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

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

For the quarterly period ended June 30, 2023

OR

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

For the transition period from ____ to ____

COMMISSION FILE NUMBER: 001-14765
HERSHA HOSPITALITY TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland 25-1811499
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
44 Hersha DriveHarrisburgPA 17102
(Address of Principal Executive Offices) (Zip Code)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes No

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

As of August 2, 2023, the number of Class A common shares of beneficial interest outstanding was 40,104,916 and there were no Class B common shares of beneficial interest outstanding.



 Hersha Hospitality Trust
Table of Contents

3

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)





June 30, 2023December 31, 2022
Assets:  
Investment in Hotel Properties, Net of Accumulated Depreciation$1,182,764 $1,189,239 
Investment in Unconsolidated Joint Ventures4,562 4,989 
Cash and Cash Equivalents142,391 224,955 
Escrow Deposits4,797 5,065 
Hotel Accounts Receivable6,201 8,922 
Due from Related Parties82 245 
Intangible Assets, Net of Accumulated Amortization of $1,270 and $1,211
624 684 
Right of Use Assets16,774 16,226 
Other Assets35,584 38,552 
Total Assets$1,393,779 $1,488,877 
  
Liabilities and Equity:  
Term Loans, Net of Unamortized Deferred Financing Costs (Note 5)$346,336 $370,636 
Unsecured Notes Payable, Net of Unamortized Deferred Financing Costs (Note 5)50,921 50,895 
Mortgages Payable, Net of Unamortized Premium and Unamortized Deferred Financing Costs184,941 208,354 
Lease Liabilities19,518 19,003 
Accounts Payable, Accrued Expenses and Other Liabilities35,855 44,148 
Dividends and Distributions Payable8,451 31,694 
Due to Related Parties2,534 2,610 
Total Liabilities$648,556 $727,340 
Redeemable Noncontrolling Interests - Consolidated Joint Venture (Note 1)$4,660 $5,076 
  
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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022; 40,103,391 and 39,697,451 Shares Issued and Outstanding at June 30, 2023 and December 31, 2022, respectively
401 398 
Common Shares:  Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at June 30, 2023 and December 31, 2022
  
Accumulated Other Comprehensive Income 13,330 16,213 
Additional Paid-in Capital1,161,282 1,157,057 
Distributions in Excess of Net Income(508,449)(490,815)
Total Shareholders' Equity666,711 683,000 
  
Noncontrolling Interests (Note 1)73,852 73,461 
  
Total Equity740,563 756,461 
  
Total Liabilities and Equity$1,393,779 $1,488,877 
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
4


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
Three Months Ended June 30,Six months ended June 30,
2023202220232022
Revenue:  
Hotel Operating Revenues:
Room$74,646 $98,242 $132,162 $163,374 
Food & Beverage15,382 15,710 26,309 24,766 
Other Operating Revenues7,702 9,247 14,350 16,886 
Other Revenues84 91 143 132 
Total Revenues97,814 123,290 172,964 205,158 
Operating Expenses:  
Hotel Operating Expenses:
Room15,538 19,447 30,007 34,037 
Food & Beverage12,258 11,607 23,152 20,011 
Other Operating Expenses30,123 36,039 57,474 62,395 
Insurance Recoveries in Excess of Property Losses (987) (962)
Hotel Ground Rent611 1,531 929 2,621 
Real Estate and Personal Property Taxes and Property Insurance6,259 8,335 12,440 16,818 
General and Administrative (including Share Based Payments of $2,697 and $3,299 and $4,749 and $5,840 for the three and six months ended June 30, 2023 and 2022, respectively)
5,770 6,491 10,702 11,809 
Depreciation and Amortization14,006 17,003 27,675 36,279 
Total Operating Expenses84,565 99,466 162,379 183,008 
  
Operating Income13,249 23,824 10,585 22,150 
  
Interest Income1,695 1 3,434 2 
Interest Expense(8,865)(14,397)(17,954)(28,267)
Other Income (Expense)73 (108)986 (207)
Loss on Debt Extinguishment(52) (66) 
Income (Loss) Before Results from Unconsolidated Joint Venture Investments and Income Taxes6,100 9,320 (3,015)(6,322)
  
(Loss) Income from Unconsolidated Joint Ventures(74)357 (426)(579)
  
Income (Loss) Before Income Taxes6,026 9,677 (3,441)(6,901)
  
Income Tax Expense(65)(93)(99)(114)
  
Net Income (Loss)5,961 9,584 (3,540)(7,015)
  
