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DEBT
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
DEBT DEBT
Mortgages
Mortgages payable at December 31, 2021 and December 31, 2020 consisted of the following:
December 31, 2021December 31, 2020
Mortgage Indebtedness$306,078 $332,264 
Net Unamortized Premium13 354 
Net Unamortized Deferred Financing Costs(1,477)(1,770)
Mortgages Payable$304,614 $330,848 
Net Unamortized Deferred Financing Costs associated with entering into mortgage indebtedness are deferred and amortized over the life of the mortgages. Net Unamortized Premiums are also amortized over the remaining life of the loans. Mortgage indebtedness balances are subject to fixed and variable interest rates, which ranged from 2.75% to 5.05% as of December 31, 2021.
Our mortgage indebtedness contains various financial and non-financial covenants customarily found in secured, non-recourse financing arrangements. Our mortgage loans payable typically require that specified debt service coverage ratios be maintained with respect to the financed properties before we can exercise certain rights under the loan agreements relating to such properties. If the specified criteria are not satisfied, the lender may be able to escrow cash flow generated by the property securing the applicable mortgage loan.
We have determined that all debt covenants contained in the loan agreements securing our consolidated hotel properties with the exception of one mortgage was met as of December 31, 2021. The lender of this mortgage has elected its right to escrow property level cash flow for the purpose of meeting future payment obligations.

As of December 31, 2021, the maturity dates for the outstanding mortgage loans ranged from December 2022 to September 2025.
During the year ended December 31, 2021, we refinanced the outstanding mortgages secured by the Hilton Garden Inn 52nd Street, the Courtyard Los Angeles Westside, the Hilton Garden Inn Tribeca, the Hyatt Union Square, and the St. Gregory Hotel, which resulted in $90 of debt modification expense.
NOTE 5 – DEBT (CONTINUED)
Credit Facilities
We maintain three secured credit agreements which aggregate to $747,481 with Citigroup Global Markets Inc., Wells Fargo Bank, Inc. and various other lenders. One credit agreement ("Credit Agreement") provides for a senior secured credit facility of $442,404 (“Credit Facility”). The Credit Facility consists of a $250,000 senior secured revolving line of credit (“Line of Credit”), and a $192,404 senior secured term loan (“First Term Loan”). The Credit Facility expires on August 10, 2022.
We maintain another credit agreement which provides for a $278,846 senior secured loan agreement (“Second Term Loan”) and expires on September 10, 2024.
A separate credit agreement provides for a $26,231 senior secured term loan agreement (“Third Term Loan” and collectively with the Credit Agreement and the Second Term Loan, the "Credit Agreements") and expires on August 10, 2022. Management intends to explore options including, but not limited to, additional asset sales, the refinancing of debt and the offering of equity or equity-linked securities prior to the maturity of the First Term Loan and the Third Term Loan on August 10, 2022.
On February 17, 2021, the Company signed amendments to the Credit Agreements which resulted in debt extinguishment expense $2,977. Debt extinguishment expense consists of $635 of debt extinguishment losses and $2,342 of debt modification losses. The signed amendments to the Credit Agreements, among other things, provide for:

•an extension of the maturity date of the Third Term Loan to August 10, 2022;
•a limited waiver of financial covenants through March 31, 2022; and
•the ability to borrow up to $174,729, inclusive of amounts already outstanding, under the Line of Credit, the proceeds of which may only be used to fund certain costs and expenses.

Certain conditions, such as minimum liquid assets in an aggregate amount of at least $30,000, and certain negative covenants and restrictions that are considered normal and customary, must be met on a recurring basis as outlined within the amendments.

