Hersha Hospitality Trust (HT) 8-K/A Entry into a Material Definitive Agreement

EXHIBIT 99.2

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

     The accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2004 is presented as if Hersha’s planned acquisition of an interest in Mystic Partners, LLC had been acquired on January 1, 2004.

     This pro forma consolidated statement should be read in conjunction with Hersha’s consolidated historical financial statements, the historical consolidated financial statements of Waterford Hospitality Group LLC included in Exhibit 99.1 to this Form 8-K/A and the pro forma financial statements of Mystic Partners LLC included in Exhibit 99.1 to this Form 8-K/A and the notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the planned acquisition have been made based on management’s best estimates.

     The following unaudited Pro Forma Consolidated Statement of Operations is not necessarily indicative of what actual results of Hersha would have been assuming such planned acquisition had been completed as of January 1, 2004, nor is it indicative of the results of operations for future periods.

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2004
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

	(A)			(B)
	Hersha			Interest
	Hospitality			in Mystic
	Trust			Partners			Combined			Adjustments			Pro Forma
Revenue:
Percentage Lease Revenues — HHMLP	$	1,192		$	—		$	1,192		$	—		$	1,192
Hotel Operating Revenues		49,370			—			49,370			—			49,370
Total Revenue		50,562			—			50,562			—			50,562
Operating Expenses:
Hotel Operating Expenses		31,557			—			31,557			—			31,557
Land Lease		779			—			779			—			779
Real Estate and Personal Property Taxes and Property Insurance		3,264			—			3,264			—			3,264
General and Administrative		3,200			—			3,200			—			3,200
Unrecognized Gain on Derivative		62			—			62			—			62
Depreciation and Amortization		7,194			—			7,194			—			7,194
Total Operating Expenses		46,056			—			46,056			—			46,056
Operating Income		4,506			—			4,506			—			4,506
Interest Income		241			—			241			—			241
Interest Income — Secured Loans Related Party		1,498			—			1,498			—			1,498
Interest Income — Secured Loans		693			—			693			—			693
Other Revenue		176			—			176			—			176
Interest Expense		(6,130	)		—			(6,130	)		—			(6,130	)
Income (Loss) from continuing operations before income (loss) from joint venture investments, distributions to preferred unit holders and minority interests		984			—			984			—			984
Income from Unconsolidated Joint Venture Investments		481			(1,057	)		(576	)		(3,498	)(C)		(4,074	)
Income (Loss) from continuing operations before distributions to preferred unit holders and minority interests		1,465			(1,057	)		408			(3,498	)		(3,090	)
Distributions to Preferred Unitholders		(499	)		—			(499	)		—			(499	)
Income (Loss) Allocated to Minority Interest in Continuing Operations		(126	)		—			(126	)		707	(D)		581
Income (Loss) from Continuing Operations	$	840		$	(1,057	)	$	(217	)	$	(2,791	)	$	(3,008	)
Earnings (Loss) Per Share from Continuing Operations(E)
Basic	$	0.05											$	(0.48	)
Diluted	$	0.05											$	(0.48	)
Weighted Average Common Shares Outstanding
Basic		16,391,805												16,391,805
Diluted		19,401,636												19,401,636

See notes to pro forma consolidated statement of operations

HERSHA HOSPITALITY TRUST

Notes and Management’s Assumptions to the
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2004
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

(A)	Represents Hersha’s audited Consolidated Statement of Operations for the year ended December 31, 2004 as filed on Form 10-K, excluding discontinued operations.
(B)	Represents Hersha’s interest in Mystic Partners based on Hersha’s planned acquisition and the historical consolidated financial statements of Waterford Hospitality Group LLC and the pro forma financial statements of Mystic Partners LLC as of and for the year ending December 31, 2004, each including the notes thereto and as included in Exhibit 99.1 to this Form 8-K/A.

