----

----

| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| Maryland                                                       |   | 251811499                            |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or Other Jurisdiction of Incorporation or Organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| 44 Hersha Drive, Harrisburg, PA                                |   | 17102                                |
| (Address of Registrant’s Principal Executive Offices)    |   | (Zip Code)                           |

| Title of each class                                                       |   | Name of each exchange on which registered |
|---------------------------------------------------------------------------|--------|-------------------------------------------|
| Class A Common Shares of Beneficial Interest, par value $.01 per share    |   | New York Stock Exchange                   |
| Series A Cumulative Redeemable Preferred Shares, par value $.01 per share |   | New York Stock Exchange                   |

| Large accelerated filer  o           | Accelerated filer                x |
|------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
| Non-accelerated filer    o | Small reporting company  o                                                                               |

----

----

----

HE

|     |                                                                                                                          | Form 10-K |
|----------|-------------------------------------------------------------------------------------------------------------------------------|-----------|
|     |                                                                                                                          | Report    |
| Item No. |                                                                                                                          | Page      |
|     |                                                                                                                          |      |
| PART I   |
| Item 1.  | Business                                                                                                                      | 1         |
| Item 1A. | Risk Factors                                                                                                                  | 8         |
| Item 1B. | Unresolved Staff Comments                                                                                                     | 18        |
| Item 2.  | Properties                                                                                                                    | 19        |
| Item 3.  | Legal Proceedings                                                                                                             | 20        |
| PART II  |                                                                                                                          |      |
| Item 4.  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity  Securities | 21        |
| Item 5.  | Selected Financial Data                                                                                                       | 23        |
| Item 6.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                   | 25        |
| Item 6A. | Quantitative and Qualitative Disclosures About Market Risk                                                                    | 39        |
| Item 7.  | Financial Statements and Supplementary Data                                                                                   | 41        |
| Item 8.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                          | 92        |
| Item 8A. | Controls and Procedures                                                                                                       | 92        |
| Item 8B. | Other Information                                                                                                             | 94        |
| PART III |                                                                                                                          |      |
| Item 9.  | Trustees, Executive Officers and Corporate Governance                                                                         | 95        |
| Item 10. | Executive Compensation                                                                                                        | 95        |
| Item 11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                                | 95        |
| Item 12. | Certain Relationships and Related Transactions, and Trustee Independence                                                      | 96        |
| Item 13. | Principal Accountant Fees and Services                                                                                        | 96        |
| PART IV  |                                                                                                                          |      |
| Item 14. | Exhibits and Financial Statement Schedules                                                                                    | 97        |

----

Index

| Item 1. | Business |
|---------|----------|

| · | our business or investment strategy; |
|--------|--------------------------------------|

| · | our projected operating results; |
|--------|----------------------------------|

| · | our distribution policy; |
|--------|--------------------------|

| · | our liquidity; |
|--------|----------------|

| · | completion of any pending transactions; |
|--------|-----------------------------------------|

| · | our ability to obtain future financing arrangements; |
|--------|------------------------------------------------------|

| · | our understanding of our competition; |
|--------|---------------------------------------|

| · | market trends; and |
|--------|--------------------|

| · | projected capital expenditures. |
|--------|---------------------------------|

| · | general volatility of the capital markets and the market price of our common shares; |
|--------|--------------------------------------------------------------------------------------|

| · | changes in our business or investment strategy; |
|--------|-------------------------------------------------|

| · | availability, terms and deployment of capital; |
|--------|------------------------------------------------|

| · | availability of qualified personnel; |
|--------|--------------------------------------|

| · | changes in our industry and the market in which we operate, interest rates, or the general economy; |
|--------|-----------------------------------------------------------------------------------------------------|

| · | the degree and nature of our competition; |
|--------|-------------------------------------------|

| · | financing risks, including the risk of leverage and the corresponding risk of default on our mortgage loans and other debt and potential inability to refinance or extend the maturity of existing indebtedness; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | the depth and duration of the current economic downturn; |
|--------|----------------------------------------------------------|

----

Index

| · | levels of spending in the business, travel and leisure industries, as well as consumer confidence; |
|--------|----------------------------------------------------------------------------------------------------|

| · | declines in occupancy, average daily rate and RevPAR and other hotel operating metrics; |
|--------|-----------------------------------------------------------------------------------------|

| · | hostilities, including future terrorist attacks, or fear of hostilities that affect travel; |
|--------|---------------------------------------------------------------------------------------------|

| · | financial condition of, and our relationships with, our joint venture partners, third-party property managers, franchisors and hospitality joint venture partners; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | the degree and nature of our competition; |
|--------|-------------------------------------------|

| · | increased interest rates and operating costs; |
|--------|-----------------------------------------------|

| · | risks associated with potential acquisitions, including the ability to ramp up and stabilize newly acquired hotels with limited or no operating history, and dispositions of hotel properties; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | risks associated with our development loan portfolio, including the ability of borrowers to repay outstanding principal and accrued interest at maturity; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | availability of and our ability to retain qualified personnel; |
|--------|----------------------------------------------------------------|

| · | our failure to maintain our qualification as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

| · | environmental uncertainties and risks related to natural disasters; |
|--------|---------------------------------------------------------------------|

| · | changes in real estate and zoning laws and increases in real property tax rates; and |
|--------|--------------------------------------------------------------------------------------|

| · | the factors discussed in Item 1A of this report under the heading “Risk Factors” and in other reports we file with the Securities and Exchange Commission from time to time. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | working together with our hotel management companies to increase occupancy levels and revenue per available room, or "RevPAR", through active property-level management, including intensive marketing efforts to tour groups, corporate and government extended stay customers and other wholesale customers and expanded yield management programs, which are calculated to better match room rates to room demand; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | maximizing our earnings by managing costs and positioning our hotels to capitalize on increased demand in the high quality, upper-upscale, upscale, mid-scale and extended-stay lodging segment, which we believe can be expected to follow from improving economic conditions. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | nationally-franchised hotels operating under popular brands, such as Marriott Hotels & Resorts, Hilton Hotels, Courtyard by Marriott, Residence Inn by Marriott, Spring Hill Suites by Marriott, Hilton Garden Inn, Homewood Suites by Hilton, Hampton Inn, Sheraton Hotels & Resorts, DoubleTree, Embassy Suites, Hyatt Summerfield Suites, TownePlace Suites and Holiday Inn Express; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | hotels in locations with significant barriers-to-entry, such as high development costs, limited availability of land and lengthy entitlement processes; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | hotels in our target markets where we can realize operating efficiencies and economies of scale. |
|--------|--------|--------------------------------------------------------------------------------------------------|

----

Index

|                  |   | Wholly Owned |   |   | Joint Ventures |   |   | Total  |   |
|-----------------------|--------|--------------|--------|--------|----------------|--------|--------|--------|--------|
| Manager               |   | Hotels       |   |   | Rooms          |   |   | Hotels |   |   | Rooms |   |   | Hotels |   |   | Rooms |   |
| HHMLP                 |   |         | 49     |   |           |   | 5,322  |   |   |   | 6 |   |   |   | 872 |   |   |   | 55 |   |   |   | 6,194 |   |
| Waterford Hotel Group |   |         | -      |   |           |   | -      |   |   |   | 9 |   |   |   | 1,708 |   |   |   | 9 |   |   |   | 1,708 |   |
| LodgeWorks            |   |         | 7      |   |           |   | 1,005  |   |   |   | - |   |   |   | - |   |   |   | 7 |   |   |   | 1,005 |   |
| Jiten Management      |   |         | -      |   |           |   | -      |   |   |   | 2 |   |   |   | 282 |   |   |   | 2 |   |   |   | 282 |   |
| Marriott              |   |         | 1      |   |           |   | 203    |   |   |   | - |   |   |   | - |   |   |   | 1 |   |   |   | 203 |   |
|                  |   |         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                 |   |         | 57     |   |           |   | 6,530  |   |   |   | 17 |   |   |   | 2,862 |   |   |   | 74 |   |   |   | 9,392 |   |

----

Index

| Quarter to which Distribution Relates |   | Class A Common Shares and Limited Partnership Unit Per Share Distribution Amount |   | Record Date |      | Payment Date |       | Series A Preferred Per Share Distribution Amount |   | Record Date |   | Payment Date |   |
|---------------------------------------|--------|----------------------------------------------------------------------------------|--------|-------------|-----------|--------------|------------|--------------------------------------------------|--------|-------------|--------|--------------|--------|
| 2009                                  |   |                                                                             |   |        |      |         |       |                                             |   |        |   |         |   |
| Fourth Quarter                        |   | $                                                                                | 0.05   |        | 1/4/2010  |         | 1/15/2010  |                                             | $      | 0.50        |   | 1/1/2010     |   | 1/15/2010 |   |
| Third Quarter                         |   | $                                                                                | 0.05   |        | 9/30/2009 |         | 10/15/2009 |                                             | $      | 0.50        |   | 10/1/2009    |   | 10/15/2009 |   |
| Second Quarter                        |   | $                                                                                | 0.05   |        | 6/30/2009 |         | 7/15/2009  |                                             | $      | 0.50        |   | 7/1/2009     |   | 7/15/2009 |   |
| First Quarter                         |   | $                                                                                | 0.18   |        | 3/31/2009 |         | 4/15/2009  |                                             | $      | 0.50        |   | 4/1/2009     |   | 4/15/2009 |   |
| 2008                                  |   |                                                                             |   |        |      |         |       |                                             |   |        |   |         |   |   |   |
| Fourth Quarter                        |   | $                                                                                | 0.18   |        | 1/5/2009  |         | 1/16/2009  |                                             | $      | 0.50        |   | 1/1/2009     |   | 1/15/2009 |   |
| Third Quarter                         |   | $                                                                                | 0.18   |        | 9/30/2008 |         | 10/16/2008 |                                             | $      | 0.50        |   | 10/1/2008    |   | 10/15/2008 |   |
| Second Quarter                        |   | $                                                                                | 0.18   |        | 6/30/2008 |         | 7/16/2008  |                                             | $      | 0.50        |   | 7/1/2008     |   | 7/15/2008 |   |
| First Quarter                         |   | $                                                                                | 0.18   |        | 3/31/2008 |         | 4/16/2008  |                                             | $      | 0.50        |   | 4/1/2008     |   | 4/15/2008 |   |

----

Index

| Franchisor                   |   | Franchises                                                                                          |
|------------------------------|--------|-----------------------------------------------------------------------------------------------------|
| Marriott International       |   | Marriott, Residence Inn, Springhill Suites, Courtyard by Marriott, Fairfield Inn, TownePlace Suites |
| Hilton Hotels Corporation    |   | Hilton, Hilton Garden Inn, Hampton Inn, Homewood Suites                                             |
| Intercontinental Hotel Group |   | Holiday Inn, Holiday Inn Express, Holiday Inn Express & Suites                                  |
| Hyatt Hotels Corporation     |   | Hyatt Summerfield Suites, Hawthorn Suites                                                           |
| Starwood Hotels              |   | Sheraton Hotels                                                                                     |
| Choice Hotels International  |   | Comfort Inn, Comfort Suites, Sleep Inn, Mainstay Suites                                             |

|   | 1. | such manager is, or is related to a person who is, actively engaged in the trade or business of operating “qualified lodging facilities” for any person unrelated to us and the TRS; |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.  | such manager does not own, directly or indirectly, more than 35% of our shares; |
|--------|----------|---------------------------------------------------------------------------------|

|   | 3. | no more than 35% of such manager is owned, directly or indirectly, by one or more persons owning 35% or more of our shares; and |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | we do not directly or indirectly derive any income from such manager. |
|--------|----|-----------------------------------------------------------------------|

----

Index

| Item 1A. | Risk Factors |
|----------|--------------|

----

Index

----

Index

----

Index

|   | · | the current downturn in lodging fundamentals is more severe or prolonged in New York City compared to the United States as a whole; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we adopt an unsuccessful strategy to ramp up and stabilize operations at the three, newly-constructed Times Square hotels; or |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | New York City is impacted by other unforeseen events beyond our control, including, among others, terrorist attacks and travel related health concerns including pandemics and epidemics such as H1N1 influenza (swine flu), avian bird flu and SARS. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | Available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------|

|   | · | The duration of the hedge may not match the duration of the related liability. |
|--------|--------|--------------------------------------------------------------------------------|

|   | · | The party at risk in the hedging transaction may default on its obligation to pay. |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | The credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

----

Index

----

Index

|   | · | amend the Declaration of Trust to increase or decrease the aggregate number of shares of beneficial interest or the number of shares of beneficial interest of any class or series that we have the authority to issue; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | cause us to issue additional authorized but unissued common shares or preferred shares; and |
|--------|--------|---------------------------------------------------------------------------------------------|

|   | · | classify or reclassify any unissued common or preferred shares and to set the preferences, rights and other terms of such classified or reclassified shares, including the issuance of additional common shares or preferred shares that have preference rights over the common shares with respect to dividends, liquidation, voting and other matters. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | 85% of our REIT ordinary income for that year; |
|--------|--------|------------------------------------------------|

|   | · | 95% of our REIT capital gain net income for that year; and |
|--------|--------|------------------------------------------------------------|

|   | · | 100% of our undistributed taxable income required to be distributed from prior years. |
|--------|--------|---------------------------------------------------------------------------------------|

----

Index

----

Index

| Item 1B. | Unresolved Staff Comments |
|----------|---------------------------|

----

Index

| Item 2. | Properties |
|---------|------------|

|                             | Name                         | Year Opened | Number of Rooms |
|----------------------------------|------------------------------|-------------|-----------------|
| Comfort Inn                      |                         |        |
|                             | North Dartmouth, MA          | 1986        | 84              |
|                             | Harrisburg, PA               | 1998        | 81              |
| Courtyard                        |                         |        |
|                             | Alexandria, VA               | 2006        | 203             |
|                             | Scranton, PA                 | 1996        | 120             |
|                             | Langhorne, PA                | 2002        | 118             |
|                             | Brookline/Boston, MA*        | 2003        | 188             |
|                             | Wilmington, DE               | 1999        | 78              |
| Fairfield Inn                    |                         |        |
|                             | Bethlehem, PA                | 1997        | 103             |
|                             | Laurel, MD                   | 1999        | 109             |
| Hampton Inn                      |                         |        |
|                             | Brookhaven, NY               | 2002        | 161             |
|                             | Chelsea/Manhattan, NY        | 2003        | 144             |
|                             | Hershey, PA                  | 1999        | 110             |
|                             | Carlisle,PA                  | 1997        | 95              |
|                             | Danville, PA                 | 1998        | 72              |
|                             | Selinsgrove, PA              | 1996        | 75              |
|                             | Herald Square, Manhattan, NY | 2005        | 136             |
|                             | Philadelphia, PA             | 2001        | 250             |
|                             | Seaport, NY                  | 2006        | 65              |
|                             | Smithfield, RI               | 2008        | 101             |
|                             | West Haven, CT               | 2009        | 98              |
| Hawthorn Suites                  |                         |        |
|                             | Franklin, MA                 | 1999        | 100             |
| Hilton Garden Inn                |                         |        |
|                             | JFK Airport, NY*             | 2005        | 188             |
|                             | TriBeCa, NY                  | 2009        | 151             |
|                             | Edison, NJ*                  | 2003        | 132             |
| Holiday Inn                      |                         |        |
|                             | Norwich, CT                  | 2006        | 134             |
| Holiday Inn Express              |                         |        |
|                             | Hauppauge, NY                | 2001        | 133             |
|                             | Cambridge, MA                | 1997        | 112             |
|                             | Hershey, PA                  | 1997        | 85              |
|                             | New Columbia, PA             | 1997        | 81              |
|                             | Malvern, PA                  | 2004        | 88              |
|                             | Oxford Valley, PA            | 2004        | 88              |
|                             | Chester, NY                  | 2006        | 80              |
|                             | Camp Springs, MD             | 2008        | 127             |
| Holiday Inn Express & Suites |                         |
|                             | Harrisburg, PA               | 1997        | 77              |
|                             | King of Prussia, PA          | 2004        | 155             |
| Independent                      |                         |        |
|                             | Wilmington, DE               | 1999        | 71              |
|                             | Fifth Ave, NY                | 2007        | 70              |
|                             | TriBeCa, NY                  | 2008        | 45              |
|                             | Brooklyn, NY                 | 2008        | 93              |
| Mainstay                         |                         |        |
|                             | Valley Forge, PA             | 2000        | 69              |
| Residence Inn                    |                         |        |
|                             | North Dartmouth, MA          | 2002        | 96              |
|                             | Tysons Corner, VA            | 1984        | 96              |
|                             | Framingham, MA               | 2000        | 125             |
|                             | Greenbelt, MD                | 2002        | 120             |
|                             | Norwood, MA                  | 2006        | 96              |
|                             | Langhorne, PA                | 2007        | 100             |
|                             | Carlisle,PA                  | 2007        | 78              |

----

Index

|               | Name              | Year Opened | Number of Rooms |
|--------------------|-------------------|-------------|-----------------|
| Sleep Inn          |              |        |
|               | Valley Forge, PA  | 2000        | 87              |
| Sheraton Hotel     |              |        |
|               | JFK Airport, NY*  | 2008        | 150             |
| Summerfield Suites |              |        |
|               | White Plains, NY  | 2000        | 159             |
|               | Bridgewater, NJ   | 1998        | 128             |
|               | Gaithersburg, MD  | 1998        | 140             |
|               | Pleasant Hill, CA | 2003        | 142             |
|               | Pleasanton, CA    | 1998        | 128             |
|               | Scottsdale, AZ    | 1999        | 164             |
|               | Charlotte, NC     | 1989        | 144             |
| TownePlace Suites  |              |        |
|               | Harrisburg, PA    | 2008        | 107             |
| TOTAL ROOMS        |              |        | 6,530           |

----

Index

|                | Name                | Year Opened |   | Number of Rooms |   |   | HHLP Ownership in Asset |   |   | HHLP Preferred Return |   | Consolidated/  Unconsolidated |
|---------------------|---------------------|-------------|--------|-----------------|--------|--------|-------------------------|--------|--------|-----------------------|--------|-----------------------------------------|
| Courtyard           |                |        |   |            |   |   |                    |   |   |                  |   |
|                | Norwich, CT         | 1997        |   |            | 144    |   |                    |   | 66.7   | %                     |   |                                    | 8.5 | % | Unconsolidated |
|                | South Boston, MA**  | 2005        |   |            | 164    |   |                    |   | 50.0   | %                     |   |                                    | N/A |   | Unconsolidated |
|                | Warwick, RI         | 2003        |   |            | 92     |   |                    |   | 66.7   | %                     |   |                                    | 8.5 | % | Unconsolidated |
|                | Ewing/Princeton, NJ | 2004        |   |            | 130    |   |                    |   | 50.0   | %                     |   |                                    | 11.0 | % | Unconsolidated |
| Hilton              |                |        |   |            |   |   |                    |   |   |                  |   |                                    |   |   |
|                | Hartford, CT        | 2005        |   |            | 393    |   |                    |   | 8.8    | %                     |   |                                    | 8.5 | % | Unconsolidated |
| Homewood Suites     |                |        |   |            |   |   |                    |   |   |                  |   |                                    |   |   |
|                | Glastonbury, CT     | 2006        |   |            | 136    |   |                    |   | 48.0   | %                     |   |                                    | 10.0 | % | Unconsolidated* |
| Marriott            |                |        |   |            |   |   |                    |   |   |                  |   |                                    |   |   |
|                | Mystic, CT          | 2001        |   |            | 285    |   |                    |   | 66.7   | %                     |   |                                    | 8.5 | % | Unconsolidated |
|                | Hartford, CT        | 2005        |   |            | 409    |   |                    |   | 15.0   | %                     |   |                                    | 8.5 | % | Unconsolidated |
| Residence Inn       |                |        |   |            |   |   |                    |   |   |                  |   |                                    |   |   |
|                | Danbury, CT         | 1999        |   |            | 78     |   |                    |   | 66.7   | %                     |   |                                    | 8.5 | % | Unconsolidated |
|                | Mystic, CT          | 1996        |   |            | 133    |   |                    |   | 66.7   | %                     |   |                                    | 8.5 | % | Unconsolidated |
|                | Southington, CT     | 2002        |   |            | 94     |   |                    |   | 44.7   | %                     |   |                                    | 8.5 | % | Unconsolidated |
|                | Williamsburg, VA    | 2002        |   |            | 108    |   |                    |   | 75.0   | %                     |   |                                    | 12.0 | % | Consolidated |
| Holiday Inn Express |                |        |   |            |   |   |                    |   |   |                  |   |                                    |   |   |
|                | South Boston, MA**  | 1998        |   |            | 118    |   |                    |   | 50.0   | %                     |   |                                    | N/A |   | Unconsolidated |
|                | Manhattan, NY       | 2006        |   |            | 228    |   |                    |   | 50.0   | %                     |   |                                    | N/A |   | Unconsolidated |
| Hilton Garden Inn   |                |        |   |            |   |   |                    |   |   |                  |   |                                    |   |   |
|                | Glastonbury, CT     | 2003        |   |            | 150    |   |                    |   | 48.0   | %                     |   |                                    | 11.0 | % | Unconsolidated* |
| Springhill Suites   |                |        |   |            |   |   |                    |   |   |                  |   |                                    |   |   |
|                | Waterford, CT       | 1998        |   |            | 80     |   |                    |   | 66.7   | %                     |   |                                    | 8.5 | % | Unconsolidated |
|                | Williamsburg, VA    | 2002        |   |            | 120    |   |                    |   | 75.0   | %                     |   |                                    | 12.0 | % | Consolidated |
| TOTAL ROOMS         |                |        |   | 2,862           |   |   |                    |   |   |                  |   |                                    |   |   |

| Item 3. | Legal Proceedings |
|---------|-------------------|

----

Index

| Item 4. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
|---------|--------------------------------------------------------------------------------------------------------------------|

| Year Ended December 31, 2009 |   | High |   |   | Low    |   |   | Dividend Per Common Share |   |
|------------------------------|--------|------|--------|--------|--------|--------|--------|---------------------------|--------|
| Fourth Quarter               |   | $    | 3.29   |   |   | $      | 2.33   |                      |   | $ | 0.05 |   |
| Third Quarter                |   | $    | 3.43   |   |   | $      | 2.16   |                      |   | $ | 0.05 |   |
| Second Quarter               |   | $    | 3.74   |   |   | $      | 1.64   |                      |   | $ | 0.05 |   |
| First Quarter                |   | $    | 3.05   |   |   | $      | 1.08   |                      |   | $ | 0.18 |   |

| Year Ended December 31, 2008 |   | High |   |   | Low    |   |   | Dividend Per Common Share |   |
|------------------------------|--------|------|--------|--------|--------|--------|--------|---------------------------|--------|
| Fourth Quarter               |   | $    | 7.25   |   |   | $      | 2.30   |                      |   | $ | 0.18 |   |
| Third Quarter                |   | $    | 8.61   |   |   | $      | 5.74   |                      |   | $ | 0.18 |   |
| Second Quarter               |   | $    | 10.41  |   |   | $      | 7.00   |                      |   | $ | 0.18 |   |
| First Quarter                |   | $    | 9.80   |   |   | $      | 7.61   |                      |   | $ | 0.18 |   |

