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DEBT
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
DEBT DEBT
Mortgages
Mortgages payable at December 31, 2022 and December 31, 2021 consisted of the following:
December 31, 2022December 31, 2021
Mortgage Indebtedness$208,880 $306,078 
Net Unamortized Premium7 13 
Net Unamortized Deferred Financing Costs(533)(1,477)
Mortgages Payable$208,354 $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. 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 $39,309.
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 4.02% to 8.50% as of December 31, 2022.
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 were met as of December 31, 2022.
As of December 31, 2022, the maturity dates for the outstanding mortgage loans ranged from June 2023 to July 2024. For mortgages with maturity dates within the next twelve months, we plan to refinance each mortgage before their maturities, or use available cash on hand or capacity under our revolving line of credit to pay the obligation.
During the year ended December 31, 2022, we refinanced the outstanding mortgage secured by the Hilton Garden Inn 52nd Street, which resulted in $21 of debt modification expense.
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
2022 Credit Facility
On August 4, 2022, we entered into a credit agreement (the "2022 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.
Immediately upon entering into the 2022 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, discussed below.

The Company incurred debt extinguishment expense of $4,302 related to the 2022 Credit Agreement and termination of the Prior Facilities on August 4, 2022.

We made principal payments on the term loan totaling $27,147 upon the disposition of the Pan Pacific hotel and the Gate hotel JFK airport as required by the 2022 Credit Agreement upon the disposition of hotels designated as borrowing based assets. The following table summarizes the balances outstanding at December 31, 2022:

Outstanding Balance
BorrowingDecember 31, 2022
Line of Credit$— 
Secured Term Loan:
Principal372,853 
Deferred Financing Costs(2,217)
Total Secured Term Loan$370,636 
The Credit Agreement contains financial covenants including a fixed charge coverage ratio of not less than 1.35 to 1.00 for the December 31, 2022 and March 31, 2023 test dates, and 1.50 to 1.00 for the June 30, 2023 test date and subsequent test dates; and a maximum leverage ratio of not more than 60%. We have determined that we are in compliance with all covenants contained in the 2022 Credit Agreement as of December 31, 2022.

The amount that we can borrow at any given time under our Line of Credit, and 2022 Credit Agreement is governed by certain operating metrics of designated unencumbered hotel properties known as borrowing base assets. As of December 31, 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- Mystic Marriott Hotel & Spa, Groton, CT
- Philadelphia Westin, Philadelphia, PA- Hilton Garden Inn JFK Airport, New York, NY
NOTE 5 – DEBT (CONTINUED)
Prior Credit Facilities

Prior to the 2022 Credit Facility, we maintained three secured credit agreements which aggregated to $747,481 with Citigroup Global Markets Inc., Wells Fargo Bank, Inc. and various other lenders. One credit agreement ("Credit Agreement") provided for a senior secured credit facility of $442,404 (“Credit Facility”). The Credit Facility consisted 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 was set to expire on August 10, 2022 prior to the refinancing discussed above.
We maintained another credit agreement which provided for a $278,846 senior secured loan agreement (“Second Term Loan”) and was set to expire on September 10, 2024 prior to the refinancing.
A separate credit agreement provided 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 was set to expire on August 10, 2022 prior to the refinancing.
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, provided 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, were required to be met on a recurring basis as outlined within the amendments.

The amendments to the Credit Agreements made certain other amendments to financial covenants in place for 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 interest rate for borrowings under the Line of Credit and Term Loans were 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 as of December 31, 2021:
Outstanding Balance
BorrowingSpreadDecember 31, 2021
Line of Credit
1.50% to 2.25%
$118,684 
Secured Term Loan:
First Term Loan
1.45% to 2.20%
192,404 
Second Term Loan
1.35% to 2.00%
278,846 
Third Term Loan
1.45% to 2.20%
26,231 
Deferred Financing Costs(1,396)
Total Secured Term Loan$496,085 

The weighted average interest rate on our credit facilities was 3.62%, 3.47% and 3.88% for the years ended December 31, 2022, 2021 and 2020, respectively.
NOTE 5 – DEBT (CONTINUED)
Notes Payable
Notes payable at December 31, 2022 and December 31, 2021 consisted of the following:

December 31, 2022December 31, 2021
Statutory Trust I and Statutory Trust II Notes Payable Indebtedness$51,548 $51,548 
Net Unamortized Deferred Financing Costs(653)(706)
Statutory Trust I and Statutory Trust II Notes Payable50,895 50,842 
Junior Notes Payable Indebtedness$— $156,239 
Net Unamortized Deferred Financing Costs— (4,209)
Net Unamortized Discount— (4,382)
Junior Notes Payable— 147,648 
Total Notes Payable$50,895 $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 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, 2022, 2021 and 2020 was 4.91%, 3.21% and 3.95%, 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 were set to mature on February 23, 2026. The 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 principal balance by $8,094 to $158,094 prior to the payoff.

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 $13,726 to redeem the Junior Notes on August 4, 2022.
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 for the five years following December 31, 2022 and thereafter are as follows:

Year Ending December 31,Amount
2023$123,994 
202484,886 
2025372,853 
2026— 
2027— 
Thereafter51,548 
$633,281 
Interest Expense
The table below shows the interest expense incurred by the Company during the years ended December 31, 2022, 2021, and 2020:
Years Ended December 31,
202220212020
Mortgage Loans Payable12,495 10,537 12,277 
Interest Rate Swap Contracts on Mortgages105 2,477 1,895 
Unsecured Notes Payable12,159 15,073 2,037 
Credit Facility and Term Loans19,593 15,587 21,927 
Interest Rate Swap Contracts on Credit Facility and Term Loans*(433)7,376 9,524 
Deferred Financing Costs Amortization4,013 4,628 3,551 
Other491 381 574 
     Total Interest Expense$48,423 $56,059 $51,785 
*Negative amount indicates decrease to interest expense.