8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 15, 2006

HERSHA HOSPITALITY TRUST

(Exact name of registrant as specified in its charter)

Maryland	001-14765	251811499
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

510 Walnut Street, 9th Floor

Philadelphia, Pennsylvania 19106

(Address and zip code of

principal executive offices)

Registrant's telephone number, including area code: (215) 238-1046

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

This Amendment No. 1 to the Current Report on Form 8-K filed on February 21, 2006 by Hersha Hospitality Trust, a Maryland real estate investment trust (“Hersha”), is being filed to amend and restate the prior filing to include certain historical financial statements and pro forma financial information pursuant to Item 9.01 of Form 8-K.

Item 2.01. Completion of Acquisition or Disposition of Assets.

Hampton Inn (Center City)

On February 15, 2006, Hersha Hospitality Limited Partnership ("HHLP"), the operating partnership subsidiary of Hersha Hospitality Trust ("HT"), and Race Street LLC, a wholly owned subsidiary of HHLP ("Race Street" and with HHLP, the "Purchasers") closed on the acquisition of 80% of the outstanding limited partnership interests in Affordable Hospitality Associates, LP (the "AHA Partnership"), the owner of the land, improvements and certain personal property of the Hampton Inn (Center City) situated at 1301 Race Street, Philadelphia, Pennsylvania (the "Hampton Inn"). The limited partners of the AHA Partnership that sold their limited partnership interests are Affordable Hospitality, Inc. ("Affordable"), 3344 Associates ("3344") and Hersha Capital, Inc. ("HCI" and collectively with Affordable and 3344, the "AHA Sellers"). Race Street will be the sole general partner of the AHA Partnership.

The purchase price for the limited partnership interests in the AHA Partnership was approximately $25.0 million, which was paid from cash on hand and borrowings under Hersha's revolving credit facility with Commerce Bank. The $25.0 million in proceeds were used for the repayment of $17.4 million of AHA Partnership’s existing debt, settlement costs of $0.7 million and distributions to AHA Sellers of $6.9 million. Hersha's 80.0% equity interest in the AHA Partnership carries a 9.0% participating preferred return. Hersha Hospitality Management L.P. ("HHMLP"), Hersha's affiliated hotel management company, will manage the Hampton Inn.

Hasu P. Shah, our Chairman of the Board of Trustees and former Chief Executive Officer, owns direct and indirect interests in the AHA Sellers. K.D. Patel, a Trustee of HT and a Director of HHMLP, owns direct and indirect interests in the AHA Sellers. Jay H. Shah, our Chief Executive Officer, owns direct and indirect interests in the AHA Sellers. Neil H. Shah, our President and Chief Operating Officer, owns direct and indirect interests in the AHA Sellers. Ashish R. Parikh, our Chief Financial Officer, owns a direct interest in 3344. David L. Desfor, our Treasurer, owns a direct interest in 3344. Kiran P. Patel, our corporate secretary, owns direct and indirect interests in the AHA Sellers. Bharat C. Mehta, a Director of HHMLP, owns direct and indirect interests in the AHA Sellers. Each of these trustees and executive officers will receive a portion of the proceeds of the transaction. As a related party transaction, the transaction was approved by all of our independent trustees.

A copy of the Purchase Agreement was filed as Exhibit 10.2 to the Current Report on Form 8-K filed by Hersha Hospitality Trust on January 25, 2006.

Hilton Garden Inn

On February 16, 2006, HHLP closed on the acquisition of 100% of the outstanding membership interests in Metro JFK Associates LLC ("Metro LLC"), the owner of a leasehold interest in the land, improvements and certain personal property of the Hilton Garden Inn JFK situated at 148-18 134 Street, Jamaica, New York (the "Garden Inn"). The members of Metro LLC that sold their interests are Shanti III Associates ("Shanti"), Kunj Associates ("Kunj"), Devi Associates ("Devi"), Shree Associates ("Shree"), David L. Desfor ("Desfor"), Ashish R. Parikh ("Parikh"), Sal Shahriar ("Shahriar"), The Hasu and Hersha Shah 2004 Trust FBO Neil H. Shah ("FBO Neil") and The Hasu and Hersha Shah 2004 Trust FBO Jay H. Shah ("FBO Jay" and collectively with Shanti, Kunj, Devi, Shree, Desfor, Parikh, Shahriar and FBO Neil, the "Sellers").

The purchase price for the membership interests in Metro LLC was approximately $29.0 million and consisted of payments from cash on hand and borrowings under Hersha's revolving credit facility with Commerce Bank of $10.0 million, the assumption of existing debt of approximately $13.0 million and $6.0 million of HHLP operating units, as is more specifically described in Item 3.02 herein. HHMLP will manage the Garden Inn.