----

Index

|                     |   | Period Ending December 31, |   |
|--------------------------|--------|---------------------------------|--------|
|                     |   | 2004                            |   |   | 2005 |   |   | 2006 |   |   | 2007 |   |   | 2008 |   |   | 2009 |   |
| Hersha Hospitality Trust |   | $                               | 100.00 |   |   | $ | 84.77 |   |   | $ | 114.69 |   |   | $ | 100.79 |   |   | $ | 36.79 |   |   | $ | 44.38 |   |
| Russell 2000             |   |                            | 100.00 |   |   |   | 104.55 |   |   |   | 123.76 |   |   |   | 121.82 |   |   |   | 80.66 |   |   |   | 102.58 |   |
| Hotel REIT Index         |   |                            | 100.00 |   |   |   | 109.80 |   |   |   | 141.22 |   |   |   | 109.91 |   |   |   | 43.96 |   |   |   | 72.82 |   |
| S&P 500              |   |                            | 100.00 |   |   |   | 104.90 |   |   |   | 121.47 |   |   |   | 128.14 |   |   |   | 80.73 |   |   |   | 102.10 |   |

----

Index

| Item 5. | Selected Financial Data |
|---------|-------------------------|

|                                                                                                         |   | 2009   |    |   | 2008   |   |    | 2007   |   |   | 2006    |   |   | 2005   |    |
|--------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
| Revenue:                                                                                                     |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |
| Hotel Operating Revenues                                                                                     |   | $      | 212,328 |   |   | $      | 236,162 |   |   | $      | 214,883 |   |   | $      | 117,705 |   |   | $ | 53,330 |   |
| Interest Income From Development Loans                                                                       |   |   | 7,411   |   |   |   | 7,890   |   |   |   | 6,046   |   |   |   | 2,487   |   |   |   | 3,940 |   |
| Other Revenues                                                                                               |   |   | 751     |   |   |   | 1,141   |   |   |   | 980     |   |   |   | 737     |   |   |   | 529 |   |
| Total Revenue                                                                                                |   |   | 220,490 |   |   |   | 245,193 |   |   |   | 221,909 |   |   |   | 120,929 |   |   |   | 57,799 |   |
| Operating Expenses:                                                                                          |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Hotel Operating Expenses                                                                                     |   |   | 124,433 |   |   |   | 133,817 |   |   |   | 119,499 |   |   |   | 65,915  |   |   |   | 29,465 |   |
| Hotel Ground Rent                                                                                            |   |   | 1,166   |   |   |   | 1,040   |   |   |   | 856     |   |   |   | 804     |   |   |   | 433 |   |
| Real Estate and Personal Property Taxes and Property Insurance                                               |   |   | 13,879  |   |   |   | 12,384  |   |   |   | 10,803  |   |   |   | 5,492   |   |   |   | 2,848 |   |
| General and Administrative                                                                                   |   |   | 5,892   |   |   |   | 7,208   |   |   |   | 7,093   |   |   |   | 5,527   |   |   |   | 4,800 |   |
| Stock Based Compensation                                                                                     |   |   | 2,143   |   |   |   | 1,502   |   |   |   | 852     |   |   |   | 293     |   |   |   | 99 |   |
| Acquisition and Terminated Transaction Costs                                                                 |   |   | 328     |   |   |   | 380     |   |   |   | 149     |   |   |   | 316     |   |   |   | 41 |   |
| Impairment of Development Loan Receivable and Other Asset                                                    |   |   | 21,408  |   |   |   | 21,004  |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Depreciation and Amortization                                                                                |   |   | 43,156  |   |   |   | 38,904  |   |   |   | 31,943  |   |   |   | 16,786  |   |   |   | 6,789 |   |
| Total Operating Expenses                                                                                     |   |   | 212,405 |   |   |   | 216,239 |   |   |   | 171,195 |   |   |   | 95,133  |   |   |   | 44,475 |   |
| Operating Income                                                                                             |   |   | 8,085   |   |   |   | 28,954  |   |   |   | 50,714  |   |   |   | 25,796  |   |   |   | 13,324 |   |
| Interest Income                                                                                              |   |   | 208     |   |   |   | 306     |   |   |   | 686     |   |   |   | 1,182   |   |   |   | 602 |   |
| Interest Expense                                                                                             |   |   | 43,359  |   |   |   | 41,218  |   |   |   | 40,237  |   |   |   | 23,500  |   |   |   | 10,687 |   |
| Other Expense                                                                                                |   |   | 165     |   |   |   | 129     |   |   |   | 83      |   |   |   | 102     |   |   |   | 12 |   |
| Loss on Debt Extinguishment                                                                                  |   |   | -       |   |   |   | 1,568   |   |   |   | -       |   |   |   | 1,485   |   |   |   | - |   |
| (Loss) Income before (Loss) Income from Unconsolidated Joint Venture Investments and Discontinued Operations |   |   | (35,231 | )      |   |   | (13,655 | )      |   |   | 11,080  |   |   |   | 1,891   |   |   |   | 3,227 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net (Loss) Income from Unconsolidated Joint Venture Investments                                              |   |   | (7,190  | )      |   |   | (517    | )      |   |   | 3,476   |   |   |   | 1,799   |   |   |   | 457 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| (Loss) Income from Continuing Operations                                                                     |   |   | (42,421 | )      |   |   | (14,172 | )      |   |   | 14,556  |   |   |   | 3,690   |   |   |   | 3,684 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Discontinued Operations (Note 12):                                                                           |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Gain on Disposition of Hotel Properties                                                                      |   |   | 1,869   |   |   |   | 2,888   |   |   |   | 4,248   |   |   |   | 784     |   |   |   | 1,323 |   |
| Loss from Impairment of Assets                                                                               |   |   | (17,703 | )      |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| (Loss) Income from Discontinued Operations                                                                   |   |   | (203    | )      |   |   | 855     |   |   |   | 1,368   |   |   |   | 1,330   |   |   |   | (1,555 | ) |
| (Loss) Income from Discontinued Operations                                                                   |   |   | (16,037 | )      |   |   | 3,743   |   |   |   | 5,616   |   |   |   | 2,114   |   |   |   | (232 | ) |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net (Loss) Income                                                                                            |   |   | (58,458 | )      |   |   | (10,429 | )      |   |   | 20,172  |   |   |   | 5,804   |   |   |   | 3,452 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Loss (Income) Allocated to Noncontrolling Interests                                                          |   |   | 8,597   |   |   |   | 1,621   |   |   |   | (2,325  | )      |   |   | (706    | ) |   |   | (155 | ) |
| Distributions to Preferred Unitholders                                                                       |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | - |   |
| Preferred Distributions                                                                                      |   |   | (4,800  | )      |   |   | (4,800  | )      |   |   | (4,800  | )      |   |   | (4,800  | ) |   |   | (1,920 | ) |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net (Loss) Income applicable to Common Shareholders                                                          |   | $      | (54,661 | )      |   | $      | (13,608 | )      |   | $      | 13,047  |   |   | $      | 298     |   |   | $ | 1,377 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Basic (Loss) Income from Continuing Operations applicable to Common Shareholders                             |   | $      | (0.81   | )      |   | $      | (0.38   | )      |   | $      | 0.20    |   |   | $      | (0.05   | ) |   | $ | 0.07 |   |
| Diluted (Loss) Income from Continuing Operations applicable to Common Shareholders (1)                       |   |   | (0.81   | )      |   |   | (0.38   | )      |   |   | 0.20    |   |   |   | (0.05   | ) |   |   | 0.07 |   |
| Dividends declared per Common Share                                                                          |   |   | 0.33    |   |   |   | 0.72    |   |   |   | 0.72    |   |   |   | 0.72    |   |   |   | 0.72 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |

----

Index

|                                                           |   | 2009   |       |   | 2008   |   |       | 2007   |   |   | 2006       |   |   | 2005   |       |
|----------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|
| Balance Sheet Data                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |
| Net investment in hotel properties                             |   | $      | 938,954    |   |   | $      | 982,082    |   |   | $      | 893,297    |   |   | $      | 807,784    |   |   | $ | 317,980 |   |
| Assets Held for Sale                                           |   |   | 21,073     |   |   |   | -          |   |   |   | -          |   |   |   | -          |   |   |   | 3,407 |   |
| Noncontrolling Interests Common Units                          |   |   | 27,126     |   |   |   | 34,781     |   |   |   | 42,845     |   |   |   | 25,933     |   |   |   | 15,147 |   |
| Redeemable Noncontrolling Interest                             |   |   | 14,733     |   |   |   | 18,739     |   |   |   | -          |   |   |   | -          |   |   |   | - |   |
| Noncontrolling Interests Consolidated Joint Ventures           |   |   | 267        |   |   |   | 1,854      |   |   |   | 1,908      |   |   |   | 3,092      |   |   |   | 2,079 |   |
| Shareholder's equity                                           |   |   | 302,197    |   |   |   | 349,963    |   |   |   | 330,405    |   |   |   | 331,619    |   |   |   | 164,703 |   |
| Total assets                                                   |   |   | 1,111,044  |   |   |   | 1,178,405  |   |   |   | 1,067,607  |   |   |   | 968,208    |   |   |   | 455,355 |   |
| Total debt                                                     |   |   | 724,551    |   |   |   | 743,781    |   |   |   | 663,008    |   |   |   | 580,542    |   |   |   | 256,146 |   |
| Debt related to Assets Held for Sale                           |   |   | 20,892     |   |   |   | -          |   |   |   | -          |   |   |   | -          |   |   |   | 375 |   |
| Other Data                                                     |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
| Funds from Operations (2)                                      |   | $      | (15,912    | )      |   | $      | 31,441     |   |   | $      | 49,823     |   |   | $      | 25,936     |   |   | $ | 14,495 |   |
| Net cash provided by operating activities                      |   | $      | 21,532     |   |   | $      | 53,894     |   |   | $      | 59,300     |   |   | $      | 27,217     |   |   | $ | 15,002 |   |
| Net cash used in investing activities                          |   | $      | (8,921     | )      |   | $      | (114,870   | )      |   | $      | (46,027    | )      |   | $      | (413,881   | ) |   | $ | (190,825 | ) |
| Net cash (used in) provided by  financing activities |   | $      | (16,904    | )      |   | $      | 64,346     |   |   | $      | (11,262    | )      |   | $      | 388,200    |   |   | $ | 163,989 |   |
| Weighted average shares outstanding                            |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
| Basic                                                          |   |   | 51,027,742 |   |   |   | 45,184,127 |   |   |   | 40,718,724 |   |   |   | 27,118,264 |   |   |   | 20,293,554 |   |
| Diluted (1)                                                    |   |   | 51,027,742 |   |   |   | 45,184,127 |   |   |   | 40,718,724 |   |   |   | 27,118,264 |   |   |   | 20,299,937 |   |

----

Index

| Item 6. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|---------|---------------------------------------------------------------------------------------------|

----

Index

| CONSOLIDATED HOTELS:                                  |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |
|-------------------------------------------------------|--------|------------|-------------|--------|------------|--------|-------------|-----------------|--------|--------|------------|--------|--------|-----------------|-------------|
|                                                  |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |
|                                                  |   | Year Ended |        |   | Year Ended |   |        | 2009 vs. 2008   |   |   | Year Ended |   |   | 2008 vs. 2007   |        |
|                                                  |   | 2009       |        |   | 2008       |   |        | % Variance |   |   | 2007       |   |   | % Variance |        |
|                                                  |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |
| Rooms Available                                       |   |       | 2,378,088   |   |       |   | 2,241,165   |            |   |   | 6.1        | %      |   |            | 2,066,525   |   |   |   | 8.5 | % |
| Rooms Occupied                                        |   |       | 1,604,847   |   |       |   | 1,610,678   |            |   |   | -0.4       | %      |   |            | 1,528,539   |   |   |   | 5.4 | % |
| Occupancy                                             |   |       | 67.48       | %      |       |   | 71.87       | %               |   |   | -4.4       | %      |   |            | 73.97       | % |   |   | -2.1 | % |
| Average Daily Rate (ADR)                              |   | $          | 126.28      |   |       | $      | 140.59      |            |   |   | -10.2      | %      |   | $               | 134.56      |   |   |   | 4.5 | % |
| Revenue Per Available Room (RevPAR)                   |   | $          | 85.22       |   |       | $      | 101.04      |            |   |   | -15.7      | %      |   | $               | 99.53       |   |   |   | 1.5 | % |
|                                                  |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |   |   |   |   |   |
| Room Revenues                                         |   | $          | 202,688,044 |   |       | $      | 226,443,272 |            |   |   | -10.5      | %      |   | $               | 205,686,215 |   |   |   | 10.1 | % |
| Hotel Operating Revenues                              |   | $          | 212,327,816 |   |       | $      | 236,162,286 |            |   |   | -10.1      | %      |   | $               | 214,882,728 |   |   |   | 9.9 | % |
| Hotel Operating Revenues from Discontinued Operations |   | $          | 7,816,286   |   |       | $      | 14,302,487  |            |   |   | N/A        |   |   | $               | 21,263,000  |   |   |   | N/A |   |

| UNCONSOLIDATED JOINT VENTURES:      |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |
|-------------------------------------|--------|------------|-------------|--------|------------|--------|-------------|-----------------|--------|--------|------------|--------|--------|-----------------|-------------|
|                                |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |
|                                |   | Year Ended |        |   | Year Ended |   |        | 2009 vs. 2008   |   |   | Year Ended |   |   | 2008 vs. 2007   |        |
|                                |   | 2009       |        |   | 2008       |   |        | % Variance |   |   | 2007       |   |   | % Variance |        |
|                                |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |
| Rooms Available                     |   |       | 961,407     |   |       |   | 963,892     |            |   |   | -0.3       | %      |   |            | 954,114     |   |   |   | 1.0 | % |
| Rooms Occupied                      |   |       | 619,558     |   |       |   | 677,485     |            |   |   | -8.6       | %      |   |            | 682,169     |   |   |   | -0.7 | % |
| Occupancy                           |   |       | 64.44       | %      |       |   | 70.29       | %               |   |   | -5.8       | %      |   |            | 71.50       | % |   |   | -1.2 | % |
| Average Daily Rate (ADR)            |   | $          | 131.86      |   |       | $      | 146.91      |            |   |   | -10.2      | %      |   | $               | 144.51      |   |   |   | 1.7 | % |
| Revenue Per Available Room (RevPAR) |   | $          | 84.98       |   |       | $      | 103.26      |            |   |   | -17.7      | %      |   | $               | 103.32      |   |   |   | -0.1 | % |
|                                |   |       |        |   |       |   |        |            |   |   |       |   |   |            |        |   |   |   |   |   |
| Room Revenues                       |   | $          | 81,717,987  |   |       | $      | 99,530,317  |            |   |   | -17.9      | %      |   | $               | 98,580,629  |   |   |   | 1.0 | % |
| Total Revenues                      |   | $          | 104,328,667 |   |       | $      | 127,874,193 |            |   |   | -18.4      | %      |   | $               | 130,167,451 |   |   |   | -1.8 | % |

----

Index

| Brand                    |   | Location              |   | Acquisition Date |   | Rooms  |   |   | 2009 Total Revenue |   |
|--------------------------|--------|-----------------------|--------|------------------|--------|--------|--------|--------|--------------------|--------|
|                     |   |                  |   |             |   |   |   |   |               |   |
| Hilton Garden Inn        |   | TriBeCa, New York, NY |   | 5/1/2009 *       |   |   | 151    |   |               | $      | 6,761 |   |
| Hampton Inn & Suites |   | West Haven, CT        |   | 11/4/2009        |   |   | 98     |   |               | $      | 374 |   |
|                     |   |                  |   |             |   |   |   |   |               |   |   |   |
|                     |   |                  |   |             |   |   | 249    |   |               | $      | 7,135 |   |

| Brand                        |   | Location                 |   | Acquisition Date |   | Rooms  |   |   | 2009Total Revenue |   |   | 2008Total Revenue |   |
|------------------------------|--------|--------------------------|--------|------------------|--------|--------|--------|--------|-------------------|--------|--------|-------------------|--------|
| Duane Street Hotel (TriBeCa) |   | New York, NY             |   | 1/4/2008         |   |   | 45     |   |              | $      | 2,836  |              |   | $ | 3,688 |   |
| TownePlace Suites            |   | Harrisburg, PA           |   | 5/8/2008         |   |   | 107    |   |              |   | 2,440  |              |   |   | 1,755 |   |
| Sheraton Hotel               |   | JFK Airport, Jamaica, NY |   | 6/13/2008        |   |   | 150    |   |              |   | 7,869  |              |   |   | 3,931 |   |
| Holiday Inn Express          |   | Camp Springs, MD         |   | 6/26/2008        |   |   | 127    |   |              |   | 2,587  |              |   |   | 1,313 |   |
| nu Hotel                     |   | Brooklyn, NY             |   | 7/7/2008 *       |   |   | 93     |   |              |   | 4,488  |              |   |   | 2,314 |   |
| Hampton Inn & Suites     |   | Smithfield, RI           |   | 8/1/2008         |   |   | 101    |   |              |   | 2,033  |              |   |   | 848 |   |
|                         |   |                     |   |             |   |   |   |   |              |   |   |              |   |   |   |   |
|                         |   |                     |   |             |   |   | 623    |   |              | $      | 22,253 |              |   | $ | 13,849 |   |

----

Index

----

Index

| Brand               |   | Location         |   | Acquisition Date |   | Rooms  |   |   | 2008 Total Revenue |   |   | 2007 Total Revenue |   |
|---------------------|--------|------------------|--------|------------------|--------|--------|--------|--------|--------------------|--------|--------|--------------------|--------|
|                |   |             |   |             |   |   |   |   |               |   |   |               |   |
| Residence Inn       |   | Langhorne, PA    |   | 1/8/2007         |   |   | 100    |   |               | $      | 4,062  |               |   | $ | 3,352 |   |
| Residence Inn       |   | Carlisle, PA     |   | 1/10/2007        |   |   | 78     |   |               |   | 2,417  |               |   |   | 2,091 |   |
| Holiday Inn Express |   | Chester, NY      |   | 1/25/2007        |   |   | 80     |   |               |   | 2,337  |               |   |   | 2,367 |   |
| Hampton Inn         |   | Seaport, NY      |   | 2/1/2007         |   |   | 65     |   |               |   | 5,833  |               |   |   | 5,200 |   |
| Independent         |   | 373 Fifth Avenue |   | 6/1/2007         |   |   | 70     |   |               |   | 4,562  |               |   |   | 3,051 |   |
| Holiday Inn         |   | Norwich, CT      |   | 7/1/2007         |   |   | 134    |   |               |   | 3,297  |               |   |   | 1,689 |   |
|                |   |             |   |             |   |   |   |   |               |   |   |               |   |   |   |   |
|                |   |             |   |             |   |   | 527    |   |               | $      | 22,508 |               |   | $ | 17,750 |   |

----

Index

----

Index

----

Index

|   | · | cash of $253; |
|--------|--------|---------------|

|   | · | our 48% minority membership interest in PRA Suites at Glastonbury, LLC, the owner of the Homewood Suites, Glastonbury, CT; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | our forgiveness of a $1,408 loan made to our former joint venture partner; and |
|--------|--------|--------------------------------------------------------------------------------|

|   | · | our assumption of the $13,141 outstanding mortgage debt secured by the Hilton Garden Inn, Glastonbury, CT. |
|--------|--------|------------------------------------------------------------------------------------------------------------|

----

Index

----

Index

----

Index

|                                                                                                  |   | Twelve Months Ending   |       |
|-------------------------------------------------------------------------------------------------------|--------|------------------------|------------|
|                                                                                                  |   | December 31, 2009 |       |   | December 31, 2008 |   |   | December 31, 2007 |   |
|                                                                                                  |   |                   |       |   |   |   |   |   |   |
| Net (loss) income applicable to common shares                                                         |   | $                      | (54,661    | ) |   | $ | (13,608 | ) |   | $ | 13,047 |   |
| (Loss) income allocated to noncontrolling interest                                                    |   |                   | (8,597     | ) |   |   | (1,621 | ) |   |   | 2,325 |   |
| Loss (income) from unconsolidated joint ventures                                                      |   |                   | 7,190      |   |   |   | 517 |   |   |   | (3,476 | ) |
| Gain on sale of assets                                                                                |   |                   | (1,869     | ) |   |   | (2,888 | ) |   |   | (4,248 | ) |
| Depreciation and amortization                                                                         |   |                   | 43,156     |   |   |   | 38,904 |   |   |   | 31,943 |   |
| Depreciation and amortization from discontinued operations                                            |   |                   | 1,129      |   |   |   | 2,514 |   |   |   | 3,187 |   |
| FFO related to the noncontrolling interest in consolidated joint ventures (1)                         |   |                   | (98        | ) |   |   | (240 | ) |   |   | (652 | ) |
| Funds from consolidated hotel operations applicable to common shares and Partnership units            |   |                   | (13,750    | ) |   |   | 23,578 |   |   |   | 42,126 |   |
|                                                                                                  |   |                   |       |   |   |   |   |   |   |   |   |   |
| (Loss) income from unconsolidated joint ventures                                                      |   |                   | (7,190     | ) |   |   | (517 | ) |   |   | 3,476 |   |
| Add:                                                                                                  |   |                   |       |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization of purchase price in excess of historical cost (2)                      |   |                   | 2,137      |   |   |   | 2,093 |   |   |   | 2,055 |   |
| Interest in deferred financing costs written off in unconsolidated joint venture debt extinguishment  |   |                   | -          |   |   |   | - |   |   |   | (2,858 | ) |
| Interest in depreciation and amortization of unconsolidated joint venture (3)                         |   |                   | 2,891      |   |   |   | 6,287 |   |   |   | 5,024 |   |
| Funds from unconsolidated joint ventures operations applicable to common shares and Partnership units |   |                   | (2,162     | ) |   |   | 7,863 |   |   |   | 7,697 |   |
|                                                                                                  |   |                   |       |   |   |   |   |   |   |   |   |   |
| Funds from Operations applicable to common shares and Partnership units                               |   | $                      | (15,912    | ) |   | $ | 31,441 |   |   | $ | 49,823 |   |
|                                                                                                  |   |                   |       |   |   |   |   |   |   |   |   |   |
| Weighted Average Common Shares and Units Outstanding                                                  |   |                   |       |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                 |   |                   | 51,027,742 |   |   |   | 45,184,127 |   |   |   | 40,718,724 |   |
| Diluted                                                                                               |   |                   | 51,027,742 |   |   |   | 53,218,864 |   |   |   | 46,183,394 |   |

|   | (1) | Adjustment made to deduct FFO related to the noncontrolling interest in our consolidated joint ventures; Represents the portion of net income and depreciation allocated to our joint venture partners. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Adjustment made to add depreciation of purchase price in excess of historical cost of the assets in the unconsolidated joint venture at the time of our investment. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Adjustment made to add our interest in real estate related depreciation and amortization of our unconsolidated joint ventures. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | a significant decrease in the market price of a long-lived asset; |
|--------|--------|-------------------------------------------------------------------|

|   | · | a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset, including an adverse action or assessment by a regulator; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a current expectation that, it is more likely than not that, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | Identifying loans for individual review. In general, these consist of development loans that are not performing in accordance with the contractual terms of the loan. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Assessing whether the loans identified for review are impaired. That is, whether it is probable that all amounts will not be collected according to the contractual terms of the loan agreement.  We determine the amount of impairment by calculating the estimated fair value, discounted cash flows or the value of the underlying collateral. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| Contractual Obligations             |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|
| (in thousands)                      |   | 2010   |   |   | 2011   |   |    | 2012   |   |   | 2013   |   |   | 2014   |   |   | Thereafter |   |
| Long Term Debt                      |   | $      | 37,406 |   |   | $      | 58,208  |   |   | $      | 44,107 |   |   | $      | 31,989 |   |       | $      | 43,935 |   |   | $ | 450,648 |   |
| Interest Expense on Long Term Debt  |   |   | 38,404 |   |   |   | 35,628  |   |   |   | 32,181 |   |   |   | 30,167 |   |       |   | 27,448 |   |   |   | 122,772 |   |
| Credit Facility                     |   |   | -      |   |   |   | 79,200  |   |   |   | -      |   |   |   | -      |   |       |   | - |   |   |   | - |   |
| Interest Expense on Credit Facility |   |   | 3,366  |   |   |   | 3,366   |   |   |   | -      |   |   |   | -      |   |       |   | - |   |   |   | - |   |
| Hotel Ground Rent                   |   |   | 904    |   |   |   | 935     |   |   |   | 975    |   |   |   | 981    |   |       |   | 986 |   |   |   | 92,175 |   |
| Total                               |   | $      | 80,080 |   |   | $      | 177,337 |   |   | $      | 77,263 |   |   | $      | 63,137 |   |       | $      | 72,369 |   |   | $ | 665,595 |   |

