8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 16, 2005

HERSHA HOSPITALITY TRUST

(Exact name of registrant as specified in its charter)

Maryland	001-14765	251811499
(State or other jurisdiction of	(Commission File Number)	(IRS Employer
incorporation)		Identification No.)

510 Walnut Street, 9^th Floor
Philadelphia, Pennsylvania 19106
(Address and zip code of
principal executive offices)

Registrant’s telephone number, including area code: (215) 238-1046

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

This Amendment No. 1 to the Current Report on Form 8-K filed on June 22, 2005 by Hersha Hospitality Trust, a Maryland real estate investment trust (“Hersha”), is being filed to amend and restate the prior filing and to include certain historical financial statements and pro forma financial information pursuant to Item 9.01 of Form 8-K related to the acquisition of the Courtyard by Marriott in Brookline, Massachusetts.

Item 2.01. Completion of Acquisition or Disposition of Assets

On May 4, 2005, Hersha Hospitality Limited Partnership (“HHLP”), the operating partnership subsidiary of Hersha, agreed to acquire the Courtyard by Marriott in Brookline, Massachusetts, which acquisition included the hotel, improvements, certain personal property and a pre-paid ground lease for the underlying land with a remaining term of approximately 90 years (the “Brookline Property”). Hersha previously reported its entry into this purchase agreement in its Quarterly Report on Form 10-Q, filed on May 10, 2005.

On June 16, 2005, HHLP completed the acquisition of the Brookline Property from Webster Street Hotel, LLC. The purchase price for the Brookline Property was approximately $54.5 million. A copy of the purchase agreement was filed as Exhibit 10.5 to the Quarterly Report on Form 10-Q, filed on May 10, 2005, and is incorporated herein by reference. In connection with this acquisition, a subsidiary of HHLP obtained (and HHLP guaranteed) a $39 million mortgage loan secured by the Brookline Property from Wachovia Bank, N.A.

Item 9.01 Financial Statements and Exhibits

(a)	Financial Statements of Business Acquired
	See Exhibit 99.1
(b)	Pro Forma Financial Information
	See Exhibit 99.2
(c)	Exhibits

Exhibit 23.1	Consent of Dworken, Hillman, LaMorte & Sterczala, P.C.
Exhibit 99.1	Financial Statements of Business Acquired
Exhibit 99.2	Pro Forma Financial Statements

SIGNATURE

     Pursuant to the requirements 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
Date: July 19, 2005	By:	/s/Ashish R. Parikh
		Ashish R. Parikh
		Chief Financial Officer

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in (a) the Registration Statement on Form S-3 (No. 333-82666) and related prospectus pertaining to the Dividend Reinvestment Plan of Hersha Hospitality Trust and Subsidiaries (“HHT”), (b) the Registration Statement on Form S-3 (No. 333-113058) and related prospectus pertaining to the resale of common shares by various shareholders, (c) the Registration Statement on Form S-3 (No. 333-113227) and related prospectus pertaining to the resale of common shares by CNL Hospitality Properties, L.P. and its transferees, (d) the Registration Statement on Form S-3 (No. 333-113061) registering for offer and sale $200 million of common shares, preferred shares and debt securities of HHT and (e) the Registration Statement on Form S-8 (No. 333-122657) and related prospectus pertaining to the issuance of common shares pursuant to the Hersha Hospitality Trust 2004 Equity Incentive Plan, of our report dated February 10, 2005, with respect to our audit of the balance sheets of Webster Street Hotel, LLC as of December 31, 2004 and 2003 and the related statements of operations, members’ equity, and cash flows for the years then ended, and our report dated June 27, 2005, with respect to our review of the balance sheets of Webster Street Hotel, LLC as of March 31, 2005 and 2004 and the related statements of operations, members’ equity, and cash flows for the three months then ended which appears in this Form 8-K/A for Hersha Hospitality Trust.

/s/ Dworken, Hillman, LaMorte & Sterczala, P.C.

Shelton, Connecticut
July 18, 2005

EX-99.1

Exhibit 99.1

Financial Statements

WEBSTER STREET HOTEL, LLC

Years Ended December 31, 2004 and 2003

WEBSTER STREET HOTEL, LLC

Years Ended December 31, 2004 and 2003

CONTENTS

	Page
Independent auditors’ report		1
Financial statements:
Balance sheets		2
Statements of operations		3
Statements of members’ equity		4
Statements of cash flows		5
Notes to financial statements		6-9

Independent Auditors’ Report

To the Members
Webster Street Hotel, LLC
Shelton, Connecticut

We have audited the accompanying balance sheets of Webster Street Hotel, LLC as of December 31, 2004 and 2003, and the related statements of operations, members’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Webster Street Hotel, LLC as of December 31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Dworken, Hillman, LaMorte & Sterczala, P.C.