(C) Represents Hersha’s depreciation expense on the difference between our proportional share of the estimated fair value of the assets and the recorded carrying amounts in the historical financial statements of Mystic Partners. Depreciation is computed using the straight-line method and is based upon the estimated useful life of the asset. The pro forma adjustment is as follows:

	Hersha Proportional Share of				Depreciation
	Fair Value Increase		Life		Expense
Land	$	9,080		N/A		N/A
Building		42,727		40	$	1,068
Furniture & Fixtures		1,602		7		229
Pro Forma Adjustment					$	1,297

Also included in this adjustment is Hersha’s interest in the interest expense attributable to the $160,364 debt incurred by Mystic Partners in excess of the interest expense included in the pro forma statement of operations for Mystic Partners. The pro forma adjustment is as follows:

						Interest
	Principal		Interest Rate			Expense
10 Year Variable Rate Debt, 5.25% Floor		42,464		5.25	%	$	2,229
4 Year Variable Rate Debt, LIBOR + 2.90%		45,000		4.37	%		1,967
4 Year Variable Rate Debt, LIBOR + 2.75%		22,000		4.22	%		928
10 Year Fixed Rate Debt, 6.89%		8,100		6.89	%		558
20 Year Debt, 3.09%-6.01%		8,000		4.55	%		364
5 Year Debt, 6.98%		9,300		8.00	%		744
5 Year Debt, 8.00%		25,500		6.98	%		1,780
Total Interest Expense						$	8,570
Less: Waterford and Minority Interest in interest expense of Mystic Partners							(3,582	)
Hersha’s interest in Mystic Partners interest expense						$	4,988
Hersha’s interest in Mystic Partners deferred loan fee amortization						$	202
Less: Hersha’s interest in Mystic Partners historical interest expense							(2,989	)
Pro Forma Adjustment						$	2,201

(D) Minority interest represents the interest owned by limited partners in our operating partnership subsidiary. The cumulative minority interest effect of Hersha’s interest in Mystic Partners is calculated by using the weighted average minority interest percentage of 15.5% for the year ended December 31, 2004, as follows:

Hersha interest in historical Mystic Partners Net Loss	$	1,057
Depreciation and interest Pro Forma Adjustment		3,498
Total	$	4,555
Minority Interest Percentage		15.5	%
Pro Forma Minority Interest Adjustment	$	707

(E) The loss from continuing operations available to common shareholders used in the basic earnings per share calculation is reduced by the dividends on the planned offering of Series A Preferred Shares. Assuming a 8.0% dividend rate, annual dividends will have the following impact on loss from continuing operations available to common shareholders used to calculate basic earnings per share:

			Pro Forma,
	Actual		as Adjusted
Income (Loss) from continuing operations	$	840	$	(3,008	)
Less: planned preferred dividends accrued		—		(4,800	)
Income (Loss) from continuing operations available to common shareholders	$	840	$	(7,808	)

Unaudited Pro Forma Consolidated Financial Information

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Balance Sheet
As of March 31, 2005
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

     The accompanying unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2005 is presented as if Hersha’s planned acquisition of its interest in Mystic Partners occurred on March 31, 2005.

     This pro forma consolidated statement should be read in conjunction with Hersha’s consolidated historical financial statements, the historical consolidated financial statements of Waterford Hospitality Group LLC included in Exhibit 99.1 to this Form 8-K/A and the pro forma financial statements of Mystic Partners LLC included in Exhibit 99.1 to this Form 8-K/A and the notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the planned acquisition of Hersha’s interest in Mystic Partners have been made based on management’s best estimate.

     The following unaudited Pro Forma Consolidated Balance Sheet is not necessarily indicative of what the actual financial position of Hersha would have been assuming such contribution had been completed as of March 31, 2005, nor is it indicative of future financial positions of Hersha.