The amendments to the Credit Agreements make certain other amendments to financial covenants in place beginning in the second quarter of 2022:

•a fixed charge coverage ratio of not less than 1.20 to 1.00 (was 1.50 to 1.00);
•a maximum leverage ratio of not more than 65% (was 60%); and
•a new financial covenant that requires the borrowing base leverage ratio to not exceed 60% at any time.
NOTE 5 – DEBT (CONTINUED)

The amount that we can borrow at any given time under our Line of Credit, and the First, Second and Third Term Loan (each a “Term Loan” and together the “Term Loans”) is governed by certain operating metrics of designated unencumbered hotel properties known as borrowing base assets. As of December 31, 2021, the following hotel properties were borrowing base assets:
- Courtyard by Marriott Brookline, Brookline, MA- Hampton Inn, Washington, DC
- The Envoy Boston Seaport, Boston, MA- Ritz-Carlton Georgetown, Washington, DC
- The Boxer, Boston, MA- Hilton Garden Inn, M Street, Washington, DC
- Hampton Inn Seaport, Seaport, New York, NY- The Winter Haven Hotel Miami Beach, Miami, FL
- Holiday Inn Express Chelsea, 29th Street, New York, NY- The Blue Moon Hotel Miami Beach, Miami, FL
- Gate Hotel JFK Airport, New York, NY- Cadillac Hotel & Beach Club, Miami, FL
- Hilton Garden Inn JFK Airport, New York, NY- The Parrot Key Hotel & Villas, Key West, FL
- NU Hotel, Brooklyn, New York, NY- TownePlace Suites, Sunnyvale, CA
- Hyatt House White Plains, White Plains, NY- The Ambrose Hotel, Santa Monica, CA
- Hampton Inn Center City/ Convention Center, Philadelphia, PA- The Pan Pacific Hotel Seattle, Seattle, WA
- The Rittenhouse, Philadelphia, PA- Mystic Marriott Hotel & Spa, Groton, CT
- Philadelphia Westin, Philadelphia, PA
The interest rate for borrowings under the Line of Credit and Term Loans are based on a pricing grid with a range of one month U.S. LIBOR plus a spread. The following table summarizes the balances outstanding and interest rate spread for each borrowing:
Outstanding Balance
BorrowingSpreadDecember 31, 2021December 31, 2020
Line of Credit
1.50% to 2.25%
$118,684 $133,053 
Secured Term Loan:
First Term Loan
1.45% to 2.20%
192,404 202,158 
Second Term Loan
1.35% to 2.00%
278,846 292,983 
Third Term Loan
1.45% to 2.20%
26,231 189,365 
Deferred Financing Costs(1,396)(2,762)
Total Secured Term Loan$496,085 $681,744 
Prior to the amendments noted above, the Credit Facility and the Term Loans included certain financial covenants and required that we maintain: (1) a minimum tangible net worth (calculated as total assets, plus accumulated depreciation, less total liabilities, intangibles and other defined adjustments) of $1,119,500, plus an amount equal to 75% of the net cash proceeds of all issuances and primary sales of equity interests of the parent guarantor or any of its subsidiaries consummated following the closing date; (2) annual distributions not to exceed 95% of adjusted funds from operations; and (3) certain financial ratios, including the following:

•a fixed charge coverage ratio of not less than 1.50 to 1.00;
•a maximum leverage ratio of not more than 60%; and
•a maximum secured debt leverage ratio of 45%.
The weighted average interest rate on our credit facilities was 3.69%, 4.07% and 4.11% for the years ended December 31, 2021, 2020 and 2019, respectively.
NOTE 5 – DEBT (CONTINUED)
Notes Payable
Notes payable at December 31, 2021 and December 31, 2020 consisted of the following:

December 31, 2021December 31, 2020
Statutory Trust I and Statutory Trust II Notes Payable Indebtedness$51,548 $51,548 
Net Unamortized Deferred Financing Costs(706)(759)
Statutory Trust I and Statutory Trust II Notes Payable50,842 50,789 
Junior Notes Payable Indebtedness$156,239 $— 
Net Unamortized Deferred Financing Costs(4,209)— 
Net Unamortized Discount(4,382)— 
Junior Notes Payable147,648 — 
Total Notes Payable$198,490 $50,789 
Statutory Trust I and Statutory Trust II Notes Payable
We have two junior subordinated notes payable in the aggregate amount of $51,548 to the Hersha Statutory Trusts                      pursuant to indenture agreements which will mature on July 30, 2035, but may be redeemed at our option, in whole or in part, prior to maturity in accordance with the provisions of the indenture agreements.  The $25,774 notes issued to Hersha Statutory Trust I and Hersha Statutory Trust II, bear interest at a variable rate of LIBOR plus 3% per annum.  This rate resets two business days prior to each quarterly payment.  The weighted average interest rate on our two junior subordinated notes payable during the years ended December 31, 2021, 2020 and 2019 was 3.21%, 3.95% and 5.50%, respectively.  
Junior Notes Payable
On February 17, 2021, the Company entered into a note purchase agreement (the “Purchase Agreement”) with several purchasers (the “Purchasers”). The Company issued and sold to the Purchasers $150,000 aggregate principal amount of the Company’s 9.50% Unsecured PIK Toggle Notes due 2026 (the “Notes”) on February 23, 2021. The Notes will mature on February 23, 2026. The Notes bear interest at a rate of 9.50% per year, payable in arrears on June 30, September 30, December 31 and March 31 of each year, beginning on June 30, 2021. For any interest period ending on or prior to March 31, 2022, the Company, in our sole discretion, may elect to pay interest (a) in cash at a rate per annum equal to 4.75% per annum, and (b) in kind at a rate per annum equal to 4.75% per annum (“PIK Interest”). Any PIK Interest will be paid by increasing the principal amount of the Notes at the end of the applicable interest period by the amount of such PIK Interest. We elected the PIK Interest option for the interest periods ended June 30, 2021, September 30, 2021, and December 31, 2021 increasing the principal balance by $6,239 to $156,239 as of December 31, 2021. We have elected the PIK Interest option for the interest period ended March 31, 2022, which is the last period that the option is available to us.

The Notes may not be redeemed prior to February 23, 2022. The notes may be redeemed during the 12 month period beginning February 23, 2022 and the 12 month period beginning February 23, 2023, at a redemption price equal to 104% and 102% of the principal amount of the Notes being redeemed, respectively. After February 23, 2024, the notes may be redeemed at the principal amount.

The Notes are subject to representations, warranties, covenants, terms and conditions customary for transactions of this type, including limitations on liens, incurrence of debt, investments, mergers and asset dispositions, covenants to preserve corporate existence and comply with laws and default provisions.

The Company may only use the net proceeds from the issuance of the Notes in accordance with the mandatory prepayment waterfalls, which includes the repayment of outstanding borrowings under the Credit Agreement and use for certain other general corporate purposes.
NOTE 5 – DEBT (CONTINUED)

Debt Maturities

Aggregate annual principal payments for the Company’s credit facility and secured term loans, as amended, mortgages, Statutory Trust I and Statutory Trust II notes, and Junior notes payable for the five years following December 31, 2021 and thereafter are as follows:
Year Ending December 31,Amount
2022$385,666 
2023103,148 
2024401,654 
202540,250 
2026147,764 
Thereafter51,548 
$1,130,030 
Interest Expense
The table below shows the interest expense incurred by the Company during the twelve months ended December 31, 2021, 2020, and 2019:
Years Ended December 31,
202120202019
Mortgage Loans Payable10,537 12,277 15,804 
Interest Rate Swap Contracts on Mortgages*2,477 1,895 (453)
Unsecured Notes Payable15,073 2,037 2,837 
Credit Facility and Term Loans15,587 21,927 33,745 
Interest Rate Swap Contracts on Credit Facility and Term Loans*8,866 11,018 (2,630)
Deferred Financing Costs Amortization4,628 3,551 2,241 
Capitalized Interest*— — (74)
Other381 574 735 
     Total Interest Expense$57,549 $53,279 $52,205 
*Negative amount indicates decrease to interest expense.