Hasu P. Shah, our Chairman of the Board of Trustees and former Chief Executive Officer, is the general partner of one of the Sellers. K.D. Patel, a Trustee of HT and a Director of HHMLP, is the general partner of one of the Sellers. Jay H. Shah, our Chief Executive Officer, is the beneficiary of and a trustee of one of the sellers and is a limited partner in one of the Sellers. Neil H. Shah, our President and Chief Operating Officer, is the beneficiary of and a trustee of one of the Sellers and is a limited partner in one of the Sellers. Ashish R. Parikh, our Chief Financial Officer, and David L. Desfor, our Treasurer, are each Sellers. Kiran P. Patel, our corporate secretary, is the general partner of one of the Sellers. Sal Shahriar is the Executive Vice President of Operations of HHMLP. Bharat C. Mehta, a Director of HHMLP, is the general partner of one of the Sellers. Each of these trustees and executive officers received a portion of the proceeds of the transaction. As a related party transaction, the transaction was approved by all of our independent trustees.

A copy of the Contribution Agreement was filed as Exhibit 10.1 to the Current Report on Form 8-K filed by Hersha Hospitality Trust on January 25, 2006.

Item 3.02. Unregistered Sales of Equity Securities.

On February 16, 2006, HHLP issued 657,895 common partnership units (the "Units") in connection with the closing of HHLP's acquisition of the membership interests in Metro LLC. As consideration for the sale of the Units, HHLP received membership interests in Metro LLC valued at approximately $6.0 million. In the Contribution Agreement, each Seller represented that it qualified as an "accredited investor" as that term is defined in Rule 501 of Regulation D under the Securities Act, and the Units were issued pursuant to the registration exemption for the sale of unregistered securities to an accredited investor. The Units are immediately eligible for conversion into shares of HT on a one-for-one basis.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

See Exhibit 99.1 which contains Affordable Hospitality Associates, L.P. and Metro JFK Associates LLC’S combined financial statements and independent auditor’s report as of December 31, 2005 and 2004 and is incorporated by reference herein.

(b) Pro Forma Financial Information.

See Exhibit 99.2 which contains pro forma financial information and is incorporated by reference herein.

(c) Exhibits

Exhibit 23.1 Consent of Reznick Group, P.C.

Exhibit 99.1 Financial Statements of Affordable Hospitality Associates, L.P. and Metro JFK Associates LLC.

Exhibit 99.2 Pro Forma Financial Statements.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HERSHA HOSPITALITY TRUST
Date: April 4, 2006	By:	/s/ Michael R. Gillespie
		Michael R. Gillespie
		Chief Accounting Officer

 3

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in (a) the Registration Statement on Form S−3 (No. 333−82666) and related prospectus pertaining to the Dividend Reinvestment Plan of Hersha Hospitality Trust and Subsidiaries (“HHT”), (b) the Registration Statement on Form S−3 (No. 333−113058) and related prospectus pertaining to the resale of common shares by various shareholders, (c) the Registration Statement on Form S−3 (No. 333−113227) and related prospectus pertaining to the resale of common shares by CNL Hospitality Properties, L.P. and its transferees, (d) the Registration Statement on Form S−3 (No. 333−113061) registering for offer and sale $200 million of common shares, preferred shares and debt securities of HHT and (e) the Registration Statement on Form S−8 (No. 333−122657) and related prospectus pertaining to the issuance of common shares pursuant to the Hersha Hospitality Trust 2004 Equity Incentive Plan, of our report dated March 10, 2006, with respect to the financial statements of Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC included in this Amendment No. 1 to the Current Report on Form 8-K dated February 15, 2006.

	REZNICK GROUP, P.C.
Baltimore, Maryland
April 5, 2006

EX-99.1

Exhibit 99.1

COMBINED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITORS’ REPORT

AFFORDABLE HOSPITALITY ASSOCIATES, L.P.

AND

METRO JFK ASSOCIATES, LLC

DECEMBER 31, 2005 AND 2004

Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

TABLE OF CONTENTS

	PAGE
INDEPENDENT AUDITORS’ REPORT	1
COMBINED FINANCIAL STATEMENTS
COMBINED BALANCE SHEETS	2
COMBINED STATEMENTS OF OPERATION	3
COMBINED STATEMENTS OF EQUITY (DEFICIT)	4
COMBINED STATEMENTS OF CASH FLOWS	5
NOTES TO COMBINED FINANCIAL STATEMENTS	6

Reznick Group, P.C. 500 East Pratt Street Suite 200 Baltimore, MD 21202-3100 Tel: (410) 783-4900 Fax: (410) 727-0460 www.reznickgroup.com Baltimore, MD 21202-3100

INDEPENDENT AUDITORS’ REPORT

Board of Directors

Hersha Hospitality Trust, Inc.

