COMPANY OVERVIEW AND MERGER AGREEMENT	9 Months Ended
COMPANY OVERVIEW AND MERGER AGREEMENT	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
COMPANY OVERVIEW AND MERGER AGREEMENT	COMPANY OVERVIEW AND MERGER AGREEMENT The accompanying unaudited consolidated financial statements of Hersha Hospitality Trust (“we,” “us,” “our” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) for interim financial information and with the general instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any future period. Accordingly, readers of these consolidated interim financial statements should refer to the Company’s audited financial statements prepared in accordance with US GAAP, and the related notes thereto, for the year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as certain footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from this report pursuant to the rules of the Securities and Exchange Commission. We are a self-administered Maryland real estate investment trust that was organized in May 1998 and completed our initial public offering in January 1999. Our common shares are traded on the New York Stock Exchange (the “NYSE”) under the symbol “HT.” We own our hotels and our investments in joint ventures through our operating partnership, Hersha Hospitality Limited Partnership (“HHLP” or “the Partnership”), for which we serve as the sole general partner. As of September 30, 2023, we owned an approximate 83.3% partnership interest in HHLP, including a 1.0% general partnership interest. The Merger Agreement On August 27, 2023, Hersha Hospitality Trust and HHLP entered into an Agreement and Plan of Merger (the “Merger Agreement”), with 1776 Portfolio Investment, LLC (“Parent”), 1776 Portfolio REIT Merger Sub, LLC, a wholly owned subsidiary of Parent (“REIT Merger Sub”), and 1776 Portfolio OP Merger Sub, LP, a subsidiary of Parent (“OP Merger Sub” and, together with Parent and REIT Merger Sub, the “Parent Parties”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, OP Merger Sub will be merged with and into HHLP (the “Partnership Merger”, and such surviving entity, the “Surviving Partnership”) and, immediately following the Partnership Merger, the Company shall be merged with and into REIT Merger Sub (the “Company Merger” and, together with the Partnership Merger, the “Mergers”). Upon completion of the Company Merger, REIT Merger Sub will survive as a wholly owned subsidiary of Parent and the separate existence of the Company will cease. The Company Merger and the other transactions contemplated by the Merger Agreement were approved and declared advisable by the board of trustees of the Company (the “Company Board”) and the Transaction Committee of the Company Board (the “Company Transaction Committee”). Merger Consideration Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Company Merger (the "Company Merger Effective Time) (A) each Priority Class A common share of beneficial interest, $0.01 par value per share, of the Company issued and outstanding immediately prior to the Company Merger Effective Time (other than Excluded Shares) will be automatically converted into the right to receive an amount in cash equal to $10.00 per share; (B) each 6.875% Series C Cumulative Redeemable Preferred Share of Beneficial Interest, par value $0.01 per share, of the Company issued and outstanding immediately prior to the Company Merger Effective Time (other than Excluded Shares) will be automatically converted into the right to receive an amount in cash equal to $25.00 per share plus accrued and unpaid dividends, if any, up to and including the date on which the closing takes place (the "Closing Date"), without interest; (C) each 6.50% Series D Cumulative Redeemable Preferred Share of Beneficial Interest, par value $0.01 per share, of the Company issued and outstanding immediately prior to the Company Merger Effective Time (other than Excluded Shares) will be automatically converted into the right to receive an amount in cash equal to $25.00 per share plus accrued and unpaid dividends, if any, up to and including the Closing Date, without interest; and (D) each 6.50% Series E Cumulative Redeemable Preferred Share of Beneficial Interest, par value $0.01 per share, of the Company issued and outstanding immediately prior to the Company Merger Effective Time (other than Excluded Shares) will be automatically converted into the right to receive an amount in cash equal to $25.00 per share plus accrued and unpaid dividends, if any, up to and including the Closing Date, without interest. At the effective time of the Partnership Merger (the "Partnership Merger Effective Time"), each Company Partnership Unit (as defined in the Merger Agreement) issued and outstanding immediately prior to the Partnership NOTE 1 - COMPANY OVERVIEW AND MERGER AGREEMENT (CONTINUED) Merger Effective Time (other than Excluded Units) will be converted into the right to receive an amount in cash equal to the Per Company Share Merger Consideration, without interest (the “OP Merger Consideration”). Company Equity Awards Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the Company Merger Effective Time, each award of restricted Company Common Shares granted under the Company’s Amended and Restated 2012 Equity Incentive Plan (each a “Company Restricted Share Award”) that is outstanding immediately prior to the Company Merger Effective Time will vest, and each Company Restricted Share Award will be canceled and converted into the right to receive a payment (without interest and subject to applicable tax withholding) equal to the number of Company Common Shares underlying such Company Restricted Share Award at $10.00 per share. At the Partnership Merger Effective Time, each Company LTIP Unit that is outstanding and unvested as of immediately prior to the Partnership Merger Effective Time shall vest and become transferable and immediately thereafter, the Company shall cause a Forced Conversion (as defined in the Merger Agreement) with respect to all Company LTIP Units then eligible for conversion (after giving effect to the vesting of all Company LTIP Units as described in in the Merger Agreement) such that, as of the Partnership Merger Effective Time, each then outstanding Company LTIP Unit will be converted into an equal number of common Company Partnership Units (with such converted Company Partnership Units treated in the same manner under the Merger Agreement as other outstanding Company Partnership Units). Closing Conditions The consummation of the Mergers is subject to certain customary closing conditions, including, among others, the approval of the Company Merger by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Shares entitled to vote on the Company Merger (the “Company Shareholder Approval”) and the other transactions contemplated by the Merger Agreement. The special meeting of shareholders (the “Special Meeting”) was held on November 8, 2023 in which the Company Shareholder Approval was obtained and other transactions proposed as part of the