February 10, 2005

WEBSTER STREET HOTEL, LLC

BALANCE SHEETS

	December 31,
	2004		2003
Assets (Notes 4 and 5)
Current assets:
Cash	$	365,008	$	247,894
Restricted cash		558,806		124,098
Accounts receivable		97,640		82,336
Prepaid expenses and other		53,400		51,271
Total current assets		1,074,854		505,599
Property and equipment (Note 2)		27,888,747		29,001,877
Prepaid ground lease, net of accumulated amortization (2004, $20,822; 2003, $10,411) (Note 3)		968,251		978,662
Deferred costs, net of accumulated amortization (2004, $42,144; 2003, $449,561)		354,232		220,040
Other				6,553
Total Assets	$	30,286,084	$	30,712,731
Liabilities and Members’ Equity
Current liabilities:
Note payable, bank (Note 5)			$	17,641,029
Accounts payable and accrued expenses	$	612,446		473,854
Total current liabilities		612,446		18,114,883
Long-term debt (Note 4)		19,000,000
Members’ Equity		10,673,638		12,597,848
Total Liabilities and Members’ Equity	$	30,286,084	$	30,712,731

See notes to financial statements. 2

WEBSTER STREET HOTEL, LLC

STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2004		2003
Departmental revenues:
Rooms	$	7,077,135	$	3,821,348
Food and beverage		236,265		134,870
Parking		274,961		158,379
Other departmental		228,725		116,056
		7,817,086		4,230,653
Departmental expenses:
Rooms		1,272,456		790,329
Food and beverage		253,623		167,930
Parking		63,124		47,512
Other departmental		123,549		62,043
		1,712,752		1,067,814
Total departmental profit		6,104,334		3,162,839
Overhead expenses:
Administrative and general		435,007		290,273
Credit card commissions		183,312		96,820
Management fee (Note 7)		312,895		169,372
Advertising and sales (Notes 6 and 7)		464,136		312,124
Royalties (Note 6)		391,773		211,630
Repairs and maintenance		239,706		145,307
Utilities		330,113		184,034
General insurance (Note 7)		87,043		65,471
Real estate and personal property taxes		337,128		135,214
		2,781,113		1,610,245
Income from operations		3,323,221		1,552,594
Other charges:
Interest expense		1,206,145		823,696
Depreciation and amortization		1,336,074		1,314,441
		2,542,219		2,138,137
Net income (loss)	$	781,002	($	585,543	)

See notes to financial statements. 3

WEBSTER STREET HOTEL, LLC

STATEMENTS OF MEMBERS’ EQUITY

Balance, January 1, 2003	$	15,244,143
Net loss	(	585,543	)
Distributions	(	2,060,752	)
Balance, December 31, 2003		12,597,848
Net income		781,002
Distributions	(	2,705,212	)
Balance, December 31, 2004	$	10,673,638

See notes to financial statements. 4

WEBSTER STREET HOTEL, LLC

STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2004			2003
Cash flows from operating activities:
Net income (loss)	$	781,002		($	585,543	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,336,074			1,314,441
Ground rent amortization		10,411			10,411
(Increase) decrease in assets:
Accounts receivable	(	15,303		(	81,737	)
Prepaid expenses and other	(	2,130	)	(	51,241	)
Other assets	(	6,553	)	(	6,553	)
Increase in liabilities:
Accounts payable and accrued expenses		138,592			360,049
Net cash flows provided by operating activities		2,255,199			959,827
Cash flows from investing activities:
Restricted cash	(	434.708	)	(	124,098	)
Deferred costs	(	321,176	)	(	669,601	)
Prepaid ground lease				(	989,103	)
Capital expenditures	(	35,960	)	(	8,675,083	)
Net cash used in investing activities	(	791,844	)	(	10,457,885	)
Cash flows from financing activities:
Distributions to members	(	2,705,212	)	(	2,060,752	)
Net proceeds (repayments) of note payable, bank	(	17,641,029	)		11,696,070
Proceeds from long-term debt		19,000,000
Net cash provided by (used in) financing activities	(	1,346,241	)		9,635,318
Net increase in cash		117,114			137,260
Cash, beginning		247,894			110,634
Cash, ending	$	365,008		$	247,894

See notes to financial statements. 5

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2004 and 2003

1.	Description of the business and summary of significant accounting policies:
	Description of business:

Webster Street Hotel, LLC (the Company) was formed as of February 9, 2000 as a limited liability company (LLC) for the purpose of owning and operating a 188 room “Courtyard by Marriott” located in Boston, Massachusetts. The hotel commenced operations in April 2003.

