aggregate Liquidation Preference Distribution Rate 2019 2018
Series C 3,000,000
 3,000,000
 $75,000
 6.875% $1.2891
 $1.2891
Series D 7,701,700
 7,701,700
 $192,500
 6.500% $1.2189
 1.2187
Series E 4,001,514
 4,001,514
 $100,000
 6.500% $1.2189
 1.2187
Total 14,703,214
 14,703,214
  
  
  
  


In December 2018, our Board of Trustees authorized us to repurchase from time to time up to an aggregate of $50,000 of our outstanding common shares. For the nine months ended September 30, 2019, the Company repurchased 933,436 common shares for an aggregate purchase price of $14,196. Upon repurchase by the Company, these common shares ceased to be outstanding and became authorized but unissued common shares. There is no guarantee that the Company will repurchase the entire aggregate value of shares authorized for repurchase prior to the program's expiration. The repurchase program will expire on December 31, 2019, unless extended by our Board of Trustees, at their discretion.

Revenue Recognition

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which is codified as ASC 606 and requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in U.S. GAAP. The Company has adopted the provisions of ASC 606 effective January 1, 2018, electing to utilize the modified retrospective transition method. The modified retrospective method allows for, among other things, a cumulative adjustment to opening equity upon adoption of the standard. The adoption of the provisions of ASC 606 was applied to contracts with customers using available practical expedients only for contracts with customers. The Company evaluated only those contracts with customers that did not meet the definition of a closed contract under the guidance of ASC 606 at the time of adoption. This approach resulted in no cumulative adjustment to opening equity for the Company as it relates to contracts with customers. The new revenue recognition model did not have a material impact on our hotel operating revenue.

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 statements 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 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 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 sheets. Advanced deposits are recognized as revenue at the time of the guest's stay. The Company notes no significant judgements regarding the recognition of room revenue.


16
15
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 1 – BASIS OF PRESENTATION (CONTINUED)


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 sheets. Advanced deposits for banquet services are recognized as revenue following the completion of the banquet services. The Company notes no significant judgements regarding the recognition of food and beverage revenue. Other operating revenues are generated by a variety of activities such as spa services, parking fees, sundry sales, etc., whereby the contracts with customers are typically completed at the time of sale and receipt of payment from the customer. There are no significant judgements regarding revenue recognition related to these ancillary revenue streams.

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.

Gains from the sales of ownership interests in real estate are accounted for in accordance with the provisions of Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, which the Company adopted effective January 1, 2018.  Our evaluation over sales of real estate is impacted by the FASB definition of a business and in substance nonfinancial assets, which have been addressed through the issuance of ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, and ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), respectively. Based on the provisions of ASU No. 2017-01 and ASU No. 2017-05, the Company expects any future sales of interests in hotel properties to likely meet the criteria for full gain recognition on sale. This treatment is not different from our historical position when selling our entire interest in hotel properties, however, this is different than the historical treatment in certain instances where the Company sold partial interests in hotel properties. 

In particular, during 2016 the Company sold partial interests in 7 hotel properties to a third party (“Cindat Sale”) resulting in an approximate $81 million deferred gain based on prevailing GAAP at the time of the transaction. The Company chose to adopt the provisions of ASC 610-20 for contracts with noncustomers for all contracts and chose not to utilize any available practical expedients as it pertains to contracts with noncustomers.  Accordingly, the Company's analysis included all contracts with noncustomers related to the sales, either full or partial, of our interest in hotel properties. The Company noted no changes to the recognition of gains on sales in instances whereby the Company sold 100% of our interest. The Company noted, however, that the Cindat Sale, under the provisions of ASC 610-20, would have resulted in full gain recognition at the time of the partial sale of our interest in the 7 hotel properties. The impact of our adoption of the new standard resulted in a cumulative adjustment to decrease the opening balance to distributions in excess of net income, thereby increasing total shareholders' equity by $123,228 and increase the opening balance of noncontrolling interests of $5,793.

The table below shows the cumulative effect our adoption of ASC 610-20 had on the opening balances of our balance sheet on January 1, 2018.

 Balance as Reported at December 31, 2017 Cumulative Effect of the Adoption of ASC 610-20 Balance at January 1, 2018, as Adjusted
Investment in Unconsolidated Joint Ventures$3,569
 $47,738
 $51,307
Deferred Gain on Disposition of Hotel Assets81,284
 (81,284) —
Distributions in Excess of Net Income(335,373) 123,228
 (212,145)
Noncontrolling Interests54,286
 5,793
 60,079



17
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 1 – BASIS OF PRESENTATION (CONTINUED)

The quantitative impact of applying the prior accounting policies would have resulted in an increase of $129,021 in the deferred gain on disposition of hotel assets, an increase of $123,228 in distributions in excess of net income thereby decreasing shareholders' equity, and a decrease of $5,793 in noncontrolling interests at September 30, 2019. The adoption of ASC 610-20 did not materially impact the balances in the Company's consolidated statement of operations or its consolidated statement of cash flows.

New Accounting Pronouncements
In June 2018, the FASB issued ASU No. 2018-07,
Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The update will simplify several aspects of the accounting for nonemployee share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this update affects all entities that enter into share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted the provisions of the update effective January 1, 2019. The adoption of this update did not have a material effect on our consolidated financial statements or the disclosures of share-based payments within Note 9 of these consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The update will make more financial and nonfinancial hedging strategies eligible for hedge accounting, changes how companies assess hedge effectiveness, and amends the presentation and disclosure requirements for hedging transactions. The Company adopted the provisions of the update effective January 1, 2019. The adoption of this update did not have a material effect on our consolidated financial statements or the disclosures related to fair value measurements within Note 8 of these consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business as it relates to acquisitions and business combinations. The update adds further guidance that assists preparers in evaluating whether a transaction will be accounted for as an asset or a business. We expect most of our hotel property acquisitions to qualify as asset acquisitions under the standard which requires the capitalization of acquisition costs to the underlying assets. The Company expects the standard to have an impact on our financial statements in periods during which we complete significant hotel acquisitions. The Company has adopted ASU No. 2017-01 effective, January 1, 2018.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), which provides guidance on the presentation of restricted cash or restricted cash equivalents within the statement of cash flows. Accordingly, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The Company adopted this standard effective January 1, 2018. The adoption of ASU No. 2016-18 changed the presentation of the statements of cash flows for the Company and we utilized a retrospective transition method for each period presented within financial statements for periods subsequent to the date of adoption. Additionally, the Company provides a reconciliation within Note 11 of cash, cash equivalents, and restricted cash to their relative balance sheet captions.

18
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 1 – BASIS OF PRESENTATION (CONTINUED)

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides the principles for the recognition, measurement, presentation and disclosure of leases. The accounting for lessors will remain largely unchanged from current GAAP; however, the standard requires that certain initial direct costs be expensed rather than capitalized. Under the standard, lessees apply a dual approach, classifying leases as either finance or operating leases. A lessee is required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, regardless of their lease classification. Based on the review of our leases, we are a lessee on ground leases in certain markets, hotel equipment leases, and office space leases. The Company adopted the provisions of the update effective January 1, 2019. As a result, the Company recorded right of use assets and corresponding lease liabilities of $55,515 at January 1, 2019 for leases where we are the lessee. The Company also reclassified $11,050 previously included in intangible assets to the right of use asset, related to purchase accounting adjustments for below market rate leases. Additionally, the Company reclassified $19,627 previously included in accounts payable and accrued expenses to the right of use assets. This reclassification related to amounts recorded for accrued lease expense, as a result of using the straight-line rent method, and intangible liabilities derived from land leases acquired at above market lease rates. Upon adoption, the right of use assets had a weighted average useful life of 64.2 years. We are also a lessor in certain office space and retail lease agreements related to our hotels and the adoption of this ASU did not have a material impact on our accounting for leases where we are the lessor. The adoption of this ASU did not impact revenue recognition policies for the Company. See Note 6 to these consolidated financial statements for further lease disclosures.


19
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

    Dividend Per Share  
Shares Outstanding  Six Months Ended June 30,
SeriesJune 30, 2020December 31, 2019Aggregate Liquidation PreferenceDistribution Rate20202019
Series C3,000,000  3,000,000  $75,000  6.875 %—  $0.8594  
Series D7,701,700  7,701,700  $192,500  6.500 %—  $0.8126  
Series E4,001,514  4,001,514  $100,000  6.500 %—  $0.8126  
Total14,703,214  14,703,214      


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. The global impact of the pandemic has been rapidly evolving and, in the United States, certain states and cities, including most where we own properties, have reacted by instituting various restrictive measures such as quarantines, restrictions on travel, school closings, "stay at home" rules and restrictions on types of business that may continue to operate. During the first quarter of 2020 as a result of the impact of the COVID-19 pandemic, we had temporarily closed 21 of our 48 hotels while our remaining hotels operated in a significantly reduced capacity. During the second quarter of 2020 we reopened 5 hotels, resulting in 16 hotels remaining closed as of June 30, 2020. 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 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. As a consequence, we cannot estimate the impact on our business, financial condition, or operating results with reasonable certainty, but we expect a net loss on a U.S. GAAP basis for the year ending December 31, 2020. On April 2, 2020, we amended our existing Credit Agreement (as defined below) and received $100,000 in available funds on our Line of Credit (as defined below), of which we drew $25,000 during April 2020 and $10,000 during July 2020. Additionally, the amendment provided a waiver of covenants under our Credit Facility (as defined below) through March 31, 2021 and changed the Credit Facility from an unsecured borrowing facility to a secured borrowing facility. Based on this amendment along with cost savings measures throughout our operations, we believe that we will be able to generate sufficient liquidity to satisfy our obligations for the next twelve months, absent a breach of Credit Facility covenants described below.

At June 30, 2020, we were in compliance with all debt covenants related to our mortgage borrowings with the exception of one mortgage where we failed a debt service coverage ratio requirement, which is not considered an event of default but triggers a cash escrow requirement related to future debt service. We have one mortgage borrowing in the amount of $25,000 that will mature within the next twelve months, which we expect to be able to extend the maturity based on the provisions within the existing mortgage or refinance the mortgage. After considering the effect of the COVID-19 pandemic on our consolidated operations, it is probable that we will fail certain financial covenants within certain property-level mortgage borrowings or under our Credit Facility within the next twelve months. We have received financial covenant waivers from certain of our mortgage lenders, which provided us relief from financial covenants for a period of time that does not extend beyond the first quarter of 2021. 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, with the exception of one mortgage borrowing. In this instance, the lender could require prepayment of the mortgage in full, however, we believe we would have sufficient available funds on our Credit Facility to accommodate this remedy of covenant default. As noted above, the covenant waivers on our Credit Facility extend through March 31, 2021; however, we believe that it is probable we will breach certain of our Credit Facility covenants when measured for the period ended June 30, 2021. This potential event of default could lead to potential acceleration of amounts due under the Credit Facility. Notwithstanding our belief that we
16

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

probably will be successful in renegotiating the terms of our Credit Facility prior to an event of default, we believe that we will continue to have access to the capital markets. Also, we could choose to raise cash by selling hotel properties, although there can be no assurances we would be successful on terms favorable to us.

Management’s primary mitigation plan to avoid a default under its Credit Agreement is to obtain a further waiver from its creditors or amend the Credit Facility in a manner to avoid an event of default. 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. 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. As a result, management determined that the future valuation and ability to realize the benefits of our deferred tax assets is not probable and we have recorded a full valuation allowance against our net deferred tax assets as of June 30, 2020.

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

Properties intended to be sold are designated as “held for sale” on the balance sheet. In accordance with ASU Update No. 2014-08 concerning the classification and reporting of discontinued operations, we evaluate each disposition to determine whether we need to classify the disposition as discontinued operations. This amendment defines discontinued operations as a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. 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.
17


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

We review our portfolio on an on-going basis to evaluate the existence of any of the aforementioned events or changes in circumstances that would require us to test for recoverability. In general, our review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value expected, as well as the effects of hotel demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make subjective assessments as to whether there are impairments in the values of our investments in hotel properties.

As of June 30, 2020, based on our analysis and given consideration to the impairment charge taken on one of our hotels held for sale, we have determined that the estimated future cash flow of each of the properties in our portfolio is sufficient to recover its carrying value.

New Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. 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 this update, in general, only apply to contract amendments and modifications entered into prior to January 1, 2023. The provisions of this update that will most likely affect our financial reporting process relate to modifications of contracts with lenders and the related hedging contracts associated with each respective modified borrowing contract. In general, the provisions of the update would benefit 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. While we anticipate the impact of this update to be to the benefit of the Company, we are still evaluating the overall impact to the Company.
18
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019[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 SeptemberJune 30, 20192020 and December 31, 2018:2019:
       
 September 30, 2019 December 31, 2018 June 30, 2020December 31, 2019
       
Land $518,243
 $518,243
Land$505,156  $518,243  
Buildings and Improvements 1,706,541
 1,688,459
Buildings and Improvements1,686,057  1,710,621  
Furniture, Fixtures and Equipment 290,819
 278,098
Furniture, Fixtures and Equipment297,465  294,527  
Construction in Progress 7,854
 3,804
Construction in Progress4,706  10,202  
 2,523,457
 2,488,604
 2,493,384  2,533,593  
  
  
   
Less Accumulated Depreciation (533,475) (461,945)Less Accumulated Depreciation(590,920) (557,620) 
  
  
   
Total Investment in Hotel Properties * $1,989,982
 $2,026,659
Total Investment in Hotel Properties *$1,902,464  $1,975,973  
* The net book value of investment in hotel property at Ritz Coconut Grove, which is a variable interest entity, is $45,325$44,139 and $44,875$44,854 at SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively.

Acquisitions
For the ninesix months ended SeptemberJune 30, 2020 and 2019, we acquired no hotel properties.

Hotel Dispositions
For the ninesix months ended SeptemberJune 30, 2020 and 2019, we disposed of no hotel properties.


19
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 2 – INVESTMENT IN HOTEL PROPERTIES (CONTINUED)
Assets Held For Sale
We have classified two assets as held for sale as of June 30, 2020. The sales of Duane Street Hotel and Blue Moon Hotel are expected to close in 2020 and are included as held for sale assets as of June 30, 2020. During the second quarter of 2020, the Company amended the purchase and sale agreement with the buyer of the hotel to reduce the purchase price by $2,000. As a result of the reduced sales price and after consideration of selling costs to the Company, management determined that the carrying value of the hotel exceeded the anticipated net proceeds from sale, resulting in a $1,069 impairment charge recorded during the three months ended June 30, 2020.
The table below shows the balances for the properties that were classified as assets held for sales as of June 30, 2020.
June 30, 2020
Land$13,087 
Buildings and Improvements35,482 
Furniture, Fixtures and Equipment6,418 
54,987 
Less Accumulated Depreciation(14,817)
Assets Held for Sale$40,170 

20
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 3 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURES


As of SeptemberJune 30, 20192020 and December 31, 2018,2019, our investment in unconsolidated joint ventures consisted of the following:
 Percent  
Joint VentureHotel PropertiesOwnedJune 30, 2020December 31, 2019
    
Cindat Hersha Owner JV, LLCHilton and IHG branded hotels in NYC31 %$—  $—  
Hiren Boston, LLCCourtyard by Marriott, South Boston, MA50 %555  1,434  
SB Partners, LLCHoliday Inn Express, South Boston, MA50 %—  —  
SB Partners Three, LLCHome2 Suites, South Boston, MA50 %6,972  7,012  
  $7,527  $8,446  
   Percent    
Joint Venture Hotel Properties Owned September 30, 2019 December 31, 2018
        
Cindat Hersha Owner JV, LLC Hilton and IHG branded hotels in NYC 31.2% $—
 $—
Hiren Boston, LLC Courtyard by Marriott, South Boston, MA 50.0% 1,696
 1,879
SB Partners, LLC Holiday Inn Express, South Boston, MA 50.0% —
 1,125
SB Partners Three, LLC Home2 Suites, South Boston, MA 50.0% 4,928
 1,000
     $6,624
 $4,004

On September 27, 2018,January 3, 2020, we entered into aan agreement with our joint venture agreement with JHMpartner for our partner to purchase our membership interests in Hiren Boston, LLC and SB Three Member, LLC which will own a Home2 Suites located in South Boston, MA. Each partner will have a 50% interestPartners, LLC.Net proceeds from the sale of our interests are anticipated to be approximately $26,000 and this asset, which is currently under development andtransaction is expected to open inclose during the fourth quarter of 2020. At the onset of the agreement, each partner contributed $1,000 and any additional contributions will be made equally by each party.

During the nine months ended September 30, 2019, we received a distribution of $1,500 from SB Partners, LLC. This distribution exceeded our accounting basis in this joint venture resulting in a $0 investment balance as of September 30, 2019.

Income/Loss Allocation

Cindat Hersha Owner JV, LLC cash available for distribution will be distributed to (1) Cindat until they receive a return on their contributed $142,000$143,650 senior common equity interest, currently at 8.5%8%, and (2) then to us until we receive an 8% return on our contributed $64,357 junior common equity interest. Any cash available for distribution remaining will be split 31.2%31% to us and 68.8%69% to Cindat. Cindat’s senior common equity return is reduced by 0.5% annually for 4 years following the closing until it is set at a rate of 8% for the remainder of the life of the joint venture.  As of SeptemberJune 30, 2019,2020, based on the income allocation methodology described above, the Company has absorbed cumulative losses equal to our accounting basis in the joint venture resulting in a $0 investment balance in the table above, however, we currently maintain a positive equity balance within the venture. This difference is due to difference in our basis inside the venture versus our basis outside of the venture, which is explained later in this note.