(Income) Loss Allocated to Noncontrolling Interests - Common Units(3)(423)1,993 2,258 
Loss (Income) Allocated to Noncontrolling Interests - Consolidated Joint Venture1,806 (691)416 (2,964)
Preferred Distributions(6,043)(6,043)(12,087)(12,087)
  
Net Income (Loss) Applicable to Common Shareholders$1,721 $2,427 $(13,218)$(19,808)
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

5


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(Loss) Earnings Per Share:    
BASIC    
Income (Loss) from Continuing Operations Applicable to Common Shareholders$0.04 $0.06 $(0.34)$(0.50)
    
DILUTED    
Income (Loss) from Continuing Operations Applicable to Common Shareholders$0.04 $0.06 $(0.34)$(0.50)
    
Weighted Average Common Shares Outstanding:    
Basic39,849,859 39,277,269 39,738,662 39,254,536 
Diluted*41,287,468 40,453,785 39,738,662 39,254,536 
*Income (Loss) allocated to noncontrolling interest in Hersha Hospitality Limited Partnership (the “Operating Partnership” or “HHLP”) has been excluded from the numerator and the Class A common shares issuable upon any redemption of the Operating Partnership’s common units of limited partnership interest (“Common Units”) and the Operating Partnership’s vested LTIP units (“Vested LTIP Units”) have been omitted from the denominator for the purpose of computing diluted earnings per share because the effect of including these shares and units in the numerator and denominator would have no impact. In addition, potentially dilutive common shares, if any, have been excluded from the denominator if they are anti-dilutive to income (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,
 2023202220232022
Common Units and Vested LTIP Units5,773,844 5,262,313 5,806,837 5,264,772 
Unvested Stock Awards and LTIP Units Outstanding  648,667 791,544 
Contingently Issuable Share Awards  927,301 318,893 
Total Potentially Dilutive Securities Excluded from the Denominator5,773,844 5,262,313 7,382,805 6,375,209 
The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.
6


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net Income (Loss)$5,961 $9,584 $(3,540)$(7,015)
Other Comprehensive Income    
Change in Fair Value of Derivative Instruments623 5,353 (3,356)20,842 
Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income (Loss)45 (372)52 (739)
Total Other Comprehensive Income (Loss) $668 $4,981 $(3,304)$20,103 
    
Comprehensive Income (Loss)6,629 14,565 (6,844)13,088 
Less:  Comprehensive (Income) Loss Attributable to Noncontrolling Interests - Common Units(92)(1,011)2,414 (121)
Less:  Comprehensive Loss (Income) Attributable to Noncontrolling Interests - Consolidated Joint Venture1,806 (691)416 (2,964)
Less:  Preferred Distributions(6,043)(6,043)(12,087)(12,087)
Comprehensive Income (Loss) Attributable to Common Shareholders$2,300 $6,820 $(16,101)$(2,084)
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
7


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES)




Redeemable Noncontrolling InterestsShareholders' EquityNoncontrolling Interests
Consolidated Joint Venture ($)Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)
Balance at March 31, 20236,466 39,874,899 399  14,703,214 147 1,157,015 12,751 (506,358)663,954 8,044,927 74,023 737,977 
Issuance Costs/Other— — — — — — (104)— (1)(105)— — (105)
Unit Conversion— 200,000 2 — — — 1,812 — — 1,814 (200,000)(1,814) 
Dividends and Distributions declared:
Preferred Shares— — — — — — — — (6,043)(6,043)— — (6,043)
Common Shares ($0.05 per share)
— — — — — — — — (2,005)(2,005)— — (2,005)
Common Units ($0.05 per share)
— — — — — — — — — — — (88)(88)
LTIP Units ($0.05 per share)
— — — — — — — — — — — (314)(314)
Dividend Reinvestment Plan— 1,407 — — — — 9 — — 9 — — 9 
Share Based Compensation:
Grants— 27,085 — — — — — — — — 192,545 — — 
Amortization— — — — — — 744 — — 744 — 1,953 2,697 
Change in Fair Value of Derivative Instruments— — — — — — — 579 — 579 — 89 668 
Adjustment to Record Noncontrolling Interest at Redemption Value(1,806)— — — — — 1,806 — — 1,806 — — 1,806 
Net Income— — — — — — — — 5,958 5,958 — 3 5,961 
Balance at June 30, 20234,660 40,103,391 401  14,703,214 147 1,161,282 13,330 (508,449)666,711 8,037,472 73,852 740,563 