----

Index

| Item 6A. | Quantitative and Qualitative Disclosures About Market Risk (in thousands, except per share data) |
|----------|--------------------------------------------------------------------------------------------------|

| Mortgages & Notes Payable |   | 2010   |   |   | 2011   |   |    | 2012   |   |   | 2013   |   |   | 2014   |   |   | Thereafter |   |   | Total  |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------------|--------|--------|--------|--------|
|                          |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |
| Fixed Rate Debt               |   | $      | 14,834 |   |   | $      | 30,492  |   |   | $      | 15,104 |   |   | $      | 31,806 |   |       | $      | 41,853 |   |   | $ | 450,647 |   |   | $ | 584,736 |   |
| Average Interest Rate         |   |   | 6.02   | %      |   |   | 6.12    | %      |   |   | 6.13   | %      |   |   | 6.11   | %      |       |   | 6.09   | %      |   |   | 6.09 | % |   |   | 6.09 | % |
|                          |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Floating Rate Debt            |   | $      | 22,572 |   |   | $      | 27,716  |   |   | $      | 29,003 |   |   | $      | 183    |   |       | $      | 2,082  |   |   | $ | 0 |   |   | $ | 81,556 |   |
| Average Interest Rate         |   |   | 6.98   | %      |   |   | 8.30    | %      |   |   | 2.98   | %      |   |   | 2.98   | %      |       |   | 2.98   | %      |   |   | N/A |   |   |   | 4.04 | % |
| subtotal                      |   | $      | 37,406 |   |   | $      | 58,208  |   |   | $      | 44,107 |   |   | $      | 31,989 |   |       | $      | 43,935 |   |   | $ | 450,647 |   |   | $ | 666,292 |   |
|                          |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Credit Facility               |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
|                          |   |   | -      |   |   |   | 79,200  |   |   |   | -      |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   | $ | 79,200 |   |
| Average Interest Rate         |   |   |   |   |   |   | 4.25    | %      |   |   |   |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   | 4.25 | % |
| TOTAL                         |   | $      | 37,406 |   |   | $      | 137,408 |   |   | $      | 44,107 |   |   | $      | 31,989 |   |       | $      | 43,935 |   |   | $ | 450,647 |   |   | $ | 745,492 |   |

----

Index

|   | · | debt assumed in the Company’s acquisition of the Hilton Garden Inn, Glastonbury, CT |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | the refinance of mortgage debt secured by the Hilton Garden Inn, TriBeCa, New York, NY |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | the Company’s exercise of each of the extension options within its discretion, |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | the Company’s exercise of each of the extension options subject to lender approval, and |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | the lender’s extension of the maturity of the revolving line of credit extension options. |
|--------|--------|-------------------------------------------------------------------------------------------------|

|                                                                                                                   |   | 2010   |    |   | 2011   |   |    | 2012   |   |   | 2013    |   |   | 2014   |   |   | Thereafter |   |   | Total  |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|------------|--------|--------|--------|--------|
|                                                                                                                   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |       |   |   |   |   |
| Principal repayments due as of December 31, 2009, as noted above                                                       |   | $      | 37,406  |   |   | $      | 137,408 |   |   | $      | 44,107  |   |   | $      | 31,989 |   |       | $      | 43,935 |   |   | $ | 450,647 |   |   | $ | 745,492 |   |
| Adjustments: (1)                                                                                                  |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Assumption of debt in connection with January 1, 2010 acquisition of  Hilton Garden Inn, Glastonbury, CT (2) |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | -      |   |       |   | -      |   |   |   | 13,141 |   |   |   | 13,141 |   |
| Refinance of debt on Hilton Garden Inn, TriBeCa, New York, NY (3)                                                      |   |   | -       |   |   |   | -       |   |   |   | (29,632 | )      |   |   | -      |   |       |   | -      |   |   |   | 32,000 |   |   |   | 2,368 |   |
| Extension Options                                                                                                      |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Hotel 373 - 5th Avenue, New York, NY (4)                                                                               |   |   | (22,000 | )      |   |   | -       |   |   |   | 22,000  |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| nu Hotel - Brooklyn, New York, NY (5)                                                                             |   |   | -       |   |   |   | (18,000 | )      |   |   | -       |   |   |   | 18,000 |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| Hilton Garden Inn, Edison, NJ (6)                                                                                      |   |   | -       |   |   |   | (5,250  | )      |   |   | 5,250   |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| TownePlace Suites, Harrisburg, PA (7)                                                                                  |   |   | -       |   |   |   | (9,250  | )      |   |   | 9,250   |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
| Hampton Inn, West Haven, CT (8)                                                                                        |   |   | -       |   |   |   | -       |   |   |   | (7,688  | )      |   |   | -      |   |       |   | -      |   |   |   | 7,688 |   |   |   | - |   |
| Residence Inn, Carlisle, PA (9)                                                                                        |   |   | -       |   |   |   | -       |   |   |   | -       |   |   |   | (6,857 | )      |       |   | -      |   |   |   | 6,857 |   |   |   | - |   |
| Line of Credit Facility (10)                                                                                           |   |   | -       |   |   |   | (79,200 | )      |   |   | 79,200  |   |   |   | -      |   |       |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Pro Forma Principal Repayments                                                                                         |   | $      | 15,406  |   |   | $      | 25,708  |   |   | $      | 122,487 |   |   | $      | 43,132 |   |       | $      | 43,935 |   |   | $ | 510,333 |   |   | $ | 761,001 |   |

|   | (1) | Adjustments reflect principal balances as of December 31, 2009.  Adjustments do not include amortization of principal scheduled to occur subsequent to December 31, 2009 through maturity date or extended maturity date if options are exercised. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | On January 1, 2010, we acquired our joint venture partner’s 52% membership interest in PRA Glastonbury, LLC, the owner of the Hilton Garden Inn, Glastonbury, CT, and this hotel became one of our wholly-owned hotels.  We assumed the outstanding mortgage debt secured by the Hilton Garden Inn, Glastonbury, CT, which has an outstanding principal balance of approximately $13,141 as of December 31, 2009, bears interest at a fixed rate of 5.98% per annum and has an anticipated maturity date of April 1, 2016. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | On January 29, 2010 we refinanced the mortgage debt secured by the Hilton Garden Inn, TriBeCa, New York, NY.  The refinanced mortgage balance equals $32,000, interest rate is fixed at 8.25% and the loan matures on February 10, 2015. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Represents mortgage debt on the Hotel 373, 5th Avenue, New York, NY which contains two one-year extension options, which can be exercised at our discretion, effectively extending the maturity from May of 2010 to May of 2012. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Represents mortgage debt on the nu Hotel, Brooklyn, New York, NY which contains two one-year extension options, which can be exercised at our discretion, effectively extending the maturity from January of 2011 to January of 2013. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | Represents mortgage debt on the Hilton Garden Inn, Edison, NJ which contains a one-year extension option, which can be exercised at our discretion, effectively extending the maturity from January of 2011 to January of 2012. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Represents the mortgage debt on the TownePlace Suites, Harrisburg, PA which contains a one-year extension option, which can be exercised at our discretion, effectively extending the maturity from July of 2011 to July of 2012. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | Represents the mortgage debt on the Hampton Inn, West Haven, CT, which contains a three-year extension option, which is subject to the lender's approval in its discretion, effectively extending the maturity from November of 2012 to November of 2015. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | Represents the mortgage debt on the Residence Inn, Carlisle, PA, which contains a three-year extension option, which is subject to the lender's approval in its discretion, effectively extending the maturity from January of 2013 to January of 2016. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (10) | Represents the revolving line of credit, which contains a one-year extension option, which is subject to the lender's approval in its discretion, effectively extending the maturity from December of 2011 to December of 2012. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| Item 7. | Financial Statements and Supplementary Data |
|---------|---------------------------------------------|

|                                                                                                            |   | Page   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|
| Hersha Hospitality Trust                                                                                        |   |   |
| Report of Independent Registered Public Accounting Firm                                                         |   | 42     |
| Consolidated Balance Sheets as of December 31, 2009 and 2008                                                    |   | 43     |
| Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007                      |   | 44     |
| Consolidated Statements of Equity and Comprehensive Income for the years ended December 31, 2009, 2008 and 2007 |   | 46     |
| Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007                      |   | 47     |
| Notes to Consolidated Financial Statements                                                                      |   | 48     |
| Schedule III - Real Estate and Accumulated Depreciation for the year ended December 31, 2009                    |   | 89     |

----

Index

----

Index

----

----

|                                                                                                                                                                                                                                               |   | December 31, 2009 |      |   | December 31, 2008 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------|--------|------------------------|--------|
| Assets:                                                                                                                                                                                                                                            |   |                   |      |   |                   |   |
| Investment in Hotel Properties, net of Accumulated Depreciation                                                                                                                                                                                    |   | $                      | 938,954   |   |                   | $      | 982,082 |   |
| Investment in Unconsolidated Joint Ventures                                                                                                                                                                                                        |   |                   | 39,182    |   |                   |   | 46,283 |   |
| Development Loans Receivable                                                                                                                                                                                                                       |   |                   | 46,094    |   |                   |   | 81,500 |   |
| Cash and Cash Equivalents                                                                                                                                                                                                                          |   |                   | 11,404    |   |                   |   | 15,697 |   |
| Escrow Deposits                                                                                                                                                                                                                                    |   |                   | 16,174    |   |                   |   | 12,404 |   |
| Hotel Accounts Receivable, net of allowance for doubtful accounts of $34 and $120                                                                                                                                                                  |   |                   | 7,103     |   |                   |   | 6,870 |   |
| Deferred Financing Costs, net of Accumulated Amortization of $4,262 and $3,606                                                                                                                                                                     |   |                   | 8,696     |   |                   |   | 9,157 |   |
| Due from Related Parties                                                                                                                                                                                                                           |   |                   | 2,394     |   |                   |   | 3,595 |   |
| Intangible Assets, net of Accumulated Amortization of $803 and $595                                                                                                                                                                                |   |                   | 7,542     |   |                   |   | 7,300 |   |
| Other Assets                                                                                                                                                                                                                                       |   |                   | 12,428    |   |                   |   | 13,517 |   |
| Assets Held for Sale                                                                                                                                                                                                                               |   |                   | 21,073    |   |                   |   | - |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Total Assets                                                                                                                                                                                                                                       |   | $                      | 1,111,044 |   |                   | $      | 1,178,405 |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Liabilities and Equity:                                                                                                                                                                                                                            |   |                   |      |   |                   |   |   |   |
| Line of Credit                                                                                                                                                                                                                                     |   | $                      | 79,200    |   |                   | $      | 88,421 |   |
| Mortgages and Notes Payable, net of unamortized discount of $49 and $61                                                                                                                                                                            |   |                   | 645,351   |   |                   |   | 655,360 |   |
| Accounts Payable, Accrued Expenses and Other Liabilities                                                                                                                                                                                           |   |                   | 16,216    |   |                   |   | 17,745 |   |
| Dividends and Distributions Payable                                                                                                                                                                                                                |   |                   | 4,293     |   |                   |   | 11,240 |   |
| Due to Related Parties                                                                                                                                                                                                                             |   |                   | 769       |   |                   |   | 302 |   |
| Liabilities Related to Assets Held for Sale                                                                                                                                                                                                        |   |                   | 20,892    |   |                   |   | - |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Total Liabilities                                                                                                                                                                                                                                  |   |                   | 766,721   |   |                   |   | 773,068 |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Redeemable Noncontrolling Interests - Common Units (Note 1)                                                                                                                                                                                        |   | $                      | 14,733    |   |                   | $      | 18,739 |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Equity:                                                                                                                                                                                                                                            |   |                   |      |   |                   |   |   |   |
| Shareholders' Equity:                                                                                                                                                                                                                              |   |                   |      |   |                   |   |   |   |
| Preferred Shares - 8% Series A, $.01 Par Value, 2,400,000 Shares Issued and Outstanding (Aggregate Liquidation Preference $60,000) at December 31, 2009 and December 31, 2008                                                                      |   |                   | 24        |   |                   |   | 24 |   |
| Common Shares - Class A, $.01 Par Value, 150,000,000 and 80,000,000 Shares Authorized at December 31, 2009 and December 31, 2008, 57,682,917 and 48,276,222 Shares Issued and Outstanding at December 31, 2009 and December 31, 2008, respectively |   |                   | 577       |   |                   |   | 483 |   |
| Common Shares - Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding                                                                                                                                                  |   |                   | -         |   |                   |   | - |   |
| Accumulated Other Comprehensive Loss                                                                                                                                                                                                               |   |                   | (160      | )      |                   |   | (109 | ) |
| Additional Paid-in Capital                                                                                                                                                                                                                         |   |                   | 487,481   |   |                   |   | 463,772 |   |
| Distributions in Excess of Net Income                                                                                                                                                                                                              |   |                   | (185,725  | )      |                   |   | (114,207 | ) |
| Total Shareholders' Equity                                                                                                                                                                                                                         |   |                   | 302,197   |   |                   |   | 349,963 |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Noncontrolling Interests (Note 1):                                                                                                                                                                                                                 |   |                   |      |   |                   |   |   |   |
| Noncontrolling Interests - Common Units                                                                                                                                                                                                            |   |                   | 27,126    |   |                   |   | 34,781 |   |
| Noncontrolling Interests - Consolidated Joint Ventures                                                                                                                                                                                             |   |                   | 267       |   |                   |   | 1,854 |   |
| Total Noncontrolling Interests                                                                                                                                                                                                                     |   |                   | 27,393    |   |                   |   | 36,635 |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Total Equity                                                                                                                                                                                                                                       |   |                   | 329,590   |   |                   |   | 386,598 |   |
|                                                                                                                                                                                                                                               |   |                   |      |   |                   |   |   |   |
| Total Liabilities and Equity                                                                                                                                                                                                                       |   | $                      | 1,111,044 |   |                   | $      | 1,178,405 |   |

----

Index

----

----

|                                                                                                         |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Revenue:                                                                                                     |   |   |    |   |   |   |    |   |   |
| Hotel Operating Revenues                                                                                     |   | $      | 212,328 |   |   | $      | 236,162 |   |   | $ | 214,883 |   |
| Interest Income from Development Loans                                                                       |   |   | 7,411   |   |   |   | 7,890   |   |   |   | 6,046 |   |
| Other Revenues                                                                                               |   |   | 751     |   |   |   | 1,141   |   |   |   | 980 |   |
| Total Revenues                                                                                               |   |   | 220,490 |   |   |   | 245,193 |   |   |   | 221,909 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Operating Expenses:                                                                                          |   |   |    |   |   |   |    |   |   |   |   |   |
| Hotel Operating Expenses                                                                                     |   |   | 124,433 |   |   |   | 133,817 |   |   |   | 119,499 |   |
| Hotel Ground Rent                                                                                            |   |   | 1,166   |   |   |   | 1,040   |   |   |   | 856 |   |
| Real Estate and Personal Property Taxes and Property Insurance                                               |   |   | 13,879  |   |   |   | 12,384  |   |   |   | 10,803 |   |
| General and Administrative                                                                                   |   |   | 5,892   |   |   |   | 7,208   |   |   |   | 7,093 |   |
| Stock Based Compensation                                                                                     |   |   | 2,143   |   |   |   | 1,502   |   |   |   | 852 |   |
| Acquisition and Terminated Transaction Costs                                                                 |   |   | 328     |   |   |   | 380     |   |   |   | 149 |   |
| Impairment of Development Loans Receivable                                                                   |   |   | 21,408  |   |   |   | 21,004  |   |   |   | - |   |
| Depreciation and Amortization                                                                                |   |   | 43,156  |   |   |   | 38,904  |   |   |   | 31,943 |   |
| Total Operating Expenses                                                                                     |   |   | 212,405 |   |   |   | 216,239 |   |   |   | 171,195 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Operating Income                                                                                             |   |   | 8,085   |   |   |   | 28,954  |   |   |   | 50,714 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Interest Income                                                                                              |   |   | 208     |   |   |   | 306     |   |   |   | 686 |   |
| Interest Expense                                                                                             |   |   | 43,359  |   |   |   | 41,218  |   |   |   | 40,237 |   |
| Other Expense                                                                                                |   |   | 165     |   |   |   | 129     |   |   |   | 83 |   |
| Loss on Debt Extinguishment                                                                                  |   |   | -       |   |   |   | 1,568   |   |   |   | - |   |
| (Loss) Income before (Loss) Income from Unconsolidated Joint Venture Investments and Discontinued Operations |   |   | (35,231 | )      |   |   | (13,655 | )      |   |   | 11,080 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| (Loss) Income from Unconsolidated Joint Venture Investments                                                  |   |   | (7,190  | )      |   |   | (517    | )      |   |   | 3,476 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| (Loss) Income from Continuing Operations                                                                     |   |   | (42,421 | )      |   |   | (14,172 | )      |   |   | 14,556 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Discontinued Operations  (Note 12):                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| Gain on Disposition of Hotel Properties                                                                      |   |   | 1,869   |   |   |   | 2,888   |   |   |   | 4,248 |   |
| Impairment of Assets Held for Sale                                                                           |   |   | (17,703 | )      |   |   | -       |   |   |   | - |   |
| (Loss) Income from Discontinued Operations                                                                   |   |   | (203    | )      |   |   | 855     |   |   |   | 1,368 |   |
| (Loss) Income from Discontinued Operations                                                                   |   |   | (16,037 | )      |   |   | 3,743   |   |   |   | 5,616 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Net (Loss) Income                                                                                            |   |   | (58,458 | )      |   |   | (10,429 | )      |   |   | 20,172 |   |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Loss (Income) Allocated to Noncontrolling Interests                                                          |   |   | 8,597   |   |   |   | 1,621   |   |   |   | (2,325 | ) |
| Preferred Distributions                                                                                      |   |   | (4,800  | )      |   |   | (4,800  | )      |   |   | (4,800 | ) |
|                                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Net (Loss) Income applicable to Common Shareholders                                                          |   | $      | (54,661 | )      |   | $      | (13,608 | )      |   | $ | 13,047 |   |

----

Index

----

----

|                                                                         |   |   |   |      |   |   |   |      |   |
|------------------------------------------------------------------------------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|
|                                                                         |   | 2009   |   |      | 2008   |   |   | 2007      |   |
| Earnings Per Share:                                                          |   |   |   |      |   |   |   |      |   |
| BASIC                                                                        |   |   |   |      |   |   |   |      |   |
| (Loss) Income from Continuing Operations applicable to Common Shareholders   |   | $      | (0.81  | )         |   | $      | (0.38  | )         |   | $ | 0.20 |   |
| (Loss) Income from Discontinued Operations applicable to Common Shareholders |   | $      | (0.27  | )         |   |   | 0.07   |      |   |   | 0.12 |   |
|                                                                         |   |   |   |      |   |   |   |      |   |   |   |   |
| Net (Loss) Income applicable to Common Shareholders                          |   | $      | (1.08  | )         |   | $      | (0.31  | )         |   | $ | 0.32 |   |
|                                                                         |   |   |   |      |   |   |   |      |   |   |   |   |
| DILUTED                                                                      |   |   |   |      |   |   |   |      |   |   |   |   |
| (Loss) Income from Continuing Operations applicable to Common Shareholders   |   | $      | (0.81  | )  * |   | $      | (0.38  | )  * |   | $ | 0.20 | * |
| (Loss) Income from Discontinued Operations applicable to Common Shareholders |   | $      | (0.27  | )  * |   |   | 0.07   | *         |   |   | 0.12 | * |
|                                                                         |   |   |   |      |   |   |   |      |   |   |   |   |
| Net (Loss) Income ap#plicable to Common Shareholders                         |   | $      | (1.08  | )  * |   | $      | (0.31  | ) *       |   | $ | 0.32 | * |

| * | Income allocated to noncontrolling interest in Hersha Hospitality Limited Partnership has been excluded from the numerator and units of limited partnership interest in Hersha Hospitality Limited Partnership have been omitted from the denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the numerator and denominator would have no impact. Weighted average units of limited partnership interest in Hersha Hospitality Limited Partnership outstanding for the year ended December 31, 2009, 2008 and 2007 were 8,724,725, 8,034,737 and 5,464,670, respectively.  Unvested stock awards and options to acquire our common shares have been omitted from the denominator for the purpose of computing diluted earnings per share for the year ended December 31, 2009, 2008, and 2007 since the effect of including these awards in the denominator would be anti-dilutive to income from continuing operations applicable to common shareholders. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