We have audited the accompanying combined balance sheets of Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC (the Hotels) as of December 31, 2005 and 2004, and the related combined statements of operations, equity (deficit) and cash flows for the years then ended. These combined financial statements are the responsibility of the Owners’ management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Hotels as of December 31, 2005 and 2004, and the results of their operations, the changes in equity (deficit) and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

	REZNICK GROUP, P.C.
Baltimore, Maryland
March 10, 2006

Atlanta n Baltimore n Bethesda n Charlotte n Chicago n Sacramento n Tysons Corner

Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

COMBINED BALANCE SHEETS

December 31, 2005 and 2004

	December 31,
	2005			2004
ASSETS
INVESTMENT IN HOTEL PROPERTIES
Land	$	1,650,000		$	1,650,000
Building and improvements		45,051,155			24,087,820
Furniture and equipment		2,573,861			526,027
Furniture and equipment under capital lease		2,001,457			2,001,457
		51,276,473			28,265,304
Less accumulated depreciation, including amounts for furniture and equipment under capital lease of $1,143,688 and $1,429,610, respectively		5,096,289			3,375,386
Net investment in hotel properties		46,180,184			24,889,918
OTHER ASSETS
Cash		677,204			61,340
Accounts receivable		927,272			262,971
Inventory		9,541			4,528
Prepaid expenses		28,347			18,067
Real estate tax escrow		496,974			189,828
Other assets, net of accumulated amortization of $511,223 and $396,309, respectively		905,507			523,289
	$	49,225,029		$	25,949,941
LIABILITIES AND PARTNERS’/MEMBERS’ EQUITY (DEFICIT)
LIABILITIES
Mortgages and loans payable	$	36,476,098		$	18,345,848
Mortgages and loans payable - related party		11,229,853			4,353,934
Accrued interest		392,654			-
Accounts payable and accrued expenses		1,648,890			791,547
Capital lease obligation		1,119,447			1,414,384
Due to affiliates		1,346,885			1,253,249
Total liabilities		52,213,827			26,158,962
PARTNERS’/MEMBERS’ EQUITY (DEFICIT)
Partners’/members’ equity (deficit)		(2,988,798	)		(209,021	)
Total partners’/members’ equity (deficit)		(2,988,798	)		(209,021	)
	$	49,225,029		$	25,949,941

See notes to combined financial statements

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

COMBINED STATEMENTS OF OPERATIONS

Years ended December 31, 2005 and 2004

	December 31,
	2005			2004
Revenue
Room revenue	$	12,293,525		$	5,846,827
Food revenue		542,043			51,579
Telephone revenue		95,131			35,057
Other revenue		1,000,790			292,506
Total revenue		13,931,489			6,225,969
Expenses
Food		475,720			212,503
Beverage		14,277			-
Telephone		35,833			23,448
Parking		292,602			290,860
Salaries and wages		3,266,530			1,583,702
Management contract		559,656			218,592
Advertising		22,578			19,560
Utilities		482,206			251,557
Repairs and maintenance		89,057			152,713
Insurance		103,522			149,496
Real estate taxes		376,581			87,082
Other operational		865,583			409,595
General and administrative		1,826,832			635,670
Franchise fees		1,098,178			460,385
Interest expense		3,449,128			2,291,556
Ground lease		353,430			-
Depreciation		1,720,903			927,935
Amortization		114,914			108,080
Total expenses		15,147,530			7,822,734
Net loss	$	(1,216,041	)	$	(1,596,765	)

See notes to combined financial statements

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

COMBINED STATEMENTS OF EQUITY (DEFICIT)

Years ended December 31, 2005 and 2004

Balance, December 31, 2003	$	1,387,744
Net loss		(1,596,765	)
Balance, December 31, 2004		(209,021	)
Distributions		(5,571,393	)
Contributions		4,007,657
Net loss		(1,216,041	)
Balance, December 31, 2005	$	(2,988,798	)

See notes to combined financial statements

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

COMBINED STATEMENTS OF CASH FLOWS

Years ended December 31, 2005 and 2004

	December 31,
	2005			2004
Cash flows from operating activities
Net loss	$	(1,216,041	)	$	(1,596,765	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization		1,835,817			1,036,015
(Increase) decrease in assets
Accounts receivable		(664,301	)		8,946
Inventory		(5,013	)		-
Prepaid expenses		(10,280	)		(1,417	)
Increase (decrease) in liabilities
Accounts payable and accrued expenses		857,343			367,207
Accrued interest		392,654			-
Net cash provided by (used in) operating activities		1,190,179			(186,014	)
Cash flows from investing activities
Franchise fees paid		(78,450	)		-
Net (deposits to) withdrawals from real estate tax escrow		(307,146	)		18,892
Investment in hotel property		(1,386,996	)		(129,908	)
Proceeds from sale of fixed assets		-			936,049
Net cash (used in) provided by investing activities		(1,772,592	)		825,033
Cash flow from financing activities
Mortgage principal payments		(14,741,759	)		(1,908,965	)
Proceeds from mortgages payable		12,897,928			566,093
Proceeds from notes payable affiliates		5,000,000			-
Payments under capital lease		(294,937	)		(263,693	)
Due to affiliates		93,636			1,222,452
Distributions to partners		(5,571,393	)		-
Contributions by partners		4,007,657			-
Loan costs paid		(192,855	)		-
Net cash provided by (used in) financing activities		1,198,277			(384,113	)
NET INCREASE IN CASH		615,864			254,906
Cash, beginning		61,340			(193,566	)
Cash, end	$	677,204		$	61,340
Supplemental disclosure of cash flow information
Cash paid during the year for interest	$	3,056,474		$	2,291,556
Supplemental disclosure of noncash investing and financing activities
During 2005, the Owners purchased hotel property in the amount of $21,850,000 through the assumption of a mortgage in the amount of $13,850,000 and the issuance of a note payable in the amount of $8,000,000.

