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DEBT
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
DEBT DEBT
Mortgages
Mortgages payable at September 30, 2022 and December 31, 2021 consisted of the following:
September 30, 2022December 31, 2021
Mortgage Indebtedness$209,188 $306,078 
Net Unamortized Premium8 13 
Net Unamortized Deferred Financing Costs(576)(1,477)
Mortgages Payable$208,620 $304,614 

On August 4, 2022, using the proceeds from the dispositions discussed in Note 2 - Investment in Hotel Properties, we paid off the Courtyard Los Angeles mortgage with a principal balance of $35,000.

As of September 30, 2022, the Hotel Milo and Courtyard Sunnyvale mortgages with an aggregate balance of $60,061 were classified as Liabilities Related to Hotel Assets Held for Sale and are included in the Liabilities Related to Hotel Assets Held for Sale section in Note 2 - Investment in Hotel Properties. On October 6, 2022, we paid off the Hotel Milo mortgage balance of $20,696 using the proceeds from the disposition of the property. On October 26, 2022, the buyer assumed the Courtyard Sunnyvale mortgage which had an outstanding principal balance of $39,365 as of September 30, 2022.

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 3.84% to 7.25% as of September 30, 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 the Courtyard Sunnyvale mortgage were met as of September 30, 2022. The lender elected its right to escrow property level cash flow for the purpose of meeting future payment obligations, and as noted above, this mortgage as well as the escrow held by the lender was assumed by the buyer upon disposition of the Courtyard Sunnyvale, CA on October 26, 2022.

As of September 30, 2022, the maturity dates for the outstanding mortgage loans ranged from December 2022 to September 2025. For the two mortgages with maturity dates within the next twelve months, we are working with the mortgage lenders to exercise available extension options under these mortgages, or refinance each mortgage before their maturities.

Credit Facilities

On August 4, 2022, we entered into a credit agreement (the "Credit Agreement"), which provided for a secured term loan of $400,000 and secured revolving line of credit with capacity of $100,000, both of which mature on August 4, 2024. Borrowings under the Credit Agreement bear interest at a rate of Term Secured Overnight Financing Rate ("SOFR") plus a 250 basis point spread. The $397,433 term loan per the Consolidated Balance Sheet as of September 30, 2022 consists of the $400,000 secured term loan, net of unamortized deferred financing costs of $2,567.

Immediately upon entering into the Credit Agreement, proceeds from the $400,000 new term loan, along with a portion of the proceeds from the dispositions discussed in Note 2 – Investment in Hotel Properties, were used to pay off and terminate all borrowings under our previous credit facility agreement ("the Prior Facilities"), which consisted of three secured credit arrangements which had an aggregate principal balance of $497,481.

The Company incurred debt extinguishment expense of $4,233 related to the new Credit Agreement and termination of the Prior Facilities on August 4, 2022. Debt extinguishment expense consists of $3,819 of debt extinguishment losses and $414 of
debt modification losses. On February 17, 2021, the Company signed amendments to the Prior Facilities which resulted in debt extinguishment expense of $2,977. Debt extinguishment expense consists of $635 of debt extinguishment losses and $2,342 of debt modification losses.

The Credit Agreement contains financial covenants beginning in the third quarter of 2022, including a fixed charge coverage ratio of not less than 1.25 to 1.00; and a maximum leverage ratio of not more than 60%. We have determined that we are in compliance with all covenants contained in the Credit Agreement as of September 30, 2022.

The amount that we can borrow at any given time under the Credit Agreement is governed by certain operating metrics of designated hotel properties known as borrowing base assets. As of September 30, 2022, the following hotel properties secure the Credit Agreement: 
 - The Envoy Boston Seaport, Boston, MA  - Ritz-Carlton Georgetown, Washington, DC
 - The Boxer, Boston, MA - The Winter Haven Hotel Miami Beach, Miami, FL
 - Hampton Inn Seaport, Seaport, New York, NY - The Blue Moon Hotel Miami Beach, Miami, FL
 - Holiday Inn Express Chelsea, 29th Street, New York, NY - Cadillac Hotel & Beach Club, Miami, FL
 - NU Hotel, Brooklyn, New York, NY - The Parrot Key Hotel & Villas, Key West, FL
 - Hyatt House White Plains, White Plains, NY - The Ambrose Hotel, Santa Monica, CA
 - The Rittenhouse, Philadelphia, PA - The Pan Pacific Hotel Seattle, Seattle, WA*
 - Philadelphia Westin, Philadelphia, PA - Mystic Marriott Hotel & Spa, Groton, CT



*On October 19, 2022, we sold this hotel and used a portion of the proceeds to pay down the term loan by $22,380, as required by the Credit Agreement. This hotel was removed as a borrowing base asset accordingly.

The weighted average interest rate on our credit facilities, including our Prior Facilities and including the effect of derivative instruments, was 3.90% and 3.47%, 3.47% and 3.51% for the three and nine months ended September 30, 2022 and 2021, respectively.

Notes Payable

Notes payable at September 30, 2022 and December 31, 2021 consisted of the following:
September 30, 2022December 31, 2021
Statutory Trust I and Statutory Trust II Notes Payable Indebtedness$51,548 $51,548 
Net Unamortized Deferred Financing Costs(666)(706)
Statutory Trust I and Statutory Trust II Notes Payable50,882 50,842 
Junior Notes Payable Indebtedness— 156,239 
Net Unamortized Deferred Financing Costs— (4,209)
Net Unamortized Discount— (4,382)
Junior Notes Payable— 147,648 
Total Notes Payable$50,882 $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 5.25% and 3.15%, and 4.16% and 3.18% for the three and nine months ended September 30, 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 “Junior Notes”) on February 23, 2021. The Junior Notes were set to mature on February 23, 2026. The Junior Notes bore 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. We elected the option 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”) 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.

On August 4, 2022, using a portion of the proceeds from the dispositions discussed in Note 2 - Investment in Hotel Properties, we paid off the Junior Notes, payable at a redemption price of 104%, or $164,418. We incurred debt extinguishment expense of $13,725 to redeem the Junior Notes on August 4, 2022.

Interest Expense

The table below shows the interest expense incurred by the Company during the nine months ended September 30, 2022 and 2021:
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Mortgage Loans Payable$3,503 $2,533 $8,980 $7,947 
Interest Rate Swap Contracts on Mortgages(184)619 739 1,849 
Unsecured Notes Payable2,222 4,386 11,217 10,634 
Credit Facility and Term Loans5,455 3,735 13,611 11,856 
Interest Rate Swap Contracts on Credit Facilities(675)1,728 1,378 5,830 
Deferred Financing Costs Amortization896 1,119 3,322 3,499 
Other116 94 353 271 
     Total Interest Expense$11,333 $14,214 $39,600 $41,886