----

----

|                                                                   |   | Shareholders' Equity |       |   | Noncontrolling Interests |   |   | Redeemable Noncontrolling Interests |   |
|------------------------------------------------------------------------|--------|----------------------|------------|--------|--------------------------|--------|--------|-------------------------------------|--------|
|                                                                   |   | Class ACommon Shares |       |   | Class BCommon Shares     |   |   | Series APreferred Shares            |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Common Units |   |   |   |   |   |   |   |   |   |   |   | Common Units |   |
|                                                                   |   | Shares               |       |   | Dollars                  |   |   | Shares                              |   |   | Dollars |   |   | Shares |   |   | Dollars |   |   | AdditionalPaid-InCapital |   |   | OtherComprehensiveIncome |   |   | Distributionsin Excessof NetEarnings |   |   | Total Shareholders' Equity |   |   | Shares |   |   | Dollars |   |   | Consolidated Joint Ventures |   |   | Total Noncontrolling Interests |   |   | Total Equity |   |   | Shares |   |   | Dollars |   |
| Balance at December 31, 2006                                           |   |                 | 40,671,950 |   |                     | $      | 405    |                                |   |   | - |   |   | $ | - |   |   |   | 2,400,000 |   |   | $ | 24 |   |   | $ | 381,592 |   |   | $ | 233 |   |   | $ | (50,635 | ) |   | $ | 331,619 |   |   |   | 3,835,586 |   |   | $ | 25,933 |   |   | $ | 3,092 |   |   | $ | 29,025 |   |   | $ | 360,644 |   |   |   | - |   |   | $ | - |   |
| Unit Conversion                                                        |   |                 | 306,460    |   |                     |   | 3      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,366 |   |   |   | - |   |   |   | - |   |   |   | 2,369 |   |   |   | (306,460 | ) |   |   | (2,369 | ) |   |   | - |   |   |   | (2,369 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Unit Conversion Costs                                                  |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (142 | ) |   |   | - |   |   |   | - |   |   |   | (142 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (142 | ) |   |   | - |   |   |   | - |   |
| Common Units Issued for Acquisitions                                   |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,895,789 |   |   |   | 33,530 |   |   |   | - |   |   |   | 33,530 |   |   |   | 33,530 |   |   |   | - |   |   |   | - |   |
| Reallocation of Noncontrolling Interest                                |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 12,422 |   |   |   | - |   |   |   | - |   |   |   | 12,422 |   |   |   | - |   |   |   | (12,422 | ) |   |   | - |   |   |   | (12,422 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Dividends declared:                                                    |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common Stock ($0.72 per share)                                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (29,547 | ) |   |   | (29,547 | ) |   |   | - |   |   |   | (4,222 | ) |   |   | - |   |   |   | (4,222 | ) |   |   | (33,769 | ) |   |   | - |   |   |   | - |   |
| Preferred Stock ($2.00 per share)                                      |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,800 | ) |   |   | (4,800 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,800 | ) |   |   | - |   |   |   | - |   |
| Consolidated Joint Ventures:                                           |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisitions of Remaining Interest in Consolidated Joint Ventures      |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (587 | ) |   |   | (587 | ) |   |   | (587 | ) |   |   | - |   |   |   | - |   |
| Distributions from Consolidated Joint Ventures                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (527 | ) |   |   | (527 | ) |   |   | (527 | ) |   |   | - |   |   |   | - |   |
| Dividend Reinvestment Plan                                             |   |                 | 2,620      |   |                     |   | 1      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 29 |   |   |   | - |   |   |   | - |   |   |   | 30 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 30 |   |   |   | - |   |   |   | - |   |
| Stock Based Compensation                                               |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Share Award Grants                                          |   |                 | 214,582    |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Restricted Share Award Vesting                                         |   |                 | -          |   |                     |   | 2      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 766 |   |   |   | - |   |   |   | - |   |   |   | 768 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 768 |   |   |   | - |   |   |   | - |   |
| Share Grants to Trustees                                               |   |                 | 8,000      |   |                     |   | 1      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 94 |   |   |   | - |   |   |   | - |   |   |   | 95 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 95 |   |   |   | - |   |   |   | - |   |
| Comprehensive Income (Loss):                                           |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Loss                                               |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (256 | ) |   |   | - |   |   |   | (256 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (256 | ) |   |   | - |   |   |   | - |   |
| Net Income                                                             |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 17,847 |   |   |   | 17,847 |   |   |   | - |   |   |   | 2,395 |   |   |   | (70 | ) |   |   | 2,325 |   |   |   | 20,172 |   |   |   | - |   |   |   | - |   |
| Total Comprehensive Income                                             |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 17,591 |   |   |   | - |   |   |   | 2,395 |   |   |   | (70 | ) |   |   | 2,325 |   |   |   | 19,916 |   |   |   | - |   |   |   | - |   |
| Balance at December 31, 2007                                           |   |                 | 41,203,612 |   |                     | $      | 412    |                                |   |   | - |   |   | $ | - |   |   |   | 2,400,000 |   |   | $ | 24 |   |   | $ | 397,127 |   |   | $ | (23 | ) |   | $ | (67,135 | ) |   | $ | 330,405 |   |   |   | 6,424,915 |   |   | $ | 42,845 |   |   | $ | 1,908 |   |   | $ | 44,753 |   |   | $ | 375,158 |   |   |   | - |   |   | $ | - |   |
| Common Stock Issuance                                                  |   |                 | 6,600,000  |   |                     |   | 66     |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 62,007 |   |   |   | - |   |   |   | - |   |   |   | 62,073 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 62,073 |   |   |   | - |   |   |   | - |   |
| Issuance Costs                                                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (228 | ) |   |   | - |   |   |   | - |   |   |   | (228 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (228 | ) |   |   | - |   |   |   | - |   |
| Unit Conversion                                                        |   |                 | 175,843    |   |                     |   | 2      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,370 |   |   |   | - |   |   |   | - |   |   |   | 1,372 |   |   |   | (175,843 | ) |   |   | (1,372 | ) |   |   | - |   |   |   | (1,372 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Common Units Issued for Acquisitions                                   |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,497,228 |   |   |   | 21,624 |   |   |   | - |   |   |   | 21,624 |   |   |   | 21,624 |   |   |   | - |   |   |   | - |   |
| Reallocation of Noncontrolling Interest                                |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,966 |   |   |   | - |   |   |   | - |   |   |   | 1,966 |   |   |   | - |   |   |   | (683 | ) |   |   | - |   |   |   | (683 | ) |   |   | 1,283 |   |   |   | - |   |   |   | (1,283 | ) |
| Reclassification of Noncontrolling Interests                           |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (3,064,252 | ) |   |   | (20,670 | ) |   |   | - |   |   |   | (20,670 | ) |   |   | (20,670 | ) |   |   | 3,064,252 |   |   |   | 20,670 |   |
| Dividends declared:                                                    |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common Stock ($0.72 per share)                                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (33,464 | ) |   |   | (33,464 | ) |   |   | - |   |   |   | (5,492 | ) |   |   | - |   |   |   | (5,492 | ) |   |   | (38,956 | ) |   |   | - |   |   |   | (552 | ) |
| Preferred Stock ($2.00 per share)                                      |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,800 | ) |   |   | (4,800 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,800 | ) |   |   | - |   |   |   | - |   |
| Dividend Reinvestment Plan                                             |   |                 | 5,092      |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 31 |   |   |   | - |   |   |   | - |   |   |   | 31 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 31 |   |   |   | - |   |   |   | - |   |
| Stock Based Compensation                                               |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Share Award Grants                                          |   |                 | 281,675    |   |                     |   | 3      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (3 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Restricted Share Award Vesting                                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,411 |   |   |   | - |   |   |   | - |   |   |   | 1,411 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,411 |   |   |   | - |   |   |   | - |   |
| Share Grants to Trustees                                               |   |                 | 10,000     |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 91 |   |   |   | - |   |   |   | - |   |   |   | 91 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 91 |   |   |   | - |   |   |   | - |   |
| Comprehensive Income (Loss):                                           |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Loss                                               |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (86 | ) |   |   | - |   |   |   | (86 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (86 | ) |   |   | - |   |   |   | - |   |
| Net Loss                                                               |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (8,808 | ) |   |   | (8,808 | ) |   |   | - |   |   |   | (1,471 | ) |   |   | (54 | ) |   |   | (1,525 | ) |   |   | (10,333 | ) |   |   | - |   |   |   | (96 | ) |
| Total Comprehensive Loss                                               |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (8,894 | ) |   |   | - |   |   |   | (1,471 | ) |   |   | (54 | ) |   |   | (1,525 | ) |   |   | (10,419 | ) |   |   | - |   |   |   | (96 | ) |
| Balance at December 31, 2008                                           |   |                 | 48,276,222 |   |                     | $      | 483    |                                |   |   | - |   |   | $ | - |   |   |   | 2,400,000 |   |   | $ | 24 |   |   | $ | 463,772 |   |   | $ | (109 | ) |   | $ | (114,207 | ) |   | $ | 349,963 |   |   |   | 5,682,048 |   |   | $ | 34,781 |   |   | $ | 1,854 |   |   | $ | 36,635 |   |   | $ | 386,598 |   |   |   | 3,064,252 |   |   | $ | 18,739 |   |
| Common Stock Issuance                                                  |   |                 | 8,442,300  |   |                     |   | 84     |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 22,423 |   |   |   | - |   |   |   | - |   |   |   | 22,507 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 22,507 |   |   |   | - |   |   |   | - |   |
| Issuance Costs                                                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,165 | ) |   |   | - |   |   |   | - |   |   |   | (1,165 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,165 | ) |   |   | - |   |   |   | - |   |
| Unit Conversion                                                        |   |                 | 44,490     |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 255 |   |   |   | - |   |   |   | - |   |   |   | 255 |   |   |   | (44,490 | ) |   |   | (255 | ) |   |   | - |   |   |   | (255 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Common Units Issued for Acquisitions                                   |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Dividends and Distributions declared:                                  |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Distribution to Noncontrolling Interest in Consolidated Joint Ventures |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (124 | ) |   |   | (124 | ) |   |   | (124 | ) |   |   | - |   |   |   | - |   |
| Common Stock ($0.33 per share)                                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (16,857 | ) |   |   | (16,857 | ) |   |   | - |   |   |   | (1,871 | ) |   |   | - |   |   |   | (1,871 | ) |   |   | (18,728 | ) |   |   | - |   |   |   | (1,010 | ) |
| Preferred Stock ($2.00 per share)                                      |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,800 | ) |   |   | (4,800 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,800 | ) |   |   | - |   |   |   | - |   |
| Dividend Reinvestment Plan                                             |   |                 | 9,943      |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 25 |   |   |   | - |   |   |   | - |   |   |   | 25 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 25 |   |   |   | - |   |   |   | - |   |
| Stock Based Compensation                                               |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restricted Share Award Grants                                          |   |                 | 862,462    |   |                     |   | 9      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (9 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Restricted Share Award Vesting                                         |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,039 |   |   |   | - |   |   |   | - |   |   |   | 2,039 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,039 |   |   |   | - |   |   |   | - |   |
| Share Grants to Trustees                                               |   |                 | 47,500     |   |                     |   | 1      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 141 |   |   |   | - |   |   |   | - |   |   |   | 142 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 142 |   |   |   | - |   |   |   | - |   |
| Disposition of JV                                                      |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,391 | ) |   |   | (1,391 | ) |   |   | (1,391 | ) |   |   | - |   |   |   | - |   |
| Comprehensive Income (Loss):                                           |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Loss                                               |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (51 | ) |   |   | - |   |   |   | (51 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (51 | ) |   |   | - |   |   |   | - |   |
| Net Loss                                                               |   |                 | -          |   |                     |   | -      |                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (49,861 | ) |   |   | (49,861 | ) |   |   | - |   |   |   | (5,529 | ) |   |   | (72 | ) |   |   | (5,601 | ) |   |   | (55,462 | ) |   |   | - |   |   |   | (2,996 | ) |
| Total Comprehensive Loss                                               |   |                 |       |   |                     |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (49,912 | ) |   |   | - |   |   |   | (5,529 | ) |   |   | (72 | ) |   |   | (5,601 | ) |   |   | (55,513 | ) |   |   | - |   |   |   | (2,996 | ) |
| Balance at December 31, 2009                                           |   |                 | 57,682,917 |   |                     | $      | 577    |                                |   |   | - |   |   | $ | - |   |   |   | 2,400,000 |   |   | $ | 24 |   |   | $ | 487,481 |   |   | $ | (160 | ) |   | $ | (185,725 | ) |   | $ | 302,197 |   |   |   | 5,637,558 |   |   | $ | 27,126 |   |   | $ | 267 |   |   | $ | 27,393 |   |   | $ | 329,590 |   |   |   | 3,064,252 |   |   | $ | 14,733 |   |

----

Index

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----

|                                                                                     |   |   |    |   |   |   |     |   |   |
|------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|----------|--------|--------|
|                                                                                     |   | 2009   |    |   | 2008   |   |     | 2007   |   |
| Operating activities:                                                                    |   |   |    |   |   |   |     |   |   |
| Net (loss) income                                                                        |   | $      | (58,458 | )      |   | $      | (10,429  | )      |   | $ | 20,172 |   |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: |   |   |    |   |   |   |     |   |   |   |   |   |
| Gain on disposition of hotel assets held for sale                                        |   |   | (1,869  | )      |   |   | (2,888   | )      |   |   | (4,248 | ) |
| Impairment of development loan receivable, other asset and assets held for sale          |   |   | 39,111  |   |   |   | 21,004   |   |   |   | - |   |
| Depreciation                                                                             |   |   | 44,002  |   |   |   | 41,219   |   |   |   | 34,963 |   |
| Amortization                                                                             |   |   | 2,285   |   |   |   | 1,958    |   |   |   | 1,812 |   |
| Debt extinguishment                                                                      |   |   | -       |   |   |   | 1,587    |   |   |   | - |   |
| Development loan interest added to principal                                             |   |   | (3,253  | )      |   |   | -        |   |   |   | - |   |
| Equity in loss (income) of unconsolidated joint ventures                                 |   |   | 7,190   |   |   |   | 517      |   |   |   | (3,476 | ) |
| Distributions from unconsolidated joint ventures                                         |   |   | 400     |   |   |   | 3,036    |   |   |   | 4,501 |   |
| Loss (gain) recognized on change in fair value of derivative instrument                  |   |   | (172    | )      |   |   | 71       |   |   |   | (89 | ) |
| Stock based compensation expense                                                         |   |   | 2,143   |   |   |   | 1,502    |   |   |   | 852 |   |
| Change in assets and liabilities:                                                        |   |   |    |   |   |   |     |   |   |   |   |   |
| (Increase) decrease in:                                                                  |   |   |    |   |   |   |     |   |   |   |   |   |
| Hotel accounts receivable                                                                |   |   | (312    | )      |   |   | 420      |   |   |   | (2,500 | ) |
| Escrows                                                                                  |   |   | (3,770  | )      |   |   | 1,302    |   |   |   | 1,845 |   |
| Other assets                                                                             |   |   | (3,727  | )      |   |   | (1,132   | )      |   |   | (261 | ) |
| Due from related party                                                                   |   |   | 2,159   |   |   |   | (3,251   | )      |   |   | 3,691 |   |
| Increase (decrease) in:                                                                  |   |   |    |   |   |   |     |   |   |   |   |   |
| Due to related party                                                                     |   |   | (634    | )      |   |   | (1,115   | )      |   |   | (1,291 | ) |
| Accounts payable and accrued expenses                                                    |   |   | (3,563  | )      |   |   | 93       |   |   |   | 3,329 |   |
| Net cash provided by operating activities                                                |   |   | 21,532  |   |   |   | 53,894   |   |   |   | 59,300 |   |
|                                                                                     |   |   |    |   |   |   |     |   |   |   |   |   |
| Investing activities:                                                                    |   |   |    |   |   |   |     |   |   |   |   |   |
| Purchase of hotel property assets                                                        |   |   | (9,315  | )      |   |   | (63,626  | )      |   |   | (32,658 | ) |
| Capital expenditures                                                                     |   |   | (6,138  | )      |   |   | (19,226  | )      |   |   | (16,773 | ) |
| Proceeds from disposition of hotel assets held for sale                                  |   |   | 8,524   |   |   |   | 6,456    |   |   |   | 11,905 |   |
| Cash paid for franchise fee intangible                                                   |   |   | -       |   |   |   | (57      | )      |   |   | (11 | ) |
| Repayment of notes receivable                                                            |   |   | -       |   |   |   | 1,350    |   |   |   | 34 |   |
| Investment in development loans receivable                                               |   |   | (2,000  | )      |   |   | (64,200  | )      |   |   | (65,700 | ) |
| Repayment of development loans receivable                                                |   |   | 500     |   |   |   | 22,416   |   |   |   | 53,000 |   |
| Distributions from unconsolidated joint venture                                          |   |   | 261     |   |   |   | 2,113    |   |   |   | 6,485 |   |
| Advances and capital contributions to unconsolidated joint ventures                      |   |   | (753    | )      |   |   | (96      | )      |   |   | (2,309 | ) |
| Net cash used in investing activities                                                    |   |   | (8,921  | )      |   |   | (114,870 | )      |   |   | (46,027 | ) |
|                                                                                     |   |   |    |   |   |   |     |   |   |   |   |   |
| Financing activities:                                                                    |   |   |    |   |   |   |     |   |   |   |   |   |
| Proceeds from (repayments of) borrowings under line of credit, net                       |   |   | (9,221  | )      |   |   | 44,721   |   |   |   | 19,700 |   |
| Principal repayment of mortgages and notes payable                                       |   |   | (39,232 | )      |   |   | (57,421  | )      |   |   | (20,717 | ) |
| Proceeds from mortgages and notes payable                                                |   |   | 42,155  |   |   |   | 59,156   |   |   |   | 28,543 |   |
| Cash paid for deferred financing costs                                                   |   |   | (362    | )      |   |   | (1,244   | )      |   |   | (286 | ) |
| Proceeds from issuance of common stock, net                                              |   |   | 21,342  |   |   |   | 61,845   |   |   |   | - |   |
| Stock issuance costs related to conversion of partnership units                          |   |   | -       |   |   |   | -        |   |   |   | (143 | ) |
| Distributions to partners in consolidated joint ventures                                 |   |   | (124    | )      |   |   | -        |   |   |   | (526 | ) |
| Dividends paid on common shares                                                          |   |   | (22,640 | )      |   |   | (32,169  | )      |   |   | (29,424 | ) |
| Dividends paid on preferred shares                                                       |   |   | (4,800  | )      |   |   | (4,800   | )      |   |   | (4,800 | ) |
| Distributions paid on common partnership units                                           |   |   | (4,022  | )      |   |   | (5,742   | )      |   |   | (3,609 | ) |
| Net cash (used in) provided by financing activities                                      |   |   | (16,904 | )      |   |   | 64,346   |   |   |   | (11,262 | ) |
|                                                                                     |   |   |    |   |   |   |     |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                                     |   |   | (4,293  | )      |   |   | 3,370    |   |   |   | 2,011 |   |
| Cash and cash equivalents - beginning of year                                            |   |   | 15,697  |   |   |   | 12,327   |   |   |   | 10,316 |   |
|                                                                                     |   |   |    |   |   |   |     |   |   |   |   |   |
| Cash and cash equivalents - end of year                                                  |   | $      | 11,404  |   |   | $      | 15,697   |   |   | $ | 12,327 |   |

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Index

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| Joint Venture                         |   | Ownership |   | Property            |   | Location            |   | Lessee/Sublessee             |
|---------------------------------------|--------|-----------|--------|---------------------|--------|---------------------|--------|------------------------------|
|                                  |   |      |   |                |   |                |   |                         |
| Unconsolidated Joint Ventures         |   |      |   |                |   |                |   |                         |
| Inn America Hospitality at Ewing, LLC |   | 50.0%     |   | Courtyard           |   | Ewing/Princeton, NJ |   | Hersha Inn America TRS Inc.  |
| PRA Glastonbury, LLC                  |   | 48.0%     |   | Hilton Garden Inn   |   | Glastonbury, CT     |   | Hersha PRA TRS, Inc          |
| PRA Suites at Glastonbury, LLC        |   | 48.0%     |   | Homewood Suites     |   | Glastonbury, CT     |   | Hersha PRA LLC               |
| Mystic Partners, LLC                  |   | 66.7%     |   | Marriott            |   | Mystic, CT          |   | Mystic Partners Leaseco, LLC |
|                                  |   | 8.8%      |   | Hilton              |   | Hartford, CT        |   | Mystic Partners Leaseco, LLC |
|                                  |   | 66.7%     |   | Courtyard           |   | Norwich, CT         |   | Mystic Partners Leaseco, LLC |
|                                  |   | 66.7%     |   | Courtyard           |   | Warwick, RI         |   | Mystic Partners Leaseco, LLC |
|                                  |   | 66.7%     |   | Residence Inn       |   | Danbury, CT         |   | Mystic Partners Leaseco, LLC |
|                                  |   | 66.7%     |   | Residence Inn       |   | Mystic, CT          |   | Mystic Partners Leaseco, LLC |
|                                  |   | 44.7%     |   | Residence Inn       |   | Southington, CT     |   | Mystic Partners Leaseco, LLC |
|                                  |   | 66.7%     |   | Springhill Suites   |   | Waterford, CT       |   | Mystic Partners Leaseco, LLC |
|                                  |   | 15.0%     |   | Marriott            |   | Hartford, CT        |   | Mystic Partners Leaseco, LLC |
| Hiren Boston, LLC                     |   | 50.0%     |   | Courtyard           |   | South Boston, MA    |   | South Bay Boston, LLC        |
| SB Partners, LLC                      |   | 50.0%     |   | Holiday Inn Express |   | South Boston, MA    |   | South Bay Sandeep, LLC       |
| Metro 29th Street Associates, LLC.    |   | 50.0%     |   | Holiday Inn Express |   | New York, NY        |   | Metro 29th Sublessee, LLC    |
|                                  |   |      |   |                |   |                |   |                         |
| Consolidated Joint Ventures           |   |      |   |                |   |                |   |                         |
| LTD Associates One, LLC               |   | 75.0%     |   | Springhill Suites   |   | Williamsburg, VA    |   | HT LTD Williamsburg One LLC  |
| LTD Associates Two, LLC               |   | 75.0%     |   | Residence Inn       |   | Williamsburg, VA    |   | HT LTD Williamsburg Two LLC  |

----

Index

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----

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Index

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| Building and Improvements         |   | 7 to 40 Years |
|-----------------------------------|--------|---------------|
| Furniture, Fixtures and Equipment |   | 2 to 7 Years  |