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.

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. 


21
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2020 AND 2019 AND 2018[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)

Income (loss) recognized during the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, for our investments in unconsolidated joint ventures is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Cindat Hersha Owner JV, LLC$—  $—  $—  $—  
Hiren Boston, LLC(477) 315  (880) 138  
SB Partners, LLC—  —  (600) 375  
SB Partners Three, LLC(25) (16) (40) (33) 
(Loss) Income from Unconsolidated Joint Venture Investments$(502) $299  $(1,520) $480  
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Cindat Hersha Owner JV, LLC —
 —
 —
 —
Hiren Boston, LLC 79
 419
 217
 668
SB Partners, LLC $—
 $163
 $375
 $250
SB Partners Three, LLC (41) —
 (74) —
Income from Unconsolidated Joint Venture Investments $38
 $582
 $518
 $918


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 SeptemberJune 30, 20192020 and December 31, 20182019 and for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018.2019.

Balance Sheets
June 30, 2020December 31, 2019
Assets
Investment in Hotel Properties, Net$584,038  $579,287  
Other Assets28,359  33,891  
Total Assets$612,397  $613,178  

Liabilities and Equity
Mortgages and Notes Payable$445,533  $430,282  
Other Liabilities22,452  19,185  
Equity:
Hersha Hospitality Trust7,996  9,588  
Joint Venture Partner(s)136,977  154,998  
Accumulated Other Comprehensive Loss(561) (875) 
Total Equity144,412  163,711  

Total Liabilities and Equity$612,397  $613,178  
 September 30, 2019 December 31, 2018
Assets    
Investment in Hotel Properties, Net $568,992
 $569,609
Other Assets 37,160
 30,088
Total Assets $606,152
 $599,697
    
Liabilities and Equity    
Mortgages and Notes Payable $423,348
 $422,205
Other Liabilities 19,655
 7,478
Equity:    
Hersha Hospitality Trust 8,251
 15,554
Joint Venture Partner(s) 155,852
 155,053
Accumulated Other Comprehensive Loss (954) (593)
Total Equity 163,149
 170,014
    
Total Liabilities and Equity $606,152
 $599,697


22
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2020 AND 2019 AND 2018[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)

Statements of Operations
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Room Revenue$5,588  $26,995  $16,932  $43,346  
Other Revenue—  622  787  1,243  
Operating Expenses(3,265) (11,890) (11,613) (21,921) 
Lease Expense(170) (164) (354) (365) 
Property Taxes and Insurance(3,154) (3,051) (6,438) (6,103) 
General and Administrative(553) (1,505) (1,516) (2,711) 
Depreciation and Amortization(3,925) (3,694) (7,840) (7,354) 
Interest Expense(5,582) (7,196) (11,869) (14,343) 
Net (Loss) Income$(11,061) $117  $(21,911) $(8,208) 
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Room Revenue $25,098
 $26,579
 $68,444
 $69,993
Other Revenue 604
 607
 1,848
 1,571
Operating Expenses (12,142) (12,205) (34,063) (33,933)
Lease Expense (164) (164) (529) (493)
Property Taxes and Insurance (3,161) (3,022) (9,264) (8,838)
General and Administrative (1,603) (1,359) (4,314) (3,961)
Depreciation and Amortization (3,731) (3,436) (11,085) (9,804)
Interest Expense (7,038) (6,713) (21,381) (18,776)
Loss on Debt Extinguishment —
 —
 —
 (7,284)
Net (Loss) Income $(2,137) $287
 $(10,344) $(11,525)


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 SeptemberJune 30, 20192020 and December 31, 2018.2019.
June 30, 2020December 31, 2019
Our share of equity recorded on the joint ventures' financial statements$7,996  $9,588  
Adjustment to reconcile our share of equity recorded on the joint ventures' financial statements to our investment in unconsolidated joint ventures(1)
(469) (1,142) 
Investment in Unconsolidated Joint Ventures$7,527  $8,446  
 September 30, 2019 December 31, 2018
Our share of equity recorded on the joint ventures' financial statements $8,251
 $15,554
Adjustment to reconcile our share of equity recorded on the joint ventures' financial statements to our investment in unconsolidated joint ventures(1)
 (1,627) (11,550)
Investment in Unconsolidated Joint Ventures $6,624
 $4,004

(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. 
 

23
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 4 - OTHER ASSETS

Other Assets

Other Assets consisted of the following at SeptemberJune 30, 20192020 and December 31, 2018:2019:
 September 30, 2019 December 31, 2018
  
  
Derivative Asset $594
 $5,307
Deferred Financing Costs 1,459
 1,845
Prepaid Expenses 10,390
 10,695
Investment in Statutory Trusts 1,548
 1,548
Investment in Non-Hotel Property and Inventories 3,230
 3,349
Deposits with Unaffiliated Third Parties 2,626
 2,866
Deferred Tax Asset, Net of Valuation Allowance of $497 13,204
 11,078
Other 3,675
 3,317
 $36,726
 $40,005

June 30, 2020December 31, 2019

Derivative Asset$—  $2,514  
Deferred Financing Costs3,019  1,330  
Prepaid Expenses6,189  11,279  
Investment in Statutory Trusts1,548  1,548  
Investment in Non-Hotel Property and Inventories2,714  2,987  
Deposits with Unaffiliated Third Parties2,575  2,577  
Deferred Tax Asset, Net of Valuation Allowance of $20,363 and $497, respectively—  11,390  
Property Insurance Receivable1,788  1,788  
Other3,163  2,764  
$20,996  $38,177  
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 Sheets.

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.

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 approximately $13,204 ofrecorded a valuations allowance resulting in net deferred tax assets of $0 as of SeptemberJune 30, 2019.2020. 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 forthe ability to realize the benefits of our deferred tax assets, andassets. In Note 1, we believealso disclosed factors that ithave given rise to substantial doubt in our ability to continue as a going concern, which is more likely than nota primary factor in our determination that we will be able to realize the $13,204 ofa full valuation allowance against our net deferred tax assets inwas appropriate to record during the future.three months ended June 30, 2020.


Property Insurance Receivable – This category represents the amount that we expect to receive from our insurance companies for reimbursement of costs incurred as a result of water damage at The Boxer.

24
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 5 - DEBT


Mortgages
Mortgages payable at SeptemberJune 30, 20192020 and December 31, 20182019 consisted of the following:
June 30, 2020December 31, 2019
Mortgage Indebtedness$333,298  $333,948  
Net Unamortized Premium585  821  
Net Unamortized Deferred Financing Costs(2,112) (2,489) 
Mortgages Payable$331,771  $332,280  
 September 30, 2019 December 31, 2018
Mortgage Indebtedness $334,333
 $334,897
Net Unamortized Premium 940
 1,304
Net Unamortized Deferred Financing Costs (2,401) (2,056)
Mortgages Payable $332,872
 $334,145

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%2.16% to 6.30% as of SeptemberJune 30, 2019.2020. Aggregate interest expense incurred under the mortgage loans payable totaled $3,994$3,031 and $4,044,$4,077, and $12,061$6,516 and $11,350,$8,067, during the three and ninesix months ended SeptemberJune 30, 2020 and 2019, respectively. The impact on interest expense related to the interest rate swap contracts on mortgages resulted in expense of $552 and 2018, respectively.
$585 for the three and six months ended June 30, 2020 and a decrease to interest expense of $99 and $196 for the three and six months ended June 30, 2019.

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 with the exception of one mortgage were met as of SeptemberJune 30, 2019.2020. The failure of meeting a minimum debt service coverage ratio requirement in this one mortgage is not considered an event of default under the loan agreement but rather, triggers a cash escrow requirement related to future debt service.

As of SeptemberJune 30, 2019,2020, the maturity dates for the outstanding mortgage loans ranged from February 2020January 2021 to September 2025. The Company expects to refinance loans maturing within a year of September 30, 2019 into new property-specific mortgage debt on or before the respective loan maturity dates.

Unsecured Notes Payable

We have 2 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 of notes issued to each of Hersha Statutory Trust I and Hersha Statutory Trust II bear interest at a variable rate of LIBOR plus 3% per annum. This rate resets 2 business days prior to each quarterly payment. The face value of the notes payable is offset by $825$785 and $864$812 as of SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively, in net deferred financing costs incurred as a result of entering into these indentures. The deferred financing costs are amortized over the life of the notes payable. The weighted average interest rate on our 2 junior subordinated notes payable was 5.37%4.08% and 5.46%5.64%, and 5.56%4.45% and 5.11%5.66%, during the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. Interest expense on Unsecured Notes Payable in the amount of $707$532 and $704,$734, and $2,173$1,160 and $1,992,$1,466, was recorded for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively.

25
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 5 - DEBT (CONTINUED)

Credit Facilities as of June 30, 2020

We maintain 3 unsecured credit agreements which aggregate to $950,900 with Citigroup Global Markets Inc., Wells Fargo Bank, Inc. and various other lenders. Our credit facilityagreement (the "Credit Agreement") provides for a $457,000 senior unsecured credit facility (“Credit Facility”). The Credit Facility consists of a $250,000 senior unsecured revolving line of credit (“Line of Credit”) and a $207,000 senior unsecured term loan ("First Term Loan"). The Credit Facility expires on August 1,10, 2022,, and, provided no event of default has occurred, we may request that the lenders renew the credit facilityCredit Facility for an additional one- yearone-year period. The Credit Facility is also expandable to $857,000 at our request, subject to the satisfaction of certain conditions.
 
We maintain another credit agreement which provides for a $300,000 senior unsecured term loan agreement (“Second Term Loan”) and expires on September 10, 20242024.
.  
A separate credit agreement provides for a $193,900 senior unsecured term loan agreement (“Third Term Loan” and collectively with the Credit Agreement and the Second Term Loan, the "Credit Agreements") and expires on August 2, 20212021.
.  
On April 2, 2020, the Company signed amendments to the Credit Agreements, which, among other things, changed each borrowing facility under the agreements from unsecured to secured. Additionally, the Company received $100,000 in available funds on its Line of Credit, of which $25,000 was drawn during April 2020 and $10,000 during July 2020.

The amount that we can borrow at any given time under our Line of Credit, and the individual term loans (each a “Term Loan” and together the “Term Loans”) is governed by certain operating metrics of designated unencumbered hotel properties known as borrowing base assets. As of SeptemberJune 30, 2019,2020, the following hotel properties were borrowing base assets:secured the amended facilities under the Credit Agreements: 
- Courtyard, Brookline, MA- Mystic Marriott Hotel & Spa, Groton, CT
- Holiday Inn Express, Cambridge, MA- Hampton Inn, Washington, DC
- Envoy Hotel, Boston, MA- Ritz Carlton, Washington, DC
- The Boxer, Boston, MA- Hilton Garden Inn, M Street, Washington, DC
- Hampton Inn, Seaport, NY- Residence Inn, Coconut Grove, FL
- The Duane Street Hotel, NY- The Winter Haven, Miami, FL
- NU Hotel, Brooklyn, NY- The Blue Moon, Miami, FL
- Holiday Inn Express, 29th Street, NY- The Cadillac Hotel and Beach Club, Miami, FL
- The Gate JFK Airport, New York, NY- The Parrot Key Hotel & Resort, Key West, FL
- Hilton Garden Inn, JFK Airport, New York, NY- TownePlace Suites, Sunnyvale, CA
- Hyatt House White Plains, NY- The Ambrose Hotel, Santa Monica, CA
- Sheraton, Wilmington South, DE- Courtyard, San Diego, CA
- Hampton Inn, Philadelphia, PA- The Pan Pacific Hotel, Seattle, WA
- The Rittenhouse, Philadelphia, PA- The Westin, Philadelphia, PA


26
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[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 are based on a pricing grid with a range of one month U.S. LIBOR plus a spread. The following table summarizes the balances outstanding and interest rate spread for each borrowing:
 Outstanding Balance
BorrowingSpreadJune 30, 2020December 31, 2019
Line of Credit1.50% to 2.25%$95,000  $48,000  
Term Loan:
     First Term Loan1.45% to 2.20%$207,000  $207,000  
     Second Term Loan1.35% to 2.00%300,000  300,000  
     Third Term Loan1.45% to 2.20%193,900  193,900  
     Deferred Loan Costs(3,303) (3,717) 
Total Term Loan$697,597  $697,183  
   Outstanding Balance
Borrowing Spread September 30, 2019 December 31, 2018
Line of Credit 1.50% to 2.25% $46,000
 $10,000
Unsecured Term Loan:      
     First Term Loan 1.45% to 2.20% $207,000
 $207,000
     Second Term Loan 1.35% to 2.00% 300,000
 300,000
     Third Term Loan 1.45% to 2.20% 193,900
 193,900
     Deferred Loan Costs   (3,905) (2,698)
Total Unsecured Term Loan   $696,995
 $698,202

The Company received a waiver of Credit Facility covenants through March 31, 2021 in connection with the April 2, 2020 amendment to the Credit Agreement. Upon expiration of the covenant waiver in March 2021, the following covenant requirements will again become effective. The Credit Facility and the Term Loans include certain financial covenants and require that we maintain: (1) a minimum tangible net worth (calculated as total assets, plus accumulated depreciation, less total liabilities, intangibles and other defined adjustments) of $1,119,500, plus an amount equal to 75% of the net cash proceeds of all issuances and primary sales of equity interests of the parent guarantor or any of its subsidiaries consummated following the closing date; (2) annual distributions not to exceed 95% of adjusted funds from operations; and (3) certain financial ratios, including the following:
- a fixed charge coverage ratio of not less than 1.50 to 1.00;
- a maximum leverage ratio of not more than 60%; and
- a maximum secured debt leverage ratio of 45%.

The Company is in compliance with all of the covenants as of September 30, 2019.

The Company recorded interest expense of $8,517$5,370 and $8,061,$8,903, and $26,057$12,404 and $22,834$17,539, related to borrowings drawn on the Credit Facility and Term Loans for the three and ninesix months ended SeptemberJune 30, 2020 and 2019, respectively. The impact on interest expense related to the interest rate swap contracts on the Credit Facility resulted in expense of $3,133 and 2018, respectively.$4,219 for the three and six months ended June 30, 2020 and a decrease to interest expense of $1,000 and $2,095 for the three and six months ended June 30, 2019. The weighted average interest rate, inclusive of the effect of derivative instruments, on the Credit Facility and Term Loans was 4.02%4.23% and 3.91%4.17%, and 4.11%4.21% and 3.77%4.15%, for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively.

Capitalized InterestPaycheck Protection Program Loans

We utilize cash, mortgage debt and our Line of Credit to finance on-going capital improvement projects at our hotels. Interest incurred on mortgages and the Line of Credit that relates to our capital improvement projects is capitalized through the date when the assets are placed in service. ForDuring the three and nine months ended SeptemberJune 30, 20192020, the Company applied for and 2018, we capitalized $0received $18,936 in loans pursuant to the Paycheck Protection Program ("the PPP") under the Coronavirus Aid, Relief, and $271, and $74 and $575, of interest expense to ongoing capital improvement projects, respectively.Economic Security Act. All funds borrowed under the PPP were returned without penalty during the three months ended June 30, 2020.

Deferred Financing Costs

As noted above, costs associated with entering into mortgages, notes payable and our credit facilities are deferred and amortized over the life of the debt instruments. The deferred costs related to mortgages and term loans and unsecured notes payable are presented as reductions in the respective debt balances. Amortization of deferred costs for the three and ninesix months ended SeptemberJune 30, 2020 and 2019 was $702 and 2018 was $547$560, and $446,$1,267 and $1,681 and $1,318,$1,134, respectively.


27
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 5 - DEBT (CONTINUED)

New Debt/Refinance

On September 10, 2019,April 2, 2020, we refinancedamended our Second Term Loan. We maintainedCredit Agreements, which covered the $300 million principal balance. The Second Term Loan was due to expire on August 10, 2020 but will now expire on September 10, 2024. The financial covenants on the new loan are substantially the same as the previous loan. Also during September 2019 we entered into new interest rate swap contracts for $700.9 million of our Credit Facility and Term Loans. See "Note 8 - Fair Value Measurements and Derivative Instruments" for more informationborrowing base of assets on the interest rate swap.

On July 25, 2019,Line of Credit, to access an additional $100,000. With these amendments, we refinanced the outstanding mortgage debt with an original principal balance of $45,000 secured by the Hilton Garden Inn Tribeca, New York, NY. The loan was due to maturereceived waivers on November 13, 2019, but will now mature on July 25, 2024. Contemporaneous with the mortgage refinance, we entered into an interest rate swap that matures July 25, 2024 that fixes the interest rate at 4.02% until maturity.

On June 7, 2019, we refinanced the outstanding mortgage debt with an original principal balance of $56,000 secured by the Hyatt Union Square, New York, NY. The loan was due to mature on June 9, 2019, but will now mature on June 7, 2023. Also on June 7, 2019, we entered into an interest rate swap that matures June 7, 2023. See "Note 8 - Fair Value Measurements and Derivative Instruments" for more information on the interest rate swap.

On April 13, 2018, we entered into a mortgage debt with a principal balance of $28,000 secured by the Annapolis Waterfront Hotel, Annapolis, MD. The loan bears interest at a variable rate of one month U.S. dollar LIBOR plus 2.65% and matures in April 2024. Concurrently, we entered into an interest rate cap which effectively caps LIBOR at 3.35%, limiting the interest rate to not exceed 6.00% per annum until May 2021.

