NOTE 4 – OTHER ASSETS AND DEPOSITS ON HOTEL ACQUISITIONS

Other Assets

Other Assets consisted of the following at March 31, 2014 and December 31, 2013:



	March 31, 2014		December 31, 2013

Transaction Costs	$	179	$	115
Investment in Statutory Trusts		1,548		1,548
Prepaid Expenses		7,050		9,256
Insurance Claims Receivable		555		1,706
Deferred Tax Asset, Net of Valuation Allowance of $804		8,304		8,766
Other		7,200		6,069
	$	24,836	$	27,460

Transaction Costs - Transaction costs include legal fees and other third party transaction costs incurred relative to entering into debt facilities, issuances of equity securities and other costs that are recorded in other assets prior to the closing of the respective transactions.

Investment in Statutory Trusts - We have an investment in the common stock of Hersha Statutory Trust I and Hersha Statutory Trust II. Our investment is accounted for under the equity method.

Prepaid Expenses - Prepaid expenses include amounts paid for property tax, insurance and other expenditures that will be expensed in the next twelve months.

Insurance Claims Receivable – As noted in “Note 2 – Investment in Hotel Properties,” we recorded an insurance claim receivable due to the property damage that occurred at several of our hotel properties as a result of Hurricane Sandy in October 2012. This claim was settled in March 2014. The balance in insurance claims receivable as of March 31, 2014 is comprised of claims that arose from property damage at several hotel properties as a result of other events.

Deferred Tax Asset - We have approximately $8,304 of net deferred tax assets as of March 31, 2014. We have considered various factors, including future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies in determining a valuation allowance for our deferred tax assets, and we believe that it is more likely than not that we will be able to realize the $8,304 of net deferred tax assets in the future.

Deposits on Hotel Acquisitions

As of March 31, 2014, we had $16,486 in interest bearing deposits related to the future acquisition of the Hilton Garden Inn -52nd Street, New York, NY. On October 24, 2012, we entered into a purchase and sale agreement to acquire the Hilton Garden Inn – 52nd Street in New York, NY for total consideration of $74,000. As of March 31, 2014, we had provided $16,486 to the seller as a deposit earning 10% per annum and we may fund an additional $514 deposit earning 10% per annum. The total consideration to the seller will consist of this $17,000 interest bearing deposit, an additional $15,000 cash to be paid to the seller upon closing and the assumption or extinguishment of a mortgage loan secured by the hotel in the original aggregate principal amount of $42,000. The transaction is expected to close shortly after the developer completes the hotel’s construction, which is anticipated for the second quarter of 2014. While this purchase and sale agreement secures the Company’s right to acquire the completed hotel, the Company is not assuming any significant construction risk, including the risk of schedule and cost overruns.

As of December 31, 2013, our Deposits on Hotel Acquisitions consisted of $15,486 in interest bearing deposits related to the future acquisition of Hilton Garden Inn 52nd Street, New York, NY and $3,100 in non-interest bearing deposits related to the acquisition of the Hotel Oceana, located in Santa Barbara, California. The acquisition of the Hotel Oceana closed in the first quarter of 2014. See “Note 2 – Investment in Hotel Properties” for more information.