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Index

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Index

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Index

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Index

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Index

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Index

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|                                 |   | December 31, 2009 |      |   | December 31, 2008 |   |
|--------------------------------------|--------|------------------------|-----------|--------|------------------------|--------|
|                                 |   |                   |      |   |                   |   |
| Land                                 |   | $                      | 161,449   |   |                   | $      | 184,879 |   |
| Buildings and Improvements           |   |                   | 814,461   |   |                   |   | 802,760 |   |
| Furniture, Fixtures and Equipment    |   |                   | 122,174   |   |                   |   | 121,991 |   |
|                                 |   |                   | 1,098,084 |   |                   |   | 1,109,630 |   |
|                                 |   |                   |      |   |                   |   |   |   |
| Less Accumulated Depreciation        |   |                   | (159,130  | )      |                   |   | (127,548 | ) |
|                                 |   |                   |      |   |                   |   |   |   |
| Total Investment in Hotel Properties |   | $                      | 938,954   |   |                   | $      | 982,082 |   |

| Hotel                                    |   | Acquisition Date |   | Land   |   |   | Buildings and Improvements |   |   | Furniture Fixtures and Equipment |   |   | Franchise Fees, Loan Costs, and Leasehold Intangible |   |   | Total Purchase Price |   |   | Fair Value of Assumed Debt |   |
|------------------------------------------|--------|------------------|--------|--------|--------|--------|----------------------------|--------|--------|----------------------------------|--------|--------|------------------------------------------------------|--------|--------|----------------------|--------|--------|----------------------------|--------|
| Hilton Garden Inn, TriBeCa, New York, NY |   | 6/30/2009        |   | $      | 21,077 |   |                       | $      | 42,955 |                             |   | $      | 2,668                                                |   |   | $                    | 300    |   |                       | $      | 67,000 |   |   | $ | 29,824 |   |
| Hampton Inn, West Haven, CT              |   | 11/4/2009        |   |   | 1,053  |   |                       |   | 10,751 |                             |   |   | 1,196                                                |   |   |                 | -      |   |                       |   | 13,000 |   |   |   | 7,700 |   |
| Total                                    |   |             |   | $      | 22,130 |   |                       | $      | 53,706 |                             |   | $      | 3,864                                                |   |   | $                    | 300    |   |                       | $      | 80,000 |   |   | $ | 37,524 |   |

| Cash paid to seller                                                                         |   | $      | 4,794  |   |
|---------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Amounts payable to seller                                                                   |   |   | 1,387  | (1)    |
| Settlement of development loans receivable and accrued interest income on development loans |   |   | 19,555 | (2)    |
| Land and mortgage transferred to seller                                                     |   |   | 10,118 | (3)    |
| Assumption of York Street, LLC mortgage loan payable                                        |   |   | 29,824 | (4)    |
| Net hotel working capital liabilities assumed                                               |   |   | 1,322  |   |
|                                                                                        |   |   |   |   |
| Total consideration given                                                                   |   | $      | 67,000 |   |

|   | (1) | “Cash payable to the seller” of $1,387 was held back at settlement pending the seller’s completion of certain capital expenditures and the delivery on the Company’s obligation to transfer land to the seller. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Index

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|   | (2) | “Settlement of development loans receivable and accrued interest income on development loans” consists of principal and accrued interest receivable reductions with respect to development loans made to York Street, LLC and Maiden Hotel, LLC, an entity controlled by the seller.  See “Note 4 – Development Loans Receivable and Land Leases” for more information related to the development loans made to York Street, LLC and Maiden Hotel, LLC. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | “Land and mortgage transferred to seller” consisted of our investment in real property at 440 West 41st Street, New York, NY, and related land lease revenue receivable.  This parcel was acquired on July 28, 2006 and leased to Metro Forty First Street, LLC, an entity controlled by the seller. In connection with our acquisition of the membership interests in York Street, LLC, we transferred this property to Metro Forty First Street, LLC, and that entity assumed our obligations under the $12,100 mortgage loan encumbering the property. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | The mortgage loan assumed in connection with the acquisition of York Street, LLC, which is secured by the Hilton Garden Inn, TriBeCa, New York, NY, was refinanced on August 7, 2009 with a $29,824 first mortgage loan which matures in July 2012 and bears interest at the Wall Street Journal variable prime rate plus 2.0% subject to an interest rate floor of 8.75%. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Hotel                                     | Acquisition Date |   | Land   |   |   | Buildings and Improvements |   |   | Furniture Fixtures and Equipment |   |   | Franchise Fees, Loan Costs, and Leasehold Intangible |   |   | Total Purchase Price |   |   | Fair Value of Assumed Debt |   |
|-------------------------------------------|------------------|--------|--------|--------|--------|----------------------------|--------|--------|----------------------------------|--------|--------|------------------------------------------------------|--------|--------|----------------------|--------|--------|----------------------------|--------|
| Duane Street Hotel, TriBeCa, New York, NY | 1/4/2008         |   | $      | 8,213  |   |                       | $      | 12,869 |                             |   | $      | 2,793                                                |   |   | $                    | -      |   |                       | $      | 23,875 |   |   | $ | - |   |
| nu Hotel, Brooklyn, NY                    | 1/14/2008        |   |   | -      |   |                       |   | 17,343 |                             |   |   | -                                                    |   |   |                 | -      |   |                       |   | 17,343 |   |   |   | - |   |
| TownePlace Suites, Harrisburg, PA         | 5/8/2008         |   |   | 1,238  |   |                       |   | 10,182 |                             |   |   | 1,792                                                |   |   |                 | 42     |   |                       |   | 13,254 |   |   |   | - |   |
| Sheraton Hotel, JFK Airport, Jamaica, NY  | 6/13/2008        |   |   | -      |   |                       |   | 27,584 |                             |   |   | 4,413                                                |   |   |                 | 2,893  |   |                       |   | 34,890 |   |   |   | 23,800 |   |
| Holiday Inn Express, Camp Springs, MD     | 6/26/2008        |   |   | 1,629  |   |                       |   | 11,115 |                             |   |   | 931                                                  |   |   |                 | 5      |   |                       |   | 13,680 |   |   |   | - |   |
| Hampton Inn, Smithfield, RI               | 8/1/2008         |   |   | 2,057  |   |                       |   | 9,502  |                             |   |   | 1,156                                                |   |   |                 | 102    |   |                       |   | 12,817 |   |   |   | 6,990 |   |
| Total                                     |             |   | $      | 13,137 |   |                       | $      | 88,595 |                             |   | $      | 11,085                                               |   |   | $                    | 3,042  |   |                       | $      | 115,859 |   |   | $ | 30,790 |   |

----

Index

----

----

----

Index

----

----

| Acquisition Date |   | Acquisition Name                         |   | Maximum Earn-Out Payment Amount |      | Earn-Out Period Expiration |              |
|------------------|--------|------------------------------------------|--------|---------------------------------|-----------|----------------------------|-------------------|
| 12/28/2006       |   | Summerfield Suites Portfolio             |   | $                               | 6,000,000 |                       | December 31, 2009 | * |
| 6/26/2008        |   | Holiday Inn Express, Camp Springs, MD    |   |                            | 1,905,000 |                       | December 31, 2010 |   |
| 8/1/2008         |   | Hampton Inn & Suites, Smithfield, RI |   |                            | 1,515,000 |                       | December 31, 2010 |   |

|                                                                       |   | For the Year Ended December 31, |       |
|----------------------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                                       |   | 2009                                 |       |   | 2008 |   |
| Pro Forma Total Revenues                                                   |   | $                                    | 224,681    |   |   | $ | 247,656 |   |
|                                                                       |   |                                 |       |   |   |   |   |   |
| Pro Forma (Loss) income from Continuing Operations                         |   | $                                    | (43,519    | ) |   | $ | (14,108 | ) |
| Income (Loss) from Discontinued Operations                                 |   |                                 | (16,037    | ) |   |   | 3,743 |   |
| Pro Forma Net (Loss) income                                                |   |                                 | (59,556    | ) |   |   | (10,365 | ) |
| Loss (Income) allocated to Noncontrolling Interest                         |   |                                 | 8,757      |   |   |   | 1,611 |   |
| Preferred Distributions                                                    |   |                                 | (4,800     | ) |   |   | (4,800 | ) |
| Pro Forma Net (Loss) income applicable to Common Shareholders              |   | $                                    | (55,599    | ) |   | $ | (13,554 | ) |
|                                                                       |   |                                 |       |   |   |   |   |   |
| Pro Forma (Loss) income applicable to Common Shareholders per Common Share |   |                                 |       |   |   |   |   |   |
| Basic                                                                      |   | $                                    | (1.09      | ) |   | $ | (0.30 | ) |
| Diluted                                                                    |   | $                                    | (1.09      | ) |   | $ | (0.30 | ) |
|                                                                       |   |                                 |       |   |   |   |   |   |
| Weighted Average Common Shares Outstanding                                 |   |                                 |       |   |   |   |   |   |
| Basic                                                                      |   |                                 | 51,027,742 |   |   |   | 45,184,127 |   |
| Diluted                                                                    |   |                                 | 51,027,742 |   |   |   | 45,184,127 |   |

----

Index

----

----

| Joint Venture                          |   | Hotel Properties                                |   | Percent Owned |      |   | Preferred Return |                |   | December 31,2009 |   |   | December 31, 2008 |   |
|----------------------------------------|--------|-------------------------------------------------|--------|---------------|-----------|--------|------------------|---------------------|--------|------------------|--------|--------|-------------------|--------|
|                                   |   |                                            |   |          |      |   |             |                |   |             |   |   |              |   |
| PRA Glastonbury, LLC                   |   | Hilton Garden Inn, Glastonbury, CT              |   |          | 48.0      | %      |             | 11.0%cumulative     |   |             | $      | 561    |              |   | $ | 738 |   |
| Inn American Hospitality at Ewing, LLC |   | Courtyard by Marriott, Ewing, NJ                |   |          | 50.0      | %      |             | 11.0%cumulative     |   |             |   | 459    |              |   |   | 736 |   |
| Hiren Boston, LLC                      |   | Courtyard by Marriott, Boston, MA               |   |          | 50.0      | %      |             | N/A                 |   |             |   | -      |              |   |   | 3,960 |   |
| SB Partners, LLC                       |   | Holiday Inn Express,  Boston, MA      |   |          | 50.0      | %      |             | N/A                 |   |             |   | 1,934  |              |   |   | 2,091 |   |
| Mystic Partners, LLC                   |   | Hilton and Marriott branded hotels in CT and RI |   |          | 8.8%-66.7 | %      |             | 8.5%non-cumulative  |   |             |   | 27,043 |              |   |   | 27,977 |   |
| PRA Suites at Glastonbury, LLC         |   | Homewood Suites, Glastonbury, CT                |   |          | 48.0      | %      |             | 10.0%non-cumulative |   |             |   | 1,754  |              |   |   | 2,800 |   |
| Metro 29th Street Associates, LLC      |   | Holiday Inn Express, New York, NY               |   |          | 50.0      | %      |             | N/A                 |   |             |   | 7,431  |              |   |   | 7,981 |   |
|                                   |   |                                            |   |          |      |   |             |                |   |             |   |   |              |   |   |   |   |
|                                   |   |                                            |   |          |      |   |             |                |   |             | $      | 39,182 |              |   | $ | 46,283 |   |

|   | · | cash of $253, |
|--------|--------|---------------|

|   | · | our 48% minority membership interest in PRA Suites at Glastonbury, LLC, the owner of the Homewood Suites, Glastonbury, CT; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | · | settlement of a note receivable and accrued interest made to our former joint venture partner with a principal balance of $1,267 and accrued interest receivable of  $141; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our assumption of the outstanding mortgage debt secured by the Hilton Garden Inn, Glastonbury, CT which has an outstanding principal balance of $13,141 as of December 31, 2009, bears interest at a fixed rate of 5.98% per annum and has an anticipated maturity date of April 1, 2016. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

----

----

|                                                                      |   | Twelve Months Ended |   |
|---------------------------------------------------------------------------|--------|---------------------|--------|
|                                                                      |   | 12/31/2009          |   |   | 12/31/2008 |   |   | 12/31/2007 |   |
| PRA Glastonbury, LLC                                                      |   | $                   | (77    | ) |   | $ | 94 |   |   | $ | 47 |   |
| Inn American Hospitality at Ewing, LLC                                    |   |                | (127   | ) |   |   | 20 |   |   |   | 73 |   |
| Hiren Boston, LLC                                                         |   |                | (460   | ) |   |   | (189 | ) |   |   | 304 |   |
| SB Partners, LLC                                                          |   |                | (156   | ) |   |   | 80 |   |   |   | 191 |   |
| Mystic Partners, LLC                                                      |   |                | (1,686 | ) |   |   | (345 | ) |   |   | 1,612 |   |
| PRA Suites at Glastonbury, LLC                                            |   |                | (6     | ) |   |   | (8 | ) |   |   | (7 | ) |
| Metro 29th Street Associates, LLC                                         |   |                | (137   | ) |   |   | 1,721 |   |   |   | 1,256 |   |
|                                                                      |   |                | (2,649 | ) |   |   | 1,373 |   |   |   | 3,476 |   |
| Less:  Impairment of Investment in Unconsolidated Joint Venture |   |                | (4,541 | ) |   |   | (1,890 | ) |   |   | - |   |
|                                                                      |   |                |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income from Unconsolidated Joint Venture Investments               |   | $                   | (7,190 | ) |   | $ | (517 | ) |   | $ | 3,476 |   |

----

Index

----

----

| Balance Sheets                      |   |              |    |   |              |   |
|-------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                                |   | December 31, |    |   | December 31, |   |
|                                |   | 2009              |    |   | 2008              |   |
| Assets                              |   |              |    |   |              |   |
| Investment in hotel properties, net |   | $                 | 196,842 |   |              | $      | 209,468 |   |
| Other Assets                        |   |              | 28,473  |   |              |   | 25,334 |   |
| Total Assets                        |   | $                 | 225,315 |   |              | $      | 234,802 |   |
|                                |   |              |    |   |              |   |   |   |
| Liabilities and Equity              |   |              |    |   |              |   |   |   |
| Mortgages and notes payable         |   | $                 | 218,116 |   |              | $      | 219,889 |   |
| Other liabilities                   |   |              | 18,219  |   |              |   | 11,636 |   |
| Equity:                             |   |              |    |   |              |   |   |   |
| Hersha Hospitality Trust            |   |              | 44,178  |   |              |   | 44,938 |   |
| Joint Venture Partner(s)            |   |              | (55,198 | )      |              |   | (41,661 | ) |
| Total Equity                        |   |              | (11,020 | )      |              |   | 3,277 |   |
|                                |   |              |    |   |              |   |   |   |
| Total Liabilities and Equity        |   | $                 | 225,315 |   |              | $      | 234,802 |   |

| Statements of Operations                     |   |                |    |
|----------------------------------------------|--------|---------------------|---------|
|                                         |   | Twelve Months Ended |    |
|                                         |   | 12/31/2009          |    |   | 12/31/2008 |   |   | 12/31/2007 |   |
| Room Revenue                                 |   | $                   | 81,718  |   |   | $ | 99,530 |   |   | $ | 98,581 |   |
| Other Revenue                                |   |                | 22,427  |   |   |   | 28,344 |   |   |   | 31,586 |   |
| Operating Expenses                           |   |                | (68,389 | ) |   |   | (82,327 | ) |   |   | (81,873 | ) |
| Interest Expense                             |   |                | (16,326 | ) |   |   | (13,442 | ) |   |   | (15,421 | ) |
| Debt Extinguishment                          |   |                | -       |   |   |   | - |   |   |   | (2,858 | ) |
| Loss on Impairment of Building and Equipment |   |                | (7      | ) |   |   | (9,171 | ) |   |   | - |   |
| Lease Expense                                |   |                | (5,647  | ) |   |   | (5,538 | ) |   |   | (5,332 | ) |
| Property Taxes and Insurance                 |   |                | (6,596  | ) |   |   | (6,459 | ) |   |   | (6,159 | ) |
| Federal and State Income Taxes               |   |                | -       |   |   |   | 121 |   |   |   | (141 | ) |
| General and Administrative                   |   |                | (7,332  | ) |   |   | (7,835 | ) |   |   | (7,446 | ) |
| Loss Allocated to Noncontrolling Interests   |   |                | 705     |   |   |   | - |   |   |   | - |   |
| Depreciation and Amortization                |   |                | (14,423 | ) |   |   | (16,171 | ) |   |   | (16,680 | ) |
|                                         |   |                |    |   |   |   |   |   |   |   |   |   |
| Net loss                                     |   | $                   | (13,870 | ) |   | $ | (12,948 | ) |   | $ | (5,743 | ) |

----

Index

----

----

|                                                                                                                                                                       |   | December 31, |   |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|-------------------|--------|
|                                                                                                                                                                       |   | 2009              |   |   | 2008              |   |
| Company's share of equity recorded on the joint ventures' financial statements                                                                                             |   | $                 | 44,178 |   |              | $      | 44,938 |   |
| Adjustment to reconcile the Company's share of equity recorded on the joint ventures' financial statements to our investment in unconsoldiated joint ventures(1) |   |              | (4,996 | )      |              |   | 1,345 |   |
| Investment in Unconsolidated Joint Ventures                                                                                                                                |   | $                 | 39,182 |   |              | $      | 46,283 |   |

----

Index

----

----

| Hotel Property                            |   | Borrower                               |   | Principal Outstanding 12/31/2009 |   |   | Principal Outstanding 12/31/2008 |   |   | Interest Rate |   |   | Maturity Date (1) |   |
|-------------------------------------------|--------|----------------------------------------|--------|----------------------------------|--------|--------|----------------------------------|--------|--------|---------------|--------|--------|-------------------|--------|
| Operational Hotels                        |   |                                   |   |                             |   |   |                             |   |   |          |   |   |              |   |
| Independent Hotel - New York, NY          |   | Maiden Hotel, LLC                      |   | $                                | 7,000  |   |                             | $      | 10,000 |          |   |   | 20                | %      |   | July 31, 2010 |   |
| Renaissance by Marriott - Woodbridge, NJ  |   | Hersha Woodbridge Associates, LLC      |   |                             | 5,000  |   |                             |   | 5,000  |          |   |   | 11                | %      |   | April 1, 2010 |  * |
| Element Hotel - Ewing, NJ                 |   | American Properties @ Scotch Road, LLC |   |                             | 2,000  |   |                             |   | -      |          |   |   | 11                | %      |   | August 6, 2010 |  * |
| Hilton Garden Inn - Dover, DE             |   | 44 Aasha Hospitality Associates, LLC   |   |                             | 1,000  |   |                             |   | 1,000  |          |   |   | 10                | %      |   | November 1, 2010 |  * |
| Hampton Inn & Suites - West Haven, CT |   | 44 West Haven Hospitality, LLC         |   |                             | -      |   |                             |   | 2,000  |          |   |   | 10                | %      |   | N/A |   |
| Hilton Garden Inn - New York, NY          |   | York Street, LLC                       |   |                             | -      |   |                             |   | 15,000 |          |   |   | 11                | %      |   | N/A |   |
| Homewood Suites - Newtown, PA             |   | Reese Hotels, LLC                      |   |                             | -      |   |                             |   | 500    |          |   |   | 11                | %      |   | N/A |   |
|                                      |   |                                   |   |                             |   |   |                             |   |   |          |   |   |              |   |   |   |   |
| Construction Hotels                       |   |                                   |   |                             |   |   |                             |   |   |          |   |   |              |   |   |   |   |
| Lexington Avenue Hotel - New York, NY     |   | 44 Lexington Holding, LLC              |   |                             | 11,591 | (2)    |                             |   | 10,000 |          |   |   | 11                | %      |   | December 31, 2010* |   |
| Union Square Hotel - New York, NY         |   | Risingsam Union Square, LLC            |   |                             | 11,503 | (2)    |                             |   | 10,000 |          |   |   | 10                | %      |   | December 31, 2010 |   |
| 32 Pearl - New York, NY                   |   | SC Waterview, LLC                      |   |                             | 8,000  |   |                             |   | 8,000  |          |   |   | 10                | %      |   | December 31, 2010 |   |
|                                      |   |                                   |   |                             |   |   |                             |   |   |          |   |   |              |   |   |   |   |
| Early Phase Development                   |   |                                   |   |                             |   |   |                             |   |   |          |   |   |              |   |   |   |   |
| Hyatt Place - New York, NY                |   | Brisam East 52, LLC                    |   |                             | -      | (2)    |                             |   | 10,000 |          |   |   | 10                | %      |   | N/A |   |
| Greenwich Street Courtyard - New York, NY |   | Brisam Greenwich, LLC                  |   |                             | -      | (2)    |                             |   | 10,000 |          |   |   | 10                | %      |   | N/A |   |
|                                      |   |                                   |   |                             |   |   |                             |   |   |          |   |   |              |   |   |   |   |
| Total Development Loans Receivable        |   |                                   |   | $                                | 46,094 |   |                             | $      | 81,500 |          |   |   |              |   |   |   |   |

| (1) | Represents current maturity date in effect. Agreements for our development loans receivable typically allow for two one-year extensions which can be exercised by the borrower if the loan is not in default.  As these loans typically finance hotel development projects, it is common for the borrower to exercise their options to extend the loans, in whole or in part, until the project has been completed and the project provides cash flow to the developer or is refinanced by the developer. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | We amended the following development loans to allow the borrower to elect, quarterly, to pay accrued interest in-kind by adding the accrued interest to the principal balance of the loan as of December 31, 2009: |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Borrower                    |   | Interest Income Year Ended December 31, 2009 |   |   | Cumulative Interest Income Paid In-Kind |   |
|-----------------------------|--------|----------------------------------------------|--------|--------|-----------------------------------------|--------|
| Risingsam Union Square, LLC |   | $                                            | 1,069  |   |                                    | $      | 1,503 |   |
| Brisam East 52, LLC         |   |                                         | 503    |   |                                    |   | 672 |   |
| 44 Lexington Holding, LLC   |   |                                         | 1,178  |   |                                    |   | 1,591 |   |
| Brisam Greenwich, LLC       |   |                                         | 503    |   |                                    |   | 736 |   |
|                        |   |                                         |   |   |                                    |   |   |   |
| Total                       |   | $                                            | 3,253  |   |                                    | $      | 4,502 |   |

----

Index

----

----

|                                                 |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Balance at January 1,                                |   | $      | 81,500  |   |   | $      | 58,183  |   |   | $ | 47,016 |   |
| New advances                                         |   |   | 2,000   |   |   |   | 64,200  |   |   |   | 65,700 |   |
| Interest added to principal                          |   |   | 4,502   |   |   |   | -       |   |   |   | - |   |
| Repayments                                           |   |   | (500    | )      |   |   | (22,416 | )      |   |   | (53,000 | ) |
| Principal exchanged for interest in hotel properties |   |   | (20,000 | )      |   |   | -       |   |   |   | - |   |
| Discount recorded                                    |   |   | -       |   |   |   | -       |   |   |   | (1,687 | ) |
| Amortization of discount                             |   |   | -       |   |   |   | 281     |   |   |   | 154 |   |
| Impairments, net of discount                         |   |   | (21,408 | )      |   |   | (18,748 | )      |   |   | - |   |
| Balance at December 31,                              |   | $      | 46,094  |   |   | $      | 81,500  |   |   | $ | 58,183 |   |