8


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES)



Redeemable Noncontrolling InterestsShareholders' EquityNoncontrolling Interests
Consolidated Joint Venture ($)Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive (Loss) Income ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)
Balance at March 31, 20224,583 39,354,893 394  14,703,214 147 1,153,486 7,077 (612,276)548,828 6,926,253 52,176 601,004 
Issuance Costs/Other— — — — — — (10)— — (10)— — (10)
Unit Conversion— 50,000 1 — — — 425 — — 426 (50,000)(426) 
Dividends and Distributions declared:
Preferred Shares— — — — — — — — (6,044)(6,044)— — (6,044)
Share Based Compensation:
Grants— 109,768 1 — — — — — — 1 194,427 — 1 
Amortization— — — — — — 1,157 — — 1,157 — 2,142 3,299 
Change in Fair Value of Derivative Instruments— — — — — — — 4,349 — 4,349 — 632 4,981 
Adjustment to Record Noncontrolling Interest at Redemption Value691 — — — — — (691)— — (691)— — (691)
Net Income— — — — — — — — 9,161 9,161 — 423 9,584 
Balance at June 30, 20225,274 39,514,661 396  14,703,214 147 1,154,367 11,426 (609,159)557,177 7,070,680 54,947 612,124 














9

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES)













Redeemable Noncontrolling InterestsShareholders' EquityNoncontrolling Interests
Consolidated Joint Venture ($)Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Loss ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)
Balance at December 31, 20225,076 39,697,451 398  14,703,214 147 1,157,057 16,213 (490,815)683,000 6,940,053 73,461 756,461 
Issuance Costs / Other— — — — — — (106)— (1)(107)— — (107)
Unit Conversion— 200,000 2 — — — 1,812 — — 1,814 (200,000)(1,814) 
Dividends and Distributions declared:
Common Shares ($0.10 per share)
— — — — — — — — (3,999)(3,999)— — (3,999)
     Preferred Shares— — — — — — — — (12,087)(12,087)— — (12,087)
Common Units ($0.10 per share)
— — — — — — — — — — — (176)(176)
LTIP Units ($0.10 per share)
— — — — — — — — — — — (629)(629)
Dividend Reinvestment Plan— 10,382 — — — — 81 — — 81 — — 81 
Share Based Compensation:
     Grants— 195,5581 — — — (1)— — — 1,297,419 — — 
     Amortization— — — — — — 2,023— — 2,0235,424 7,447 
Change in Fair Value of Derivative Instruments— — — — — — — (2,883)— (2,883)— (421)(3,304)
Adjustment to Record Noncontrolling Interest at Redemption Value(416)— — — — — 416 — — 416— — 416 
Net Loss— — — — — — — — (1,547)(1,547)— (1,993)(3,540)
Balance at June 30, 20234,660 40,103,391401  14,703,214 147 1,161,282 13,330 (508,449)666,711 8,037,472 73,852 740,563 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.






10

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES)


















Redeemable Noncontrolling InterestsShareholders' EquityNoncontrolling Interests
Consolidated Joint Venture ($)Common SharesClass A Common Shares ($)Class B Common Shares ($)Preferred SharesPreferred Shares ($)Additional Paid-In Capital ($)Accumulated Other Comprehensive Loss ($)Distributions in Excess of Net Income ($)Total Shareholders' Equity ($)Common Units and LTIP UnitsCommon Units and LTIP Units ($)Total Equity ($)
Balance at December 31, 20212,310 39,325,025 394  14,703,214 147 1,155,034 (6,211)(592,314)557,050 6,926,253 51,246 608,296 
Unit Conversion— 50,000 1 — — — 425 — — 426 (50,000)(426) 
Issuance Costs/Other— — — — — — (48)— (1)(49)— — (49)
Dividends and Distributions declared:
Preferred Shares— — — — — — — — (12,087)(12,087)— — (12,087)
Share Based Compensation:
Grants— 139,636 1 — — — (1)— — — 194,427 — — 
Amortization— — — — — — 1,921 — — 1,921 — 3,919 5,840 
Change in Fair Value of Derivative Instruments— — — — — — — 17,637 — 17,637 — 2,466 20,103 
Adjustment to Record Noncontrolling Interest at Redemption Value2,964 — — — — — (2,964)— — (2,964)— — (2,964)
Net Loss— — — — — — — — (4,757)(4,757)(2,258)(7,015)
Balance at June 30, 20225,274 39,514,661 396  14,703,214 147 1,154,367 11,426 (609,159)557,177 7,070,680 54,947 612,124 