Estimates and assumptions:

Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities and the reported revenues and expenses. Actual results could vary from the estimates used.

Cash:

The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk.

Restricted cash:

Under the terms of its debt agreement, the Company is required to deposit 3% of annual gross revenues, as defined, into an account to be used for equipment replacement, repairs and renovations.

Accounts receivable:

The Company continuously monitors the creditworthiness of customers and establishes an allowance for amounts that may become uncollectible in the future based on current economic trends, historical payment and bad debt write-off experience, and any specific customer related collection issues.

Property and equipment:

Property and equipment are stated at cost. Depreciation is being provided using the straight-line method over the estimated useful asset lives.

6

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2004 and 2003

1.	Summary of significant accounting policies (continued):
	Deferred expenses:

Cost related to obtaining financing and franchise application fees are capitalized and amortized over the term of the related agreement using the straight-line method.

Income taxes:

The Company was formed as an LLC and is taxed as a partnership. Federal and state income tax regulations provide that a partnership is not subject to income taxes at the partnership level. Rather, each partner is taxed on their share of the Partnership’s taxable income, whether or not distributed, and is entitled to deduct on their own income tax return their share of any net losses of the Partnership to the extent of tax basis of their partnership interest, subject to certain passive activity loss limitations.

2. Property and equipment:

	2004		2003
Building	$	27,333,577	$	27,333,577
Furniture, fixtures and equipment		2,569,140		2,533,180
		29,902,717		29,866,757
Less accumulated depreciation		2,013,970		864,880
	$	27,888,747	$	29,001,877

The Company capitalized interest costs on borrowings incurred during the period of construction. Capitalized interest was added to the cost of the underlying assets and is being amortized over the useful lives of the assets. The Company capitalized $210,000 of interest in connection with the construction of the hotel in 2003.

The Company entered into a project administration agreement with an affiliate. The agreement was completed in 2003 for a total cost of $700,000. The project administration fee was capitalized as part of the building.

3. Prepaid ground lease:

In October 2000, the Company entered into a noncancellable ground lease with the City of Brookline, Massachusetts for a period not to exceed 95 years. Under the terms of the ground lease, the Company was required to pay an initial lease payment of $75,000, perform improvements to the property, as defined, and pay the City 50% of all parking fees collected from the 60 overnight resident parking spaces located on the property.

7

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2004 and 2003

3. Prepaid ground lease (continued):

The initial lease payment and property improvements are being amortized on a straight-line basis over the term of the ground lease. Rent expense was $10,411 and $12,871 in 2004 and 2003, respectively.

4. Long-term debt:

Note payable, Prudential Insurance (Prudential), payable in monthly installments of interest only at 5.98% through July 2006. Beginning in August 2006, monthly principal and interest payments of $126,854 are required through July 2009, at which time the remaining outstanding balance is due.

The aggregate maturities of long-term debt as of December 31, 2004 are as follows:

Year Ending December 31:
2005	$	—
2006		162,464
2007		406,791
2008		431,795
2009		17,998,950
	$	19,000,000

In January 2005, the Company borrowed an additional $4,000,000 from Prudential. The additional borrowing is payable in monthly installments of interest only at 5.69% through July 2006. Beginning in August 2006, monthly principal and interest payments of $26,018 are required through July 2009, at which time the remaining outstanding balance is due.

The notes are secured by substantially all assets of the Company.

5. Note payable, bank:

Note payable, bank, is subject to the terms of a building loan agreement and provides for a borrowing limit of $19,200,000. The note requires monthly payments of interest only. The note matures in April 2004, but provides for up to four six-month extensions, subject to certain terms and conditions. The note is secured by substantially all assets of the Company and is guaranteed by, among others, New Castle Hotels, LLC, an affiliate of the Company. The note was paid in full in June 2004.

8

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2004 and 2003

6. Franchise agreement:

In June 2001, the Company entered into a franchise agreement to operate the hotel as a “Courtyard by Marriott” franchise. The initial term of the agreement is for 20 years and requires monthly payments of 7.50% of gross room revenues, as defined, which includes a 2% advertising fee. Total franchise expense was $533,720, including advertising expense of $141,949, in 2004 and $288,059, including advertising expense of $76,429, in 2003.