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Balance Sheet
As of March 31, 2005
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

	(A)		(B)
			Interest
			in Mystic
	Historical		Partners		Pro Forma
Assets:
Investment in Hotel Properties, net	$	171,990	$	—	$	171,990
Due from Related Party		27,849		—		27,849
Investment in Unconsolidated Joint Ventures		8,725		52,048		60,773
Other Assets (includes hotel assets held for sale of $18,806)		47,703		5,887		53,590
Total Assets	$	256,267	$	57,935	$	314,202
Liabilities and Shareholders’ Equity:
Mortgages Payable	$	97,395	$	—	$	97,395
Other Liabilities (includes debt related to hotel assets held for sale of $12,952)		25,359		—		25,359
Total Liabilities		122,754		—		122,754
Minority Interest:		18,174		—		18,174
Shareholders’ Equity:		115,339		57,935		173,274
Total Liabilities and Shareholders’ Equity	$	256,267	$	57,935	$	314,202

See notes to pro forma consolidated balance sheet.

HERSHA HOSPITALITY TRUST

Notes and Management’s Assumptions to the
Pro Forma Consolidated Balance Sheet
As of March 31, 2005
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

(A)

Represents the unaudited Consolidated Balance Sheet of Hersha as of March 31, 2005 as filed on Form 10-Q.

(B)

Represents planned acquisition of Hersha’s interest in Mystic Partners as if it had occurred on March 31, 2005 for $52,048. Assumes funding for the planned acquisition will be provided by proceeds of an offering of Series A Preferred Shares of $60,000 less transaction costs of $2,065. Excess proceeds of $5,887 from the Preferred offerings will be used for general corporate purposes, including future acquisitions. Hersha’s investment in Mystic Partners will be recorded under the equity method of accounting.

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2005
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

     The accompanying unaudited Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2005 is presented as if Hersha’s planned interest in Mystic Partners had been acquired on January 1, 2005.

     This pro forma consolidated statement should be read in conjunction with Hersha’s consolidated historical financial statements, the historical consolidated financial statements of Waterford Hospitality Group LLC included in Exhibit 99.1 to this Form 8-K/A and the pro forma financial statements of Mystic Partners LLC included in Exhibit 99.1 to this Form 8-K/A and the notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the planned acquisition have been made based on management’s best estimate.

     The following unaudited Pro Forma Consolidated Statement of Operations is not necessarily indicative of what actual results of Hersha would have been assuming such planned acquisition had been completed as of January 1, 2005, nor is it indicative of the results of operations for future periods.

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2005
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

	(A)			(B)
				Interest
				in Mystic
	Historical			Partners			Combined			Adjustments			Pro Forma
Revenue:
Percentage Lease Revenues — HHMLP	$	—		$	—		$	—		$	—		$	—
Hotel Operating Revenues		12,800			—			12,800			—			12,800
Total Revenue		12,800			—			12,800			—			12,800
Operating Expenses:
Hotel Operating Expenses		9,278			—			9,278			—			9,278	��
Land Lease		183			—			183			—			183
Real Estate and Personal Property Taxes and Property Insurance		883			—			883			—			883
General and Administrative		990			—			990			—			990
Unrecognized Gain on Derivative		(4	)		—			(4	)		—			(4	)
Depreciation and Amortization		1,963			—			1,963			—			1,963
Total Operating Expenses		13,293			—			13,293			—			13,293
Operating Loss		(493	)		—			(493	)		—			(493	)
Interest Income		37			—			37			—			37
Interest Income — Secured Loans Related Party		1,000			—			1,000			—			1,000
Interest Income — Secured Loans		—			—			—			—			—
Other Revenue		27			—			27			—			27
Interest Expense		(1,875	)		—			(1,875	)		—			(1,875	)
Loss from continuing operations before income (loss) from joint venture investments, distributions to preferred unit holders and minority interests		(1,304	)		—			(1,304	)		—			(1,304	)
Income (Loss) from Unconsolidated Joint Venture Investments		49			(1,854	)		(1,805	)		(995	) (C)		(2,800	)
Loss from continuing operations before distributions to preferred unit holders and minority interests		(1,255	)		(1,854	)		(3,109	)		(995	)		(4,104	)
Distributions to Preferred Unitholders		—			—			—			—			—
Loss Allocated to Minority Interest in Continuing Operations		261			—			261			350	(D)		611
Loss from Continuing Operations	$	(994	)	$	(1,854	)	$	(2,848	)	$	(645	)	$	(3,493	)
Loss Per Share from Continuing Operations(E)
Basic	$	(0.05	)										$	(0.23	)
Diluted	$	(0.05	)										$	(0.23	)
Weighted Average Common Shares Outstanding
Basic		20,291,234												20,291,234
Diluted		23,133,671												23,133,671