On January 31, 2018, we refinanced the outstanding mortgage debt with an original principal balance of $25,000 secured by the Capitol Hill Hotel, Washington, D.C. The loan was due to mature on January 31, 2018, but will now mature on Januaryall financial covenants through March 31, 2021. The proceeds from the borrowings drawn will be used to fund the operating expenses of the business. See "Liquidity, Capital Resources and Equity Offerings".



28
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]


NOTE 6 – LEASES

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides the principles for the recognition, measurement, presentation and disclosure of leases. The Company adopted the provisions of the update effective January 1, 2019. We elected the modified retrospective transition method upon adoption, which resulted in no cumulative-effect adjustment to the balance of opening retained earnings. As part of our adoption, we elected to utilize the package of practical expedients which allowed us to not reassess existing contracts for embedded leases and not reassess the classification of existing leases. As a result of our adoption, the Company recorded a lease liabilitiesliability and corresponding right of use assetsasset of $55,515 at January 1, 2019 for leases where we are the lessee. Our most significant leases are land leases. We own 5 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 May 2062 to October 2103. Based on the nature of these leases, the Company assumed that all extension options would be fully executed. For land leases that include variable payments, those include payments that are tied to an index such as the consumer price index or include rental payments based partially on the hotelhotel's revenues. NaN additional office space leaseleases are also factored into the lease liability and are classified as operating leases with terms ranging from January 2022 to December 2027. For office space leases that include variable payments, those include payments for the Company's proportionate share of the building's property taxes, insurance, and common area maintenance.

The Company applied judgments related to the determination of the discount rates used to calculate the lease liability upon adoption at January 1, 2019. Since the discount rate implicit in the leases could not be readily determinable, we calculated our incremental borrowing rate as prescribed by ASC Topic 842. We utilized judgments and estimates regarding the Company's market credit rating, comparable market bond yield curve, and adjustments to market yield curves to determine a securitized rate.

We are also a lessor in certain office space and retail lease agreements related to our hotels and the adoption of this ASU did not have a material impact on our accounting for leases where we are the lessor. The adoption of this ASU did not impact revenue recognition policies for the Company.

The components of lease costs for the three and nine months ended SeptemberJune 30, 2020 and 2019 were as follows:

 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
 Ground LeaseOffice LeaseTotal Ground LeaseOffice LeaseTotal
Operating lease costs$976
$121
$1,097
 $2,922
$363
$3,285
Variable lease costs251
73
324
 529
232
761
Total lease costs$1,227
$194
$1,421
 $3,451
$595
$4,046


Three Months Ended June 30, 2020Three Months Ended June 30, 2019
Ground LeaseOffice LeaseTotalGround LeaseOffice LeaseTotal
Operating lease costs$1,050  $121  $1,171  $973  $121  $1,094  
Variable lease costs8  87  95  141  88  229  
Total lease costs$1,058  $208  $1,266  $1,114  $209  $1,323  
Other information related to leases as
The components of andlease costs for the ninesix months ended SeptemberJune 30, 2020 and 2019 iswere as follows:
Six Months Ended June 30, 2020Six Months Ended June 30, 2019
Ground LeaseOffice LeaseTotalGround LeaseOffice LeaseTotal
Operating lease costs$2,100  $242  $2,342  $1,946  $242  $2,188  
Variable lease costs21  154  175  278  159  437  
Total lease costs$2,121  $396  $2,517  $2,224  $401  $2,625  
 September 30, 2019
Cash paid from operating cash flow for operating leases$3,655
Weighted average remaining lease term64.2
Weighted average discount rate7.86%



29
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]


NOTE 6 – LEASES (CONTINUED)

Payments against lease liabilities are as follows:
  Amount
October 1, 2019 to December 31, 2019 $1,148
2020 4,638
2021 4,705
2022 4,167
2023 4,149
Thereafter 270,927
     Total undiscounted lease payments 289,734
Less imputed interest (235,028)
     Total lease liabilities $54,706

Future minimum lease payments (without reflecting future applicable Consumer Price Index increases) under these agreementsOther information related to leases as of December 31, 2018 areand for the six months ended June 30, 2020 and 2019 is as follows:

June 30, 2020June 30, 2019
Cash paid from operating cash flow for operating leases$1,951  $2,188  
Weighted average remaining lease term64.264.2
Weighted average discount rate7.86 %7.85 %
Year Ending December 31, Amount
2019 $4,585
2020 4,638
2021 4,705
2022 4,167
2023 4,149
Thereafter 270,978
  $293,222



30
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[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. HHMLP is owned, in part, by certain executives and trustees of the Company. Our management agreements with HHMLP provide for a term of five years 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 three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, base management fees incurred from HHMLP totaled $3,652$564 and $3,593,$3,949, and $10,594$2,933 and $9,739,$6,942, respectively, and are recorded as Hotel Operating Expenses. For the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, we did not0t incur incentive management fees.

Franchise Agreements

Our branded hotel properties are operated under franchise agreements assumed by the hotel property lessee. The franchise agreements have 10 to 20 year terms, but may be terminated by either the franchisee or franchisor on certain anniversary dates specified in the agreements. The franchise agreements require annual payments for franchise royalties, reservation, and advertising services, and such payments are based upon percentages of gross room revenue. These payments are paid by the hotels and charged to expense as incurred. Franchise fee expenses for the three and ninesix months ended SeptemberJune 30, 2020 and 2019 were $775 and 2018 were $6,034$6,508, and $6,156,$4,603 and $17,518 and $17,151,$11,483, respectively, and are recorded in Hotel Operating Expenses. The initial fees incurred to enter into the franchise agreements are amortized over the life of the franchise agreements.

Accounting and Information Technology Fees

Each of the wholly-owned hotels and consolidated joint venture hotel properties managed by HHMLP incurs a monthly accounting and information technology fee. Monthly fees for accounting services are between $2 and $3 per property and monthly information technology fees range from $1 to $2 per property. For the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, the Company incurred accounting fees of $319 and $315, and $317,$644 and $946 and $924,$631, respectively. For the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, the Company incurred information technology fees of $99 and $103 and $303$102, and $299,$208 and $203, respectively. Accounting fees and information technology fees are included in Hotel Operating Expenses.

Capital Expenditure Fees

HHMLP charges a 5% fee 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 three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, we incurred fees of $530$56 and $1,461,$989, and $2,043$956 and $2,385,$1,513, respectively, which were capitalized with the cost of capital expenditures.

31
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 2020 AND 2019 AND 2018[UNAUDITED][UNAUDITED]
[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 three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, we incurred charges for hotel supplies of $46$11 and $164,$80, and $260$63 and $294,$214, respectively. For the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, we incurred charges for capital expenditure purchases of $3,578$176 and $529,$3,882, and $7,995$1,056 and $1,487,$4,417, respectively. These purchases were made from Hersha Purchasing and Design, a hotel supply company owned, in part, by certain executives and trustees of the Company. Hotel supplies are expensed and included in Hotel Operating Expenses on our consolidated statements of operations, and capital expenditure purchases are included in investment in hotel properties on our consolidated balance sheets. Approximately $2$26 and $0$9 is included in accounts payable for the purchase of hotel supplies at SeptemberJune 30, 20192020 and December 31, 2018.2019, respectively.

Insurance Services

The Company utilizes the services of the Hersha Group, a risk management business owned, in part, by certain executives and trustees of the Company. The Hersha Group provides 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. The total costs of property insurance that we paid through the Hersha Group were $1,388 and $1,269, and $2,984 and $2,706, for the three and six months ended June 30, 2020 and 2019, respectively. These amounts paid to the Hersha Group include insurance premiums, which are then paid to insurance carriers, and consulting procurement fees and claims handling as compensation for services.

Restaurant Lease Agreements with Independent Restaurant Group

The Company enters into lease agreements with a number of restaurant management companies for the lease of restaurants located within our hotels.  During the first nine months of 2019, theThe Company previously entered into lease agreements with Independent Restaurant Group (“IRG”("IRG") for restaurants at 23 of its hotel properties.  CertainJay H. Shah and Neil H. Shah, executive officers and/or trustees of the Company, collectively own a 70.0% interest in IRG.  The Company’s restaurant lease agreements with IRG generally provideprovided for a term of five years and the payment of base rents and percentage rents, which arewere based on IRG’s revenue in excess of defined thresholds. The base rents are due monthlyEffective April 1, 2020, each of these lease agreements became a management agreement between the Company and percentages rents owed, if any, are due quarterly.  The restaurant leases areIRG, subject to early termination upon the occurrencesupervision of defaults and certain other events described therein. All material termsHHMLP, as property manager. At the time of the conversion of the lease agreements with IRG are reviewed byto management agreements there was rent due of $103, which was forgiven due to the independent membersimpact of the COVID-19 pandemic on the operations of our Boardhotels and IRG's restaurants. The total amount of Trustees.revenue recognized from IRG was $0 and $143 for the six months ended June 30, 2020 and 2019, respectively.

Due From Related Parties

The due from related parties balance as of SeptemberJune 30, 20192020 and December 31, 20182019 was approximately $5,714$2,363 and $3,294,$6,113, 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 SeptemberJune 30, 20192020 and December 31, 20182019 was $0.





32
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[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 SeptemberJune 30, 2019,2020, 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 counter-party’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 counter-parties. However, as of SeptemberJune 30, 20192020 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 SeptemberJune 30, 20192020 and December 31, 2018.2019.


33
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[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 DebtTypeStrike RateIndexEffective DateDerivative Contract Maturity DateNotional AmountJune 30, 2020December 31, 2019
        
Term Loan Instruments:        
Credit FacilitySwap1.341 %1-Month LIBOR + 2.20%October 3, 2019August 2, 2021150,000  (1,965) 539  
Credit FacilitySwap1.316 %1-Month LIBOR + 2.20%September 3, 2019August 2, 202143,900  (563) 175  
Credit FacilitySwap1.824 %1-Month LIBOR + 2.20%September 3, 2019August 10, 2022103,500  (3,698) (718) 
Credit FacilitySwap1.824 %1-Month LIBOR + 2.20%September 3, 2019August 10, 2022103,500  (3,698) (718) 
Credit FacilitySwap1.460 %1-Month LIBOR + 2.00%September 10, 2019September 10, 2024300,000  (15,695) 1,776  
        
Mortgages:        
Courtyard, LA Westside, Culver City, CASwap1.683 %1-Month LIBOR + 2.75%August 1, 2017August 1, 202035,000  —  (8) 
Annapolis Waterfront Hotel, MDCap3.350 %1-Month LIBOR +2.65%May 1, 2018May 1, 202128,000  —  —  
Hyatt, Union Square, New York, NYSwap1.870 %1-Month LIBOR + 2.30%June 7, 2019June 7, 202356,000  (2,827) (556) 
Hilton Garden Inn Tribeca, New York, NYSwap1.768 %1-Month LIBOR + 2.25%July 25, 2019July 25, 202422,725  (1,438) (169) 
Hilton Garden Inn Tribeca, New York, NYSwap1.768 %1-Month LIBOR + 2.25%July 25, 2019July 25, 202422,725  (1,438) (169) 
Hilton Garden Inn 52nd Street, New York, NYSwap1.540 %1-Month LIBOR + 2.30%December 4, 2019December 4, 202244,325  (1,515) 23  
Courtyard, LA Westside, Culver City, CASwap0.495 %1-Month LIBOR + 2.75%June 1, 2020August 1, 202135,000  (134) —  
     $(32,971) $175  
             Estimated Fair Value
             Asset / (Liability) Balance
Hedged Debt Type Strike Rate Index Effective Date Derivative Contract Maturity Date Notional Amount September 30, 2019 December 31, 2018
    
            
Term Loan Instruments:            
  
  
Unsecured Credit Facility Swap 1.011% 1-Month LIBOR + 2.20% 
November 3, 2016
 
October 3, 2019
 $150,000
 $13
 $1,741
Unsecured Credit Facility (1) Swap 1.694% 1-Month LIBOR + 2.20% 
April 3, 2017
 
September 3, 2019
 50,000
 —
 320
Unsecured Credit Facility (3) Swap 2.654% 1-Month LIBOR + 2.20% 
January 10, 2019
 
September 3, 2019
 103,500
 —
 (314)
Unsecured Credit Facility (4) Swap 2.654% 1-Month LIBOR + 2.20% 
January 10, 2019
 
September 3, 2019
 103,500
 —
 (315)
Unsecured Credit Facility (2) Swap 1.866% 1-Month LIBOR + 2.25% 
August 10, 2017
 
September 10, 2019
 300,000
 —
 2,287
Unsecured Credit Facility Swap 1.341% 1-Month LIBOR + 2.20% 
October 3, 2019
 
August 2, 2021
 150,000
 395
 —
Unsecured Credit Facility (1) Swap 1.316% 1-Month LIBOR + 2.20% 
September 3, 2019
 
August 2, 2021
 43,900
 138
 —
Unsecured Credit Facility (3) Swap 1.824% 1-Month LIBOR + 2.20% 
September 3, 2019
 
August 10, 2022
 103,500
 (1,200) —
Unsecured Credit Facility (4) Swap 1.824% 1-Month LIBOR + 2.20% 
September 3, 2019
 
August 10, 2022
 103,500
 (1,201) —
Unsecured Credit Facility (2) Swap 1.460% 1-Month LIBOR + 1.85% 
September 10, 2019
 
September 10, 2024
 300,000
 (1,283) —
                
Mortgages:    
        
  
  
Hilton Garden Inn 52nd Street, New York, NY Swap 1.600% 1-Month LIBOR + 2.90% 
February 24, 2017
 
February 24, 2020
 44,325
 44
 479
Courtyard, LA Westside, Culver City, CA Swap 1.683% 1-Month LIBOR + 2.75% 
August 1, 2017
 
August 1, 2020
 35,000
 3
 458
Annapolis Waterfront Hotel, MD Cap 3.350% 1-Month LIBOR + 2.65% 
May 1, 2018
 
May 1, 2021
 28,000
 —
 22
Hyatt, Union Square, New York, NY Swap 1.870% 1-Month LIBOR + 2.30% 
June 7, 2019
 
June 7, 2023
 56,000
 (937) —
Hilton Garden Inn Tribeca, New York, NY Swap 1.768% 1-Month LIBOR + 2.25% 
July 25, 2019
 
July 25, 2024
 22,725
 (398) —
Hilton Garden Inn Tribeca, New York, NY Swap 1.768% 1-Month LIBOR + 2.25% 
July 25, 2019
 
July 25, 2024
 22,725
 (398) —
    
          
  
             $(4,824) $4,678
(1) On September 3, 2019,June 1, 2020, we entered into an accelerated termination agreement on the interest rate swap associated with $50,000 of our unsecured credit facility,the $35,000 mortgage debt on the Courtyard LA Westside, which had an initial maturity of October 3, 2019.August 1, 2020. Also on September 3, 2019,June 1, 2020, we entered into a new interest rate swap associated with $43,900 of our unsecured credit facility,the $35,000 mortgage on the Courtyard LA Westside, which will mature on August 2,1, 2021. As the initial swap was only one month from maturity, the balance in other comprehensive income was reclassified to interest expense.
(2) On September 10, 2019, we entered into an accelerated termination agreement on the interest rate swap associated with $300,000 of our unsecured credit facility, which had an initial maturity of August 10, 2020. Also on September 10, 2019, we entered into a new interest rate swap associated with $300,000 of our unsecured credit facility, which will mature on September 10, 2024. The fair value of the old swap at the time of termination was a liability in the amount of $1,379.$67. Instead of settling this liabilityamount with cash consideration the rate and terms of the new swap were such that, the fair value

34
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 8 – FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS (CONTINUED)

at termination, of the old swap would carry over as the fair value of the new swap at inception. The other comprehensive income related to the old swap will be reclassified to interest expense until the original maturity date of August 10, 2020.
(3) On September 3, 2019, we entered into an accelerated termination agreement on the interest rate swap associated with $103,500 of our unsecured credit facility, which had an initial maturity of January 10, 2021. Also on September 3, 2019, we entered into a new interest rate swap associated with $103,500 of our unsecured credit facility, which will mature on August 10, 2022. The fair value of the old swap at the time of termination was a liability in the amount of $1,783. Instead of settling this liability with cash consideration, the rate and terms of the new swap were such that, the fair value at termination of the old swap would carry over as the fair value of the new swap at inception. The other comprehensive income related to the old swap will be reclassified to interest expense until the original maturity date of January 10, 2021.
(4) On September 3, 2019, we entered into an accelerated termination agreement on the interest rate swap associated with $103,500 of our unsecured credit facility, which had an initial maturity of January 10, 2021. Also on September 3, 2019, we entered into a new interest rate swap associated with $103,500 of our unsecured credit facility, which will mature on August 10, 2022. The fair value of the old swap at the time of termination was a liability in the amount of $1,783. Instead of settling this liability with cash consideration, the rate and terms of the new swap were such that, the fair value at termination of the old swap would carry over as the fair value of the new swap at inception. The other comprehensive income related to the old swap will be reclassified to interest expense until the original maturity date of January 10, 2021.August 1, 2020.

The fair value of swaps and our interest rate caps with a positive balance is included in other assets at SeptemberJune 30, 20192020 and December 31, 2018.2019. The fair value of our interest rate swaps with a negative balance is included in accounts payable, accrued expenses and other liabilities at SeptemberJune 30, 20192020 and December 31, 2018.2019.