7. Related party transactions:

Management agreement:

In April 2001, the Company entered into a management agreement with Brookline Hotel Management, LLC, an affiliate of the Company. The agreement calls for a monthly fee of 4% of gross revenues. The initial term of the agreement is ten years, but provides for two five-year extensions at the Company’s option.

Insurance:

The Company obtains general and workers compensation insurance through an affiliate. Total insurance premiums paid to the affiliate were $107,226 and $115,679 in 2004 and 2003, respectively.

Marketing fees:

An affiliate provides marketing services to the Company. Total marketing fees paid to the affiliate were $2,090 and $29,645 in 2004 and 2003, respectively.

8. Supplemental disclosure of cash flow information:

Cash paid for interest was $1,155,647 and $1,033,116 in 2004 and 2003, respectively.

9

Financial Statements

WEBSTER STREET HOTEL, LLC

Three Months Ended March 31, 2005 and 2004

WEBSTER STREET HOTEL, LLC

Three Months Ended March 31, 2005 and 2004

CONTENTS

	Page
Accountants’ review report		1
Financial statements:
Balance sheets		2
Statements of operations		3
Statements of members’ equity		4
Statements of cash flows		5
Notes to financial statements		6-9

To the Members
Webster Street Hotel, LLC
Shelton, Connecticut

We have reviewed the balance sheets of Webster Street Hotel, LLC (the Company) as of March 31, 2005 and 2004, and the related statements of operations, members’ equity, and cash flows for the three months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Information in these financial statements is the representation of the management of the Company.

A review consists of principally of inquiries of Company personnel and analytical procedures applied to financial information. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is to express an opinion on the financial statements taken as a whole. Accordingly, we do not express an opinion.

Based on our reviews, we are not aware of material modifications that should be made to the financial statements for them to conform with accounting principles generally accepted in the United States of America.

Dworken, Hillman, LaMorte & Sterczala, P.C.

June 27, 2005

1

WEBSTER STREET HOTEL, LLC

BALANCE SHEETS
(See Accountants’ Review Report)

	March 31,
	2005		2004
Assets (Notes 4 and 5)
Current assets:
Cash	$	390,406	$	175,300
Restricted cash		606,773		157,096
Accounts receivable		118,196		170,683
Prepaid expenses and other		132,241		76,744
Total current assets		1,247,616		579,823
Property and equipment (Note 2)		27,609,429		28,723,192
Prepaid ground lease, net of accumulated amortization (2005, $23,425; 2004, $13,014) (Note 3)		965,648		976,059
Deferred costs, net of accumulated amortization (2005, $59,456; 2004, $599,414)		381,599		70,187
Other				3,200
Total Assets	$	30,204,292	$	30,352,461
Liabilities and Members’ Equity
Current liabilities:
Note payable, bank (Note 4)			$	17,641,029
Accounts payable and accrued expenses	$	797,227		640,045
Total current liabilities		797,227		18,281,074
Long-term debt (Note 5)		23,000,000
Members’ Equity		6,407,065		12,071,387
Total Liabilities and Members’ Equity	$	30,204,292	$	30,352,461

See notes to financial statements. 2

WEBSTER STREET HOTEL, LLC

STATEMENTS OF OPERATIONS
(See Accountants’ Review Report)

	Three Months
	Ended March 31,
	2005			2004
Departmental revenues:
Rooms	$	1,384,537		$	1,064,061
Food and beverage		49,896			43,092
Parking		67,445			54,786
Other departmental		51,831			43,133
		1,553,709			1,205,072
Departmental expenses:
Rooms		293,535			232,729
Food and beverage		57,805			47,479
Parking		9,672			19,461
Other departmental		32,152			16,751
		393,164			316,420
Total departmental profit		1,160,545			888,652
Overhead expenses:
Administrative and general		79,664			94,659
Credit card commissions		35,383			25,782
Management fee (Note 7)		62,511			52,020
Advertising and sales (Notes 6 and 7)		91,591			78,645
Royalties (Note 6)		76,764			60,088
Repairs and maintenance		64,807			53,810
Utilities		110,545			93,268
General insurance (Note 7)		20,625			23,282
Real estate and personal property taxes		101,514			84,282
		643,404			565,836
Income from operations		517,141			322,816
Other charges:
Interest expense		320,724			312,148
Depreciation and amortization		305,480			437,129
		626,204			749,277
Net loss	($	109,063	)	($	426,461	)

See notes to financial statements. 3

WEBSTER STREET HOTEL, LLC

STATEMENTS OF MEMBERS’ EQUITY
(See Accountants’ Review Report)