See notes to combined financial statements

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2005 and 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The combined financial statements are a combination of the balance sheets, statements of operations, partner's/members' equity (deficit) and cash flows of two entities under common ownership (Hersha Affiliates) and management (Hersha Hospitality Management, LP) (collectively the Owners). The entities combined in these financial statements consist of the following:

Entity	Hersha Affiliates Ownership Pct
Affordable Hospitality Assocaites, L.P.		100	%
Metro JFK Associates, LLC		100	%

The above entities owned and operated the following hotel properties, whose operations are combined in these financial statements.

Hotel Property	Date Opened	Rooms	Location
Hampton Inn Philadelphia	May, 2001	250	Philadelphia, PA
Hilton Garden Inn	February, 2005	194	JFK Airport, NY

Affordable Hospitality Associates, L.P. owned and operated the Hampton Inn, Philadelphia since its inception.

On February 1, 2005, the Hersha Affiliates obtained a 50% interest in Metro 10 Hotels, LLC, which owned and operated the Hilton Garden Inn from February 1, 2005 (date opened) through November 28, 2005. On November 28, 2005, Metro JFK Associates, LLC purchased the hotel assets from Metro 10 Hotels, LLC and operated the hotel through December 31, 2005.

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

Metro 10 Hotels, LLC's operating activity is reflected in the combined statements of operations for the year ended December 31, 2005.
 

All intercompany transactions and balances have been eliminated in combination.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported accounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Investment in Hotel Properties

The hotel properties are stated at cost. Depreciation is provided for in amounts sufficient to relate the costs of depreciable assets to operations by use of accelerated methods over their estimated useful lives:

Building and improvements	7 - 39 years
Furniture and equipment	7 years

Maintenance and repairs are charged to operations as incurred. Additions and major improvements are capitalized. Upon sale or disposition, both the asset and related accumulated depreciation are relieved and the related gain or loss is included in operations.

The Owners evaluate long-lived assets for potential impairment by analyzing the operating results, trends and prospects for the properties and considering any other events and circumstances which might indicate potential impairment.

Franchise Fees

Franchise fees are amortized over the terms of the corresponding agreements using the straight-line method.

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

Loan Costs

Loan costs are amortized over the terms of the corresponding agreements using the straight-line method.

Ground Lease Asset

Amounts represent the excess of the fair value of the assumed ground lease over the total cost under the remaining term of the lease. The asset is being amortized over the term of the lease using the straight-line method.

Inventories

Consist of food, beverage and hotel supplies and are stated at the lower of cost or market.

Revenue Recognition

Room and other revenue are recognized as earned.

Accounts Receivable and Bad Debts

Accounts receivable are charged to bad debt expense when they are determined to be uncollectible based upon periodic review of the accounts by management. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debt expense; however, the effects of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method.

Advertising Costs

Advertising costs are expensed as incurred; including costs incurred under the terms of the franchise agreements.

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

Income Taxes

No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners/members on their respective income tax returns.

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

NOTE 2 - OTHER ASSETS

As of December 31, 2005 and 2004 other assets consisted of the following:

	2005			2004
Franchise fees	$	134,700		$	56,250
Financing fees		1,056,203			863,348
Ground lease asset		225,827			-
		1,416,730			919,598
Accumulated amortization		(511,223	)		(396,309	)
	$	905,507		$	523,289

Amortization expense related to the above assets for five years following December 31, 2005 is as follows:

December 31, 2006	$	108,592
2007	$	108,592
2008	$	49,776
2009	$	20,369
2010	$	20,369

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

NOTE 3 - MORTGAGES AND LOANS PAYABLE

Mortgages and loans payable at December 31, 2005 and 2004 consists of the following:

	December 31,
	2005		2004
Hampton Inn Philadelphia
Mortgage payable to The Union Labor Life Insurance Company in monthly installments of principal and interest of $114,405, bearing interest at the 8.5% per annum through maturity on June 1, 2008. The loan is secured by the land and building.	$	12,083,620	$	12,448,356
Mortgage payable to Philadelphia Industrial Development Corporation in monthly installments of principal and interest of $65,528, bearing interest at the 7.51% per annum through maturity in September 2016. The loan is secured by the land and building.		5,542,478		5,897,492