The net change in fair value ofrelated 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 loss of $1,121$792 and a gainloss of $101$5,234 for the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, and a loss of $9,276$30,941 and a gainloss of $4,441$8,155 for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively.


34
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019[UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 8 – FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS (CONTINUED)
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 $1,010$1,228 and $813,$1,112 and $3,263$2,205 and $1,832,$2,253 of net unrealized gains/losses from accumulated other comprehensive income as an increase/decrease to interest expense for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. For the next twelve months ending SeptemberJune 30, 2020,2021, we estimate that an additional $3,078$14,197 will be reclassified as aan increase to interest expense.

Fair Value of Debt
We estimate the fair value of our fixed rate debt and the credit spreads over variable market rates on our 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 SeptemberJune 30, 2020, the carrying value and estimated fair value of our debt were $1,175,131 and $1,150,217 respectively. As of December 31, 2019, the carrying value and estimated fair value of our debt were $1,126,590$1,128,199 and $1,092,226 respectively. As of December 31, 2018, the carrying value and estimated fair value of our debt were $1,093,031 and $1,082,485,$1,098,082, respectively.

35
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[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. 

The Company established and ourOur 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.
Executives
In its continuous effort Pursuant to implement executive compensation strategies that further align the interests of the Company’s executives with those of shareholders, the Compensation Committee comprehensively redesigned the executive compensation programs for 2019. Prior to 2019, executives participated in our legacy incentive compensation programs, the Annual Cash Incentive Program (“ACIP”), the Annual Long Term Equity Incentive Program (“Annual EIP”), and the Multi-Year Long Term Equity Incentive Program (“Multi-Year EIP”). Beginning in 2019, executives will participate in the Short Term Incentive Program (“STIP”) and the Long-Term Incentive Program (“LTIP”), eliminating the legacy compensation programs.

Short Term Incentive Program
On March 6, 2019, the Compensation Committee approved the 2019 STIP for the executive officers, pursuant to which the executive officers are eligible to earn cash and2012 Plan, equity awardsmay be awarded in the form of stock awards, LTIP Units, or performance share awards issuable pursuantissuable.

The Short Term Incentive Program ("STIP") and the Long-Term Incentive Program ("LTIP") were incentive compensation programs the Compensation Committee of our Board of Trustees established to align executive compensation with the 2012 Plan. Awards are earnedperformance of the Company. Prior to 2019, executives participated in our legacy incentive compensation programs, including the Multi-Year Long Term Equity Incentive Program ("Multi-Year EIP").

On April 10, 2020, based on the achievement of certain metrics established under the 2019 STIP based on achieving a threshold, target or maximum level of definedfor the performance objectives and any amounts earned are satisfied 50% in cash and 50% in equity awards. Theperiod ended December 31, 2019, the Compensation Committee provided the optionawarded 833,539 LTIP Units. The awards issued pursuant to the executive officers to elect shares in lieu of cash payment underSTIP vest on December 31, 2021, the 2019 STIP.  The Company accounts for grants as performance awards for whichtwo year anniversary following the Company assesses the probability of achievementend of the performance conditions atperiod. On April 13, 2020, the end of each period. As of September 30, 2019,  0 shares orCompensation Committee awarded 240,923 LTIP Units have beenbased on the achievement of certain metrics established under the 2017 Multi-Year EIP for the performance period ended December 31, 2019. Following the three year performance period, the awards issued in accordance with the 2012 Planpursuant to the executive officers in settlement2017 Multi-Year EIP vest 50% on the date of issuance and 50% on December 31, 2020. The LTIP Units awarded under both the 2019 STIP.STIP and the 2017 Multi-Year EIP were determined by dividing the dollar amount of award earned by $3.58, the per share volume weighted average trading price of the Company’s common shares on the NYSE for the 20 trading days prior to April 13, 2020, the date of issuance.

A summary of our share based compensation activity from January 1, 2020 to June 30, 2020 is as follows:
LTIP Unit AwardsRestricted Share AwardsShare Awards
Number of UnitsWeighted Average Grant Date Fair ValueNumber of Restricted SharesWeighted Average Grant Date Fair ValueNumber of SharesWeighted Average Grant Date Fair Value
Unvested Balance as of December 31, 2019441,201  $17.99  92,102  $17.07  —  
Granted1,101,924  5.23  135,740  5.21  —  N/A
Vested(120,459) 5.23  (75,384) 12.74  —  N/A
Forfeited—  N/A(113) 18.00  —  N/A
Unvested Balance as of June 30, 20201,422,666  $9.19  152,345  $8.65  —  


36
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)

The following table is a summary of all unvested LTIP Units issued to executives:
         Units Vested Unearned Compensation
Issuance Date Weighted Average Share Price LTIP Units Issued Vesting Period Vesting Schedule September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
March 21, 2019          
      
(2018 Annual EIP)
(2018 ACIP)
 $18.00
 498,261
 3 years 
25%/year (1)(2)
 64,583
 —
 $3,259
 $—
March 28, 2018                
(2017 Annual EIP)
(2017 ACIP)
 17.91
 564,434
 3 years 
25%/year (1)(3)
 144,216
 144,216
 971
 2,875
March 28, 2017          
      
(2016 Annual EIP) 18.53
 122,727
 3 years 
25%/year (1)
 92,042
 92,042
 38
 152
   1,185,422
     300,841
 236,258
 $4,268
 $3,027

(1)
25% of the issued shares or LTIP Units vested immediately upon issuance. In general, the remaining shares or LTIP Units vest 25% on the first through third anniversaries of the end of the performance period, which is a calendar year-end (subject to continuous employment through the applicable vesting date).
(2)
The issuance included 239,918 units issued with a 2 year cliff vesting provision.
(3)
The issuance included 276,000 units issued with a 2 year cliff vesting provision.
Stocksummarizes share based compensation expense related to the STIP and our legacy short term incentive programs of $1,249 and $1,390, and $4,796 and $4,006 was incurred during the three and nine months ended September 30, 2019 and 2018, respectively. Unearned compensation related to the legacy short term incentive programs as of September 30, 2019 and December 31, 2018 was $4,268 and $3,027, respectively. Unearned compensation related to the grants and amortization of LTIP Units is included in Noncontrolling Interests on the Company’s Consolidated Balance Sheets and Consolidated Statements of Equity.
Long Term Incentive Programs
On March 6, 2019, the Compensation Committee approved the 2019 LTIP. This program has a three-year performance period which commenced on January 1, 2019 and ends December 31, 2021. As of September 30, 2019, no shares or LTIP Units have been issued to the executive officers in settlement of 2019 LTIP awards.

37
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)

The following table is a summary of the approved Multi-Year EIPs:
         Units Vested Unearned Compensation
Compensation Committee Approval Date Weighted Average Share Price LTIP Units Issued LTIP Issuance Date Performance Period September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
March 6, 2019                
(2019 LTIP) $10.08
 —
 N/A 1/1/2019 to 12/31/2021 —
 —
 $1,700
 $—
March 8, 2018                
(2018 Multi-Year EIP) 11.06
 —
 N/A
1/1/2018 to 12/31/2020 —
 —
 980
 1,306
March 10, 2017                
(2017 Multi-Year EIP) 9.25
 —
 N/A 1/1/2017 to 12/31/2019 —
 —
 374
 598
March 17, 2016                
(2016 Multi-Year EIP) 11.25
 32,020
 N/A 1/1/2016 to 12/31/2018 16,009
 —
 111
 296
   32,020
     16,009
 —
 $3,165
 $2,200

The shares or LTIP Units issuable under the LTIP or legacy long term incentive programs are 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).
The Company accounts for the total shareholder return components of these grants as market based awards where the Company estimates unearned compensation at the grant date fair value which is then amortized into compensation cost over the vesting period of each individual plan. The Company accounts for the RevPAR component of the grants as performance-based awards for which the Company assesses the probable achievement of the performance conditions at the end of the reporting period.
Stock based compensation expense of $426 and $337, and $1,116 and $1,225 was recorded for the three and ninesix months ended SeptemberJune 30, 2020 and 2019 and 2018, respectively, for the 2019 LTIP and the legacy long term incentive programs. Unearnedunearned compensation related to the Multi-Year EIPs as of SeptemberJune 30, 20192020 and December 31, 2018, respectively, was $3,165,2019:
Share Based
Compensation Expense		Unearned
Compensation
For the Three Months EndedFor the Six Months EndedAs of
6/30/20206/30/20196/30/20206/30/20196/30/202012/31/2019
Issued Awards
LTIP Unit Awards$1,142  $1,428  $2,951  $2,791  $4,179  $2,878  
Restricted Share Awards342  459  674  795  1,080  1,051  
Share Awards—  402  —  402  —  —  
Unissued Awards
Market Based315  430  630  689  2,110  2,739  
Performance Based���  755  —  755  —  —  
Total$1,799  $3,474  $4,255  $5,432  $7,369  $6,668  

The weighted-average period of which the unrecognized compensation expense will be recorded is approximately 1.5 years for LTIP Unit Awards and $2,200.0.9 years for Restricted Share Awards.
The remaining unvested target units are expected to vest as follows:
2020202120222023
LTIP Unit Awards524,540898,126—  —  
Restricted Share Awards3,784144,3763,654531
528,324  1,042,502  3,654  531  

38
37
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)

Restricted Share Awards

Trustees
Board Fee Compensation
The Compensation Committee approved a program that allows the Company’s trustees to 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. On December 31, 2018, we issued 10,863 shares which do not fully vest until December 31, 2019. Compensation expense incurred for the three and nine months ended September 30, 2019 and 2018 was $48 and $50, and $143 and $151, respectively. The following table is a summary of all unvested share awards issued to trustees in lieu of board fee compensation:
         Unearned Compensation
Original Issuance Date Shares Issued Share Price on Date of Grant Vesting Period Vesting Schedule September 30, 2019 December 31, 2018
December 31, 2018 10,863
 $17.54
 12 months 100% $48
 $191


Multi-Year Long-Term Equity Incentives
Compensation expense for the Multi-Year Long Term Incentive Programs for the Company’s trustees incurred for the three and nine months ended September 30, 2019 and 2018 was $35 and $26, and $105 and $78, respectively. Unearned compensation related to the Multi-Year Long Term Equity Incentive Programs was $192 and $298 as of September 30, 2019 and December 31, 2018, respectively.
The following table is a summary of all unvested share awards issued to trustees under the 2012 Plan and prior equity incentive plans:
         Shares Vested Unearned Compensation
Original Issuance Date Weighted Average Share Price Shares Issued Vesting Period Vesting Schedule September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
December 31, 2018 $17.54
 9,000
 3 years 33% /year —
 —
 $118
 $158
December 29, 2017 17.40
 9,000
 3 years 33% /year 3,000
 3,000
 65
 104
December 30, 2016 21.50
 5,000
 3 years 33% /year 3,335
 3,335
 9
 36
         6,335
 6,335
 $192
 $298

Share Awards

Compensation expense related to share awards issued to the Company’s trustees of $402 and $420 was incurred during the three and nine months ended September 30, 2019 and 2018, respectively, and is recorded in general and administrative expense on the consolidated statements of operations. Share grants issued to the Company’s trustees are immediately vested. On June 3, 2019, an aggregate of 23,333 shares were issued to the Company’s trustees at a price per share on the date of grant of $17.22.

Employee and Non-employee Awards
In addition to share based compensation expense related to awards to executives and trustees under the programs described above, share based compensation expense related to restricted common shares issued to employees of the Company and non-employees for services provided to the Company totaled $251 and $265 and $879 and $917 for the three and nine months ended September 30, 2019 and 2018, respectively.  Unearned compensation related to these restricted share awards as of September 30, 2019 and December 31, 2018 was $846 and $829, respectively. 

39
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]

NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)


The following table is a summary of all unvested share awards issued to employees  under the 2012 Plan :

         Shares Vested Unearned Compensation
Original Year of Issuance Date Shares Issued Range of Share Price on Date of Grant Vesting Period Vesting Schedule September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
2019 60,179
 $16.25-$18.00 0-4 years 25-100% /year 8,344
 —
 $618
 $—
2018 54,492
 $17.91-$22.65 1-4 years 25-100% /year 43,131
 2,189
 174
 641
2017 41,897
 $18.47-$18.53 2 years 50% /year 38,378
 24,111
 54
 174
2016 29,294
 $18.02-$21.11 2 years 50%/year 29,294
 29,294
 —
 —
2015 15,703
 $28.09 2-4 years 25-50% /year 15,703
 14,469
 —
 14
Total 201,565
       134,850
 70,063
 $846
 $829




40
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[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.
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
NUMERATOR:    
Basic and Diluted*    
Net (Loss) Income$(71,780) $5,559  $(97,752) $(2,323) 
Loss allocated to Noncontrolling Interests10,360  41  13,257  1,264  
Distributions to Preferred Shareholders(6,044) (6,043) (12,088) (12,087) 
Dividends Paid on Unvested Restricted Shares and LTIP Units—  (271) —  (553) 
Net Loss applicable to Common Shareholders$(67,464) $(714) $(96,583) $(13,699) 
    
DENOMINATOR:    
Weighted average number of common shares - basic38,609,922  39,127,385  38,587,011  39,121,421  
Effect of dilutive securities:    
Restricted Stock Awards and LTIP Units (unvested)—  —  —  —  
Contingently Issued Shares and Units—  —  —  —  
Weighted average number of common shares - diluted38,609,922  39,127,385  38,587,011  39,121,421  
*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 areanti-dilutive to income (loss)applicable to common shareholders.
38
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
NUMERATOR:        
Basic and Diluted*        
Net Income (Loss) $507
 $2,987
 $(1,816) $5,676
Loss (Income) allocated to Noncontrolling Interests 102
 (178) 1,366
 1,626
Distributions to Preferred Shareholders (6,044) (6,044) (18,131) (18,131)
Dividends Paid on Unvested Restricted Shares and LTIP Units (279) (196) (831) (589)
Net Loss applicable to Common Shareholders $(5,714) $(3,431) $(19,412) $(11,418)
        
DENOMINATOR:        
Weighted average number of common shares - basic 38,878,818
 39,321,062
 39,039,665
 39,400,237
Effect of dilutive securities:  
  
  
  
Restricted Stock Awards and LTIP Units (unvested) —
 —
 —
 —
Contingently Issued Shares and Units —
 —
 —
 —
Weighted average number of common shares - diluted 38,878,818
 39,321,062
 39,039,665
 39,400,237
*
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 areanti-dilutive to income (loss)applicable to common shareholders.

41
Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019 [UNAUDITED]
[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]


NOTE 11 – CASH FLOW DISCLOSURES AND NON CASH INVESTING AND FINANCING ACTIVITIES

Interest paid during the ninesix months ended SeptemberJune 30, 2020 and 2019 totaled $21,488 and 2018$27,802 respectively. Net Cash paid on Interest Rate Derivative contracts during the six months ended June 30, 2020 and 2019 totaled $41,774$1,505 and $36,118$(2,443) respectively. Cash paid for income taxes during the ninesix months ended SeptemberJune 30, 2020 and 2019 totaled $233 and 2018 totaled $437 and $1,336,$466, respectively. The following non-cash investing and financing activities occurred during the ninesix months ended SeptemberJune 30, 20192020 and 2018:2019:

 2019 2018
Common Shares issued as part of the Dividend Reinvestment Plan $48
 $57
Acquisition of hotel properties:    
Deposit paid in prior period towards acquisition which closed in current period —
 1,000
Conversion of note payable and accrued interest to non-controlling interest —
 3,386
Conversion of Common Units to Common Shares —
 1,173
Issuance of share based payments 12,593
 13,312
Accrued payables for capital expenditures placed into service 3,357
 1,508
Cumulative Effect on Equity from the Adoption of ASC Subtopic 610-20 —
 129,021
Adjustment to Record Noncontrolling Interest at Redemption Value 488
 2,358
Adjustment to Record Right of Use Asset & Lease Liability 55,515
 —
Amortization related to Right of Use Asset & Lease Liability 809
 —

20202019
Common Shares issued as part of the Dividend Reinvestment Plan$14  $42  
Issuance of share based payments6,404  12,119  
Accrued payables for capital expenditures placed into service1,398  1,268  
Adjustment to Record Noncontrolling Interest at Redemption Value(3,196) 148  
Adjustment to Record Right of Use Asset & Lease Liability—  55,515  

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 ninesix months ended SeptemberJune 30, 20192020 and 2018:2019:

 20192018
Cash and cash equivalents$31,621
$37,727
Escrowed cash10,540
9,285
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows$42,161
$47,012


20202019
Cash and cash equivalents$23,228  $36,780  
Escrowed cash7,374  10,767  
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows$30,602  $47,547  


Amounts included in restricted cash represent those required to be set aside in escrow by contractual agreement with various lenders for the payment of specific items such as property insurance, property tax, and capital expenditures.