	2005			2004
Balance, January 1	$	10,673,638		$	12,597,848
Net loss	(	109,063	)	(	426,461	)
Distributions	(	4,157,510	)	(	100,000	)
Balance, March 31	$	6,407,065		$	12,071,387

See notes to financial statements. 4

WEBSTER STREET HOTEL, LLC

STATEMENTS OF CASH FLOWS
(See Accountants’ Review Report)

	Three Months
	Ended March 31,
	2005			2004
Cash flows from operating activities:
Net loss	($	109,063	)	($	426,461	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		305,480			437,129
Ground rent amortization		2,603			2,603
Increase in assets:
Accounts receivable	(	20,556	)	(	88,347	)
Prepaid expenses and other	(	78,838	)	(	25,473	)
Increase in liabilities:
Accounts payable and accrued expenses		184,781			169,544
Net cash flows provided by operating activities		284,407			68,995
Cash flows from investing activities:
Restricted cash	(	47,967	)	(	32,998	)
Deferred costs	(	44,680	)
Capital expenditures	(	8,852	)	(	8,591	)
Net cash used in investing activities	(	101,499	)	(	41,589	)
Cash flows from financing activities:
Distributions to members	(	4,157,510	)	(	100,000	)
Proceeds from long-term debt		4,000,000
Net cash used in financing activities	(	157,510	)	(	100,000	)
Net increase (decrease) in cash		25,398		(	72,594	)
Cash, beginning		365,008			247,894
Cash, ending	$	390,406		$	175,300

See notes to financial statements.

5

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Three Months Ended March 31, 2005 and 2004
(See Accountants’ Review Report)

1. Description of the business and summary of significant accounting policies:

Description of business:

Webster Street Hotel, LLC (the Company) was formed as of February 9, 2000 as a limited liability company (LLC) for the purpose of owning and operating a 188 room “Courtyard by Marriott” located in Boston, Massachusetts. The hotel commenced operations in April 2003.

Estimates and assumptions:

Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities and the reported revenues and expenses. Actual results could vary from the estimates used.

Cash:

The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk.

Restricted cash:

Under the terms of its debt agreement, the Company is required to deposit 3% of annual gross revenues, as defined, into an account to be used for equipment replacement, repairs and renovations.

Accounts receivable:

The Company continuously monitors the creditworthiness of customers and establishes an allowance for amounts that may become uncollectible in the future based on current economic trends, historical payment and bad debt write-off experience, and any specific customer related collection issues.

Property and equipment:

Property and equipment are stated at cost. Depreciation is being provided using the straight-line method over the estimated useful asset lives.

6

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Three Months Ended March 31, 2005 and 2004
(See Accountants’ Review Report)

1. Summary of significant accounting policies (continued):

Deferred expenses:

Cost related to obtaining financing and franchise application fees are capitalized and amortized over the term of the related agreement using the straight-line method.

Income taxes:

The Company was formed as an LLC and is taxed as a partnership. Federal and state income tax regulations provide that a partnership is not subject to income taxes at the partnership level. Rather, each partner is taxed on their share of the partnership’s taxable income, whether or not distributed, and is entitled to deduct on their own income tax return their share of any net losses of the partnership to the extent of tax basis of their partnership interest, subject to certain passive activity loss limitations.

2. Property and equipment:

	2005		2004
Building	$	27,333,577	$	27,333,577
Furniture, fixtures and equipment		2,577,990		2,541,771
		29,911,567		29,875,348
Less accumulated depreciation		2,302,138		1,152,156
	$	27,609,429	$	28,723,192

The Company capitalized interest costs on borrowings incurred during the period of construction. Capitalized interest was added to the cost of the underlying assets and is being amortized over the useful lives of the assets. The Company capitalized $210,000 of interest in connection with the construction of the hotel in 2003.

The Company entered into a project administration agreement with an affiliate. The agreement was completed in 2003 for a total cost of $700,000. The project administration fee was capitalized as part of the building.

3. Prepaid ground lease:

In October 2000, the Company entered into a noncancellable ground lease with the City of Brookline, Massachusetts for a period not to exceed 95 years. Under the terms of the ground lease, the Company was required to pay an initial lease payment of $75,000, perform improvements to the property, as defined, and pay the City 50% of all parking fees collected from the 60 overnight resident parking spaces located on the property.

7

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Three Months Ended March 31, 2005 and 2004
(See Accountants’ Review Report)

3. Prepaid ground lease (continued):

The initial lease payment and property improvements are being amortized on a straight-line basis over the term of the ground lease. Rent expense was $2,603 for the three months ended March 31, 2005 and 2004.