----

Index

----

----

----

Index

----

----

|                                                              |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |
| Transaction Costs                                                 |   | $      | 292    |   |   | $      | 237 |   |
| Investment in Statutory Trusts                                    |   |   | 1,548  |   |   |   | 1,548 |   |
| Notes Receivable                                                  |   |   | 1,412  |   |   |   | 1,267 |   |
| Due from Lessees                                                  |   |   | -      |   |   |   | 1,907 |   |
| Prepaid Expenses                                                  |   |   | 4,468  |   |   |   | 3,182 |   |
| Interest Receivable from Development Loans to Non-Related Parties |   |   | 1,573  |   |   |   | 2,024 |   |
| Deposits on Property Improvement Plans                            |   |   | 167    |   |   |   | 149 |   |
| Hotel Purchase Option                                             |   |   | 933    |   |   |   | 933 |   |
| Other                                                             |   |   | 2,035  |   |   |   | 2,270 |   |
|                                                              |   | $      | 12,428 |   |   | $      | 13,517 |   |

----

Index

----

----

| Year Ending December 31, |   | Amount |    |
|--------------------------|--------|--------|---------|
|                     |   |   |    |
| 2010                     |   |   | 37,406  |   |
| 2011                     |   |   | 58,208  |   |
| 2012                     |   |   | 44,107  |   |
| 2013                     |   |   | 31,989  |   |
| 2014                     |   |   | 43,935  |   |
| Thereafter               |   |   | 450,647 |   |
| Net Unamortized Discount |   |   | (49     | ) |
|                     |   | $      | 666,243 |   |

----

Index

----

----

| - Hampton Inn, Danville, PA                      |   | - Holiday Inn Express, New Columbia, PA              |
|--------------------------------------------------|--------|------------------------------------------------------|
| - Hampton Inn, Philadelphia, PA                  |   | - Mainstay Suites and Sleep Inn, King of Prussia, PA |
| - Holiday Inn, Norwich, CT                       |   | - Residence Inn, Langhorne, PA                       |
| - Holiday Inn Express, Camp Springs, MD          |   | - Residence Inn, Norwood, MA                         |
| - Holiday Inn Express and Suites, Harrisburg, PA |   | - Sheraton Hotel, JFK Airport, New York, NY          |

|   | · | The annual interest rate on prime rate loans was increased from the Wall Street Journal variable prime rate to the Wall Street Journal variable prime rate plus 1.50%. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The annual interest rate on LIBOR rate loans was increased from LIBOR plus 2.50% to the greater of (i) LIBOR plus 3.50% or (ii) 4.25%. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a debt service coverage ratio of not less than 1.20 to 1.00; |
|--------|--------|--------------------------------------------------------------|

|   | · | a total funded liabilities to gross asset value ratio of not more than 0.67 to 1.00; and |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | a EBITDA to debt service ratio of not less than 1.25 to 1.00; |
|--------|--------|---------------------------------------------------------------|

|   | · | The sum of the aggregate amount of outstanding loans and letter of credit obligations may not exceed the lesser of the committed amount of $135,000 or 67% of the appraised value of the hotel properties pledged as collateral.  In the event the aggregate amount of outstanding loans and letter of credit obligations exceeds this amount, we will be required to repay a portion of the outstanding loans and letter of credit obligations or provide additional collateral to the lenders. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

----

----

----

Index

----

----

----

Index

----

----

----

Index

----

----

| Year Ending December 31, |   | Amount |   |
|--------------------------|--------|--------|--------|
|                     |   |   |   |
| 2010                     |   | $      | 904    |   |
| 2011                     |   |   | 935    |   |
| 2012                     |   |   | 975    |   |
| 2013                     |   |   | 981    |   |
| 2014                     |   |   | 986    |   |
| Thereafter               |   |   | 92,175 |   |
|                     |   | $      | 96,956 |   |

----

Index

----

----

----

Index

----

----

|                |   |                                                      |   |   |   |             |   | Value                  |   |
|---------------------|--------|-----------------------------------------------------------|--------|--------|--------|------------------|--------|------------------------|--------|
| Date of Transaction |   | Hedged Debt                                               |   | Type   |   | Maturity Date    |   | December 31, 2009 |   |   | December 31, 2008 |   |
| January 15, 2008    |   | Variable Rate Mortgage - Nu Hotel, Brooklyn, NY           |   | Swap   |   | January 10, 2011 |   | $                      | (103   | ) |   | $ | (6 | ) |
| December 31, 2008   |   | Variable Rate Mortgage - Hilton Garden Inn, Edison, NJ    |   | Swap   |   | January 1, 2011  |   |                   | (53    | ) |   |   | (25 | ) |
| July 1, 2007        |   | Variable Rate Mortgage - Hotel 373, New York, NY          |   | Cap    |   | May 9, 2010      |   |                   | -      |   |   |   | - |   |
| July 2, 2004        |   | Variable Rate Mortgage - Sheraton Four Points, Revere, MA |   | Swap   |   | July 23, 2009    |   |                   | -      |   |   |   | (172 | ) |
| February 1, 2008    |   | Revolving Variable Rate Credit Facility                   |   | Swap   |   | February 1, 2009 |   |                   | -      |   |   |   | (74 | ) |
|                |   |                                                      |   |   |   |             |   | $                      | (156   | ) |   | $ | (277 | ) |

----

Index

----

----

|                   |   |          |   |                         |   |           |                  |             |         | Shares Vested          |   |    | Unearned Compensation  |   |
|------------------------|--------|---------------|--------|------------------------------|--------|----------------|-----------------------|------------------|--------------|------------------------|--------|---------|------------------------|--------|
| Original Issuance Date |   | Shares Issued |   | Share Price on date of grant |   | Vesting Period |                  | Vesting Schedule |         | December 31, 2009 |   |    | December 31, 2008 |   |   | December 31, 2009 |   |   | December 31, 2008 |   |
| June 1, 2005           |   | 71,000        |   | $                            | 9.60   |           |  4 years         |             | 25%/year     |                   | $      | 71,000  |                   |   | $ | 53,250 |   |   | $ | - |   |   | $ | 71 |   |
| June 1, 2006           |   | 89,500        |   | $                            | 9.40   |           |  4 years         |             | 25%/year     |                   |   | 67,125  |                   |   |   | 44,750 |   |   |   | 87 |   |   |   | 298 |   |
| June 1, 2007           |   | 214,582       |   | $                            | 12.32  |           |  4 years         |             | 25%/year     |                   |   | 107,291 |                   |   |   | 53,645 |   |   |   | 935 |   |   |   | 1,597 |   |
| June 2, 2008           |   | 278,059       |   | $                            | 8.97   |           |  4 years         |             | 25%/year     |                   |   | 69,515  |                   |   |   | - |   |   |   | 1,506 |   |   |   | 2,130 |   |
| September 30, 2008     |   | 3,616         |   | $                            | 7.44   |           |   1-4 years |             | 25-100%/year |                   |   | 654     |                   |   |   | - |   |   |   | 6 |   |   |   | 22 |   |
| June 1, 2009           |   | 744,128       |   | $                            | 2.80   |           |  4 years         |             | 25%/year     |                   |   | -       |                   |   |   | - |   |   |   | 1,780 |   |   |   | - |   |
| September 10, 2009     |   | 108,334       |   | $                            | 2.96   |           |  1 year          |             | 100%/year    |                   |   | -       |                   |   |   | - |   |   |   | 280 |   |   |   | - |   |
| September 25, 2009     |   | 10,000        |   | $                            | 3.06   |           |  1 year          |             | 100%/year    |                   |   | -       |                   |   |   | - |   |   |   | 20 |   |   |   | - |   |
| Total                  |   | 1,519,219     |   |                         |   |           |                  |             |         |                   | $      | 315,585 |                   |   | $ | 151,645 |   |   | $ | 4,614 |   |   | $ | 4,118 |   |

----

Index

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----

| Date of Award Issuance |   | Shares Issued |   |   | Share Price on date of grant |   |
|------------------------|--------|---------------|--------|--------|------------------------------|--------|
| March 1, 2005          |   |          | 2,095  |   |                         | $      | 11.97 |   |
| January 3, 2006        |   |          | 5,000  |   |                         |   | 9.12 |   |
| January 2, 2007        |   |          | 4,000  |   |                         |   | 11.44 |   |
| July 2, 2007           |   |          | 4,000  |   |                         |   | 12.12 |   |
| January 2, 2008        |   |          | 4,000  |   |                         |   | 9.33 |   |
| June 2, 2008           |   |          | 6,000  |   |                         |   | 8.97 |   |
| January 2, 2009        |   |          | 12,500 |   |                         |   | 2.96 |   |
| June 1, 2009           |   |          | 17,000 |   |                         |   | 2.80 |   |
| December 31, 2009      |   |          | 18,000 |   |                         |   | 3.14 |   |
| Total                  |   |          | 72,595 |   |                         |   |   |   |

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Index

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|                                                                           |   | Year Ended        |       |
|--------------------------------------------------------------------------------|--------|-------------------|------------|
|                                                                           |   | December 31, 2009 |       |   | December 31, 2008 |   |   | December 31, 2007 |   |
| Numerator:                                                                     |   |              |       |   |   |   |   |   |   |
| BASIC AND DILUTED*                                                             |   |              |       |   |   |   |   |   |   |
| (Loss) Income from Continuing Operations                                       |   | $                 | (42,421    | ) |   | $ | (14,172 | ) |   | $ | 14,556 |   |
| Loss (Income) from Continuing Operations allocated to Noncontrolling Interests |   |              | 6,205      |   |   |   | 2,134 |   |   |   | (1,612 | ) |
| Distributions to 8.0% Series A Preferred Shareholders                          |   |              | (4,800     | ) |   |   | (4,800 | ) |   |   | (4,800 | ) |
| Dividends Paid on Unvested Restricted Shares                                   |   |              | (255       | ) |   |   | (329 | ) |   |   | (197 | ) |
| (Loss) Income from Continuing Operations applicable to Common Shareholders     |   |              | (41,271    | ) |   |   | (17,167 | ) |   |   | 7,947 |   |
|                                                                           |   |              |       |   |   |   |   |   |   |   |   |   |
| Discontinued Operations                                                        |   |              |       |   |   |   |   |   |   |   |   |   |
| Income from Discontinued Operations                                            |   |              | (16,037    | ) |   |   | 3,743 |   |   |   | 5,616 |   |
| Income from Discontinued Operations allocated to Noncontrolling Interests      |   |              | 2,392      |   |   |   | (513 | ) |   |   | (713 | ) |
| Income from Discontinued Operations applicable to Common Shareholders          |   |              | (13,645    | ) |   |   | 3,230 |   |   |   | 4,903 |   |
|                                                                           |   |              |       |   |   |   |   |   |   |   |   |   |
| Net (Loss) Income  applicable to Common Shareholders                 |   | $                 | (54,916    | ) |   | $ | (13,937 | ) |   | $ | 12,850 |   |
|                                                                           |   |              |       |   |   |   |   |   |   |   |   |   |
|                                                                           |   |              |       |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                   |   |              |       |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares - basic                               |   |              | 51,027,742 |   |   |   | 45,184,127 |   |   |   | 40,718,724 |   |
| Effect of dilutive securities:                                                 |   |              |       |   |   |   |   |   |   |   |   |   |
| Stock awards                                                                   |   |              | -          | ** |   |   | - | ** |   |   | - | ** |
| Weighted average number of common shares - diluted*                            |   |              | 51,027,742 |   |   |   | 45,184,127 |   |   |   | 40,718,724 |   |

----

Index

----

----

|                                                                       |   | Year Ended             |   |
|----------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                       |   | December 31, 2009 |   |   | December 31, 2008 |   |   | December 31, 2007 |   |
| Earnings Per Share:                                                        |   |                   |   |   |   |   |   |   |   |
| BASIC                                                                      |   |                   |   |   |   |   |   |   |   |
| (Loss) Income from Continuing Operations applicable to Common Shareholders |   | $                      | (0.81  | ) |   | $ | (0.38 | ) |   | $ | 0.20 |   |
| Income from Discontinued Operations applicable to Common Shareholders      |   |                   | (0.27  | ) |   |   | 0.07 |   |   |   | 0.12 |   |
| Net (Loss) Income applicable to Common Shareholders                        |   | $                      | (1.08  | ) |   | $ | (0.31 | ) |   | $ | 0.32 |   |
|                                                                       |   |                   |   |   |   |   |   |   |   |   |   |   |
| DILUTED*                                                                   |   |                   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income from Continuing Operations applicable to Common Shareholders |   | $                      | (0.81  | ) |   | $ | (0.38 | ) |   | $ | 0.20 |   |
| Income from Discontinued Operations applicable to Common Shareholders      |   |                   | (0.27  | ) |   |   | 0.07 |   |   |   | 0.12 |   |
| Net (Loss) Income applicable to Common Shareholders                        |   | $                      | (1.08  | ) |   | $ | (0.31 | ) |   | $ | 0.32 |   |

----

Index

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----

|                                                                                                                                            |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                            |   | 2009   |   |   | 2008   |   |   | 2007   |   |
| Common Shares issued as part of the Dividend Reinvestment Plan                                                                                  |   | $      | 25     |   |   | $      | 31     |   |   | $ | 30 |   |
| Issuance of Common Shares to the Board of Trustees                                                                                              |   |   | 141    |   |   |   | 91     |   |   |   | 95 |   |
| Issuance of Common Units for acquisitions of hotel properties                                                                                   |   |   | -      |   |   |   | 21,624 |   |   |   | 25,781 |   |
| Development loan accrued interest revenue receivable paid in-kind by adding balance to development loan principal                               |   |   | 4,502  |   |   |   | -      |   |   |   | - |   |
| Debt assumed in acquisition of  hotel properties                                                                                      |   |   | 37,524 |   |   |   | 30,790 |   |   |   | 70,564 |   |
| Settlement of development loans receivable principal and accrued interest revenue receivable in connection with acquisition of hotel properties |   |   | 21,760 |   |   |   | -      |   |   |   | - |   |
| Land and mortgage transferred to seller as part of acquisition of hotel property                                                                |   |   | 10,118 |   |   |   | -      |   |   |   | - |   |
| Issuance of Common Units for acquisition of unconsolidated joint venture                                                                        |   |   | -      |   |   |   | -      |   |   |   | 6,817 |   |
| Issuance of Common Units for acquisition of option to acquire interest in hotel property                                                        |   |   | -      |   |   |   | -      |   |   |   | 933 |   |
| Conversion of Common Units to Common Shares                                                                                                     |   |   | 255    |   |   |   | 1,372  |   |   |   | 2,369 |   |
| Reallocation to noncontrolling interest                                                                                                         |   |   | -      |   |   |   | 1,966  |   |   |   | 12,422 |   |

----

Index

----

----

----

Index

----

----

|                                             |   | December 31, 2009 |   |
|--------------------------------------------------|--------|------------------------|--------|
|                                             |   |                   |   |
| Land                                             |   | $                      | 18,389 |   |
| Buildings and Improvements                       |   |                   | 2,912  |   |
| Furniture, Fixtures and Equipment                |   |                   | 531    |   |
| Intangible Assets                                |   |                   | 50     |   |
|                                             |   |                   | 21,882 |   |
|                                             |   |                   |   |   |
| Less Accumulated Depreciation & Amortization |   |                   | (809   | ) |
|                                             |   |                   |   |   |
| Assets Held for Sale                             |   | $                      | 21,073 |   |

----

Index

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----

|                                                           |   | 2009   |    |   | 2008   |   |   | 2007   |   |
|----------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|
| Revenue:                                                       |   |   |    |   |   |   |   |   |   |
| Hotel Operating Revenues                                       |   | $      | 7,816   |   |   | $      | 14,302 |   |   | $ | 21,263 |   |
| Hotel Lease Revenue                                            |   |   | -       |   |   |   | 628    |   |   |   | 781 |   |
| Land Lease Revenue                                             |   |   | 2,624   |   |   |   | 5,276  |   |   |   | 4,860 |   |
| Total Revenue                                                  |   |   | 10,440  |   |   |   | 20,206 |   |   |   | 26,904 |   |
|                                                           |   |   |    |   |   |   |   |   |   |   |   |   |
| Expenses:                                                      |   |   |    |   |   |   |   |   |   |   |   |   |
| Hotel Operating Expenses                                       |   |   | 6,202   |   |   |   | 11,155 |   |   |   | 15,411 |   |
| Land Lease Expense                                             |   |   | 1,455   |   |   |   | 2,939  |   |   |   | 2,720 |   |
| Real Estate and Personal Property Taxes and Property Insurance |   |   | 548     |   |   |   | 634    |   |   |   | 1,056 |   |
| Depreciation and Amortization                                  |   |   | 1,129   |   |   |   | 2,514  |   |   |   | 3,187 |   |
| General and Administrative                                     |   |   | (463    | )      |   |   | 7      |   |   |   | 8 |   |
| Loss on Debt Extinguishment                                    |   |   | -       |   |   |   | 19     |   |   |   | - |   |
| Interest Expense                                               |   |   | 1,772   |   |   |   | 2,083  |   |   |   | 3,154 |   |
|                                                           |   |   | 10,643  |   |   |   | 19,351 |   |   |   | 25,536 |   |
| Total Expenses                                                 |   |   |    |   |   |   |   |   |   |   |   |   |
|                                                           |   |   |    |   |   |   |   |   |   |   |   |   |
| (Loss) Income from Discontinued Operations                     |   |   | (203    | )      |   |   | 855    |   |   |   | 1,368 |   |
| Gain on Disposition of Hotel Properties                        |   |   | 1,869   |   |   |   | 2,888  |   |   |   | 4,248 |   |
| Impairment of Assets Held for Sale                             |   |   | (17,703 | )      |   |   | -      |   |   |   | - |   |
| (Loss) Income from Discontinued Operations                     |   | $      | (16,037 | )      |   | $      | 3,743  |   |   | $ | 5,616 |   |

----

Index

----

----

----

Index

----

----

|                                                             |   | For the year ended December 31, |   |
|------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                             |   | 2009                                 |   |   | 2008 |   |   | 2007 |   |
| Computed "Expected" federal tax expense (benefit) of TRS, at 35% |   | $                                    | (1,061 | ) |   | $ | (1,251 | ) |   | $ | (270 | ) |
| State income taxes, net of federal income tax effect             |   |                                 | (421   | ) |   |   | (181 | ) |   |   | (66 | ) |
| Changes in valuation allowance                                   |   |                                 | 1,482  |   |   |   | 1,432 |   |   |   | 336 |   |
|                                                             |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Total income tax expense                                         |   | $                                    | -      |   |   | $ | - |   |   | $ | - |   |

|                            |   | as of December 31, |   |
|---------------------------------|--------|-------------------------|--------|
|                            |   | 2009                    |   |   | 2008 |   |
| Deferred tax assets:            |   |                    |   |   |   |   |
| Net operating loss carryforward |   | $                       | 3,558  |   |   | $ | 3,185 |   |
| Depreciation                    |   |                    | (48    | ) |   |   | (29 | ) |
| Net deferred tax assets         |   |                    | 3,510  |   |   |   | 3,156 |   |
| Valuation allowance             |   |                    | (3,510 | ) |   |   | (3,156 | ) |
| Deferred tax assets             |   | $                       | -      |   |   | $ | - |   |

----

Index

----

----

|                           |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|--------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Preferred Shares - 8% Series A |   |   |   |   |   |   |   |   |   |
| Ordinary income                |   |   | 0.00   | %      |   |   | 86.46  | %      |   |   | 81.98 | % |
| Capital Gain Distribution      |   |   | 100.00 | %      |   |   | 13.54  | %      |   |   | 18.02 | % |
| Common Shares - Class A        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ordinary income                |   |   | 0.00   | %      |   |   | 44.61  | %      |   |   | 48.25 | % |
| Return of Capital              |   |   | 100.00 | %      |   |   | 48.40  | %      |   |   | 41.14 | % |
| Capital Gain Distribution      |   |   | 0.00   | %      |   |   | 6.99   | %      |   |   | 10.61 | % |