39
42

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

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, as amended, including, without limitation, statements containing the words, “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” and words of similar import. Such forward-looking statements relate to future events, our plans, strategies, prospects and future financial performance, and involve known and unknown risks that are difficult to predict, 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 and other reports filed by us with the SEC, including, but not limited to those discussed in the section entitled “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018,2019 and in our subsequent Quarterly Reports on Form 10-Q, 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 distribution policy;
● our liquidity;
● completion of any pending transactions;
● our ability to maintain existing financing arrangements 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 repurchase shares on attractive terms from time to time;
● our understanding of our competition;
● market trends; and
● projected capital expenditures.expenditures;
● the impact of and changes to various government programs, including in response to novel coronavirus, or COVID-19;
● the timing of the development of any effective cure or treatment for COVID-19;
● 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;
● our ability to dispose of selected hotel properties on the terms and timing we expect, if at all; and
● our ability to reopen our nonoperational hotels 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. The following factors could cause actual results to vary from our 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 of the 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. In particular, it is difficult to fully assess the impact of COVID-19 at this time due to, among other factors, uncertainty regarding the severity and duration of the outbreak domestically and internationally and the effectiveness of federal, state and local governments’ efforts to contain the spread of COVID-19 and respond to its direct and indirect impact on the U.S. economy and economic activity.

The following non-exclusive list of factors could also cause actual results to vary from our forward-looking statements:

40
● 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;
● availability of qualified personnel;
● 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;policies such as immigration policies, border closings, and travel bans related to COVID-19;
● the degree and nature of our competition;
● financing risks, including the risk of leverage and the corresponding risk of default on our mortgage loans and other debt and potential inability to refinance or extend the maturity of existing indebtedness;
● levels of spending in the business, travel and leisure industries, as well as consumer confidence;
● declines in occupancy, average daily rate and RevPAR and other hotel 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, franchisors and hospitality joint venture partners;
● increased interest rates and operating costs;
● ability to complete development and redevelopment projects;
● risks associated with potential acquisitions, including the ability to ramp up and stabilize newly acquired hotels with limited or no operating history, and 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;
● 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;

● 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;
43

people to travel may lead to a decline in demand for hotels; and
● the factors discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20182019 under the heading “Risk Factors”Factors,” in our subsequent Quarterly Reports on Form 10-Q 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.
 
BACKGROUND

As of SeptemberJune 30, 2019,2020, we owned interests in 48 hotels in major urban gateway markets including New York, Washington DC, Boston, Philadelphia, San Diego, Los Angeles, Seattle, and Miami, including 38 wholly-owned hotels, 1 hotel through our interest in a consolidated joint venture, and interests in 9 hotels owned through unconsolidated joint ventures. We also entered into a joint venture during the third quarter of 2018 that is constructing a new hotel adjacent to two existing hotels partially owned by us through separate, unconsolidated joint venture interests. We have elected to be taxed as a REIT for federal income tax purposes, beginning with the taxable year ended December 31, 1999. For purposes of the REIT qualification rules, we cannot directly operate any of our hotels. Instead, we must lease our hotels to a third party lessee or to a TRS, provided that the TRS engages an eligible independent contractor to manage the hotels. As of SeptemberJune 30, 2019,2020, 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.
41
The TRS structure enables us to participate more directly in the operating performance of our hotels. The TRS directly receives all revenue from, and funds all expenses relating to, hotel operations. The TRS is also subject to income tax on its earnings.

OVERVIEW

We believeAt the repositioningbeginning of the year, we expected that we would achieve operating results for 2020 that would outperform other market participants due to the strong performance anticipated from newly renovated and upgraded hotels in our portfolio, over the past few years has better enabled us to capitalize on further improvement in lodging fundamentals. During the first nine months of 2019, we continued to see improvements overall inprimarily led by our key metrics for our consolidated hotels. Our results for the first nine months of 2019 were positively impacted by having our two hurricane impacted hotels in South Florida fully operational. OutsideFlorida. We started 2020 off on solid footing with our comparable portfolio achieving RevPAR growth through the end of February 2020 but this impactwas quickly erased as a result of the global economic slowdown caused by the COVID-19 pandemic. As a result of the pandemic and subsequent government mandates and health official recommendations, hotel demand was substantially reduced across the United States.

Following the government mandates and health official recommendations, and after evaluating the cost of running our portfoliorespective properties at low occupancy levels versus closing the properties, we originally closed 21 of our 48 hotels properties and dramatically reduced staffing. As of June 30, 2020, we had 32 hotels operating performance was positively impactedwhile 16 hotels remained closed. We had 21 of our wholly-owned hotels that have been opened for the entirety of the second quarter of 2020, and these hotels experienced increased occupancy levels during the second quarter of 2020, including our open New York City hotels, which generated 61% occupancy. While travel restrictions have slowly eased in a few markets and leisure demand began to recover late in the second quarter, group and business travel are unlikely to rebound quickly. As of August 1, 2020 we had 33 hotels open and by prior year hotel renovationsthe end of the third quarter 2020, we anticipate having 44 of our 48 hotels open assuming there is no significant increase in COVID-19 cases or government mandated closures.

In addition to our focus on strategically reopening hotels and repositionings. Whiledriving occupancy at these hotels, we have remained focused on executing expense mitigation measures and shoring up our liquidity position as we continue to explore acquisition opportunities in coastal gateway urban centers and select resort destinations, we remain focused onface a challenging operating efficiencies within our portfolio and asset repositioning opportunities to drive earnings and cash flow growth over the next year to de-lever our balance sheet. In addition, we will continue to look for attractive opportunities to divest certain properties at favorable prices, potentially redeploying capital in markets that offer higher growth, reducing our leverage, or opportunistically repurchasingenvironment. The suspension of our common shares.    and preferred dividends, which is expected to last through at least the end of 2020, is expected to reduce our cash expenditures by $72.5 million on an annualized basis when compared to dividends we declared in 2019. We have also deferred certain planned capital expenditures for 2020 with an anticipated cash savings of between $10.0 million to $15.0 million for 2020. In April 2020, we amended our existing Credit Facility, which granted us a waiver of our covenants under the Credit Facility through March 31, 2021 and provided us with additional availability under the Credit Facility of $100 million, of which $25,000 was drawn in April 2020 and $10,000 during July 2020.

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 continue tocontract or grow if at all, isare not reasonably predictable. In addition, the availability of hotel-level financing for the acquisition of new hotels is not within our control. As a result, there can be no assurances that we will be able to growachieve the hotel revenues, occupancy, ADRoperating metrics or RevPARthe results at our properties per our forecasts.we have forecasted. Factors that might contribute to less-than-anticipated performance include those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20182019 in our subsequent Quarterly Reports on Form 10-Q, and other documents that we may file with the SEC in the future.future, including this Quarterly Report on Form 10-Q. We will continue to cautiously monitor lodging demand and rates, our third-party hotel managers, and our performance generally.


44

SUMMARY OF OPERATING RESULTS
The table below outlines operating results for the Company’s portfolio of hotels consolidated within our financial statements for the three and nine months ended September 30, 2019 and 2018.
We define a comparable consolidated hotel as one that is currently consolidated, that we have owned in whole or in part during the periods being presented, and is deemed fully operational. Based on this definition, for the three and nine months ended September 30, 2019 and 2018, there are 37 comparable consolidated hotels. The comparable key hotel operating statistics presented in the table below have been computed using pro forma methodology to compute the operating results for the portion of time prior to our ownership of hotels purchased during the comparable period for the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018 for our comparable hotels. 
For the comparison of the three and nine months ended September 30, 2019 to the three and nine months ended September 30, 2018, comparable hotel operating results contain results from our consolidated hotels owned as of September 30, 2019, excluding: (1) the Cadillac Hotel and Beach Club, Miami, FL and the Parrot Key Hotel & Villas because both hotels had not been operating during the first three quarters of 2018 while the damage from Hurricane Irma was being remediated; and (2) the results of all hotels sold since December 31, 2017. The comparison of the nine months ended September 30, 2019 to September 30, 2018 also includes results as reported by the prior owners of the Annapolis Waterfront Hotel, which was acquired by the Company on March 28, 2018.

COMPARABLE CONSOLIDATED HOTELS:
(includes 37 hotels in both periods)
($'s in 000's except ADR and RevPAR)
 Three Months Ended   Nine Months Ended,  
 September 30,   September 30,  
 2019 2018 Variance 2019 2018 Variance
Occupancy 86.3% 85.6% 77 bps 84.0% 82.2% 174 bps
Average Daily Rate (ADR) $228.17
 $227.55
 0.3% $225.96
 $225.73
 0.1%
Revenue Per Available Room (RevPAR) $196.97
 $194.70
 1.2% $189.69
 $185.57
 2.2%
  
          
Room Revenues $103,535
 $102,331
 1.2% $295,862
 $289,418
 2.2%
Total Revenues $127,331
 $125,494
 1.5% $366,654
 $357,164
 2.7%

For the three and nine months ended September 30, 2019 when compared to the same periods in 2018, we experienced growth in occupancy while ADR remained relatively flat, resulting in RevPAR growth of 1.2% and 2.2%, respectively. For the three months ended September 30, 2019, our hotels in Washington D.C. and Boston contributed to our overall RevPAR growth by delivering RevPAR growth of 9.1% and 4.2%, respectivley. While both our New York City and West Coast properties experienced decreases in RevPAR of 2.9% and 2.2%, respectivley. For the nine months ended September 30, 2019, our hotels in Philadelphia, Boston, and Washington D.C. contributed to our overall RevPAR growth by delivering RevPAR growth of 8.3%, 4.7%, and 3.0%, respectivley. Our New York City properties experienced a decrease in RevPAR of 2.8% over the first nine months of 2019 compared to 2018, while the remaining markets maintained relatively stable metrics over that comparative period.


45

The table below outlines operating results for the Company’s portfolio of hotels we own through interests in unconsolidated joint ventures for the three and nine months ended September 30, 2019 and 2018.
We define a comparable unconsolidated joint venture hotel as one that is currently owned by our unconsolidated joint ventures in whole or in part for the entirety of the periods being presented, and is deemed fully operational. Based on this definition, for the three and nine months ended September 30, 2019 and 2018, there are 9 comparable unconsolidated joint venture hotels.

COMPARABLE UNCONSOLIDATED JOINT VENTURES:
(includes 9 hotels in both periods)
($'s in 000's except ADR and RevPAR)
 Three Months Ended   Nine Months Ended,  
 September 30,   September 30,  
 2019 2018 Variance 2019 2018 Variance
Occupancy 94.1% 94.1% -7 bps 92.3% 92.5% -20 bps
Average Daily Rate (ADR) $206.34
 $215.47
 (4.2)% $191.49
 $200.04
 (4.3)%
Revenue Per Available Room (RevPAR) $194.06
 $202.81
 (4.3)% $176.82
 $185.11
 (4.5)%
            
Room Revenues $25,442
 $26,579
 (4.3)% $68,788
 $69,993
 (1.7)%
Total Revenues $26,041
 $27,185
 (4.2)% $70,629
 $71,563
 (1.3)%
The properties held within our unconsolidated joint ventures collectively experienced decreases in key operating metrics for the three and nine months ended September 30, 2019 compared to the same periods in 2018. The properties within our unconsolidated joint ventures, on a comparable basis, experienced a decrease of 4.3% and 4.5% in RevPAR for the three and nine months ended September 30, 2019, respectively. The hotel properties located in Boston had a RevPAR decrease of 1.8% for the three months ended September 30, 2019 and a decrease of 4.3% for the nine months ended September 30, 2019, compared to the same periods in 2018. The properties within our Cindat joint venture in New York City had decreases in RevPAR of 4.9% and 4.0% for the three and nine months ended September 30, 2019, respectively, when compared to 2018.

46

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019
(dollars in thousands, except ADR, RevPAR, and per share data)

Revenue

Our total revenues for the three months ended SeptemberJune 30, 20192020 consisted of hotel operating revenues and other revenue. Hotel operating revenues were approximately 99% of total revenues for the three months ended SeptemberJune 30, 20192020 and 2018.2019. Hotel operating revenues are recorded for wholly-owned hotels that are leased to our wholly owned TRS and hotels owned through joint venture or other interests that are consolidated in our financial statements. Hotel operating revenues increased $7,190,decreased $130,101, or 5.6%88.2%, to $134,919$17,412 for the three months ended SeptemberJune 30, 20192020 compared to $127,729$147,513 for the same period in 2018.2019.  This increasedecrease is attributable to the reduction in operations across our portfolio due to the decrease in demand caused by the COVID-19 pandemic. Management expects hotel operating revenues can be explained by the following table:to remain at a decreased level until business and leisure activities return to pre-pandemic levels, which we have no way to predict at this time.




42
Hotel Operating Revenue for the three months ended September 30, 2018   $127,729
Revenue Reductions from Dispositions (1/1/2018 - 9/30/2019):    
 Residence Inn - Tysons Corner, VA (1,053)  
 Total Revenue Reductions from Dispositions   (1,053)
Change in Hotel Operating Revenue for Remaining Hotels   8,243
Hotel Operating Revenue for the three months ended September 30, 2019   $134,919
Expenses

As noted in the table above, our properties, exclusive of recently disposed hotels, experienced a $8,243 increase inTotal hotel operating revenue. This increase is primarily attributableexpenses decreased 77.8% to the Cadillac Hotel and Beach Club and Parrot Key Hotel & Villas, both of which were closed for all or a significant portion of the third quarter of 2018 and fully operational for the third quarter of 2019. The Cadillac Hotel and Beach Club was damaged during Hurricane Irma in 2017 while it was branded as a Courtyard by Marriott. As a result of the hurricane damage, we accelerated our plan to convert this hotel to an Autograph Collection hotel causing it to be closed until the end of the third quarter of 2018. The Parrot Key Hotel & Villas incurred significant damage during Hurricane Irma in 2017, remaining closed for repairs until it re-opened during the fourth quarter of 2018. Collectively, these two hotels accounted for an increase in hotel operating revenueapproximately $18,378 for the three months ended SeptemberJune 30, 2019 of $6,209. The remaining hotels contributed a net increase in revenue for the third quarter of 2019 of approximately $2,034 when compared to the same period in 2018.

Expenses
Total hotel operating expenses increased 5.0% to approximately $80,0812020 from $82,610 for the three months ended SeptemberJune 30, 2019 from $76,295 for the three months ended September 30, 2018.2019. The increasedecrease in hotel operating expenses can be explained by the following table:
Hotel Operating Expenses for the three months ended September 30, 2018   $76,295
Expense Reductions from Dispositions (1/1/2018 - 9/30/2019):    
 Residence Inn - Tysons Corner, VA (614)  
 Total Expense Reductions from Dispositions   (614)
Change in Hotel Operating Expenses for Remaining Hotels   4,400
Hotel Operating Expenses for the three months ended September 30, 2019   $80,081
As noted intemporary closure of certain of our hotels and reduced operations at the table above, our properties, exclusive of recently disposedremaining hotels experiencedas a $4,400 increase in hotel operating expenses. As mentioned in the revenue section above, the Cadillac Hotel and Beach Club and Parrot Key Hotel & Villas were closed for all or a significant portionresult of the third quarter of 2018 and fully operational fordecrease in demand caused by the third quarter of 2019 resulting in an increase in hotel operating expenses related to these two properties of $2,400, collectively. The remaining hotels contributed a net increase in expense for the third quarter of 2019 of approximately $2,000 when compared to the same period in 2018.COVID-19 pandemic.


47

Depreciation and amortization increased by 5.8%1.5%, or $1,328,$358, to $24,092$24,322 for the three months ended SeptemberJune 30, 20192020 from $22,764$23,964 for the three months ended SeptemberJune 30, 2018. The increase in depreciation and amortization was primarily attributable to the depreciation and amortization recorded on the hotels recently renovated, partially offset by properties sold. 2019.

Real estate and personal property tax and property insurance increased $1,785,$972, or 20.0%10.8%, for the three months ended SeptemberJune 30, 20192020 when compared to the same period in 2018. The majority of this2019. This increase is mostly related to increased real estate taxes on five propertiestax that had been re-assessed by the applicable taxing authority, resulting in higher than usual increases in real estate tax expense for the quarter as we had to cumulatively catch up, in certain instances, our estimated tax accruals at the time of the new assessment receipt during the quarter. The total increase to expense during the quarter to adjust our estimated real estate tax to actual was $607. When taking this into account, our quarter over quarter increase would have equated to approximately 13%. We typically experience increases in tax assessments and tax rates as the economy improves which could be offset by reductions resulting from successful real estate tax appeals.

General and administrative expense decreased by 3.9%48.3%, or approximately $228,$3,913, from $5,841$8,100 in the three months ended SeptemberJune 30, 20182019 to $5,613$4,187 for the same period in 2019.2020. General and administrative expense includes expenseexpenses related to payroll, rents, and other corporate level administrative costs as well as non-cash share based payments issued as incentive compensation to the Company’s trustees, executives, and employees.  Execution of our cost containment strategies resulted in a decrease of $2,235 in our payroll and other administrative costs. Expenses related to non-cash share based compensation decreased $59$1,675 when comparing the three months ended SeptemberJune 30, 20192020 to the same period in 2018.2019. Please refer to “Note 9 – Share Based Payments” of the notes to the consolidated financial statements for more information about our share based compensation.

Operating Income
Operating incomeLoss

Operating Loss for the three months ended SeptemberJune 30, 20192020 was $13,264$41,542 compared to operating income of $17,486$22,716 during the same period in 2018. The decrease in our2019. Our operating loss for the second quarter 2020 compared to operating income of $4,222 for the third quarter 2019 compared to the same period in 20182019 was largely the result of the thirdsecond quarter of 2018 containing2020 hotel operating revenues decreasing at a net gain on insurance settlementlarger rate than hotel operating expenses, both of $4,778 whilewhich are the third quarterresult of 2019 contained no such gain.decreased operations across our portfolio due to the COVID-19 pandemic. Additionally, we experienced increases in depreciation expense, and real estate taxes and insurance, and depreciation and amortization expense during the thirdsecond quarter of 20192020 compared to 2018. These items were partially offset by growth in hotel operating revenues exceeding our increases in hotel operating expenses during the quarter.2019.