4. Note payable, bank:

Note payable, bank, is subject to the terms of a building loan agreement and provides for a borrowing limit of $19,200,000. The note requires monthly payments of interest only. The note matures in April 2004, but provides for up to four six-month extensions, subject to certain terms and conditions. The note is secured by substantially all assets of the Company and is guaranteed by, among others, New Castle Hotels, LLC, an affiliate of the Company. The note was paid in full in June 2004.

5. Long-term debt:

Note payable, Prudential Insurance (Prudential), payable in monthly installments of interest only at 5.98% through July 2006. Beginning in August 2006, monthly principal and interest payments of $126,854 are required through July 2009, at which time the remaining outstanding balance is due.	$	19,000,000
Note payable, Prudential, payable in monthly installments of interest only at 5.69% through July 2006. Beginning in August 2006, monthly principal and interest payments of $26,018 are required through July 2009, at which time the remaining outstanding balance is due.		4,000,000
	$	23,000,000

The notes are secured by substantially all assets of the Company.

The aggregate maturities of long-term debt as of March 31, 2005 are as follows:

Year Ending December 31:
2005	$	–
2006		205,275
2007		496,145
2008		526,368
2009		21,772,212
	$	23,000,000

8

WEBSTER STREET HOTEL, LLC

NOTES TO FINANCIAL STATEMENTS

Three Months Ended March 31, 2005 and 2004
(See Accountants’ Review Report)

6. Franchise agreement:

In June 2001, the Company entered into a franchise agreement to operate the hotel as a “Courtyard by Marriott” franchise. The initial term of the agreement is for 20 years and requires monthly payments of 7.50% of gross room revenues, as defined, which includes a 2% advertising fee. Total franchise expense was $104,678, including advertising expense of $27,914 and $81,375, including advertising expense of $21,287 for the three months ended March 31, 2005 and 2004, respectively.

7. Related party transactions:

Management agreement:

In April 2001, the Company entered into a management agreement with Brookline Hotel Management, LLC, an affiliate of the Company. The agreement calls for a monthly fee of 4% of gross revenues. The initial term of the agreement is ten years, but provides for two five-year extensions at the Company’s option.

Insurance:

The Company obtains general and workers compensation insurance through an affiliate. There were no insurance premiums paid to the affiliate during the three months ended March 31, 2005 and 2004.

Marketing fees:

An affiliate provides marketing services to the Company. Total marketing fees paid to the affiliate were $628 and $1,580 for the three months ended March 31, 2005 and 2004, respectively.

8. Supplemental disclosure of cash flow information:

Cash paid for interest was $312,768 and $205,812 for the three months ended March 31, 2005 and 2004, respectively.

9. Subsequent event:

In June 2005, the Company sold substantially all of its assets to Hersha Hospitality Limited Partnership for $54,500,000. The Company used the proceeds to repay all outstanding debt.

9

EX-99.2

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 the acquisition of the Brookline Property had been consummated and leased as of January 1, 2004.

     This pro forma consolidated statement should be read in conjunction with the Hersha and Brookline Property historical financial statements and notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the acquisitions have been made based on management’s best estimates.

     The following unaudited Pro Forma Consolidated Statement of Operations is not necessarily indicative of what the actual results of Hersha would have been assuming such 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			Brookline
	Hospitality Trust			Property			Combined			Adjustments			Pro Forma
Revenue:
Percentage Lease Revenues — HHMLP	$	1,192		$	—		$	1,192		$	—		$	1,192
Hotel Operating Revenues		49,370			7,817			57,187			—			57,187
Total Revenue		50,562			7,817			58,379			—			58,379
Operating Expenses:
Hotel Operating Expenses		31,557			3,635			35,192			—			35,192
Land Lease		779			—			779			39	(C)		818
Real Estate and Personal Property Taxes and Property Insurance		3,264			424			3,688			—			3,688
General and Administrative		3,200			435			3,635			—			3,635
Unrecognized Gain on Derivative		62			—			62			—			62
Depreciation and Amortization		7,194			1,336			8,530			385	(C)		8,915
Total Operating Expenses		46,056			5,830			51,886			424			52,310
Operating Loss		4,506			1,987			6,493			(424	)		6,069
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	)		(1,206	)		(7,336	)		(1,560	) (D)		(8,896	)
Income (Loss) from continuing operations before income (loss) from joint venture investments, distributions to preferred unit holders and minority interests		984			781			1,765			(1,984	)		(219	)
Income from Unconsolidated Joint Venture Investments		481			—			481			—			481
Income (Loss) from continuing operations before distributions to preferred unit holders and minority interests		1,465			781			2,246			(1,984	)		262
Distributions to Preferred Unitholders		(499	)		—			(499	)		—			(499	)
Income (Loss) Allocated to Minority Interest in Continuing Operations		(126	)		—			(126	)		187	(E)		61
Income (Loss) from Continuing Operations	$	840		$	781		$	1,621		$	(1,797	)	$	(176	)
Earnings Per Share from Continuing Operations
Basic	$	0.05											$	(0.01	)
Diluted	$	0.05											$	(0.01	)
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 the historical statement of operations for the Brookline Property for the year ended December 31, 2004 included in the audited financial statements of Webster Street Hotel, LLC.
(C)	Represents the adjustment to reflect the estimated depreciation on the property of the Brookline Property after the allocation of purchase price, net of the amounts recorded for depreciation in the historical statement of operations for the Brookline Property. This adjustment also reflects the amortization of purchase price allocated to an interest in a land lease, which is recorded as land lease expense. Depreciation and amortization are computed using the straight-line method and are based upon the estimated useful life of the asset. The pro forma adjustment is as follows:

	Purchase Price				Depreciation
	Allocated		Life		Expense
Building	$	47,350		40	$	1,184
Furniture & Fixtures		3,760		7		537
Total					$	1,721
Less: Brookline Property historical depreciation						(1,336	)
Pro forma depreciation						385
Land Lease amortization	$	3,570		91	$	39
Pro Forma Adjustment					$	424

(D) Represents the adjustment to reflect the estimated annual interest expense for the Brookline Property on proceeds from the mortgage payable and borrowings under the line of credit facility to finance the acquisition, net of interest expense included in the historical statement of operations for the Brookline Property. Included in the adjustment is amortization of deferred loan costs of $134 over the ten year term of the loan. The pro forma adjustment is as follows:

			Weighted			Estimated
			Average			Interest
	Principal		Interest Rate			Expense
Mortgages Payable	$	38,913		5.35	%		2,082
Line of Credit		15,604		4.30	%		671
Total						$	2,753
Amortization of deferred loan costs							13
Less: Brookline Property historical interest expense							(1,206	)
Pro Forma Adjustment						$	1,560

(E) Represents minority interest allocable to holders of units of limited partnership interest in our operating partnership. The cumulative minority interest effect of the Brookline Property is calculated by using the weighted average minority interest percentage of 15.5% for the year ended December 31, 2004, as follows:

Historical Brookline Property Net Income	$	(781	)
Depreciation and Amortization Pro Forma Adjustment		424
Interest Expense Pro Forma Adjustment		1,560
Total	$	1,203
Minority Interest Percentage		15.5	%
Pro Forma Minority Interest Adjustment	$	187

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 the acquisition of the Brookline Property occurred on March 31, 2005.

     This pro forma consolidated statement should be read in conjunction with the Hersha and Brookline Property historical financial statements and notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the acquisition of the Brookline Property 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 acquisition 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)

			(B)
	(A)		Brookline
	Historical		Property		Pro Forma
Assets:
Investment in Hotel Properties, net	$	171,990	$	51,110	$	223,100
Due from Related Party		27,849		—		27,849
Other Assets (includes hotel held for sale of $18,806)		56,428		3,407		59,835
Total Assets	$	256,267	$	54,517	$	310,784
Liabilities and Shareholders’ Equity:
Mortgages Payable	$	97,395	$	38,913	$	136,308
Other Liabilities (includes debt related to hotel assets held for sale of $12,952)		25,359		15,604		40,963
Total Liabilities		122,754		54,517		177,271
Minority Interest:		18,174		—		18,174
Shareholders’ Equity:		115,339		—		115,339
Total Liabilities and Shareholders’ Equity	$	256,267	$	54,517	$	310,784

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 the purchase of the Brookline Property as if it had occurred on March 31, 2005 for $54,500 plus transaction expenses. The source of funding for the acquisition was a mortgage payable of $38,913; borrowings under Hersha’s existing line of credit of $15,604; and cash of $1,268.
	The following are based on a preliminary allocation of purchase price and cash paid in the acquisition:

Building		47,350
Furniture and Fixtures		3,760
Investment in Hotel Properties	$	51,110
Deferred Costs, net	$	133
Escrow Deposits		509
Land Leasehold		3,570
Other Assets		463
Cash and Cash Equivalents		(1,268	)
Other Assets	$	3,407

Included in Other Assets is purchase price allocated to an interest in a land lease in the amount of $3,570. The land lease has 91 years remaining and all future lease payments have been prepaid.