----

Index

----

----

|                                                                                           |   | Year Ended December 31, 2009 |       |
|------------------------------------------------------------------------------------------------|--------|------------------------------|------------|
|                                                                                           |   |                         |       |   |   |   |   |   |   |   |   |   |
|                                                                                           |   | First Quarter                |       |   | Second Quarter |   |   | Third Quarter |   |   | Fourth Quarter |   |
| Total Revenues                                                                                 |   | $                            | 45,083     |   |   | $ | 60,082 |   |   | $ | 61,906 |   |   | $ | 53,627 |   |
| Total Expenses                                                                                 |   |                         | 54,261     |   |   |   | 58,747 |   |   |   | 83,256 |   |   |   | 59,665 |   |
| (Loss) Income from Unconsolidated Joint Ventures                                               |   |                         | (1,329     | ) |   |   | (395 | ) |   |   | (606 | ) |   |   | (4,860 | ) |
| (Loss) Income from Continuing Operations                                                       |   |                         | (10,507    | ) |   |   | 940 |   |   |   | (21,956 | ) |   |   | (10,898 | ) |
|                                                                                           |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income from Discontinued Operations (including Gain on Disposition of Hotel Properties) |   |                         | (176       | ) |   |   | 544 |   |   |   | (15,979 | ) |   |   | (426 | ) |
| Net (Loss) Income                                                                              |   |                         | (10,683    | ) |   |   | 1,484 |   |   |   | (37,935 | ) |   |   | (11,324 | ) |
|                                                                                           |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income Allocated to Noncontrolling Interests in Continuing Operations                   |   |                         | (2,053     | ) |   |   | 451 |   |   |   | (5,560 | ) |   |   | (1,435 | ) |
| Preferred Distributions                                                                        |   |                         | 1,200      |   |   |   | 1,200 |   |   |   | 1,200 |   |   |   | 1,200 |   |
| Net (Loss) Income applicable to Common Shareholders                                            |   | $                            | (9,830     | ) |   | $ | (167 | ) |   | $ | (33,575 | ) |   | $ | (11,089 | ) |
| Basic and diluted earnings per share:                                                          |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income from continuing operations applicable to common shareholders                     |   | $                            | (0.21      | ) |   | $ | 0.00 |   |   | $ | (0.39 | ) |   | $ | (0.19 | ) |
| Discontinued Operations                                                                        |   |                         | -          |   |   |   | - |   |   |   | (0.26 | ) |   |   | (0.01 | ) |
| Net (Loss) Income applicable to Common Shareholders                                            |   | $                            | (0.21      | ) |   | $ | 0.00 |   |   | $ | (0.65 | ) |   | $ | (0.20 | ) |
| Weighted Average Common Shares Outstanding                                                     |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                          |   |                         | 47,786,503 |   |   |   | 47,964,818 |   |   |   | 51,878,482 |   |   |   | 56,488,607 |   |
| Diluted                                                                                        |   |                         | 47,786,503 |   |   |   | 47,964,818 |   |   |   | 51,878,482 |   |   |   | 56,488,607 |   |
|                                                                                           |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   | Year Ended December 31, 2008 |       |
|                                                                                           |   |                         |       |   |   |   |   |   |   |   |   |   |
|                                                                                           |   | First Quarter                |       |   | Second Quarter |   |   | Third Quarter |   |   | Fourth Quarter |   |
| Total Revenues                                                                                 |   | $                            | 51,397     |   |   | $ | 66,053 |   |   | $ | 70,383 |   |   | $ | 57,663 |   |
| Total Expenses                                                                                 |   |                         | 54,016     |   |   |   | 58,032 |   |   |   | 65,040 |   |   |   | 82,062 |   |
| (Loss) Income from Unconsolidated Joint Ventures                                               |   |                         | (738       | ) |   |   | 1,360 |   |   |   | 1,629 |   |   |   | (2,768 | ) |
| (Loss) Income from Continuing Operations                                                       |   |                         | (3,357     | ) |   |   | 9,381 |   |   |   | 6,972 |   |   |   | (27,167 | ) |
|                                                                                           |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income from Discontinued Operations (including Gain on Disposition of Hotel Properties) |   |                         | (528       | ) |   |   | 581 |   |   |   | 788 |   |   |   | 2,901 |   |
| Net (Loss) Income                                                                              |   |                         | (3,885     | ) |   |   | 9,962 |   |   |   | 7,760 |   |   |   | (24,266 | ) |
|                                                                                           |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income Allocated to Noncontrolling Interests in Continuing Operations                   |   |                         | (1,006     | ) |   |   | 1,737 |   |   |   | 1,425 |   |   |   | (3,777 | ) |
| Preferred Distributions                                                                        |   |                         | 1,200      |   |   |   | 1,200 |   |   |   | 1,200 |   |   |   | 1,200 |   |
| Net (Loss) Income applicable to Common Shareholders                                            |   | $                            | (4,079     | ) |   | $ | 7,025 |   |   | $ | 5,135 |   |   | $ | (21,689 | ) |
| Basic and diluted earnings per share:                                                          |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income from continuing operations applicable to common shareholders                     |   | $                            | (0.09      | ) |   | $ | 0.15 |   |   | $ | 0.10 |   |   | $ | (0.51 | ) |
| Discontinued Operations                                                                        |   |                         | (0.01      | ) |   |   | 0.01 |   |   |   | 0.01 |   |   |   | 0.05 |   |
| Net Loss (Income) applicable to Common Shareholders                                            |   | $                            | (0.10      | ) |   | $ | 0.16 |   |   | $ | 0.11 |   |   | $ | (0.46 | ) |
| Weighted Average Common Shares Outstanding                                                     |   |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                          |   |                         | 40,891,140 |   |   |   | 44,253,641 |   |   |   | 47,764,168 |   |   |   | 47,770,780 |   |
| Diluted                                                                                        |   |                         | 40,891,140 |   |   |   | 44,253,641 |   |   |   | 47,764,168 |   |   |   | 47,770,780 |   |

----

Index

----

----

| · | a Hampton Inn located at 337 West 39th Street, New York (the “Hampton Inn Times Square”) from Metro Eleven LLC; |
|--------|-----------------------------------------------------------------------------------------------------------------------------|

| · | a Candlewood Suites located at 339 West 39th Street, New York (the “Candlewood Suites Times Square”) from Metro Eleven LLC; and |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

| · | a Holiday Inn Express located at 343 West 39th Street, New York (the “Holiday Inn Express Times Square”) from M&R Hotel LLC and Lincoln Avenue Center, LLC. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Hotel                            | Total Purchase Price |
|----------------------------------|----------------------|
| Hampton Inn Times Square         | $  56,000  |
| Candlewood Suites Times Square   | $  51,000  |
| Holiday Inn Express Times Square | $  58,000  |

----

Index

----

----

|                                                 |   |         |    |   | Initial Costs |   |   | Costs Capitalized Subsequent to Acquisition |   |   | Gross Amounts at which Carrried at Close of Period |   |   |                              |   |   | Accumulated |   |   | Net Book Value                    |   |   |
|------------------------------------------------------|--------|--------------|---------|--------|---------------|--------|--------|---------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|-----------------------------------|--------|--------|-------------|--------|--------|-----------------------------------|--------|--------|
|                                                 |   |         |    |   |          |   |   |                                        |   |   |                                               |   |   |                              |   |   |        |   |   |                              |   |   |   |   |   | Depreciation |   |   | Land |   |   |
| Description                                          |   | Encumbrances |    |   | Land          |   |   | Buildings & Improvements           |   |   | Land                                               |   |   | Buildings & Improvements |   |   | Land        |   |   | Buildings & Improvements |   |   | Total |   |   | Buildings & Improvements* |   |   | Buildings & Improvements |   | Date of Acquisition |
|                                                 |   |         |    |   |          |   |   |                                        |   |   |                                               |   |   |                              |   |   |        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |         |    |   |          |   |   |                                        |   |   |                                               |   |   |                              |   |   |        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Hampton Inn, Carlisle, PA                            |   | $            | (3,383  | )      |          | $      | 300    |                                        |   | $      | 3,109                                              |   |   | $                                 | 200    |   |        | $      | 2,181  |                              |   | $      | 500 |   |   | $ | 5,290 |   |   | $ | 5,790 |   |   | $ | (1,653 | ) |   | $ | 4,137 |   | 06/01/97 |
| Holiday Inn Exp, Hershey, PA                         |   |         | (5,970  | )      |          |   | 426    |                                        |   |   | 2,645                                              |   |   |                              | 410    |   |        |   | 3,782  |                              |   |   | 836 |   |   |   | 6,427 |   |   |   | 7,263 |   |   |   | (1,973 | ) |   |   | 5,290 |   | 10/01/97 |
| Holiday Inn Exp,  New Columbia, PA         |   |         | -       |   |          |   | 94     |                                        |   |   | 2,510                                              |   |   |                              | 66     |   |        |   | 780    |                              |   |   | 160 |   |   |   | 3,290 |   |   |   | 3,450 |   |   |   | (999 | ) |   |   | 2,451 |   | 12/01/97 |
| Comfort Inn, Harrisburg, PA                          |   |         | (2,055  | )      |          |   | -      |                                        |   |   | 2,720                                              |   |   |                              | 214    |   |        |   | 1,189  |                              |   |   | 214 |   |   |   | 3,909 |   |   |   | 4,123 |   |   |   | (1,164 | ) |   |   | 2,959 |   | 05/15/98 |
| Hampton Inn, Selinsgrove, PA                         |   |         | (2,826  | )      |          |   | 157    |                                        |   |   | 2,511                                              |   |   |                              | 93     |   |        |   | 2,359  |                              |   |   | 250 |   |   |   | 4,870 |   |   |   | 5,120 |   |   |   | (1,718 | ) |   |   | 3,402 |   | 09/12/96 |
| Hampton Inn, Danville, PA                            |   |         | -       |   |          |   | 300    |                                        |   |   | 2,787                                              |   |   |                              | 99     |   |        |   | 1,183  |                              |   |   | 399 |   |   |   | 3,970 |   |   |   | 4,369 |   |   |   | (1,177 | ) |   |   | 3,192 |   | 08/28/97 |
| Holiday Inn Exp & Suites, Harrisburg, PA         |   |         | -       |   |          |   | 213    |                                        |   |   | 1,934                                              |   |   |                              | 81     |   |        |   | 1,093  |                              |   |   | 294 |   |   |   | 3,027 |   |   |   | 3,321 |   |   |   | (889 | ) |   |   | 2,432 |   | 03/06/98 |
| Hampton Inn, Hershey, PA                             |   |         | (2,812  | )      |          |   | 807    |                                        |   |   | 5,714                                              |   |   |                              | 4      |   |        |   | 1,038  |                              |   |   | 811 |   |   |   | 6,752 |   |   |   | 7,563 |   |   |   | (1,868 | ) |   |   | 5,695 |   | 01/01/00 |
| Mainstay Suites & Sleep Inn, King of Prussia, PA |   |         | -       |   |          |   | 1,133  |                                        |   |   | 7,294                                              |   |   |                              | -      |   |        |   | 347    |                              |   |   | 1,133 |   |   |   | 7,641 |   |   |   | 8,774 |   |   |   | (1,663 | ) |   |   | 7,111 |   | 06/01/01 |
| Hilton Garden Inn, Edison, NJ                        |   |         | (5,250  | )      |          |   | -      |                                        |   |   | 12,159                                             |   |   |                              | -      |   |        |   | 331    |                              |   |   | - |   |   |   | 12,490 |   |   |   | 12,490 |   |   |   | (1,993 | ) |   |   | 10,497 |   | 10/01/04 |
| Residence Inn, Framingham, MA                        |   |         | (8,639  | )      |          |   | 1,325  |                                        |   |   | 12,737                                             |   |   |                              | -      |   |        |   | 827    |                              |   |   | 1,325 |   |   |   | 13,564 |   |   |   | 14,889 |   |   |   | (2,092 | ) |   |   | 12,797 |   | 03/26/04 |
| Hampton Inn, New York, NY                            |   |         | (25,791 | )      |          |   | 5,472  |                                        |   |   | 23,280                                             |   |   |                              | -      |   |        |   | 107    |                              |   |   | 5,472 |   |   |   | 23,387 |   |   |   | 28,859 |   |   |   | (2,939 | ) |   |   | 25,920 |   | 04/01/05 |
| Residence Inn, Greenbelt, MD                         |   |         | (11,773 | )      |          |   | 2,615  |                                        |   |   | 14,815                                             |   |   |                              | -      |   |        |   | 255    |                              |   |   | 2,615 |   |   |   | 15,070 |   |   |   | 17,685 |   |   |   | (2,109 | ) |   |   | 15,576 |   | 07/16/04 |
| Fairfield Inn,  Laurel, MD                 |   |         | (7,313  | )      |          |   | 927    |                                        |   |   | 6,120                                              |   |   |                              | -      |   |        |   | 994    |                              |   |   | 927 |   |   |   | 7,114 |   |   |   | 8,041 |   |   |   | (1,027 | ) |   |   | 7,014 |   | 01/31/05 |
| Holiday Inn Exp, Langhorne, PA                       |   |         | (6,390  | )      |          |   | 1,088  |                                        |   |   | 6,573                                              |   |   |                              | -      |   |        |   | 76     |                              |   |   | 1,088 |   |   |   | 6,649 |   |   |   | 7,737 |   |   |   | (784 | ) |   |   | 6,953 |   | 05/26/05 |
| Holiday Inn Exp, Malvern, PA                         |   |         | (3,971  | )      |          |   | 2,639  |                                        |   |   | 5,324                                              |   |   |                              | 654    |   |        |   | 109    |                              |   |   | 3,293 |   |   |   | 5,433 |   |   |   | 8,726 |   |   |   | (631 | ) |   |   | 8,095 |   | 05/24/05 |
| Holiday Inn Exp, King of Prussia, PA                 |   |         | (12,634 | )      |          |   | 2,557  |                                        |   |   | 13,339                                             |   |   |                              | -      |   |        |   | 348    |                              |   |   | 2,557 |   |   |   | 13,687 |   |   |   | 16,244 |   |   |   | (1,620 | ) |   |   | 14,624 |   | 05/23/05 |
| Courtyard Inn, Wilmington, DE                        |   |         | (7,805  | )      |          |   | 988    |                                        |   |   | 10,295                                             |   |   |                              | -      |   |        |   | 729    |                              |   |   | 988 |   |   |   | 11,024 |   |   |   | 12,012 |   |   |   | (1,401 | ) |   |   | 10,611 |   | 06/17/05 |
| McIntosh Inn, Wilmington, DE                         |   |         | (4,615  | )      |          |   | 898    |                                        |   |   | 4,515                                              |   |   |                              | -      |   |        |   | 782    |                              |   |   | 898 |   |   |   | 5,297 |   |   |   | 6,195 |   |   |   | (755 | ) |   |   | 5,440 |   | 06/17/05 |
| Residence Inn, Williamsburg, VA                      |   |         | (7,277  | )      |          |   | 1,911  |                                        |   |   | 11,625                                             |   |   |                              | (1     | )      |        |   | 610    |                              |   |   | 1,910 |   |   |   | 12,235 |   |   |   | 14,145 |   |   |   | (2,525 | ) |   |   | 11,620 |   | 11/22/05 |
| Springhill Suites, Williamsburg, VA                  |   |         | (4,955  | )      |          |   | 1,430  |                                        |   |   | 10,293                                             |   |   |                              | -      |   |        |   | 85     |                              |   |   | 1,430 |   |   |   | 10,378 |   |   |   | 11,808 |   |   |   | (2,064 | ) |   |   | 9,744 |   | 11/22/05 |
| Courtyard Inn, Brookline, MA                         |   |         | (38,913 | )      |          |   | -      |                                        |   |   | 47,414                                             |   |   |                              | -      |   |        |   | 929    |                              |   |   | - |   |   |   | 48,343 |   |   |   | 48,343 |   |   |   | (5,516 | ) |   |   | 42,827 |   | 06/15/05 |
| Courtyard Inn, Scranton, PA                          |   |         | (6,101  | )      |          |   | 761    |                                        |   |   | 7,193                                              |   |   |                              | -      |   |        |   | 1,120  |                              |   |   | 761 |   |   |   | 8,313 |   |   |   | 9,074 |   |   |   | (1,003 | ) |   |   | 8,071 |   | 02/01/06 |
| Courtyard Inn, Langhorne, PA                         |   |         | (15,075 | )      |          |   | 3,064  |                                        |   |   | 16,068                                             |   |   |                              | -      |   |        |   | 421    |                              |   |   | 3,064 |   |   |   | 16,489 |   |   |   | 19,553 |   |   |   | (1,657 | ) |   |   | 17,896 |   | 01/03/06 |
| Fairfield Inn, Bethlehem, PA                         |   |         | (6,025  | )      |          |   | 1,399  |                                        |   |   | 6,778                                              |   |   |                              | -      |   |        |   | 341    |                              |   |   | 1,399 |   |   |   | 7,119 |   |   |   | 8,518 |   |   |   | (800 | ) |   |   | 7,718 |   | 01/03/06 |
| Residence Inn, Tyson's Corner, VA                    |   |         | (8,824  | )      |          |   | 4,283  |                                        |   |   | 14,475                                             |   |   |                              | -      |   |        |   | 286    |                              |   |   | 4,283 |   |   |   | 14,761 |   |   |   | 19,044 |   |   |   | (1,482 | ) |   |   | 17,562 |   | 02/02/06 |
| Hilton Garden Inn,  JFK Airport, NY        |   |         | (21,000 | )      |          |   | -      |                                        |   |   | 25,018                                             |   |   |                              | -      |   |        |   | 830    |                              |   |   | - |   |   |   | 25,848 |   |   |   | 25,848 |   |   |   | (2,592 | ) |   |   | 23,256 |   | 02/16/06 |
| Hawthorne Suites, Franklin, MA                       |   |         | (8,302  | )      |          |   | 1,872  |                                        |   |   | 8,968                                              |   |   |                              | -      |   |        |   | 113    |                              |   |   | 1,872 |   |   |   | 9,081 |   |   |   | 10,953 |   |   |   | (863 | ) |   |   | 10,090 |   | 04/25/06 |
| Residence Inn, Dartmouth, MA                         |   |         | (8,449  | )      |          |   | 1,933  |                                        |   |   | 10,434                                             |   |   |                              | -      |   |        |   | 252    |                              |   |   | 1,933 |   |   |   | 10,686 |   |   |   | 12,619 |   |   |   | (997 | ) |   |   | 11,622 |   | 05/01/06 |
| Holiday Inn Exp, Cambridge, MA                       |   |         | (10,794 | )      |          |   | 1,956  |                                        |   |   | 9,793                                              |   |   |                              | -      |   |        |   | 653    |                              |   |   | 1,956 |   |   |   | 10,446 |   |   |   | 12,402 |   |   |   | (1,045 | ) |   |   | 11,357 |   | 05/03/06 |
| Residence Inn, Norwood, MA                           |   |         | -       |   |          |   | 1,970  |                                        |   |   | 11,761                                             |   |   |                              | -      |   |        |   | 153    |                              |   |   | 1,970 |   |   |   | 11,914 |   |   |   | 13,884 |   |   |   | (1,027 | ) |   |   | 12,857 |   | 07/27/06 |