Interest Expense

Interest expense increased $528$156 from $12,407$13,325 for the three months ended SeptemberJune 30, 20182019 to $12,935$13,481 for the three months ended SeptemberJune 30, 2019.2020. The balance of our borrowings, excluding discounts and deferred costs, have increased by $19,062$57,036 in total between SeptemberJune 30, 20182019 and SeptemberJune 30, 2019,2020, as we drew $20,000,$58,000, net on our lineLine of creditCredit and had a net decrease in mortgages payable of $938.$963. The primary driver of our increased interest expense is due to increases in rates and balances onoverall balance; however, the credit facility as well as a decrease in capitalizedweighted average interest rates related to our Credit Facility almost offset the increase due to balance growth.

Loss from Impairment of $270 as our hotel development projects from Hurricane Irma restoration have been completed.Assets
Income Tax Expense

During the three months ended SeptemberJune 30, 2019,2020, the Company recorded an impairment charge of $1,069 related to the Duane Street Hotel, which is held for sale as of June 30, 2020. During the second quarter of 2020, the Company amended the purchase and sale agreement with the buyer of the hotel to reduce the purchase price by $2,000. As a result of the reduced sales price and after consideration of selling costs to the Company, management determined that the carrying value of the hotel exceeded the anticipated net proceeds from sale, resulting in the impairment charge.

Income Tax Expense

During the three months ended June 30, 2020, the Company recorded an income tax benefitexpense of $551$15,872 compared to an income tax expense of $2,685$4,031 for the three months ended SeptemberJune 30, 2018.2019. After considering various factors, including future reversals of existing taxable temporary differences, future taxable income and tax planning strategies, we believe it is no longer more likely than not that we will realize our deferred tax assets.During the three months ended June 30, 2020 we recorded a valuation allowance of $19,866 resulting in net deferred tax assets of $0 as of June 30, 2020.  The amount of
43
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 Loss Applicable to Common Shareholders

Net loss applicable to common shareholders for the three months ended SeptemberJune 30, 20192020 was $5,435$67,464 compared to net loss of $3,235$443 during the same period in 2018, resulting2019. This increase in a decrease of $2,200. This decrease in incomeloss was primarily related to the decreased operating income and increased income tax expense during the three months ended June 30, 2020, as discussed above, and increased interest expense. Also contributing toabove. Partially offsetting the decrease in incomeincrease is the reduction in loss being absorbed by the noncontrolling interest in our consolidated joint venture for the three months ended September 30, 2019 compared to 2018. Partially offsetting this increased loss is a decrease in income tax expense.interests.




48

COMPARISON OF THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20192020 AND 20182019
(dollars in thousands, except ADR, RevPAR, and per share data)

Revenue

Our total revenues for the ninesix months ended SeptemberJune 30, 20192020 consisted of hotel operating revenues and other revenue. Hotel operating revenues were approximately 99% of total revenues for the ninesix months ended SeptemberJune 30, 20192020 and 2018.2019. Hotel operating revenues are recorded for wholly-owned hotels that are leased to our wholly owned TRS and hotels owned through joint venture or other interests that are consolidated in our financial statements. Hotel operating revenues increased $36,069,decreased $154,806, or 10.0%59.1%, to $397,075$107,350 for the ninesix months ended SeptemberJune 30, 20192020 compared to $361,006$262,156 for the same period in 2018.2019.  This increasedecrease is attributable to the reduction in operations across our portfolio due to the decrease in demand caused by the COVID-19 pandemic. During the six months ended June 30, 2020, our hotel portfolio experienced a decrease in RevPAR as a result of local stay-at-home orders and business restrictions implemented by local governments and national restrictions on travel. Management expects hotel operating revenues can be explained by the following table:to remain at a decreased level until business and leisure activities return to pre-pandemic levels, which we have no way to predict at this time.
Hotel Operating Revenue for the nine months ended September 30, 2018   $361,006
Incremental Revenue Additions from Acquisitions (1/1/2018 - 9/30/2019):    
 The Annapolis Waterfront Hotel - Annapolis, MD 2,533
  
 Total Incremental Revenue from Acquisitions   2,533
Revenue Reductions from Dispositions (1/1/2018 - 9/30/2019):    
 Residence Inn - Tysons Corner, VA (3,301)  
 Hampton inn - Pearl Street, New York, NY (530)  
 Total Revenue Reductions from Dispositions   (3,831)
Change in Hotel Operating Revenue for Remaining Hotels   37,367
Hotel Operating Revenue for the nine months ended September 30, 2019   $397,075

As noted in the table above, our properties, exclusive of recently acquired and disposed hotels, experienced a $37,367 increase in hotel operating revenue. This increase is primarily attributable to the Cadillac Hotel and Beach Club and Parrot Key Hotel & Villas, both of which were closed for all or a significant portion of the first nine months of 2018 and fully operational for the first nine months of 2019. The Cadillac Hotel and Beach Club was damaged during Hurricane Irma in 2017 while it was branded as a Courtyard by Marriott. As a result of the hurricane damage, we accelerated our plan to convert this hotel to an Autograph Collection hotel causing it to be closed until the end of the third quarter of 2018. The Parrot Key Hotel & Villas incurred significant damage during Hurricane Irma in 2017, remaining closed for repairs until it re-opened during the fourth quarter of 2018. Collectively, these two hotels accounted for an increase in hotel operating revenue for the nine months ended September 30, 2019 of $28,115. The remaining hotels contributed a net increase in revenue for the nine months ended September 30, 2019 of approximately $9,252 when compared to the same period in 2018.


49

Expenses

Total hotel operating expenses increased 8.2%decreased 46.8% to approximately $237,803$83,897 for the ninesix months ended SeptemberJune 30, 20192020 from $219,736$157,721 for the ninesix months ended SeptemberJune 30, 2018.2019. The increasedecrease in hotel operating expenses can be explained by the following table:
Hotel Operating Expenses for the nine months ended September 30, 2018   $219,736
Incremental Expense Additions from Acquisitions (1/1/2018 - 9/30/2019):    
 The Annapolis Waterfront Hotel - Annapolis, MD 1,334
  
 Total Incremental Expenses from Acquisitions   1,334
Expense Reductions from Dispositions (1/1/2018 - 9/30/2019):    
 Residence Inn - Tysons Corner, VA (1,848)  
 Hampton inn - Pearl Street, New York, NY (602)  
 Total Expense Reductions from Dispositions   (2,450)
Change in Hotel Operating Expenses for Remaining Hotels   19,182
Hotel Operating Expenses for the nine months ended September 30, 2019   $237,802
As noted intemporary closure of certain of our hotels and reduced operations at the table above, our properties, exclusive of recently acquired and disposedremaining hotels experiencedas a $19,182 increase in hotel operating expenses. As mentioned in the revenue section above, the Cadillac Hotel and Beach Club and Parrot Key Hotel & Villas were closed for all or a significant portionresult of the first nine months of 2018 and fully operational fordecrease in demand caused by the first nine months of 2019 resulting in an increase in hotel operating expenses related to these two properties of $13,194, collectively. The remaining hotels contributed a net increase in expense for the nine months ended September 30, 2019 of approximately $5,988 when compared to the same period in 2018.COVID-19 pandemic.

Depreciation and amortization increased by 8.8%0.9%, or $5,820,$418, to $72,184$48,510 for the ninesix months ended SeptemberJune 30, 20192020 from $66,364$48,092 for the ninesix months ended SeptemberJune 30, 2018. The increase in depreciation and amortization was primarily attributable to the depreciation and amortization recorded on the hotels recently acquired or renovated, partially offset by properties sold. 2019.

Real estate and personal property tax and property insurance increased $3,758,$1,517, or 14.8%8.2%, for the ninesix months ended SeptemberJune 30, 20192020 when compared to the same period in 2018. Approximately $1,252 of the2019. This increase relates to higher property insurance costs for the first nine months of 2019 compared to 2018. The majority of this increase in insurance expense is attributable to increased insurance costs at our Florida hotel properties with the largest increases affecting the Cadillac Hotel and Beach Club and the Parrot Key Hotel & Villas. The remaining $2,506 increase relatesmostly related to increased real estate tax costs. The majority of this increase is related to real estate taxes on five properties that had been re-assessed by the applicable taxing authority, resulting in higher than usual increases in real estate tax expense. The total increaseexpense for the quarter as we had to expensecumulatively catch up, in certain instances, our estimated tax accruals at the time of the new assessment receipt during the first nine months of 2019 to adjust our estimated real estate tax to the actual assessment was $459. The effect of the three properties sold during 2018 versus the one property purchased in 2018 was a net decrease of expense of $181. The impact of real estate and personal property tax refunds during first nine months of 2019 compared to the same period in 2018 was a net decrease in expense of $107. When taking this into account, our year over year increase would have equated to approximately 14%.quarter. We otherwise typically experience increases in tax assessments and tax rates as the economy improves which could be offset by reductions resulting from successful real estate tax appeals.

General and administrative expense increaseddecreased by 4.3%26.9%, or approximately $798,$3,679, from $18,515$13,700 in the ninesix months ended SeptemberJune 30, 20182019 to $19,313$10,021 for the same period in 2019.2020. General and administrative expense includes expenseexpenses related to payroll, rents, and other corporate level administrative costs as well as non-cash share based payments issued as incentive compensation to the Company’s trustees, executives, and employees. Executives elected 100%Execution of their annual cash incentive payments, if earned,our cost containment strategies resulted in shares or LTIP Units. As a result expensesdecrease of $2,517 in our payroll and other administrative costs. Expenses related to non-cash share based compensation increased $644decreased $1,177 when comparing the ninesix months ended SeptemberJune 30, 20192020 to the same period in 2018.2019. Please refer to “Note 9 – Share Based Payments” of the notes to the consolidated financial statements for more information about our share based compensation.

50

Operating Income
Operating incomeLoss

Operating Loss for the ninesix months ended SeptemberJune 30, 20192020 was $35,426$57,951 compared to operating income of $38,885$22,163 during the same period in 2018. The decrease in our2019. Our operating income of $3,459loss for the first nine monthshalf of 20192020 compared to operating income during the same period in 20182019 was largely the result of hotel operating revenues for the six months ended June 30, 2020 decreasing at a larger rate than hotel operating expenses, both of which are the result of decreased operations across our portfolio due to the
44
COVID-19 pandemic. Additionally, we experienced increases in depreciation expense, real estate taxes and insurance, and generaldepreciation and administrative expensesamortization expense during the nine months ended September 30, 2019first half of 2020 compared to 2018. Additionally, the nine months ended September 30, 2018 contained a net gain on insurance settlement of $11,141 while the comparable period in 2019 contained no such gain. Partially offsetting these increased expenses was the result of our growth in hotel operating revenues exceeding our increases in hotel operating expenses for the nine months ended September 30, 2019 compared to 2018, which added $18,002 to operating income.2019.

Interest Expense

Interest expense increased $3,500$265 from $35,658$26,223 for the ninesix months ended SeptemberJune 30, 20182019 to $39,158$26,488 for the ninesix months ended SeptemberJune 30, 2019.2020. The balance of our borrowings, excluding discounts and deferred costs, have increased by $19,062$57,036 in total between SeptemberJune 30, 20182019 and SeptemberJune 30, 2019,2020, as we drew $20,000,$58,000, net on our lineLine of creditCredit and had a net decrease in mortgages payable of $938.$963. The primary driver of our increased interest expense is due to increasingincreases in overall balance; however, the decrease in weighted average interest rates andrelated to our Credit Facility almost fully offset the increase due to balance growth.

Loss from Impairment of Assets

During the six months ended June 30, 2020, the Company recorded an increased balance. The mortgage debt onimpairment charge of $1,069 related to the Annapolis WaterfrontDuane Street Hotel, which was originated inis held for sale as of June 30, 2020. During the second quarter of 2018 also added $451 of interest expense when comparing2020, the first nine months of 2019Company amended the purchase and sale agreement with the same periodbuyer of the hotel to reduce the purchase price by $2,000. As a result of the reduced sales price and after consideration of selling costs to the Company, management determined that the carrying value of the hotel exceeded the anticipated net proceeds from sale, resulting in 2018.the impairment charge.

Income Tax BenefitExpense

During the ninesix months ended SeptemberJune 30, 2019,2020, the Company recorded an income tax benefitexpense of $1,784$11,374 compared to an income tax expensebenefit of $1,200$1,233 for the ninesix months ended SeptemberJune 30, 2018.2019. After considering various factors, including future reversals of existing taxable temporary differences, future taxable income and tax planning strategies, we believe it is no longer more likely than not that we will realize our deferred tax assets.During the three months ended June 30, 2020 we recorded a valuation allowance of $19,866 resulting in net deferred tax assets of $0 as of June 30, 2020.  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 Loss Applicable to Common Shareholders

Net loss applicable to common shareholders for the ninesix months ended SeptemberJune 30, 20192020 was $18,581$96,583 compared to $10,829net loss of $13,146 during the same period in 2018,2019, resulting in an increased loss of $7,752.$83,437. This increase in loss was primarily related to increased interest expense, decreased gain on hotel dispositions, andthe decreased operating income. Also contributing toincome and increased income tax expense during the first half of 2020, as discussed above. Partially offsetting the increase in net loss is the reductionincrease in loss being absorbed by the noncontrolling interests for the nine months ended September 30, 2019 compared to 2018. Partially offsetting these increases in loss is a reduction in income tax expense.

interests.
51
45

LIQUIDITY, CAPITAL RESOURCES, AND EQUITY OFFERINGS
(dollars in thousands, except per share data)

We started 2020 off on solid footing with our comparable portfolio achieving RevPAR growth through the end of February 2020, but this was quickly erased as a result of the global economic slowdown caused by the COVID-19 pandemic. As a result of this pandemic and subsequent government mandates and health official recommendations, hotel demand was substantially reduced across the United States. Following the government mandates and health official recommendations, and after evaluating the cost of running our respective properties at low occupancy levels versus closing the properties, we initially closed 21 of our 48 hotel properties and dramatically reduced staffing. As of June 30, 2020, we had 32 hotels open while 16 hotels remained closed. For 21 of our wholly-owned hotels that have been open for the entirety of the second quarter, we experienced increased occupancy levels during the second quarter of 2020 with our New York City hotels generating 61% occupancy during the second quarter. While travel restrictions have slowly eased in a few markets and leisure demand began to recover late in the second quarter, group and business travel are unlikely to rebound quickly. As of August 1, 2020 we had 33 hotels open and by the end of the third quarter 2020, we anticipate having 44 of our 48 hotels open assuming there is no significant increase in COVID-19 cases or government-mandated closures.

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 existing lenders. Our ability to raise funds through the issuance of debt and equity securities is dependent upon, among other things, capital market volatility, risk tolerance of investors, general market conditions for REITs and market perceptions related to the Company’s ability to generate cash flow and positive returns on its investments.

In addition, our mortgage indebtedness contains various financial and non-financial covenants customarily found in secured, nonrecourse financing arrangements. If the specified criteria are not satisfied, the lender may be able to escrow cash flow generated by the property securing the applicable mortgage loan. We have determined that all covenants contained in the loan agreements securing our hotel properties were met as of SeptemberJune 30, 2019.2020, with the exception of one mortgage. This covenant failure was the result of a failure to maintain a minimum debt service coverage ratio at the mortgaged hotel. This covenant failure does not result in an event of default; rather, it triggers certain cash escrow requirements at the property.

We have unsecured debt facilities in the aggregate of $950,900 which is comprised of a $457,000 senior unsecured credit facility and two unsecured term loans totaling $493,900. The unsecured credit facility (“Credit Facility”) contains a $207,000 unsecured term loan (“First Term Loan”) and a $250,000 unsecured revolving line of credit (“Line of Credit”). This Credit Facility expires on August 10, 2022 and, provided no event of default has occurred, we may request that the lenders renew the credit facility for an additional one-year period. The Credit Facility is also expandable by $400,000 at our request, subject to the satisfaction of certain conditions. Our two additional unsecured term loans are $300,000 (“Second Term Loan”) and $193,900 (“Third Term Loan”), which mature on September 10, 2024 and August 2, 2021, respectively.

On April 2, 2020, we amended our existing Credit Agreement and received $100,000 in available funds on our Line of Credit, of which we drew $25,000 during April 2020 and $10,000 during July 2020.The amendment provided a waiver of covenants under our Credit Facility through March 31, 2021 and changed the Credit Facility from an unsecured borrowing facility to a secured borrowing facility. If we would breach certain of our Credit Facility covenants when measured for the period ended June 30, 2021,Management’s primary mitigation plan to avoid a default is to obtain a further waiver from its creditors or amend the Credit Facility in a manner to avoid an event of default. As of SeptemberJune 30, 2019,2020, the outstanding balance under the First Term Loan was $207,000, under the Second Term Loan was $300,000, under the Third Term Loan was $193,900 and we had $46,000$95,000 outstanding under the Line of Credit. As of September 30, 2019, our remaining borrowing capacity under the Credit Facility, Second Term Loan and Third Term Loan was $120,466 which is based on certain operating metrics of unencumbered hotel properties designated as borrowing base assets.