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 the acquisition of the Brookline Property had been consummated and leased as of January 1, 2005.

     This pro forma consolidated statement should be read in conjunction with the Hersha and Brookline Property historical financial statements and notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the acquisitions have been made based on management’s best estimate.

     The following unaudited Pro Forma Consolidated Statement of Operations is not necessarily indicative of what the actual results of Hersha would have been assuming such 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)

				(B)
	(A)			Brookline
	Historical			Property			Combined			Adjustments			Pro Forma
Revenue:
Percentage Lease Revenues — HHMLP	$	—		$	—		$	—		$	—		$	—
Hotel Operating Revenues		12,800			1,554			14,354			—			14,354
Total Revenue		12,800			1,554			14,354			—			14,354
Operating Expenses:
Hotel Operating Expenses		9,278			834			10,112			—			10,112
Land Lease		183			—			183			10	(C)		193
Real Estate and Personal Property Taxes and Property Insurance		883			123			1,006			—			1,006
General and Administrative		990			80			1,070			—			1,070
Unrecognized Gain on Derivative		(4	)		—			(4	)		—			(4	)
Depreciation and Amortization		1,963			305			2,268			125	(C)		2,393
Total Operating Expenses		13,293			1,342			14,635			135			14,770
Operating Loss		(493	)		212			(281	)		(135	)		(416	)
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	)		(321	)		(2,196	)		(427	) (D)		(2,623	)
Loss from continuing operations before income (loss) from joint venture investments, distributions to preferred unit holders and minority interests		(1,304	)		(109	)		(1,413	)		(562	)		(1,975	)
Income from Unconsolidated Joint Venture Investments		49			—			49			—			49
Loss from continuing operations before distributions to preferred unit holders and minority interests		(1,255	)		(109	)		(1,364	)		(562	)		(1,926	)
Distributions to Preferred Unitholders		—			—			—			—			—
Loss Allocated to Minority Interest in Continuing Operations		261			—			261			82	(E)		343
Income from Continuing Operations	$	(994	)	$	(109	)	$	(1,103	)	$	(480	)	$	(1,583	)
Earnings Per Share from Continuing Operations
Basic	$	(0.05	)										$	(0.08	)
Diluted	$	(0.05	)										$	(0.08	)
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 the historical statement of operations for the Brookline Property for the three months ended March 31, 2005, included in the financial statements of Webster Street Hotel, LLC.
(C)	Represents the adjustment to reflect the estimated depreciation on property of the Brookline Property after the allocation of purchase price, net of the amounts recorded for depreciation in the historical statement of operations for the Brookline Property. This adjustment also reflects the amortization of purchase price allocated to an interest in a land lease, which is recorded as land lease expense. Depreciation and amortization are computed using the straight-line method and are based upon the estimated useful life of the asset. The pro forma adjustment is as follows:

	Purchase Price				Depreciation
	Allocated		Life		Expense
Building	$	47,350		40	$	296
Furniture & Fixtures		3,760		7		134
Total					$	430
Less: Brookline Property historical depreciation						(305	)
Pro forma depreciation						125
Land Lease amortization	$	3,570		91	$	10
Pro Forma Adjustment					$	135

(D) Represents the adjustment to reflect the estimated three month interest expense for the Brookline Property on proceeds from the mortgage payable and borrowings under the line of credit facility to finance the acquisition, net of interest expense included in the historical statement of operations for the Brookline Property. Included in the adjustment is amortization of deferred loan costs of $134 over the ten year term of the loan. The pro forma adjustment is as follows:

			Weighted Average			Estimated Interest
	Principal		Interest Rate			Expense
Mortgages Payable	$	38,913		5.35	%		521
Line of Credit		15,604		5.75	%		224
Total						$	745
Amortization of deferred loan costs							3
Less: Brookline Property historical interest expense							(321	)
Pro Forma Adjustment						$	427

(E) Represents minority interest allocable to holders of units of limited partnership interest in our operating partnership. The cumulative minority interest effect of the Brookline Property is calculated by using the weighted average minority interest percentage of 12.3% for the three months ended March 31, 2005, as follows:

Historical Brookline Property Net Loss	$	109
Depreciation and Amortization Pro Forma Adjustment		135
Interest Expense Pro Forma Adjustment		427
Total	$	671
Minority Interest Percentage		12.3	%
Pro Forma Minority Interest Adjustment	$	82