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

	December 31,
	2005		2004
Hilton Garden Inn
Mortgage to GE Capital Franchise Finance Corporation payable in monthly installments of principal and interest of $91,964, commencing January 1, 2006, bearing interest at the LIBOR rate plus 2.75% per annum (7.01 percent at December 31, 2005) through maturity in December 2010. The loan is secured by the building.		13,000,000		-
Total mortgages payable		30,626,098		18,345,848
Hilton Garden Inn
Note payable to Metro Ten Hotel, LLC, LTD bearing interest at 6% per annum through maturity in March 2006, when all outstanding principal and unpaid interest are due. The note is guaranteed by one of the members.		5,850,000		-
Total notes payable		5,850,000		-
Total mortgages and notes payable	$	36,476,098	$	18,345,848

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

Annual principal payments on the mortgages for the five years following December 31, 2005 are as follows:

December 31, 2006	$	10,981,287
2007		3,208,546
2008		3,453,193
2009		3,716,565
2010		4,000,099
Thereafter		11,116,408
	$	36,476,098

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

NOTE 4 - MORTGAGE AND LOANS PAYABLE -RELATED PARTY

Loans payable to related parties at December 31, 2005 and 2004 consists of the following:

	December 31,
	2005		2004
Hampton Inn Philadelphia
Mortgage payable to Hersha Hospitality Trust, a related party, in monthly installments of interest only at 10% per annum through maturity on December 31, 2005. The loan is secured by the land and building.	$	850,000	$	-
Note payable to Shreenathji Enterprises, LTD, an affiliate of a partner, in monthly installments of interest only at 8.58% per annum at December 31, 2005 and 15% per annum at December 31, 2004. The note is unsecured and due on demand.		4,541,673		3,536,934
Note payable to Hersha United Construction, an affiliate of a partner, the note is noninterest bearing, unsecured and due on demand.		328,000		328,000
Note payable to The Stern Group, an affiliate of a partner, the note is noninterest bearing, unsecured and due on demand.		340,000		340,000
Note payable to York Hunter Carribe, an affiliate of a partner, the note is noninterest bearing, unsecured and due on demand.		149,000		149,000

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

	December 31,
	2005		2004
Hilton Garden Inn
Note payable to Hersha Hospitality Trust, an affiliate of a partner, in monthly installments of interest only at 8.00% per annum. The note is unsecured and due on demand.		5,000,000		-
Note payable to Shreenathji Enterprises, LTD, an affiliate of the members, the note is noninterest bearing, unsecured and due on demand.		21,180		-
Total mortgages payable	$	11,229,853	$	4,353,934

Annual principal payments on the mortgages for the five years following December 31, 2005 are as follows:

December 31, 2006	$	11,229,853
2007		-
2008		-
2009		-
2010		-
Thereafter		-
	$	11,229,853

NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASE

The Hampton Inn Philadelphia has entered into an equipment lease requiring monthly payments of $34,213 through the lease term ending in 2008. Future minimum lease payments under the agreement, together with the present value of the minimum are as follows:

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Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

December 31, 2006	$	410,553
2007		410,553
2008		410,553
		1,231,659
Less amount representing interest		112,212
Present value of minimum lease payments	$	1,119,447

NOTE 6 - GROUND LEASE

Pursuant to the lease entered into between David Levine and Metro 10 Hotels, LLC on July 1, 2001 and its subsequent assumption by Metro JFK Associates, LLC effective September 9, 2005 with an original term of 99 years. The lease calls for a fixed monthly lease payment which increases at fixed amounts over the life of the lease. For the year ended December 31, 2005, rent expense on a straight-line basis was incurred in the amount of $353,430 which exceeded the minimum rent under the lease of $300,536, resulting in a liability of $53,074 which is included in accounts payable and accrued expenses.

The future minimum lease payments are as follows:

December 31, 2006	$	388,233
2007		396,003
2008		403,923
2009		412,005
2010		420,246
Thereafter		37,906,176
	$	39,926,586

NOTE 7 - RELATED PARTY TRANSACTIONS

Management Fee

All the hotels are managed by Hersha Hospitality Management, LP, an affiliate of the partners/members in the hotels, pursuant to an agreement which provides for a management fee of 3% - 3.5% of gross room revenue plus certain additional fees for bookkeeping and technology fees as described in the management agreement. For the years ended 2005 and 2004 total fees of $559,656 and $218,592, respectively, were incurred, of which $504,000 and $218,592 remains payable at December 31, 2005 and 2004, respectively, and are included in accounts payable and accrued expenses.

- 17 -

Affordable Hospitality Associates, L.P. and Metro JFK Associates, LLC

NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

December 31, 2005 and 2004

Due to affiliates

Affiliates of the partners/members in the hotels have advanced monies to cover certain development and operating costs of the hotel properties. The advances are non-interest bearing and due on demand. As of December 31, 2005 and 2004, the amounts owed to affiliates were $1,346,885 and $1,253,249, respectively.

NOTE 8 - FRANCHISE AGREEMENTS

Pursuant to the franchise agreements entered into between the Owners and Promus Hotel, Inc. (Hampton Inn Philadelphia) and Hilton Hotels Corporation (Hilton Garden Inn) the hotels are required to payment monthly royalty and marketing fees which collective range from 8% to 9.3% of gross revenue. During the years ended December 31, 2005 and 2004, total fees to paid to the franchisors amounted to $1,098,178 and $460,385, respectively.