We will continue to monitor our debt maturities to manage our liquidity needs. However, no assurances can be given that we will be successful in refinancing all or a portion of our future debt obligations due to factors beyond our control or that, if refinanced, the terms of such debt will not vary from the existing terms. As of SeptemberJune 30, 2019,2020, we have $0 of mortgage indebtedness maturing on or before December 31, 2019.2020. We have one mortgage borrowing in the amount of $25,000 that will mature within the next twelve months, which we expect to be able to extend the maturity based on the provisions within the existing mortgage or refinance the mortgage. We currently expect that cash requirements for all debt that is not refinanced by our existing lenders for which the maturity date is not extended will be met through a combination of cash on hand, refinancing the existing debt with new lenders, draws on the Line of Credit and the issuance of our securities.

46
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 as evidenced by our transaction involving the Cindat JV properties, or from sales of non-core hotels in secondary and tertiary markets.hotels. Capital from these types of transactions is intended to be redeployed into high growth acquisitions, share buybacks, orutilized to pay down existing debt. As of June 30, 2020, we are not under any requirement to sell any properties as a matter of meeting debt obligations.
Common Share Repurchase Plan
In December 2018, our Board of Trustees authorized a share repurchase program for up to $50,000 of common shares which commenced upon the completion of the prior repurchase program. The program will expire on December 31, 2019, unless extended by our Board of Trustees. For the nine months ended September 30, 2019, the Company repurchased 933,436 common shares for an average price of $15.21.

Acquisitions

During the ninesix months ended SeptemberJune 30, 2019,2020, we acquired no hotel properties. Given the current economic downturn and challenging operating environment facing the lodging industry, we are not currently exploring hotel acquisition opportunities as we focus on maintaining liquidity or reducing debt obligations, when possible. 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.

52

Operating Liquidity and Capital Expenditures

WeAs we find ourselves operating in a severely reduced capacity with 16 of our hotels temporarily closed due to decreased demand as a result of the COVID-19 pandemic, 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. WeThe 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. While we believe that the net cash provided by operations in the coming year and borrowings drawn on the Line of Credit and any cash provided by operations in the coming year will be adequate to fund the Company’s operating requirements and monthly recurring debt service, we cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because we have not previously experienced such an abrupt and drastic reduction in hotel demand.The magnitude, duration, and speed of the pandemic is uncertain and, as a consequence, our ability to be predictive is uncertain and we cannot estimate the impact on our business, financial condition, or operating results with reasonable certainty. We have cancelled the payment of dividends in accordancefor the first and second quarter of 2020 and anticipate not paying dividends for the remainder of 2020. Based on remaining funds available to us on our Line of Credit, along with REIT requirementscost savings measures throughout our operations, we believe that we will be able to generate sufficient liquidity to satisfy our obligations for the next twelve months, absent a breach of the Internal Revenue Code of 1986, as amended.Credit Facility covenants.

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 thatif and when we will continue to make distributions to our shareholders at the current rate of $0.28 per common share per quarter or at all.shareholders. Due to the seasonality of our business, cash provided by operating activities fluctuates significantly from quarter to quarter. However, we believe that, based on our current estimates, which include the addition of cash from operations provided by the continued ramp up of the hotel acquired during 2018 and newly renovated hotels, our cash provided byquarter in a normal operating activities will be sufficient over the next 12 months to fund the payment of our dividend at its current level. However, ourperiod. Our Board of Trustees continues to evaluate the dividend policy in the context of our overall liquidity and market conditions and may electwill determine when we are able to reduce or suspend these distributions.reinstate the dividend. Net cash providedused by operating activities for the ninesix months ended SeptemberJune 30, 20192020 was $74,474$16,357 and cash used for the payment of distributions and dividends for the ninesix months ended SeptemberJune 30, 20192020 was $54,660.$18,051, which related to the dividend declared during the fourth quarter of 2019.
We also project that our operating cash flow and available borrowings under the Line of Credit will be sufficient to satisfy our liquidity and other capital needs over the next twelve to eighteen months.

Our long-term liquidity requirements consist primarily of the costs of acquiring additional hotel properties, renovation and other non-recurring capital expenditures that need to be made periodically with respect to hotel properties and scheduled debt repayments. We will seek to satisfy these long-term liquidity requirements through various sources of capital, including borrowings under the Line of Credit and through secured, non-recourse mortgage financings with respect to our unencumbered hotel properties. In addition, we may seek to raise capital through public or private offerings of our securities. Certain factors may have a material adverse effect on our ability to access these capital sources, including our degree of leverage, the value of our unencumbered hotel properties and borrowing restrictions imposed by lenders or franchisors. We will continue to analyze which source of capital is most advantageous to us at any particular point in time, but financing may not be consistently available to us on terms that are attractive, or at all.
Spending on capital improvements during the ninesix months ended SeptemberJune 30, 20192020 decreased when compared to spending on capital improvements during the ninesix months ended SeptemberJune 30, 2018.2019. During the ninesix months ended SeptemberJune 30, 2019,2020, we spent $33,706$15,612 on capital expenditures to renovate, improve or replace assets at our hotels. This compares to $53,573$21,230 during the same period in 2018.2019. These capital expenditures were undertaken to comply with brand mandated improvements and to initiate projects that we believe will generate a return on investment. ConstructionIn an effort to replace assets damaged by recent hurricanes is discussedproperly manage liquidity in the paragraph below.
47
current operating environment we are completing projects previously commenced and have deferred all other capital expenditure projects for the remainder of the year.

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. Currently, all brand mandated improvements have been deferred by the respective franchisors for the remainder of 2020. We are also obligated to fund the cost of certain capital improvements to our hotels. In addition to capital reserves required under certain loan agreements and capital expenditures to renovate, improve or replace assets at our hotels, we have opportunistically engaged in hotel development projects. DuringIn an effort to properly manage liquidity in the nine months ended September 30, 2019,current operating environment we spent $149 on hotel development projects comparedhave sought or are currently in negotiations with our mortgage lenders to $29,606 during the samedefer all payments into capital expenditure escrow accounts for a period of 2018, which consisted mostly of construction on hurricane impacted hotels. Other than the equity contributions required6 months to be made for the hotel being constructed by one of our unconsolidated joint ventures, we do not expect significant cash outlays for hotel development projects in the near term.a year.

53
48

CASH FLOW ANALYSIS
(dollars in thousands, except per share data)

Comparison of the NineSix Months Ended SeptemberJune 30, 20192020 and 20182019

Net cash provided by operating activities decreased $8,593$63,228 from $83,067$46,871 for the ninesix months ended SeptemberJune 30, 20182019 to $74,474cash used by operating activities of $16,357 for the comparable period in 2019. Net2020. In addition to the change in net income adjusted for non-cash items, reflected in the consolidated statements of cash flowsfollowing items are the other contributing factors for the nine months ended September 30, 2019 and 2018, increased by $10,647 for the nine months ended September 30, 2019 when compared to 2018. Additional decreaseschange in operating cash from operating activities was due to decreased distributionsflow.

•Distributions received from unconsolidated joint ventures of $444,operations totaled $478 for the six months ended June 30, 2019 with no such proceeds in 2020.
•The remaining change in operating cash flows related to net changes in working capital assets and a decrease in business interruption insurance proceeds of $8,614.liabilities.

Net cash used in investing activities for the ninesix months ended SeptemberJune 30, 20192020 was $36,513$16,191 compared to net cash used in investing activities of $14,467$24,675 for the ninesix months ended SeptemberJune 30, 2018. During2019. The following items are the ninemajor contributing factors for the change in investing cash flows:

•An increase in comparative cash flows of $5,618 related to a decrease in spending on capital expenditures for the six months ended SeptemberJune 30, 2019, we received $02020 compared to 2019.
•An increase in proceeds from the dispositioncomparative cash flows of hotel properties and $0 in insurance proceeds$3,400 related to claimsa contribution of $600 to unconsolidated joint ventures for property losses as a resultthe six months ended June 30, 2020 compared to contributions of Hurricane Irma. Additionally, we$4,000 made for the comparative period in 2019.
•A decrease in comparative cash flows of $1,022 related to distributions received $1,342 in proceeds from unconsolidated joint ventures as a return of our investment. Duringduring the ninesix months ended SeptemberJune 30, 2018 we2019. No such distributions were received $49,580 in proceeds from the disposition of two hotels and $13,624 in insurance proceeds related to claims for property losses as a result of Hurricane Irma. Additionally, we received $47,738 in proceeds from the redemption of our preferred equity investment in Cindat. Offsetting these sources of funds were $0 for no purchases of hotel property and $33,855 spent on capital expenditures and development projects during the nine months ended September 30, 2019 compared to $41,230 for the purchase of one hotel property and $83,179 spent on capital expenditures and development projects during the nine months ended September 30, 2018. 2020.

Net cash used inprovided by financing activities for the ninesix months ended SeptemberJune 30, 20192020 was $36,583$26,165 compared to net cash used in financing activities for the ninesix months ended SeptemberJune 30, 20182019 of $47,174. We had net$15,432. The following items are the major contributing factors for the change in financing cash outflowsflows:

•An increase in comparative cash flows as we drew $20,000 more on our Line of $564 in repayments of mortgage borrowingsCredit during the ninesix months ended SeptemberJune 30, 2019. During the nine months ended September 30, 2018, we had net increased borrowings on the unsecured term loan, and mortgages payable of $8,763. During the nine months ended September 30, 2019, we borrowed $36,000 net, from our line of credit. During the nine months ended September 30, 2018 we borrowed $9,900 net, from our line of credit. Also during the nine months ended September 30, 2019, we repurchased $14,196 of our Class A Common Shares compared with $10,833 in the nine months ended September 30, 2018. In addition, dividends and distributions paid during the nine months ended September 30, 2019 increased $2582020 when compared to the same period in 2018.2019.
•An increase in comparative cash flows of $4,624 related to the repurchase on common shares. During the six months ended June 30, 2019, we repurchased $4,624 in common shares. We had no such repurchases during 2020.
•An increase in comparative cash flows of $18,387 related to dividends paid. During the six months ended June 30, 2020 we paid $18,051 in dividends compared to $36,438 for the comparative period in 2019.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.



5449

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. We determined that the loss from the impairment of certain depreciable assets including investments in unconsolidated joint ventures and land, was driven by a measurable decrease in the fair value of certain hotel properties and other assets as determined by our analysis of those assets in accordance with applicable GAAP. As such, these impairments have been eliminated from net loss to determine FFO.

FFO does not represent cash flows from operating activities in accordance with GAAP and should not be considered an alternative to net income as an indication of the Company’s performance or to cash flow as a measure of liquidity or ability to make distributions. We consider FFO to be a meaningful, additional measure of operating performance because it excludes the effects of the assumption that the value of real estate assets diminishes predictably over time, and because it is widely used by industry analysts as a performance measure. We show both FFO from consolidated hotel operations and FFO from unconsolidated joint ventures because we believe it is meaningful for the investor to understand the relative contributions from our consolidated and unconsolidated hotels. The display of both FFO from consolidated hotels and FFO from unconsolidated joint ventures allows for a detailed analysis of the operating performance of our hotel portfolio by management and investors. We present FFO applicable to common shares and Common Units because our Common Units are redeemable for common shares. We believe it is meaningful for the investor to understand FFO applicable to all common shares and Common Units.

5550
Table of Contents

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):
Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
    
Net loss applicable to common shareholders$(69,608) $(443) $(98,727) $(13,146) 
Loss allocated to noncontrolling interest(8,216) (41) (11,113) (1,264) 
Loss (income) from unconsolidated joint ventures502  (299) 1,520  (480) 
Loss from impairment of depreciable assets1,069  —  1,069  —  
Depreciation and amortization24,322  23,964  48,510  48,092  
Funds from consolidated hotel operations applicable to common shareholders and Partnership Units(51,931) 23,181  (58,741) 33,202  
    
(Loss) income from unconsolidated joint ventures(502) 299  (1,520) 480  
Unrecognized pro rata interest in loss (1)
(512) (35) (361) (3,008) 
Depreciation and amortization of difference between purchase price and historical cost (2)
21  23  42  47  
Interest in depreciation and amortization of unconsolidated joint ventures (3)
393  1,292  795  2,574  
Funds from unconsolidated joint ventures operations applicable to common shareholders and Partnership Units(600) 1,579  (1,044) 93  
    
Funds from Operations applicable to common shareholders and Partnership Units$(52,531) $24,760  $(59,785) $33,295  
    
Weighted Average Common Shares and Common Units    
Basic38,609,922  39,127,385  38,587,011  39,121,421  
Diluted43,286,310  43,443,916  43,426,465  43,396,004  
 Three Months Ended Nine Months Ended
 September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
        
Net loss applicable to common shareholders $(5,435) $(3,235) $(18,581) $(10,829)
(Loss) income allocated to noncontrolling interest (102) 178
 (1,366) (1,626)
Income from unconsolidated joint ventures (38) (582) (518) (918)
Gain on disposition of hotel properties —
 —
 —
 (3,403)
Depreciation and amortization 24,092
 22,764
 72,184
 66,364
Funds from consolidated hotel operations applicable to common shareholders and Partnership Units 18,517
 19,125
 51,719
 49,588
        
Income from unconsolidated joint ventures 38
 582
 518
 918
Unrecognized pro rata interest in loss (1)
 (655) (290) (3,664) (4,215)
Depreciation and amortization of difference between purchase price and historical cost (2)
 26
 23
 73
 70
Interest in depreciation and amortization of unconsolidated joint ventures (3)
 1,305
 1,175
 3,879
 3,281
Funds from unconsolidated joint ventures operations applicable to common shareholders and Partnership Units 714
 1,490
 806
 54
        
Funds from Operations applicable to common shareholders and Partnership Units $19,231
 $20,615
 $52,525
 $49,642
        
Weighted Average Common Shares and Common Units        
Basic 38,878,818
 39,321,062
 39,039,665
 39,400,237
Diluted 43,195,646
 43,237,267
 43,386,630
 43,274,342
(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's FFO including loss we have not recognized for U.S. GAAP reporting.
(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.
Based on guidance provided by NAREIT, we have eliminated loss from the impairment of certain depreciable assets, including investments in unconsolidated joint ventures and land, from net loss to arrive at FFO in each year presented.

56
51
Table of Contents

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. Additionally, our management companies will face challenges to raise room rates to reflect the impact of inflation until there is a substantial economic recovery from the COVID-19 pandemic.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The estimates and assumptions made by management in applying critical accounting policies have not changed materially during 20192020 and 20182019 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. See Item 7 of our Annual Report on Form 10-K for the year ended December 31, 20182019 for a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements.

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

Properties intended to be sold are designated as “held for sale” on the balance sheet. In accordance with ASU Update No. 2014-08 concerning the classification and reporting of discontinued operations, we evaluate each disposition to determine whether we need to classify the disposition as discontinued operations. This amendment defines discontinued operations as a component of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. 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.

57
52
Table of Contents

We review our portfolio on an on-going basis to evaluate the existence of any of the aforementioned events or changes in circumstances that would require us to test for recoverability. In general, our review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value expected, as well as the effects of hotel demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make subjective assessments as to whether there are impairments in the values of our investments in hotel properties.

As of SeptemberJune 30, 2019,2020, based on our analysis and given consideration to the impairment charge taken on one of our hotels held for sale, we have determined that the estimated future cash flow of each of the properties in our portfolio iswas sufficient to recover its carrying value.

New Accounting Pronouncements

In June 2018,March 2020, the FASB issued ASU No. 2018-07,2020-4, Stock CompensationReference Rate Reform (Topic 718)848): ImprovementsFacilitation of the Effects of Reference Rate Reform on Financial Reporting. 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 Nonemployee Share-Based Payment Accounting.identify alternative reference rates that are more observable or transaction based. The update will simplify several aspects of theprovides guidance in accounting for nonemployee share-based paymentchanges in contracts, hedging relationships, and other transactions for acquiring goodsas a result of this reference rate reform. The optional expedients and services from nonemployees. The amendments inexceptions contained within this update, affects all entitiesin general, only apply to contract amendments and modifications entered into prior to January 1, 2023. The provisions of this update that enter into share-based payment transactions for acquiring goodswill most likely affect our financial reporting process relate to modifications of contracts with lenders and services from nonemployees. The Company adoptedthe related hedging contracts associated with each respective modified borrowing contract. In general, the provisions of the update effective January 1, 2019. The adoptionwould benefit the Company by allowing, among other things, the following:

•Allowing modifications of this update did not have a material effect on our consolidated financial statements ordebt contracts with lenders that fall under the disclosuresguidance of share-based payments within Note 9 of these consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted ImprovementsASC Topic 470 to Accounting for Hedging Activities. The update will make more financial and nonfinancial hedging strategies eligible for hedge accounting, changes how companies assess hedge effectiveness, and amends the presentation and disclosure requirements for hedging transactions. The Company adopted the provisions of the update effective January 1, 2019. The adoption of this update did not have a material effect on our consolidated financial statements or the disclosures related to fair value measurements within Note 8 of these consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business as it relates to acquisitions and business combinations. The update adds further guidance that assists preparers in evaluating whether a transaction will be accounted for as an asseta 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 business. 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 expect mosthave 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 hotel property acquisitionscontracts with lenders and hedging counterparties are indexed to qualify as asset acquisitions underLIBOR. While we anticipate the standard which requiresimpact of this update may benefit the capitalization of acquisition costsCompany, we are still evaluating the overall impact to the underlying assets. The Company expects the standard to have an impact on our financial statements in periods during which we complete significant hotel acquisitions. The Company has adopted ASU No. 2017-01 effective, January 1, 2018.Company.


