SHARE BASED PAYMENTS

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

We measure the cost of employee service received in exchange for an award of equity instruments based on the grant-date fair value of the award. The compensation cost is amortized on a straight-line basis over the period during which an employee is required to provide service in exchange for the award. The compensation cost related to performance awards that are contingent upon market-based criteria being met is recorded at the fair value of the award on the date of the grant and amortized over the performance period. As discussed in Note 1, forfeitures of share-based awards are expensed as they occur.

Our shareholders approved the Hersha Hospitality Trust 2012 Equity Incentive Plan, as amended, (the “2012 Plan”) for the purpose of attracting and retaining executive officers, employees, trustees and other persons and entities that provide services to the Company.

Summary of Share Based Compensation Programs

Executives

The Compensation Committee of our Board of Trustees implements executive compensation strategies that align the interests of the Company’s executives with those of shareholders. It does so through a mix of base salary, the Short Term Incentive Program ("STIP"), and the Long-Term Incentive Program ("LTIP"). The STIP and LTIP are incentive compensation programs that align executive compensation with the performance of the Company.

•Short Term Incentive Program - On May 26, 2022, the Compensation Committee approved the 2022 STIP, pursuant to which the executive officers are eligible to earn cash and equity awards based on achieving a threshold, target or maximum level of defined performance objectives at the end of the performance period, December 31, 2022. Any amounts earned are satisfied 50% in cash and 50% in equity awards. The Compensation Committee provided the option to the executive officers to elect equity awards in lieu of cash payment for amounts earned under the 2022 STIP. As of December 31, 2022, no LTIP Units have been issued to the executive officers in settlement of the 2022 STIP.

The Company accounts for grants earned under the STIP as performance awards for which the Company assesses the probability of achievement of the performance conditions at the end of each period. Estimates of amounts earned under the STIP are recorded in general and administrative expense on the consolidated statement of operations and a liability is recorded in accounts payable, accrued expenses and other liabilities on the consolidated balance sheet.

•Long Term Incentive Program - On May 26, 2022, the Compensation Committee approved the 2022 LTIP in which 60% are issuable based on the Company's achievement of a certain level of (1) absolute total shareholder return (37.5% of the award), (2) relative total shareholder return as compared to the Company’s peer group (37.5% of the award), and (3) relative growth in revenue per available room ("RevPar") compared to the Company’s peer group (25.0% of the award) and the remaining 40% of the awards provide for time-based vesting. On May 26, 2022, the Compensation Committee awarded 194,427 LTIP Units related to the time-based portion of the plan. These Units will vest over a three year period from January 1, 2022 to December 31, 2024. The LTIP Units awarded were determined by dividing the dollar amount of award earned by $9.04, the per share volume weighted average trading price of the Company's common shares on the NYSE for the 20 trading days prior to December 31, 2021. The 60% market-based portion of the 2022 LTIP has a three-year performance period which commenced on January 1, 2022 and ends December 31, 2024.

The Company accounts for the total shareholder return components of these grants as market based awards where the Company estimates unearned compensation at the grant date fair value which is then amortized into compensation cost over the vesting period of each individual plan. The Company accounts for the RevPAR component of the grants as performance-based awards for which the Company assesses the probable achievement of the performance conditions at the end of the reporting period. As of December 31, 2022, no shares or LTIP Units have been issued to the executive officers in settlement of the 2022 market-based LTIP awards.

NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)

Remaining unearned compensation for LTIP Units issued to executives in settlement of awards under the STIP, LTIP or the Company’s legacy incentive compensation programs is recorded in noncontrolling interests on the Company’s consolidated balance sheets and is amortized in general and administrative expense on the consolidated statement of operations over the remaining vesting period.

Trustees

To align the interests of the Company’s trustees with those of shareholders, our trustees receive equity as a component of the compensation for their service on our board of trustees.

•Share Awards - Trustees receive biennial share awards that vest immediately upon issuance.

•Trustee Long Term Incentive Program - Trustees receive grants of restricted shares which vest over a three-year period subject to continued service to the Company’s board of trustees.

•Board Fee Compensation Elected in Equity - Trustees can make a voluntary election to receive any portion of their board fee compensation in the form of common equity valued at a 25% premium to the cash that would have been received. Shares issued for board retainer elected in equity vest over the year of service covered by the retainer and shares issued for service as lead director, committee chair and committee membership vest immediately upon issuance.

For shares issued that are subject to vesting, unearned compensation is recorded in additional paid in capital on the consolidated balance sheet and is amortized in general and administrative expense on the consolidated statement of operations over the vesting period. Share based compensation for shares issued that immediately vest is recorded in general and administrative expense on the consolidated statement of operations.

Employees and Non-Employees

Grants of restricted shares are issued to attract, retain and reward employees and non-employees that are critical to the Company’s success. These restricted shares typically vest over a period of between one and four years, subject to continued service to the Company.

NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)

Share Based Compensation Activity

A summary of our share based compensation activity from January 1, 2020 to December 31, 2022 is as follows:


	LTIP Unit Awards			Restricted Share Awards			Share Awards
	Number of Units	Weighted Average Grant Date Fair Value		Number of Restricted Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Unvested Balance as of January 1, 2020	441,201	$	17.99	92,102	$	17.07	—

Granted	1,112,862	5.24		189,851	5.34		—	N/A
Vested	(655,937)	12.56		(78,962)	12.49		—	N/A
Forfeited	—	N/A		(113)	18.00		—	N/A

Unvested Balance as of December 31, 2020	898,126	6.15		202,878	7.87		—

Granted	1,774,990	10.82		207,748	9.88		32,460	11.31
Vested	(1,014,121)	6.84		(239,736)	7.73		(32,460)	11.31
Forfeited	—	N/A		(150)	11.31		—	N/A

Unvested Balance as of December 31, 2021	1,658,995	10.73		170,740	10.52		—

Granted	194,427	11.25		119,745	9.90		71,832	10.57
Vested	(747,849)	12.46		(126,019)	10.82		(71,832)	10.57
Forfeited	—	N/A		(300)	11.25		—	N/A

Unvested Balance as of December 31, 2022	1,105,573	9.65		164,166	9.83		—

NOTE 9 – SHARE BASED PAYMENTS (CONTINUED)

The following table summarizes share based compensation expense and unearned compensation for the years ended December 31, 2022, 2021 and 2020 and as of December 31, 2022 and 2021:


	Share Based Compensation Expense						Unearned Compensation
	For the Year Ended December 31,						As of December 31,
	2022		2021		2020		2022		2021
Issued Awards
LTIP Unit Awards	10,910		8,952		6,105		5,311		11,344
Restricted Share Awards	1,027		1,215		2,063		683		834
Share Awards	1,068		367		—		—		—
Unissued Awards
Market Based	1,379		1,499		1,320		2,541		2,230

Total	$	14,384	$	12,033	$	9,488	$	8,535	$	14,408

The weighted-average period of which the unrecognized compensation expense will be recorded is approximately 0.7 years for LTIP Unit Awards and 0.5 years for Restricted Share Awards.

The remaining unvested target units are expected to vest as follows:


	2023	2024	2025

LTIP Unit Awards	1,046,441	59,132	—
Restricted Share Awards	125,190	35,976	3,000
	1,171,631	95,108	3,000