NOTE 9 - SUBSEQUENT EVENT

On February 15, 2006, Hersha Hospitality Trust completed the acquisition of an eighty percent partnership interest in Affordable Hospitality Associates, LP for a purchase price of $27.9 million, including $21 million in debt and $6.9 in cash.

On February 16, 2006, Hersha Hospitality Trust completed the acquisition of substantially all of the assets of Metro JFK Associates, LLC for a purchase price of $29 million, including $13 million assumed in debt and the remainder paid for with cash on hand and borrowings under a credit line with Commerce Bank.

In connection with the purchase of the hotel properties, except as noted above, all related party mortgages and loans payable were paid in full.

NOTE 10 - CONCENTRATION OF CREDIT RISK

The Owners maintain their cash accounts with major financial institutions. The cash balances consist of checking accounts. The checking accounts are insured by the Federal Deposit Insurance Corporation up to $100,000 for each entity. As of December 31, 2005, the checking account balances exceed the federally insured limits by $206,413. The Owners have not experienced any losses with respect to bank balances in excess of government provided insurance and do not believe that a significant concentration of credit risk exists with respect to these cash balances as of December 31, 2005.

- 18 - 

EX-99.2

Exhibit 99.2

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Balance Sheet

As of December 31, 2005

(Unaudited, Dollar Amounts in Thousands Except per Share Data)

The accompanying unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2005 is presented as if the acquisition of our interests in the AHA Partnership and Metro LLC occurred on December 31, 2005.

This pro forma consolidated balance sheet should be read in conjunction with the Hersha and the AHA Partnership and Metro LLC historical financial statements and notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the acquisition of our interests in the AHA Partnership and Metro LLC have been made based on management’s best estimate.

The following unaudited Pro Forma Consolidated Balance Sheet is not necessarily indicative of what the actual financial position of Hersha would have been assuming such acquisition had been completed as of December 31, 2005, nor is it indicative of future financial positions of Hersha.

	(A)		(B)
	Historical		AHA Partnership and Metro LLC			Pro Forma
Assets:
Investment in Hotel Properties, net	$	317,980	$	55,539		$	373,519
Investment in Unconsolidated Joint Ventures		55,981		-			55,981
Development Loans Receivable from Related Parties		32,470		-			32,470
Due from Related Parties		2,779		-			2,779
Other Assets		46,145		(7,621	)		38,524
Total Assets	$	455,355	$	47,918		$	503,273
Liabilities and Shareholders’ Equity:
Line of Credit	$	-		26,000			26,000
Mortgages Payable		256,146		13,000			269,146
Due to Related Parties		4,655		820			5,475
Other Liabilities		12,625		894			13,519
Total Liabilities		273,426		40,714			314,140
Minority Interest:
Common Units		15,147		3,653			18,800
Interest in Consolidated Joint Ventures		2,079		1,204			3,283
Total Minority Interest		17,226		4,857			22,083
Shareholders’ Equity:		164,703		2,347			167,050
Total Liabilities and Shareholders’ Equity	$	455,355	$	47,918		$	503,273

1

HERSHA HOSPITALITY TRUST

Notes and Management’s Assumptions to the

Pro Forma Consolidated Balance Sheet

As of December 31, 2005

(Unaudited, Dollar Amounts in Thousands Except per Share Data)

(A) Represents the Consolidated Balance Sheet of Hersha as of December 31, 2005 as filed on Form 10-K/A.

(B) Represents the purchase of our interest in the AHA Partnership and Metro LLC as if it had occurred on December 31, 2005. We acquired an 80% interest in AHA Partnership for total consideration of $24,997. Cash was used to repay AHA Partnership debt of $17,392, settlement costs of $687 and distributions to AHA Sellers of $6,918. We will consolidate the AHA Partnership, since it is a voting interest entity, we are the general partner and we own a majority of the voting interest. We also acquired a 100% interest in Metro LLC for $28,994. The source of funding for these acquisitions was cash, borrowings under our line of credit, issuance of limited partnership units in HHLP, and mortgage payable assumed, as follows:

	AHA Partnership		Metro LLC		Combined
Cash paid, net	$	3,997	$	4,994	$	8,991
Line of credit		21,000		5,000		26,000
HHLP Limited Partnership Units (657,895 units issued at $9.12 per unit)		-		6,000		6,000
Less:
Mortgage Payable assumed		-		13,000		13,000
	$	24,997	$	28,994	$	53,991

Preliminary allocation of purchase is detailed in the following table:

	AHA Partnership			Metro LLC			Combined
Land	$	2,852		$	-		$	2,852
Building		21,228			24,889			46,117
Furniture and Fixtures		2,949			3,621			6,570
Investment in Hotel Properties		27,029			28,510			55,539
Hotel Accounts Receivable		171			598			769
Deferred Costs		-			190			190
Intangible Assets		43			301			344
Other Assets		40			27			67
Mortgage Payable		-			(13,000	)		(13,000	)
Capital Lease Payable		(873	)		-			(873	)
Advance Deposits		(21	)		-			(21	)
Due to related party		(188	)		(632	)		(820	)
Minority Interest		(1,204	)		-			(1,204	)

Included in intangible assets is purchase price allocated to franchise fees of $43 and $78 for the AHA Partnership and Metro LLC, respectively, and $226 related to an interest in a land lease. The land lease intangible relates to a land lease assumed with rates below fair value at the time of purchase and will be amortized over its remaining 94 year life.