53
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), which provides guidance on the presentation of restricted cash or restricted cash equivalents within the statement of cash flows. Accordingly, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard effective January 1, 2018. The adoption of ASU No. 2016-18 changed the presentation of the statement of cash flows for the Company and we utilized a retrospective transition method for each period presented within financial statements for periods subsequent to the date of adoption. Additionally, the Company provides a reconciliation within Note 11 of cash, cash equivalents, and restricted cash to their relative balance sheet captions.

58
Table of Contents

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides the principles for the recognition, measurement, presentation and disclosure of leases. The accounting for lessors will remain largely unchanged from current GAAP; however, the standard requires that certain initial direct costs be expensed rather than capitalized. Under the standard, lessees apply a dual approach, classifying leases as either finance or operating leases. A lessee is required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, regardless of their lease classification. Based on the review of our leases, we are a lessee on ground leases in certain markets, hotel equipment leases, and office space leases. The Company adopted the provisions of the update effective January 1, 2019. As a result, the Company recorded a right of use asset and corresponding lease liability of $55,515 at January 1, 2019 for leases where we are the lessee. The Company also reclassified $11,050 previously included in intangible assets to the right of use asset, related to purchase accounting adjustments for below market rate leases. Additionally, the Company reclassified $19,627 previously included in accounts payable and accrued expenses to the right of use asset. This reclassification related to amounts recorded for accrued lease expense, as a result of using the straight-line rent method, and intangible liabilities derived from land leases acquired at above market lease rates. Upon adoption the right of use asset had a weighted average useful life of 64.2 years. We are also a lessor in certain office space and retail lease agreements related to our hotels and the adoption of this ASU did not have a material impact on our accounting for leases where we are the lessor. The adoption of this ASU did not impact revenue recognition policies for the Company. See Note 6 to these consolidated financial statements for further lease disclosures.

59
Table of Contents

Item 3. 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. As of SeptemberJune 30, 2019,2020, we are exposed to interest rate risk with respect to variable rate borrowings under our Line of Credit, Facility, Second and Third Term Loans and certain variable rate mortgages, and notes payable. As of SeptemberJune 30, 2019,2020, we had total variable rate debt outstanding of $150,548$199,548 with a weighted average interest rate of 4.71%3.04%. The effect of a 100 basis point increase or decrease in the interest rate on our variable rate debt outstanding as of SeptemberJune 30, 20192020 would be an increase or decrease in our interest expense for the three and ninesix months ended SeptemberJune 30, 20192020 of $373$490 and $1,088,$911, respectively.

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 SeptemberJune 30, 2019,2020, we have an interest rate cap related to debt on the Annapolis Waterfront Hotel, MD and we have eightten interest rate swaps related to debt on theHilton Garden Inn, 52nd Street, New York, NY; Courtyard, LA Westside, Culver City, CA; Hilton Garden Inn, 52nd Street, New York, NY; Hyatt Union Square, New York, NY; Hilton Garden Inn Tribeca, New York, NY; and our Unsecured Term Loans.Credit Facility. We do not intend to enter into derivative or interest rate transactions for speculative purposes.

As of SeptemberJune 30, 2019,2020, approximately 89%85.5% of our outstanding consolidated long-term indebtedness iswas subject to fixed rates or effectively capped, while 11%14.5% of our outstanding long term indebtedness is subject to floating rates, including borrowings under our Line of Credit. The majority of our floating rate debt and any corresponding derivative instruments are indexed to various tenors of LIBOR, and we acknowledge that in 2021, the financial institutions that produce the LIBOR indexes are expected to discontinue that practice. We are currently evaluating the impact this will have on our financial results and liquidity and will continue to work with our lenders to find a suitable resolution for our LIBOR-based debt.

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 SeptemberJune 30, 20192020 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 SeptemberJune 30, 20192020 to be approximately $1,060,402$1,123,707 and a 100 basis point decrease in market interest rates would cause the fair value of our fixed-rate debt outstanding at SeptemberJune 30, 20192020 to be approximately $1,125,401.$1,177,680.

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 SeptemberJune 30, 2019,2020, the following table presents expected principal repayments and related weighted average interest rates by expected maturity dates:
Less Than 1 Year1 - 3 years4 - 5 YearsAfter 5 YearsTotal
     
Fixed Rate Debt$932  $505,385  $437,049  $37,831  $981,197  
Weighted Average Interest Rate3.83 %3.83 %3.79 %4.72 %4.04 %
    
Floating Rate Debt$—  $26,045  $26,955  $51,548  $104,548  
Weighted Average Interest Rate—  3.04 %3.09 %3.16 %3.03 %
$932  $531,430  $464,004  $89,379  $1,085,745  
Line of Credit$—  $95,000  $—  $—  $95,000  
Weighted Average Interest Rate—  2.41 %—  —  2.41 %
$932  $626,430  $464,004  $89,379  $1,180,745  

54
 Less Than 1 Year 1 - 3 years 4 - 5 Years After 5 Years Total
          
Fixed Rate Debt $379
 $298,459
 $286,020
 $397,375
 $982,233
Weighted Average Interest Rate 3.86% 3.81% 3.64% 4.15% 3.87%
  
  
  
    
Floating Rate Debt $—
 $25,309
 $891
 $78,348
 $104,548
Weighted Average Interest Rate —
 4.77% 4.90% 5.02% 4.84%
 $379

$323,768

$286,911

$475,723

$1,086,781
           
Line of Credit $—
 $46,000
 $—
 $—
 $46,000
Weighted Average Interest Rate —
 4.27% —
 —
 4.27%
  $379
 $369,768
 $286,911
 $475,723
 $1,132,781

60
Table of Contents

Item 4. Controls and Procedures

Based on the most recent evaluation, the Company’s Chief Executive Officer and Chief Financial Officer believe the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of SeptemberJune 30, 2019.2020.

There were no changes to the Company’s internal controls over financial reporting during the three months ended SeptemberJune 30, 2019,2020, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

55
61

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.
 
None.The current COVID-19 pandemic had, and will continue to have adverse effects on our financial condition, results of operations, cash flows and performance for an indeterminate period of time. Future pandemics may also have adverse effects on our financial condition, results of operations, cash flows and performance.

The global pandemic caused by the coronavirus known as COVID-19 has had, and is continuing to have, a severe and negative impact on both the U.S. economy and the global economy. Financial markets have experienced significant volatility during the first and second quarters of 2020, which is expected to continue over upcoming quarters. Globally and throughout the United States, federal, state, and local governments have 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 have had, and continue to have, a severe impact on the U.S. lodging industry and many of our hotels have suspended operations while others continue to operate at a significantly reduced occupancy.

The following factors should be considered because the COVID-19 pandemic has significantly adversely affected, and continues to affect, the ability of our hotel managers to successfully operate our hotels and has had, and continues to have, a significant adverse effect on our financial condition, results of operations and cash flows due to, among other factors:

•a complete suspension or significant reduction of operations at many of our properties;
•a variety of factors related to the coronavirus have caused, and continue to cause, 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 continue to be, 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;
•travelers may be dissuaded from traveling due to possible enhanced COVID-19-related screening measures which are being implemented across multiple markets we serve;
•travelers may be dissuaded from traveling due to the concern that additional travel restrictions implemented between their departure and return may affect their ability to return to their homes;
•commercial airline service has been reduced or suspended to many of the areas in which our hotels are located, if scheduled airline service does not increase or return to normal levels once our hotels and resorts are re-opened it could negatively affect our revenues;
•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 after the temporary restrictions are lifted;
•a decrease in the ancillary revenue from amenities at our properties;
•the financial impact of the COVID-19 pandemic could negatively impact our future compliance with the financial covenants of our Credit Facility after these covenants again become applicable in 2021 or our compliance with covenants in other debt obligations, and result in a default and potentially an acceleration of indebtedness which would adversely affect our financial condition and liquidity;
•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
56
•the reduction in our cash flows has caused the indefinite suspension of dividends and could impact our ability to pay dividends to our stockholders at expected levels in the future.

The rapid development and fluidity of the COVID-19 pandemic makes it extremely difficult to assess its full adverse economic impact, and future impact, on our financial condition, results of operations, cash flows and performance. In addition, an outbreak of another disease or similar public health threat, 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.

The potential effects of COVID-19 also could intensify or otherwise affect many of our other risk factors that are
included in Part 1-Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the "Annual Report"), including, but not limited to, those factors listed under “Risks Related to the Economy and Credit Markets” and “Risks Related to the Hotel Industry” and in our subsequent Quarterly Reports on Form 10-Q. Because the COVID-19 situation is unprecedented and continuously evolving, the other potential impacts to our risk factors that are further described in our Annual Report and in our subsequent Quarterly Reports on Form 10-Q are uncertain.

We may be unsuccessful in obtaining a waiver or amendment to our Credit Agreement, specifically with respect to the Credit Facility covenants, prior to certain covenants being measured for the period ending June 30, 2021. The failure to obtain such a waiver or amendment, or otherwise repay the debt, probably will 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.

The covenant waivers on our Credit Facility extend through March 31, 2021. Absent additional amendments to our Credit Agreement, however, we believe that it is probable we will breach certain of our Credit Facility covenants when measured for the period ended June 30, 2021. This potential event of default could lead to potential acceleration of amounts due under the Credit Facility.Notwithstanding our belief that we probably will be successful in renegotiating the terms of our Credit Facility prior to an event of default, we believe that we will continue to have access to the capital markets. Also, we could choose to raise cash by selling hotel properties, although there can be no assurances we would be successful on terms favorable to us.

Management’s primary mitigation plan to avoid a default under its Credit Agreement is to obtain a further waiver from its creditors or amend the Credit Facility in a manner to avoid an event of default. There can be no assurances that we will be able to obtain a waiver or amendment in a timely manner, or on acceptable terms, if at all. 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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following is a table summary of our common share repurchases during the nine months ended September 30, 2019 under the $50 million repurchase program authorized by our Board of Trustees in December 2018. All such common shares were repurchased pursuant to open market transactions.None.
The share repurchase program will expire on December 31, 2019, unless extended by our Board of Trustees.
Issuer Purchases of Common Shares
        
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands)
        
January 1 to January 31, 2019 273,538
 $16.91
 273,538
 $45,375
February 1 to February 28, 2019 —
 —
 —
 45,375
March 1 to March 31, 2019 —
 —
 —
 45,375
April 1 to April 30, 2019 —
 —
 —
 45,375
May 1 to May 31, 2019 —
 —
 —
 45,375
June 1 to June 30, 2019 —
 —
 —
 45,375
July 1 to July 31, 2019 —
 —
 —
 45,375
August 1 to August 31, 2019 641,984
 14.52
 915,522
 36,053
September 1 to September 30, 2019 17,914
 13.83
 933,436
 35,805


Item 3. Defaults Upon Senior Securities.

None.As a result of the turmoil in the financial markets resulting from the spread of the novel coronavirus and the global COVID-19 pandemic, on March 19, 2020, in order to preserve liquidity, we revoked our previously announced first quarter 2020 quarterly cash dividends on our common shares, 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. The payment by us of dividends, with limited exceptions, has been prohibited under the terms of the amendments to the Credit Agreements entered into on April 2, 2020. Unpaid dividends on our Series B and Series C Preferred Stock accumulate without interest. Unpaid dividends on our preferred shares shall accrue without interest. No cash dividends may be paid on our common shares unless all accrued but unpaid dividends on our preferred shares have been (or contemporaneously are) declared and paid, or declared and a sum sufficient for such payment has been set apart for payment for all past dividend periods. As of the date of this report, the total arrearage of unpaid cash dividends 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 is $2,578,200, $6,257,632 and $3,251,230, respectively.

Item 4. Mine Safety Disclosures.
 
Not Applicable.


57
Item 5. Other Information.

None.Third Amended and Restated Employment Agreements

On August 3, 2020, the Company entered into amended and restated employment agreements (each, an “employment agreement,” and collectively, the “employment agreements”) with Hasu P. Shah (Chairman), Jay H. Shah (Chief Executive Officer), Neil H. Shah (President and Chief Operating Officer), Ashish R. Parikh (Chief Financial Officer) and Michael R. Gillespie (Chief Accounting Officer) (each, an “Applicable Employee,” and collectively, the “Applicable Employees”) replacing the prior agreements with each Applicable Employee. The form of employment agreement is filed as an exhibit to this report on Form 10-Q and the following summary is qualified in its entirety by the terms set forth therein. Each employment agreement is for an initial term through December 31, 2022, and thereafter will renew for successive one year periods unless terminated by the Company.

Each employment agreement provides for the payment of a minimum annual base salary to an Applicable Employee, subject to any increase approved by the Board of Trustees. In addition, each Applicable Employee is eligible to receive other incentive compensation, including but not limited to, grants of stock options or common shares. Each of the employment agreements also contains certain confidentiality, non-competition and non-recruitment provisions.

Each of the employment agreements provides for cash payments and the provision of other benefits to the Applicable Employee upon the occurrence of certain triggers. These triggers include the Applicable Employee’s voluntary termination, the Applicable Employee’s termination without cause (other than a termination without cause during the 12-month period following a change of control), the Applicable Employee’s termination with cause, the Applicable Employee’s death or disability and the Applicable Employee’s termination without cause or resignation for good reason within 12 months of a change of control. Certain compensation calculations are described below. All capitalized terms not defined herein shall have the meanings ascribed to them in the respective employment agreement.

With respect to a Termination without Cause (other than a Termination without Cause during the 12-month period following a Change of Control), for each of the Applicable Employees, the termination without cause calculation includes the following:

•all Base Salary payable and expenses reimbursable to the Executive by the Company, each through the date of the termination;
•12 months of Base Salary;
•the maximum annual bonus under the Company’s STIP that the employee could earn for the year that includes the date of termination;
•full accelerated vesting of the employee’s time-based and performance-based outstanding and unvested awards (including outstanding LTIP Awards) granted under the Equity Plan, and with respect to any such awards containing performance periods that have not yet concluded, then such awards shall fully vest as though the performance conditions were achieved at target level; and
•immediate redemption by the Company of the LTIP Awards of each employee at their then fair market value.

With respect to a Termination without Cause during the 12-month period following a Change of Control, for each of the Applicable Employees the calculation includes the same compensation elements as Termination without Cause with the base salary and maximum annual bonus elements subject to a multiple for each of the Applicable Employees. The multiple for each applicable employee are as follows: Hasu P. Shah - 2.00x, Jay H. Shah - 2.99x, Neil H. Shah - 2.99x, Ashish R. Parikh - 2.00x, and Michael R. Gillespie - 1.00x.

2020 Executive Compensation Program

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. The Short Term Incentive Program ("STIP") and the Long-Term Incentive Program ("LTIP") are incentive compensation programs that align executive compensation with the performance of the Company.

2020 Short Term Incentive Program

On August 3, 2020, the Compensation Committee of our Board of Trustees (the “Compensation Committee”) approved the 2020 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 for the performance period ending on December 31, 2020. The 2020 STIP objectives include the following metrics (1) liquidity generation, (2) balance sheet flexibility, (3) expense reduction measures and (4) exploration of long term strategic objectives. Amounts earned under the STIP are awarded 50% in cash and 50% in equity awards, provided that the Compensation Committee has a policy that allows
62
58
the executive officers to elect to receive LTIP Units in lieu of cash payment for amounts earned under the 2020 STIP. All of our executive officers elected to receive the incentive from the 2020 STIP in LTIP Units. For payments elected in LTIP Units in lieu of cash payments, the executive officers receive a 25% premium. Equity issued under the 2020 STIP vests on the two year anniversary from the end of the performance period

Based on the unique circumstances of the COVID-19 pandemic and the timing of the adoption of the 2020 STIP, the 2020 STIP incentive ranges offer the executive officers the opportunity to earn 50% of the 2019 STIP opportunity at the target level. The table below details the amounts the executive officers may earn for threshold, target and maximum performance under the 2020 STIP as a percentage of base salary, prior to any voluntary base salary reductions taken by the executive officers:

2020 STIP Ranges
ThresholdTargetMaximum
Chairman60%70%80%
CEO120%150%190%
COO120%150%190%
CFO80%120%150%
CAO80%90%110%

2020 Long Term Incentive Program

On August 3, 2020, the Compensation Committee approved the 2020 LTIP pursuant to which the executive officers are eligible to earn equity awards based on achieving a threshold, target or maximum level of defined market and performance objectives during the three-year performance period which commenced on January 1, 2020 and ends December 31, 2022. The shares or LTIP Units issuable under the 2020 LTIP are 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).

The 2020 LTIP incentive ranges are consistent with the 2019 LTIP and the table below details those ranges under the 2020 LTIP as a percentage of base salary prior to any voluntary base salary reductions taken by the executive officers:

2020 LTIP Ranges
ThresholdTargetMaximum
Chairman115%140%170%
CEO160%185%210%
COO160%185%210%
CFO110%130%150%
CAO35%60%75%


59
Table of Contents
Item 6. Exhibits.
Exhibit No.
10.1
31.1
31.2
32.1
32.2
101.INS
The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
Inline XBRL Taxonomy Extension Labels Linkbase Document*
 101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document*
*104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith
+Compensatory plan or arrangement

63
60

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
NovemberAugust 6, 20192020/s/ Ashish R. Parikh
Ashish R. Parikh
Chief Financial Officer
(Principal Financial Officer)

64
61