Mergers received a majority affirmative vote. The obligations of the parties to consummate the Mergers are not subject to any financing condition or the receipt of any financing by the Parent Parties. The Merger Agreement provides that, unless Parent otherwise notifies the Company in writing, the closing of the Mergers will not occur prior to November 28, 2023. Representations, Warranties and Covenants The Merger Agreement contains customary representations, warranties and covenants, including, among others, covenants by the Company to conduct its business in the ordinary course consistent with past practice, subject to certain exceptions, during the period between the execution of the Merger Agreement and the Company Merger Effective Time. The Merger Agreement also requires the Company to convene and hold a shareholders’ meeting for the purpose of obtaining the Company Shareholder Approval, which, as noted above, was held on November 8, 2023. Termination of the Merger Agreement; Termination Payment The Merger Agreement contains customary termination rights, including, among others, the right of either Parent or the Company to terminate the Merger Agreement if the Company Merger Effective Time has not occurred on or before 5:00 p.m. (Eastern Time) on February 27, 2024 (the “End Date”), if any Governmental Entity (as defined in the Merger Agreement) of competent jurisdiction has issued a final, non-appealable order permanently enjoining or otherwise prohibiting the consummation of the Mergers, or the Company Shareholder Approval has not been obtained upon a vote taken at the shareholders’ meeting or any adjournment or postponement thereof. The Merger Agreement also may be terminated by the Company under certain circumstances, including if, prior to obtaining the Company Shareholder Approval and after following certain procedures and adhering to certain restrictions, the Company Board (or a committee thereof) effects a Company Change of Recommendation in respect of a Company Superior Proposal and the Company pays Parent the Company Termination Payment (as defined below) or due to certain uncured material breaches of the Merger Agreement by any of the Parent Parties that causes certain conditions to the Closing not to be satisfied. In addition, Parent may terminate the Merger Agreement under certain circumstances and subject to certain restrictions, including if, prior to obtaining the Company NOTE 1 - COMPANY OVERVIEW AND MERGER AGREEMENT (CONTINUED) Shareholder Approval, the Company Board or Company Transaction Committee effects a Company Change of Recommendation or due to certain uncured material breaches of the Merger Agreement by the Company or Company OP that causes certain conditions to the Closing not to be satisfied. In certain specified circumstances further described in the Merger Agreement, in connection with the termination of the Merger Agreement, the Company will be required to pay Parent a termination fee of $30.0 million. In addition, in certain specified circumstances further described in the Merger Agreement, in connection with the termination of the Merger Agreement, Parent will be required to pay the Company a termination fee of $67.5 million upon termination of the Merger Agreement, including if the Company terminates the Merger Agreement as a result of the Parent Parties’ failure to close when otherwise obligated pursuant to the Merger Agreement or as a result of an uncured material breach of the Merger Agreement by the Parent Parties that causes certain conditions to the Closing not to be satisfied or as a result of the Closing not having occurred by the End Date in circumstances, in each case where the Company could have terminated as a result of the Parent Parties’ failure to close when otherwise obligated pursuant to the Merger Agreement. Dividends Pursuant to the terms of the Merger Agreement, the Company may declare and pay regular quarterly dividends and HHLP may declare and pay regular quarterly distributions, in each case, subject to certain limitations. The Company and HHLP may not pay dividends or distributions other than the Company Permitted Dividend without the written consent of Parent, except as necessary to preserve the Company’s tax status as a real estate investment trust or to avoid the imposition of income or excise taxes, subject to certain limitations. The foregoing description of the Merger Agreement is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 28, 2023. Commitments and Guarantees The Parent Parties have obtained debt and equity commitments for the transactions contemplated by the Merger Agreement, the aggregate proceeds of which will be sufficient for the Parent Parties to pay all amounts the Parent Parties may be obligated to pay pursuant to the Merger Agreement or the Mergers, including the Merger Consideration, the Preferred Merger Consideration and the OP Merger Consideration and all related fees and expenses. Certain entities affiliated with the Parent Parties have committed to fund Parent, prior to or substantially concurrently with the Closing, with aggregate equity contributions in an amount equal to $400 million, subject to the terms and conditions set forth in such equity commitment letter, dated as of August 27, 2023. The Parent Parties have delivered to the Company an executed debt commitment letter pursuant to which the lenders party thereto have committed to provide debt financing to Parent in an aggregate amount up to $1.05 billion, subject to the terms and conditions set forth in such debt commitment letter, dated as of August 27, 2023, to enable Parent to consummate the Mergers and make payments required under and in connection with the Merger Agreement. In addition, certain entities affiliated with the Parent Parties have entered into a limited guarantee for certain other payment obligations of the Parent Parties under the Merger Agreement in favor of the Company (the “Limited Guarantee”), up to an aggregate amount equal to $75.0 million, subject to the terms and conditions of the Limited Guarantee. NOTE 1 - COMPANY OVERVIEW AND MERGER AGREEMENT (CONTINUED) Going Concern Consideration Our secured term loan which has a principal balance of $347,853 as of September 30, 2023 will mature on August 4, 2024, and five of our mortgages totaling $184,952 mature in the next twelve months. Our current and anticipated liquidity is less than the principal balance of these obligations. As noted above, we anticipate that the closing of the transactions contemplated by the Merger Agreement will occur in the fourth quarter of 2023, subject to the closing conditions. Should the transactions contemplated by the Merger Agreement not close as anticipated, we fail to repay or refinance the debt noted above, or obtain a waiver or amendment for the debt, an event of default could occur. The occurrence of these events requires participation of third parties. As a result, we have concluded that substantial doubt exists about our ability to continue as a going concern.