As a result of the issuance of 657,895 limited partnership units, our pro forma ownership interest in HHLP is 85.3% while 14.7% is owned by a minority interest. To reflect the pro forma ownership interests in HHLP, Shareholder’s Equity was increased and Minority Interest was decreased by $2,347.

2

HERSHA HOSPITALITY TRUST

Pro Forma Consolidated Statement of Operations

For the year ended December 31, 2005

(Unaudited, Dollar Amounts in Thousands Except per Share Data)

The accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2005 is presented as if the acquisition of our interest in the AHA Partnership and Metro LLC had been consummated on January 1, 2005.

This pro forma consolidated statement should be read in conjunction with the Hersha and the AHA Partnership and Metro LLC historical financial statements and notes thereto. In management’s opinion, adjustments necessary to reflect the effects of the acquisitions have been made based on management’s best estimate.

The following unaudited Pro Forma Consolidated Statement of Operations is not necessarily indicative of what actual results of Hersha would have been assuming such acquisition had been completed as of January 1, 2005, nor is it indicative of the results of operations for future periods.

	(A)			(B)
	Historical			AHA Partnership and Metro LLC			Combined			Adjustments				Pro Forma
Revenue:
Hotel Operating Revenues	$	80,899		$	13,931		$	94,830		$	-			$	94,830
Total Revenue		80,899			13,931			94,830			-				94,830
Operating Expenses:
Hotel Operating Expenses		49,783			9,509			59,292			-				59,292
Land Lease		433			353			786			74		(C)		860
Real Estate and Personal Property Taxes and Property Insurance		4,346			-			4,346			-				4,346
General and Administrative		4,992			-			4,992			-				4,992
Unrecognized Gain on Derivative		(13	)		-			(13	)		-				(13	)
Depreciation and Amortization		10,600			1,836			12,436			472		(D)		12,908
Total Operating Expenses		70,141			11,698			81,839			546				82,385
Operating Income (Loss)		10,758			2,233			12,991			(546	)			12,445
Interest Income		359			-			359			-				359
Interest Income - Secured Loans Related Party		4,046			-			4,046			(1,226	)	(E)		2,820
Interest Income - Secured Loans		137			-			137			-				137
Other Revenue		520			-			520			-				520
Interest Expense		(14,094	)		(3,449	)		(17,543	)		1,875		(E)(F)		(15,668	)
Income (Loss) from continuing operations before income (loss) from joint venture investments, distributions to preferred unit holders and minority interests		1,726			(1,216	)		510			103				613
Income from Unconsolidated Joint Venture Investments		457			-			457			-				457
Income (Loss) from continuing operations before distributions to preferred unit holders and minority interests		2,183			(1,216	)		967			103				1,070
Loss Allocated to Minority Interest in Continuing Operations		-			-			-			233		(G)		233
Income (Loss) from Continuing Operations		2,183		$	(1,216	)	$	967		$	336			$	1,303
Preferred Distributions		1,920			-			1,920			-				1,920
Income (Loss) from Continuing Operations applicable to Common Shareholders	$	263		$	(1,216	)	$	(953	)	$	336			$	(617	)
Earnings Per Share from Continuing Operations applicable to Common Shareholders
Basic	$	0.01												$	(0.03	)
Diluted	$	0.01												$	(0.03	)
Weighted Average Common Shares Outstanding
Basic		20,293,554													20,293,554
Diluted		20,335,181													20,335,181

3

HERSHA HOSPITALITY TRUST

Notes and Management’s Assumptions to the

Pro Forma Consolidated Statement of Operations

For the Year Ended December 31, 2005

(Unaudited, Dollar Amounts in Thousands Except per Share Data)

(A) Represents Hersha’s Consolidated Statement of Operations for the year ended December 31, 2005 as filed on Form 10-K, excluding discontinued operations.

(B) Represents the historical statement of operations for the AHA Partnership and Metro LLC for the year ended December 31, 2005, included in the combined financial statements of Affordable Hospitality Associates L.P. and Metro JFK Associates, LLC.

(C) Represents the adjustment to reflect the amortization of the land lease intangible and lease expense for the Metro LLC land lease over the remaining 94 year life of the lease on a straight line basis. The pro forma adjustment is as follows:

Amortization of the land lease intangible and land lease expense on a straight line basis	$	427
Less: Metro LLC historical land lease expense		(353	)
Pro Forma Adjustment	$	74

(D) Represents the adjustment to reflect the estimated depreciation on property of the AHA Partnership and Metro LLC after the allocation of purchase price, net of the amounts recorded for depreciation in the historical statement of operations for the AHA Partnership and Metro LLC. Depreciation and amortization are computed using the straight-line method and are based upon the estimated useful life of the asset.