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



11


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS)
Six Months Ended June 30,
20232022
Operating Activities:  
Net Loss$(3,540)$(7,015)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:  
Insurance Recoveries in Excess of Property Loss (962)
Junior Note PIK Interest Added to Principal 1,855 
Depreciation27,615 36,117 
Amortization1,337 3,017 
Loss on Debt Extinguishment66  
Equity in Loss of Unconsolidated Joint Ventures426 579 
Loss (Gain) Recognized on Change in Fair Value of Derivative Instrument52 (739)
Share Based Compensation Expense4,749 5,840 
Change in Assets and Liabilities:  
(Increase) Decrease in:  
Hotel Accounts Receivable2,721 249 
Other Assets(885)(4,057)
Due from Related Parties163 1,961 
Increase (Decrease) in:  
Due to Related Parties(76)(1,241)
Accounts Payable, Accrued Expenses and Other Liabilities(6,011)4,882 
Net Cash Provided by Operating Activities$26,617 $40,486 
  
Investing Activities:  
Capital Expenditures(20,681)(12,041)
Contributions to Unconsolidated Joint Ventures (485)
Proceeds from Insurance Claims 1,294 
Net Cash Used in Investing Activities$(20,681)$(11,232)
Financing Activities:  
Payments on Term Loans(25,000) 
Principal Repayment of Mortgages(23,618)(1,221)
Deferred Financing Costs(99)(209)
Dividends Paid on Common Shares(23,746) 
Dividends Paid on Preferred Shares(12,087)(12,087)
Distributions Paid on Common Units and LTIP Units(4,218) 
Net Cash Used in Financing Activities$(88,768)$(13,517)
  
Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash$(82,832)$15,737 
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period230,020 84,945 
  
Cash, Cash Equivalents, and Restricted Cash - End of Period$147,188 $100,682 
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

12


HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (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 six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 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, 2022, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, 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 June 30, 2023, we owned an approximate 83.3% partnership interest in HHLP, including a 1.0% general partnership interest.

Principles of Consolidation and Presentation

The accompanying consolidated financial statements have been prepared in accordance with US GAAP and include all of our accounts as well as accounts of the Partnership, subsidiary partnerships and our wholly owned Taxable REIT Subsidiary Lessee (“TRS Lessee”), 44 New England Management Company. All significant inter-company amounts have been eliminated.
Consolidated properties are either wholly owned or owned less than 100% by the Partnership and are controlled by the Company as general partner of the Partnership. Properties owned in joint ventures are also consolidated if the determination is made that we are the primary beneficiary in a variable interest entity (“VIE”) or we maintain control of the asset through our voting interest in the entity.
 
Variable Interest Entities

We evaluate each of our investments and contractual relationships to determine whether they meet the guidelines for consolidation. To determine if we are the primary beneficiary of a VIE, we evaluate whether we have a controlling financial interest in that VIE. An enterprise is deemed to have a controlling financial interest if it has i) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be significant to the VIE. Control can also be demonstrated by the ability of a member to manage day-to-day operations, refinance debt and sell the assets of the partnerships without the consent of the other member and the inability of the members to replace the managing member.  Based on our examination, there have been no changes to the operating structure of our legal entities during the three and six months ended June 30, 2023 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, 2022.


13

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (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 $73,852 as of June 30, 2023 and $73,461 as of December 31, 2022. As of June 30, 2023, there were 8,037,472 Common Units and LTIP Units outstanding with a fair market value of $48,948, based on the price per share of our common shares on the NYSE on such date. In accordance with the partnership agreement of HHLP, holders of these Common Units may redeem them for cash unless we, in our sole and absolute discretion, elect to issue common shares on a one-for-one basis in lieu of paying cash.
 
Net income or loss attributed to Common Units and LTIP Units is included in net income or loss but excluded from net income or loss applicable to common shareholders in the consolidated statements of operations.

