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DEBT
 3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
DEBT DEBT
Mortgages
Mortgages payable at March 31, 2022 and December 31, 2021 consisted of the following:
March 31, 2022December 31, 2021
Mortgage Indebtedness$305,525 $306,078 
Net Unamortized Premium11 13 
Net Unamortized Deferred Financing Costs(1,288)(1,477)
Mortgages Payable$304,248 $304,614 

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 3.10% to 5.05% as of March 31, 2022.

Our mortgage indebtedness contains various financial and non-financial covenants customarily found in secured, non-recourse financing arrangements. Our mortgage loans 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 March 31, 2022. The lender has elected its right to escrow property level cash flow for the purpose of meeting future payment obligations.

As of March 31, 2022, the maturity dates for the outstanding mortgage loans ranged from December 2022 to September 2025.

Credit Facilities

We maintain three secured credit arrangements which aggregate to $747,481 with Citigroup Global Markets Inc., Wells Fargo Bank, Inc. and various other lenders. One credit agreement provides for a $442,404 senior secured credit facility (“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"), and expires on August 10, 2022.
 
We maintain another credit agreement which provides for a $278,846 senior secured term 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 Facility 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.

The amount that we can borrow at any given time under our Line of Credit, and the individual term loans (each a “Term Loan” and together the “Term Loans”) is governed by certain operating metrics of designated hotel properties known as borrowing base assets. As of March 31, 2022, the following hotel properties secured the amended facilities under the Credit Agreements: 
- 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
BorrowingSpreadMarch 31, 2022December 31, 2021
Line of Credit
1.50% to 2.25%
$118,684 $118,684 
Term Loans:
     First Term Loan
1.45% to 2.20%
$192,404 $192,404 
     Second Term Loan
1.35% to 2.00%
278,846 278,846 
     Third Term Loan
1.45% to 2.20%
26,231 26,231 
     Deferred Loan Costs(1,175)(1,396)
Total Term Loans$496,306 $496,085 

The weighted average interest rate on our credit facilities was 3.55% and 3.58% for the three months ended March 31, 2022 and 2021, respectively.
Notes Payable

Notes payable at March 31, 2022 and December 31, 2021 consisted of the following:
March 31, 2022December 31, 2021
Statutory Trust I and Statutory Trust II Notes Payable Indebtedness$51,548 $51,548 
Net Unamortized Deferred Financing Costs(693)(706)
Statutory Trust I and Statutory Trust II Notes Payable50,855 50,842 
Junior Notes Payable Indebtedness158,094 156,239 
Net Unamortized Deferred Financing Costs(3,970)(4,209)
Net Unamortized Discount(4,124)(4,382)
Junior Notes Payable150,000 147,648 
Total Notes Payable$200,855 $198,490 

Statutory Trust I and Statutory Trust II Notes Payable

We have two junior subordinated notes payable in the aggregate amount of $51,548 related 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 of notes issued to each of Hersha Statutory Trust I and Hersha Statutory Trust II bear interest at a variable rate of LIBOR plus 3% per annum. This rate resets 2 business days prior to each quarterly payment. The related deferred financing costs are amortized over the life of the notes payable. The weighted average interest rate on our two junior subordinated notes payable was 3.17% and 3.21% for the three months ended March 31, 2022 and 2021, respectively.

Junior Notes Payable

On February 17, 2021, the Company entered into a note 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 Issuer, in its 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, December 31, 2021, and March 31, 2022, increasing the total principal balance by $8,094 to $158,094 as of March 31, 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 new 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 Agreements and use for certain other general corporate purposes.

Interest Expense

The table below shows the interest expense incurred by the Company during the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
2022
2021
Mortgage Loans Payable$2,529 $2,833 
Interest Rate Swap Contracts on Mortgages565 603 
Unsecured Notes Payable4,406 1,838 
Credit Facility and Term Loans3,649 4,368 
Interest Rate Swap Contracts on Credit Agreements1,822 2,424 
Deferred Financing Costs Amortization1,191 1,293 
Other75 70 
     Total Interest Expense$14,237 $13,429