We acquired an 80% interest in the AHA Partnership from our partners in the venture. The purchase price allocated to the property of the AHA Partnership represents the historical cost of the property, net of accumulated depreciation, and our portion of the fair value in excess of the net historical cost of the property. The pro forma adjustment reflects the depreciation expense incurred on the fair value in excess of the historical net cost of the property and is as follows:

Assets Acquired	Fair Value in excess of Net Historical Cost		Life		Depreciation Expense
Land	$	1,203		N/A	$	-
Building and Improvements		461		40		12
FF&E		1,464		7		209
Pro Forma Adjustment					$	221

We acquired a 100% interest in Metro LLC and have allocated the purchase price to the assets acquired and liabilities assumed. The purchase price allocated to the property of Metro LLC represents fair value of the property. The property was put in service and began depreciating on February 1, 2005. The pro forma adjustment reflects the depreciation expense incurred on the fair value of the property in excess of the depreciation included in the historical statement of operations for Metro LLC and is as follows:

Assets Acquired	Fair Value		Life		Depreciation Expense
Building and Improvements	$	24,889		40	$	544
FF&E		3,621		7		453
Total						997
Less: Metro LLC historical depreciation						(746	)
Pro Forma Adjustment					$	251

4

(E) Represents the elimination of interest income and interest expense on development loans receivable with related parties and interest bearing deposits with the AHA Partnership and Metro LLC. We maintained a development loan receivable with Metro LLC bearing interest at 10.0% per annum. Interest from this development loan receivable was $1,156 for the year ended December 31, 2005. We also had deposits with the AHA Partnership and Metro LLC bearing interest at 8.0% per annum. Interest from these deposits was $70 for the year ended December 31, 2005.

(F) Represents the adjustment to reflect the estimated interest expense for the AHA Partnership and Metro LLC on proceeds from the borrowings under the line of credit facility to finance the acquisition, net of interest expense included in the historical statement of operations for the AHA Partnership which was paid down on the date of acquisition. The line of credit bears interest at the Wall Street Journal Prime Rate less 0.50% which was 6.75% as of December 31, 2005. The pro forma adjustment is as follows:

		Principal	Weighted Average Interest Rate			Interest Expense
Line of Credit	$	26,000	5.69	%	$	1,479
Less: AHA Partnership historical interest expense						(2,128	)
Pro Forma Adjustment					$	(649	)

(G) Represents minority interest allocable to our partners in the AHA Partnership and minority interest allocable to holders of units of limited partnership interest in our operating partnership, HHLP.

The balance sheet and results of operation of AHA Partnership will be consolidated in our financial statements. Our 80% interest in the AHA Partnership carries a 9% participating preferred return on our contributed equity, limited by cash available for distribution. The 9% preferred return is non-cumulative. Cash available in excess of our 9% preferred return and the 9% return on our partners contributed equity is distributed in accordance with each partners interest in the AHA partnership. Pro forma cash available for distribution for the year ended December 31, 2005 was $1,702 and is allocated to Hersha in the amount of $1,362 and to our partner in the venture in the amount of $340. Based upon the preferences in cash distributions and upon liquidation, as defined in the partnership agreement, pro forma net loss of $151 was allocated to our partners in the venture due to our preference in the event of liquidation of the AHA Partnership.

We issued 657,895 common units of our operating partnership, HHLP in connection with the acquisition of Metro LLC, increasing the pro forma weighted average units outstanding in HHLP for the year ended December 31, 2005 from 2,842,507 to 3,299,952. As a result, pro forma weighted average minority interest percentage increased from 12.3% to 14.7%. The cumulative minority interest effect of the AHA Partnership and Metro LLC is calculated by using the weighted average minority interest percentage of 14.7% for year ended December 31, 2005, as follows:

Increase in historical Hersha income allocated to HHLP unit holders			$	(60	)
Minority interest in historical income (loss) of AHA Partnership and Metro LLC
Hersha interest in historical income of AHA Partnership	1,362
Historical Metro LLC net loss	(304	)
Total Interest in historical net income (loss) of AHA Partnership and Metro LLC	1,058
Minority interest percentage	14.7	%
Pro forma adjustment				(156	)
Minority interest in pro forma adjustments
Depreciation pro forma adjustment	(472	)
Interest expense pro forma adjustment	(1,479	)
Straight-line lease expense pro forma adjustment	(74	)
Total pro forma adjustments	(2,025	)
Minority interest percentage	14.7	%
Pro forma adjustment				298
Total pro forma adjustments for minority interest due to HHLP unit holders			$	82

The total pro forma adjustment for loss allocated to our partners in the AHA Partnership and the loss allocated to HHLP unit holders is $233.

5