We are party to a joint venture that owns the Ritz-Carlton Coconut Grove, FL, in which our joint venture partner has a noncontrolling equity interest of 15% in the property. Hersha Holding RC Owner, LLC, the owner entity of the Ritz-Carlton Coconut Grove joint venture ("Ritz Coconut Grove"), will distribute income based on cash available for distribution which will be distributed as follows: (1) to us until we receive a cumulative return on our contributed senior common equity interest, currently at 8%, and (2) then to the owner of the noncontrolling interest until they receive a cumulative return on their contributed junior common equity interest, currently at 8%, and (3) then 75% to us and 25% to the owner of the noncontrolling interest until we both receive a cumulative return on our contributed senior common equity interest, currently at 12%, and (4) finally, any remaining operating profit shall be distributed 70% to us and 30% to the owner of the noncontrolling interest. Additionally, the noncontrolling interest in the Ritz Coconut Grove has the right to put their ownership interest to us for cash consideration at any time during the life of the venture. The balance sheets and financial results of the Ritz Coconut Grove are included in our consolidated financial statements and the book value of the noncontrolling interest in the Ritz Coconut Grove is classified as temporary equity within our Consolidated Balance Sheets.

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

The noncontrolling interest in the Ritz Coconut Grove is measured at the greater of historical cost or the put option redemption value, and is recorded as part of the (Income) Loss Allocated to Noncontrolling Interests - Consolidated Joint Venture line item within the Consolidated Statements of Operations. The value of the noncontrolling interest at the put option redemption value was $4,660 as of June 30, 2023. As such, we reclassified $(1,806) from Additional Paid in Capital to Redeemable Noncontrolling Interests - Consolidated Joint Venture during the six months ended June 30, 2023 to record the noncontrolling interest at the estimated value of the put option.













14

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (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 June 30, 2023 and December 31, 2022 are summarized as follows:
    Dividend Per Share 
Shares Outstanding  Six Months Ended June 30,
SeriesJune 30, 2023December 31, 2022Aggregate Liquidation PreferenceDistribution Rate20232022
Series C3,000,000 3,000,000 $75,000 6.875 %$0.8594 $0.8594 
Series D7,701,700 7,701,700 $192,500 6.500 %$0.8125 $0.8125 
Series E4,001,514 4,001,514 $100,000 6.500 %$0.8125 $0.8125 
Total14,703,214 14,703,214     

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, and two to seven years for furniture, fixtures and equipment. We are required to make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in hotel properties. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in hotel properties we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

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

We consider a hotel to be held for sale when management and our independent trustees commit to a plan to sell the property, the property is available for sale, management engages in an active program to locate a buyer for the property and it is probable the sale will be completed within a year of the initiation of the plan to sell. We evaluate each disposition to determine whether we need to classify the disposition as discontinued operations. We generally include the operations of a hotel that was sold or a hotel that has been classified as held for sale in continuing operations unless the sale represents a strategic shift that will have a major impact on our future operations and financial results. We anticipate that most of our hotel dispositions will not be classified as discontinued operations as most will not fit this definition.














15

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)


NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

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

a significant decrease in the market price of a long-lived asset;
a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition; 
a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator;
an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset;
a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and
a current expectation that, it is more likely than not that, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
We review our portfolio on an ongoing basis to evaluate the existence of any of the aforementioned events or changes in circumstances that would require us to test for recoverability. In general, our review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value expected, as well as the effects of hotel demand, competition and other factors. Other assumptions used in the review of recoverability include the holding period and expected terminal capitalization rate. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make subjective assessments as to whether there are impairments in the values of our investments in hotel properties.

Revision of Prior Period Financial Statements

During the third quarter of 2022, the Company identified immaterial errors in its previously issued financial statements resulting from the incorrect amortization of accumulated other comprehensive income related to interest rate hedges. This occurred over the periods from 2019 through 2021, thereby overstating interest expense in those periods as well as impacting certain captions in the equity section of the consolidated balance sheet, including accumulated other comprehensive income, distributions in excess of net income, and noncontrolling interests.






















16

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS)



In accordance with Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company assessed the materiality of these misstatements both quantitatively and qualitatively and determined that these errors and the related impact did not, either individually or in the aggregate, materially misstate previously issued consolidated financial statements. To reflect the correction of these immaterial errors, the Company is revising the previously issued consolidated financial statements for the three and six months ended June 30, 2022 in this Form 10-Q. As a result, the Company has corrected the immaterial misstatements as disclosed in the following tables for all impacted financial statement line items in prior periods.

For the Three Months Ended For the Six Months Ended
June 30, 2022June 30, 2022
As Previously ReportedAdjustmentAs RevisedAs Previously ReportedAdjustmentAs Revised
Consolidated Statement of Operations:
Interest Expense$(14,769)$372 $(14,397)$(29,006)$739 $(28,267)
Income (Loss) Before Results from Unconsolidated Joint Venture Investments and Income Taxes8,948 372 9,320 (7,061)739