NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

As of December 31, 2015 and December 31, 2014 our investment in unconsolidated joint ventures consisted of the following:



		Percent	Preferred		December 31,		December 31,
Joint Venture	Hotel Properties	Owned	Return		2015		2014

SB Partners, LLC	Holiday Inn Express, South Boston, MA	50.0%	N/A	$	795	$	913
Hiren Boston, LLC	Courtyard by Marriott, South Boston, MA	50.0%	N/A		4,499		4,680
Mystic Partners, LLC	Hilton and Marriott branded hotels in CT	8.8%-66.7%	8.5% non-cumulative		5,022		5,556
				$	10,316	$	11,150

Income or loss from our unconsolidated joint ventures is allocated to us and our joint venture partners consistent with the allocation of cash distributions in accordance with the joint venture agreements. Any difference between the carrying amount of these investments and the underlying equity in net assets is amortized over the expected useful lives of the properties and other intangible assets.

Income (loss) recognized during the years ended December 31, 2015, 2014 and 2013, for our investments in unconsolidated joint ventures is as follows:




	Year Ended Ended December 31,
		2015		2014		2013
SB Partners, LLC	$	582	$	407	$	264
Hiren Boston, LLC		694		603		113
Mystic Partners, LLC		(311)		(317)		(399)
Income (Loss) from Unconsolidated Joint Venture Investments		965		693		(22)
Impairment from Unconsolidated Joint Ventures		-		-		(1,813)
Income (Loss) from Unconsolidated Joint Venture Investments	$	965	$	693	$	(1,835)

In 2013, we recorded an impairment loss of $1,813 related to the Courtyard, Norwich, CT, one of the properties owned by Mystic Partners, LLC. Mystic Partners, LLC transferred the title to the property to the lender during the year ended December 31, 2014. As we did not anticipate recovering our investment balance in this asset, we reduced the portion of our Mystic Partners, LLC investment related to this property to $0 as of December 31, 2013.

On February 1, 2013, the Company closed on the sale of its interest in one of the unconsolidated joint venture properties owned in part by Mystic Partners, LLC to its joint venture partner. As our investment in this unconsolidated joint venture equated the net proceeds distributed to us, we did not record a gain or loss in connection with the sale of this hotel.

The Mystic Partners, LLC joint venture agreement provides for an 8.5% non-cumulative preferred return based on our contributed equity interest in the venture. Cash distributions will be made from cash available for distribution, first, to us to provide an 8.5% annual non-compounded return on our unreturned capital contributions and then to our joint venture partner to provide an 8.5% annual non-compounded return of their unreturned contributions. Any remaining cash available for distribution will be distributed to us 10.5% with respect to the net cash flow from the Hartford Marriott, 7.0% with respect to the Hartford Hilton and 56.7%, with respect to the remaining property. Mystic Partners, LLC allocates income to us and our joint venture partner consistent with the allocation of cash distributions in accordance with the joint venture agreements.

The Hartford Marriott, part of the Mystic Partners, LLC joint venture, is under an Asset Management Agreement with 44 New England to provide asset management services. Fees for these services are paid monthly to 44 New England and recognized as income in the amount of 0.25% of operating revenues.

NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)

The following tables set forth the total assets, liabilities, equity and components of net income or loss, including the Company’s share, related to the unconsolidated joint ventures discussed above as of December 31, 2015 and December 31, 2014 and for the years ended December 31, 2015, 2014 and 2013.



Balance Sheets
		December 31,		December 31,
		2015		2014
Assets
Investment in Hotel Properties, Net	$	105,354	$	106,430
Other Assets		15,558		19,032
Total Assets	$	120,912	$	125,462

Liabilities and Equity
Mortgages and Notes Payable	$	113,532	$	115,446
Other Liabilities		30,575		30,832
Equity:
Hersha Hospitality Trust		22,698		23,060
Joint Venture Partner(s)		(45,893)		(43,876)
Total Equity		(23,195)		(20,816)

Total Liabilities and Equity	$	120,912	$	125,462



Statements of Operations

	Year Ended December 31,
		2015		2014		2013
Room Revenue	$	57,927	$	59,135	$	58,273
Other Revenue		22,776		21,725		22,606
Operating Expenses		(55,178)		(54,831)		(55,179)
Lease Expense		(1,115)		(1,063)		(996)
Property Taxes and Insurance		(2,948)		(2,934)		(3,034)
General and Administrative		(5,609)		(5,783)		(5,794)
Depreciation and Amortization		(6,549)		(6,376)		(6,697)
Interest Expense		(6,677)		(11,995)		(7,526)
Debt Extinguishment and Gain on Debt Forgiveness		-		3,016		-
Gain (Loss) allocated to Noncontrolling Interests		(341)		115		(179)

Net Income From Continuing Operations	$	2,286	$	1,009	$	1,474
(Loss) Income from Discontinued Operations		-		-		(55)
Gain on Disposition of Hotel Properties		-		-		1,161

Net Income	$	2,286	$	1,009	$	2,580

NOTE 3 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)

The following table is a reconciliation of the Company’s share in the unconsolidated joint ventures’ equity to the Company’s investment in the unconsolidated joint ventures as presented on the Company’s balance sheets as of December 31, 2015 and December 31, 2014.



		December 31,		December 31,
		2015		2014
Company's share of equity recorded on the joint ventures' financial statements	$	22,698	$	23,060
Adjustment to reconcile the Company's share of equity recorded on the joint ventures' financial statements to our investment in unconsolidated joint ventures(1)		(12,382)		(11,910)
Investment in Unconsolidated Joint Ventures	$	10,316	$	11,150

(1) Adjustment to reconcile the Company's share of equity recorded on the joint ventures' financial statements to our investment in unconsolidated joint ventures consists of the following:

cumulative impairment of the Company’s investment in joint ventures not reflected on the joint ventures' financial statements;

the Company’s basis in the investment in joint ventures not recorded on the joint ventures' financial statements; and

accumulated amortization of the Company’s equity in joint ventures that reflects the Company’s portion of the excess of the fair value of joint ventures' assets on the date of our investment over the carrying value of the assets recorded on the joint ventures financial statements (this excess investment is amortized over the life of the properties, and the amortization is included in Income (Loss) from Unconsolidated Joint Venture Investments on the Company’s consolidated statement of operations).