See notes to pro forma consolidated statement of operations

HERSHA HOSPITALITY TRUST

Notes and Management’s Assumptions to the
Pro Forma Consolidated Statement of Operations
For the Three Months Ended March 31, 2005
(Unaudited, Dollar Amounts in Thousands Except per Share Data)

(A)	Represents Hersha’s Consolidated Statement of Operations for the three months ended March 31, 2005 as filed on Form 10-Q, excluding discontinued operations.
(B)	Represents Hersha’s interest in Mystic Partners based on Hersha’s planned acquisition and the historical consolidated financial statements of Waterford Hospitality Group LLC and the pro forma financial statements of Mystic Partners LLC as of and for the three months ending March 31, 2005, each including the notes thereto and as included in Exhibit 99.1 to this Form 8-K/A.

(C) Represents Hersha’s depreciation expense on the difference between our proportional share of the estimated fair value of the assets and the recorded carrying amounts in the pro forma financial statements of Mystic Partners. Depreciation is computed using the straight-line method and is based upon the estimated useful life of the asset. The pro forma adjustment is as follows:

	Hersha Proportional Share of				Depreciation
	Fair Value Increase		Life		Expense
Land	$	9,080		N/A		N/A
Building		42,727		40	$	267
Furniture & Fixtures		1,602		7		57
Pro Forma Adjustment					$	324

Also included in this adjustment is Hersha’s interest in the interest expense attributable to the $160,364 debt incurred by Mystic Partners in excess of the interest expense included in the historical statement of operations for Mystic Partners. The pro forma adjustment is as follows:

						Interest
	Principal		Interest Rate			Expense
10 Year Variable Rate Debt, 5.25% Floor		42,464		5.25	%	$	557
4 Year Variable Rate Debt, LIBOR + 2.90%		45,000		5.49	%		618
4 Year Variable Rate Debt, LIBOR + 2.75%		22,000		5.34	%		294
10 Year Fixed Rate Debt, 6.89%		8,100		6.89	%		140
20 Year Debt, 3.09%-6.01%		8,000		4.55	%		91
5 Year Debt, 6.98%		9,300		8.00	%		186
5 Year Debt, 8.00%		25,500		6.98	%		445
Total Interest Expense						$	2,330
Less: Waterford and Minority Interest in interest expense of Mystic Partners							(993	)
Hersha’s interest in Mystic Partners interest expense						$	1,337
Hersha’s interest in Mystic Partners deferred loan fee amortization						$	50
Less: Hersha’s interest in Mystic Partners historical interest expense							(716	)
Pro Forma Adjustment						$	671

(D) The cumulative minority interest effect of Hersha’s interest in Mystic Partners is calculated by using the weighted average minority interest percentage of 12.3% for the three months ended March 31, 2005, as follows:

Hersha interest in historical Mystic Partners Net Loss	$	1,854
Depreciation and interest Pro Forma Adjustment		995
Total	$	2,849
Minority Interest Percentage		12.3	%
Pro Forma Minority Interest Adjustment	$	350

(E) The loss from continuing operations available to common shareholders used in the basic earnings per share calculation is reduced by the dividends on the planned offering of Series A Preferred Shares. Assuming a 8.0% dividend rate, quarterly dividends will have the following impact on loss from continuing operations available to common shareholders used to calculate basic earnings per share:

				Pro Forma,
	Actual			as Adjusted
Income (Loss) from continuing operations	$	(994	)	$	(3,493	)
Less: planned preferred dividends accrued		—			(1,200	)
Loss from continuing operations available to common shareholders	$	(994	)	$	(4,693	)