----

Index

----

----

|                                         |   |         |     |   | Initial Costs |   |    | Costs Capitalized Subsequent to Acquisition |   |   | Gross Amounts at which Carrried at Close of Period |   |   |                              |    |   | Accumulated |   |   | Net Book Value                    |   |   |
|----------------------------------------------|--------|--------------|----------|--------|---------------|--------|---------|---------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|-----------------------------------|---------|--------|-------------|--------|--------|-----------------------------------|--------|--------|
|                                         |   |         |     |   |          |   |    |                                        |   |   |                                               |   |   |                              |    |   |        |   |   |                              |   |   |   |   |   | Depreciation |   |   | Land |   |   |
| Description                                  |   | Encumbrances |     |   | Land          |   |    | Buildings & Improvements           |   |   | Land                                               |   |   | Buildings & Improvements |    |   | Land        |   |   | Buildings & Improvements |   |   | Total |   |   | Buildings & Improvements* |   |   | Buildings & Improvements |   | Date of Acquisition |
|                                         |   |         |     |   |          |   |    |                                        |   |   |                                               |   |   |                              |    |   |        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Hampton Inn, Brookhaven, NY                  |   | $            | (14,442  | )      |          | $      | 3,130   |                                        |   | $      | 17,345                                             |   |   | $                                 | 1       |   |        | $      | 870    |                              |   | $      | 3,131 |   |   | $ | 18,215 |   |   | $ | 21,346 |   |   | $ | (1,638 | ) |   | $ | 19,708 |   | 09/06/06 |
| Holiday Inn Exp, Hauppage, NY                |   |         | (9,613   | )      |          |   | 2,737   |                                        |   |   | 14,080                                             |   |   |                              | -       |   |        |   | 694    |                              |   |   | 2,737 |   |   |   | 14,774 |   |   |   | 17,511 |   |   |   | (1,352 | ) |   |   | 16,159 |   | 09/01/06 |
| Residence Inn, Langhorne, PA                 |   |         | -        |   |          |   | 1,463   |                                        |   |   | 12,094                                             |   |   |                              | 93      |   |        |   | 889    |                              |   |   | 1,556 |   |   |   | 12,983 |   |   |   | 14,539 |   |   |   | (953 | ) |   |   | 13,586 |   | 01/08/07 |
| Hampton Inn, Chelsea, NY                     |   |         | (35,938  | )      |          |   | 8,905   |                                        |   |   | 33,500                                             |   |   |                              | -       |   |        |   | 723    |                              |   |   | 8,905 |   |   |   | 34,223 |   |   |   | 43,128 |   |   |   | (2,924 | ) |   |   | 40,204 |   | 09/29/06 |
| Hyatt Summerfield Suites, Bridgewater, NJ    |   |         | (14,492  | )      |          |   | 3,373   |                                        |   |   | 19,685                                             |   |   |                              | -       |   |        |   | 165    |                              |   |   | 3,373 |   |   |   | 19,850 |   |   |   | 23,223 |   |   |   | (1,498 | ) |   |   | 21,725 |   | 12/28/06 |
| Hyatt Summerfield Suites, Charlotte, NC      |   |         | (7,330   | )      |          |   | 770     |                                        |   |   | 7,315                                              |   |   |                              | -       |   |        |   | 1,636  |                              |   |   | 770 |   |   |   | 8,951 |   |   |   | 9,721 |   |   |   | (968 | ) |   |   | 8,753 |   | 12/28/06 |
| Hyatt Summerfield Suites, Gaithersburg, MD   |   |         | (13,720  | )      |          |   | 2,912   |                                        |   |   | 16,001                                             |   |   |                              | -       |   |        |   | 352    |                              |   |   | 2,912 |   |   |   | 16,353 |   |   |   | 19,265 |   |   |   | (1,306 | ) |   |   | 17,959 |   | 12/28/06 |
| Hyatt Summerfield Suites, Pleasant Hills, CA |   |         | (20,160  | )      |          |   | 6,216   |                                        |   |   | 17,229                                             |   |   |                              | -       |   |        |   | 143    |                              |   |   | 6,216 |   |   |   | 17,372 |   |   |   | 23,588 |   |   |   | (1,312 | ) |   |   | 22,276 |   | 12/28/06 |
| Hyatt Summerfield Suites, Pleasanton, CA     |   |         | (14,490  | )      |          |   | 3,941   |                                        |   |   | 12,560                                             |   |   |                              | -       |   |        |   | 155    |                              |   |   | 3,941 |   |   |   | 12,715 |   |   |   | 16,656 |   |   |   | (965 | ) |   |   | 15,691 |   | 12/28/06 |
| Hyatt Summerfield Suites, Scottsdale, AZ     |   |         | (16,778  | )      |          |   | 3,060   |                                        |   |   | 19,968                                             |   |   |                              | -       |   |        |   | 203    |                              |   |   | 3,060 |   |   |   | 20,171 |   |   |   | 23,231 |   |   |   | (1,525 | ) |   |   | 21,706 |   | 12/28/06 |
| Hyatt Summerfield Suites, White Plains, NY   |   |         | (33,030  | )      |          |   | 8,823   |                                        |   |   | 30,273                                             |   |   |                              | -       |   |        |   | 182    |                              |   |   | 8,823 |   |   |   | 30,455 |   |   |   | 39,278 |   |   |   | (2,300 | ) |   |   | 36,978 |   | 12/28/06 |
| Holiday Inn Exp & Suites, Chester, NY    |   |         | (6,700   | )      |          |   | 1,500   |                                        |   |   | 6,671                                              |   |   |                              | -       |   |        |   | 47     |                              |   |   | 1,500 |   |   |   | 6,718 |   |   |   | 8,218 |   |   |   | (491 | ) |   |   | 7,727 |   | 01/25/07 |
| Residence Inn, Carlisle, PA                  |   |         | (6,857   | )      |          |   | 1,015   |                                        |   |   | 7,511                                              |   |   |                              | -       |   |        |   | 25     |                              |   |   | 1,015 |   |   |   | 7,536 |   |   |   | 8,551 |   |   |   | (564 | ) |   |   | 7,987 |   | 01/10/07 |
| Hampton Inn, Seaport, NY                     |   |         | (19,672  | )      |          |   | 7,816   |                                        |   |   | 19,040                                             |   |   |                              | -       |   |        |   | 145    |                              |   |   | 7,816 |   |   |   | 19,185 |   |   |   | 27,001 |   |   |   | (1,412 | ) |   |   | 25,589 |   | 02/01/07 |
| Hotel 373-5th Ave, New York, NY              |   |         | (22,000  | )      |          |   | 14,239  |                                        |   |   | 16,778                                             |   |   |                              | -       |   |        |   | 81     |                              |   |   | 14,239 |   |   |   | 16,859 |   |   |   | 31,098 |   |   |   | (1,098 | ) |   |   | 30,000 |   | 06/01/07 |
| Holiday Inn, Norwich, CT                     |   |         | -        |   |          |   | 1,984   |                                        |   |   | 12,037                                             |   |   |                              | -       |   |        |   | 381    |                              |   |   | 1,984 |   |   |   | 12,418 |   |   |   | 14,402 |   |   |   | (788 | ) |   |   | 13,614 |   | 07/01/07 |
| Sheraton Hotel, JFK Airport, NY              |   |         | -        |   |          |   | -       |                                        |   |   | 27,315                                             |   |   |                              | -       |   |        |   | 210    |                              |   |   | - |   |   |   | 27,525 |   |   |   | 27,525 |   |   |   | (1,076 | ) |   |   | 26,449 |   | 06/13/08 |
| Hampton Inn, Philadelphia, PA                |   |         | -        |   |          |   | 3,490   |                                        |   |   | 24,382                                             |   |   |                              | -       |   |        |   | 2,803  |                              |   |   | 3,490 |   |   |   | 27,185 |   |   |   | 30,675 |   |   |   | (5,184 | ) |   |   | 25,491 |   | 02/15/06 |
| Duane Street, Tribeca, NY                    |   |         | (15,000  | )      |          |   | 8,213   |                                        |   |   | 12,869                                             |   |   |                              | -       |   |        |   | 358    |                              |   |   | 8,213 |   |   |   | 13,227 |   |   |   | 21,440 |   |   |   | (706 | ) |   |   | 20,734 |   | 01/04/08 |
| NU Hotel, Brooklyn, NY                       |   |         | (18,000  | )      |          |   | -       |                                        |   |   | 22,042                                             |   |   |                              | -       |   |        |   | 15     |                              |   |   | - |   |   |   | 22,057 |   |   |   | 22,057 |   |   |   | (815 | ) |   |   | 21,242 |   | 01/14/08 |
| Towneplace Suites, Harrisburg, PA            |   |         | (9,250   | )      |          |   | 1,237   |                                        |   |   | 10,136                                             |   |   |                              | -       |   |        |   | 45     |                              |   |   | 1,237 |   |   |   | 10,180 |   |   |   | 11,417 |   |   |   | (420 | ) |   |   | 10,997 |   | 05/08/08 |
| Holiday Inn Express, Camp Springs, MD        |   |         | -        |   |          |   | 1,629   |                                        |   |   | 11,094                                             |   |   |                              | -       |   |        |   | 248    |                              |   |   | 1,629 |   |   |   | 11,342 |   |   |   | 12,971 |   |   |   | (450 | ) |   |   | 12,521 |   | 06/26/08 |
| Hampton Inn, Smithfield, RI                  |   |         | (6,818   | )      |          |   | 2,057   |                                        |   |   | 9,486                                              |   |   |                              | -       |   |        |   | 18     |                              |   |   | 2,057 |   |   |   | 9,503 |   |   |   | 11,560 |   |   |   | (336 | ) |   |   | 11,224 |   | 08/01/08 |
| Hilton Garden Inn, Tribeca, NY               |   |         | (29,632  | )      |          |   | -       |                                        |   |   | -                                                  |   |   |                              | 21,077  |   |        |   | 42,964 |                              |   |   | 21,077 |   |   |   | 42,963 |   |   |   | 64,040 |   |   |   | (716 | ) |   |   | 63,324 |   | 05/01/09 |
| Hampton Inn, West Haven, CT                  |   |         | (7,688   | )      |          |   | -       |                                        |   |   | -                                                  |   |   |                              | 1,053   |   |        |   | 10,751 |                              |   |   | 1,053 |   |   |   | 10,750 |   |   |   | 11,803 |   |   |   | (45 | ) |   |   | 11,758 |   | 11/04/09 |
| Courtyard Inn, Alexandria, VA                |   |         | (24,957  | )      |          |   | 6,376   |                                        |   |   | 26,089                                             |   |   |                              | -       |   |        |   | 359    |                              |   |   | 6,377 |   |   |   | 26,447 |   |   |   | 32,824 |   |   |   | (2,217 | ) |   |   | 30,607 |   | 09/29/06 |
|                                         |   |         |     |   |          |   |    |                                        |   |   |                                               |   |   |                              |    |   |        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Investment in Real Estate              |   | $            | (593,509 | )      |          | $      | 137,404 |                                        |   | $      | 725,701                                            |   |   | $                                 | 24,044  |   |        | $      | 88,765 |                              |   | $      | 161,449 |   |   | $ | 814,461 |   |   | $ | 975,910 |   |   | $ | (83,085 | ) |   | $ | 892,825 |   |   |
|                                         |   |         |     |   |          |   |    |                                        |   |   |                                               |   |   |                              |    |   |        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets Held for Sale                         |   |         |     |   |          |   |    |                                        |   |   |                                               |   |   |                              |    |   |        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comfort Inn, Dartmouth                       |   |         | (3,031   | )      |          |   | 902     |                                        |   |   | 3,525                                              |   |   |                              | (282    | )      |        |   | (720   | )                                 |   |   | 620 |   |   |   | 2,805 |   |   |   | 3,425 |   |   |   | (455 | ) |   |   | 2,970 |   | 05/01/06 |
| 8th Ave Land, New York City, NY              |   |         | (11,913  | )      |          |   | 21,575  |                                        |   |   | -                                                  |   |   |                              | (9,754  | )      |        |   | 108    |                              |   |   | 11,821 |   |   |   | 108 |   |   |   | 11,929 |   |   |   | (16 | ) |   |   | 11,913 |   | 06/28/06 |
| Nevins Street Land,  Brooklyn, NY  |   |         | (5,948   | )      |          |   | 10,650  |                                        |   |   | -                                                  |   |   |                              | (4,702  | )      |        |   | -      |                              |   |   | 5,948 |   |   |   | - |   |   |   | 5,948 |   |   |   | - |   |   |   | 5,948 |   | 6/11/07 & 07/11/07 |
| Total Assets Held for Sale                   |   |         | (20,892  | )      |          |   | 33,127  |                                        |   |   | 3,525                                              |   |   |                              | (14,738 | )      |        |   | (612   | )                                 |   |   | 18,389 |   |   |   | 2,913 |   |   |   | 21,302 |   |   |   | (471 | ) |   |   | 20,831 |   |   |
|                                         |   |         |     |   |          |   |    |                                        |   |   |                                               |   |   |                              |    |   |        |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Real Estate                            |   | $            | (614,401 | )      |          | $      | 170,531 |                                        |   | $      | 729,226                                            |   |   | $                                 | 9,306   |   |        | $      | 88,153 |                              |   | $      | 179,838 |   |   | $ | 817,374 |   |   | $ | 997,212 |   |   | $ | (83,556 | ) |   | $ | 913,656 |   |   |

----

Index

----

----

|                                       |   | 2009   |    |   | 2008   |   |    | 2007   |   |
|--------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Reconciliation of Real Estate              |   |   |    |   |   |   |    |   |   |
| Balance at beginning of year               |   | $      | 987,639 |   |   | $      | 878,099 |   |   | $ | 776,609 |   |
| Additions during the year                  |   |   | 79,170  |   |   |   | 114,596 |   |   |   | 125,175 |   |
| Dispositions during the year               |   |   | (53,493 | )      |   |   | (5,056  | )      |   |   | (23,685 | ) |
| Changes in Assets Held for Sale            |   |   | (37,406 | )      |   |   | -       |   |   |   | - |   |
| Investment in Real Estate                  |   |   | 975,910 |   |   |   | 987,639 |   |   |   | 878,099 |   |
| Assets Held for Sale, net of impairment    |   |   | 21,302  |   |   |   | -       |   |   |   | - |   |
| Total Real Estate                          |   | $      | 997,212 |   |   | $      | 987,639 |   |   | $ | 878,099 |   |
|                                       |   |   |    |   |   |   |    |   |   |   |   |   |
| Reconciliation of Accumulated Depreciation |   |   |    |   |   |   |    |   |   |   |   |   |
| Balance at beginning of year               |   | $      | 67,824  |   |   | $      | 49,091  |   |   | $ | 33,373 |   |
| Depreciation for year                      |   |   | 22,667  |   |   |   | 20,965  |   |   |   | 17,252 |   |
| Accumulated depreciation on assets sold    |   |   | (6,935  | )      |   |   | (2,232  | )      |   |   | (1,534 | ) |
| Balance at the end of year                 |   | $      | 83,556  |   |   | $      | 67,824  |   |   | $ | 49,091 |   |

----

Index

| Item 8. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
|---------|--------------------------------------------------------------------------------------|

| Item 8A. | Controls and Procedures |
|----------|-------------------------|

| · | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

----

Index

| Item 8B. | Other Information |
|----------|-------------------|

----

Index

| Item 9. | Trustees, Executive Officers and Corporate Governance |
|---------|-------------------------------------------------------|

| · | establish procedures for shareholders calling special meetings, including a requirement to request a record date to call a special meeting and granting the Board of Trustees certain limited authority to refuse to call a special meeting; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | increase the number of shareholders necessary to call a special meeting from twenty-five percent to a majority; |
|--------|-----------------------------------------------------------------------------------------------------------------|

| · | clarify that previously scheduled meetings of shareholders may be postponed or cancelled by the Board of Trustees, authorize the chairman of the meeting to adjourn a meeting of the shareholders and clarify that a majority of the shares, excluding abstentions, may vote to adjourn a meeting in the absence of a quorum; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | elaborate upon the advance notice procedures and requirements that apply to the nominations of persons for election to the Board of Trustees and the proposal of any other business to be considered at a meeting of shareholders; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | require persons nominated for election to the Board of Trustees to complete a written questionnaire and make certain representations to us relating to voting commitments and other economic arrangements and future compliance with our corporate governance and other applicable policies and guidelines applicable to trustees; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | authorize the Board of Trustees to appoint persons as “Advisory Trustees” or “Emeritus Trustees”; |
|--------|---------------------------------------------------------------------------------------------------------------------------|

| · | modify the provisions relating to indemnification and advancement of expenses to, among other things, to provide that indemnification is available for expenses incurred as a witness in any proceeding, clarify that any adverse modifications to the indemnification and advancement rights may only be made prospectively; and |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | make other technical and conforming changes. |
|--------|----------------------------------------------|

| Item 10. | Executive Compensation |
|----------|------------------------|

| Item 11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
|----------|------------------------------------------------------------------------------------------------|

----

Index

| Plan Category                                              |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights |   | Weighted average exercise price of outstanding options, warrants and rights |   | Number of securities remaining available for future issuance under equity compensation plans(1) |
|------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|
|                                                       |   | (a)                                                                                         |   | (b)                                                                         |   | (c)                                                                                             |
|                                                       |   |                                                                                        |   |                                                                        |   |                                                                                            |
| Equity compensation plans approved by security holders     |   |  -                                                                                     |   |  -                                                                     |   | 1,660,364                                                                                       |
| Equity compensation plans not approved by security holders |   |  -                                                                                     |   |  -                                                                     |   |  -                                                                                         |
| Total                                                      |   |  -                                                                                     |   |  -                                                                     |   | 1,660,364                                                                                       |

|   | (1) | Shares indicated are the aggregate of those issuable under the Company’s 2008 Equity Incentive Plan. |
|--------|-----|------------------------------------------------------------------------------------------------------------|

| Item 12. | Certain Relationships and Related Transactions, and Trustee Independence |
|----------|--------------------------------------------------------------------------|

| Item 13. | Principal Accountant Fees and Services |
|----------|----------------------------------------|

----

Index

| Item 14. | Exhibits and Financial Statement Schedules |
|----------|--------------------------------------------|

| (a) | Documents filed as part of this report. |
|-----|-----------------------------------------|

| 1. | Financial Statements: |
|----|-----------------------|

| 2. | Financial Statement Schedules: |
|----|--------------------------------|

| 3. | Exhibits |
|----|----------|

| INDEX OF EXHIBITS |
|-------------------|
| ExhibitNo.        |   | Description |
|              |   |   |
| 3.1               |   | Amended and Restated Declaration of Trust, as amended and supplemented (filed with the SEC as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q, filed on August 7, 2009 and incorporated by reference herein). |
|              |   |   |
| 3.2               |   | Amended and Restated Bylaws.** |
|              |   |   |
| 4.1               |   | Form of Common Share Certificate.* |
|              |   |   |
| 4.2               |   | Junior Subordinated Indenture, dated as of May 13, 2005, between the Company and JPMorgan Chase Bank, National Association, as trustee (filed as Exhibit 4.1 to the Current Report on Form 8-K filed on May 17, 2005 and incorporated by reference herein). |
|              |   |   |
| 4.3               |   | Amended and Restated Trust Agreement, dated as of May 13, 2005, among the Company, as depositor, JPMorgan Chase Bank, National Association, as property trustee, Chase Bank USA, National Association, as Delaware trustee, the Administrative Trustees named therein and the holders of undivided beneficial interests in the assets of the Trust. (filed as Exhibit 4.2 to the Current Report on Form 8-K filed on May 17, 2005 and incorporated by reference herein). |
|              |   |   |
| 4.4               |   | Form of Junior Subordinated Note (included in Exhibit 4.2 hereto). |
|              |   |   |
| 4.5               |   | Form of Trust Preferred Security Certificate (included in Exhibit 4.3 hereto). |
|              |   |   |
| 4.6               |   | Junior Subordinated Indenture, dated as of May 31, 2005, between the Company and Wilmington Trust Company, as trustee (filed as Exhibit 4.1 to the Current Report on Form 8-K filed on June 6, 2005 and incorporated by reference herein). |

----

Index

| Exhibit No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.7         |   | Amended and Restated Trust Agreement, dated as of May 31, 2005, among the Company, as depositor, Wilmington Trust Company, as property trustee and Delaware trustee, the Administrative Trustees named therein and the holders of undivided beneficial interests in the assets of the Trust (filed as Exhibit 4.2 to the Current Report on Form 8-K filed on June 6, 2005 and incorporated by reference herein). |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.8         |   | Form of Junior Subordinated Note (included in Exhibit 4.6 hereto).                                                                                                                                                                                                                                                                                                                                                              |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.9         |   | Form of Trust Preferred Security Certificate (included in Exhibit 4.7 hereto).                                                                                                                                                                                                                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.10        |   | Form of 8.00% Series A Cumulative Redeemable Preferred Share certificate (filed as Exhibit 3.4 to the Form 8-A filed on August 3, 2005  and incorporated by reference herein).                                                                                                                                                                                                                              |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.1        |   | Amended and Restated Agreement of Limited Partnership of Hersha Hospitality Limited Partnership.*                                                                                                                                                                                                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.2        |   | Option Agreement dated as of June 3, 1998, among Hasu P. Shah, Jay H. Shah, Neil H, Shah, Bharat C. Mehta, K.D. Patel, Rajendra O. Gandhi, Kiran P. Patel, David L. Desfor, Madhusudan I. Patni and Manhar Gandhi, and the Partnership.*†                                                                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.3        |   | Amendment to Option Agreement dated December 4, 1998.*†                                                                                                                                                                                                                                                                                                                                                                        |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.4        |   | Form of Percentage Lease.*                                                                                                                                                                                                                                                                                                                                                                                                           |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.5        |   | Second Amendment to the Amended and Restated Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, dated as of April 21, 2003 (filed as Exhibit 10.2 to the Form 8-K filed on April 23, 2003 and incorporated by reference herein).                                                                                                                                                                       |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.6        |   | Second Amendment to Option Agreement (filed as Exhibit 10.15 to the Registration Statement on Form S-3 filed on February 24, 2004 and incorporated by reference herein).†                                                                                                                                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.7        |   | Purchase Agreement, dated as of May 11, 2005, among the Company, the Trust and Merrill Lynch International (previously filed with the SEC as Exhibit 10.1 to the Current Report on Form 8-K filed on May 17, 2005 and incorporated by reference herein).                                                                                                                                                              |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.8        |   | Placement Agreement, dated as of May 31, 2005, among the Company, the Trust and Credit Suisse First Boston LLC (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 6, 2005 and incorporated by reference herein).                                                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.9        |   | Membership Interests Contribution Agreement, dated June 15, 2005, by and among Waterford Hospitality Group, LLC, Mystic Hotel Investors, LLC and Hersha Hospitality Group Limited Partnership (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 21, 2005 and incorporated by reference herein).                                                                                   |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.10       |   | Form of Limited Liability Company Agreement of Mystic Partners, LLC (filed as Exhibit 10.2 to the Current Report on Form 8-K filed on June 21, 2005 and incorporated by reference herein).                                                                                                                                                                                                                            |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.11       |   | Form of Management Agreement between Lessee and Waterford Hotel Group, Inc. (filed as Exhibit 10.3 to the Current Report on Form 8-K filed on June 21, 2005  and incorporated by reference herein).                                                                                                                                                                                                              |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.12       |   | Form of Limited Liability Company Agreement of Leaseco, LLC (filed as Exhibit 10.4 to the Current Report on Form 8-K filed on June 21, 2005 and incorporated by reference herein).                                                                                                                                                                                                                               |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.13       |   | Third Amendment to Agreement of Limited Partnership of Hersha Hospitality Limited Partnership, by and between Hersha Hospitality Trust and Hersha Hospitality Limited Partnership, dated August 5, 2005 (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on August 8, 2005 and incorporated by reference herein).                                                                        |

----

Index

| Exhibit No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14       |   | Sixth Amendment to Membership Interests Contribution Agreement, dated February 8, 2006, by and among Hersha Hospitality Limited Partnership, Mystic Hotel Investors, LLC; Waterford Hospitality Group, LLC and First American Title Insurance Company (filed as Exhibit 10.5 to the Current Report on Form 8-K filed February 14, 2006 and incorporated by reference herein).                                                                                                                                                            |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.15       |   | Second Amendment to Limited Liability Company Operating Agreement of Mystic Partners, LLC, dated February 8, 2006 (filed as Exhibit 10.6 to the Current Report on Form 8-K filed February 14, 2006 and incorporated by reference herein).                                                                                                                                                                                                                                                                                           |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.16       |   | First Amendment to Limited Liability Company Operating Agreement of Mystic Partners Leaseco, LLC, dated February 8, 2006 (filed as Exhibit 10.7 to the Current Report on Form 8-K filed February 14, 2006 and incorporated by reference herein).                                                                                                                                                                                                                                                                                         |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.17       |   | Conditional Payment Guaranty, dated February 8, 2006, made by Hersha Hospitality Limited Partnership and Mystic Hotel Investors, LLC to and for the benefit or Merrill Lynch Capital (filed as Exhibit 10.8 to the Current Report on Form 8-K filed February 14, 2006 and incorporated by reference herein).                                                                                                                                                                                                                             |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.18       |   | Conditional Payment Guaranty, dated February 8, 2006, made by Hersha Hospitality Limited Partnership and Mystic Hotel Investors, LLC to and for the benefit or Merrill Lynch Capital (filed as Exhibit 10.9 to the Current Report on Form 8-K filed February 14, 2006 and incorporated by reference herein).                                                                                                                                                                                                                        |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.19       |   | Supplemental Limited Joinder, dated February 8, 2006, made by Hersha Hospitality Limited Partnership and Mystic Hotel Investors LLC (filed as Exhibit 10.10 to the Current Report on Form 8-K filed February 14, 2006 and incorporated by reference herein).                                                                                                                                                                                                                                                                             |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.20       |   | Purchase and Sale Agreement, dated as of the 18th day of December, 2006, between Bridgeworks Hotelworks Associates, L.P., Charlotte Hotelworks Associates, L.P., Gaithersburg Hotelworks Associates, L.P., Pleasant Hill Lodging Partners, L.P., Pleasanton Hotelworks Associates, L.P., Scottsdale Hotelworks Associates, L.P., and Harrison Hotelworks Associates, L.P., and Hersha Hospitality Limited Partnership (filed as Exhibit 10.1 to the Current Report on Form 8-K filed December 18, 2006 and incorporated by reference herein). |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.21       |   | Amended and Restated Employment Agreement, dated June 28, 2007, by and between the Company and Hasu P. Shah (filed as Exhibit 10.1 to the Current Report on Form 8-K filed July 3, 2007 and incorporated by reference herein).†                                                                                                                                                                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.22       |   | Amended and Restated Employment Agreement, dated June 28, 2007, by and between the Company and Jay H. Shah (filed as Exhibit 10.2 to the Current Report on Form 8-K filed July 3, 2007 and incorporated by reference herein).†                                                                                                                                                                                                                                                                                                     |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.23       |   | Amended and Restated Employment Agreement, dated June 28, 2007, by and between the Company and Neil H. Shah (filed as Exhibit 10.3 to the Current Report on Form 8-K filed July 3, 2007 and incorporated by reference herein).†                                                                                                                                                                                                                                                                                                         |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.24       |   | Amended and Restated Employment Agreement, dated June 28, 2007 by and between the Company and Ashish R. Parikh (filed as Exhibit 10.4 to the Current Report on Form 8-K filed July 3, 2007 and incorporated by reference herein).†                                                                                                                                                                                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.25       |   | Amended and Restated Employment Agreement, dated June 28, 2007 by and between the Company and Michael R. Gillespie (filed as Exhibit 10.5 to the Current Report on Form 8-K filed July 3, 2007 and incorporated by reference herein).†                                                                                                                                                                                                                                                                                                  |

----

Index

| ExhibitNo. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.26      |   | Contribution Agreement, dated as of January 8, 2008, by and among Shree Associates, Kunj Associates, Shanti III Associates, Trust FBO Sajni Mehta Browne under the Bharat and Devyani Mehta 2005 Trust dated January 13, 2006, Trust FBO Neelay Mehta under the Bharat and Devyani Mehta 2005 Trust dated January 13, 2006, Trust FBO Jay H Shah under the Hasu and Hersha Shah 2004 Trust dated August 18, 2004, Trust FBO Neil H Shah under the Hasu and Hersha Shah 2004 Trust dated August 18, 2004, PLM Associates LLC, David L. Desfor and Ashish R. Parikh and Hersha Hospitality Limited Partnership (filed as Exhibit 10.1 to the Current Report on form 8-K filed January 10, 2008 and incorporated by reference herein).† |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.27      |   | Hersha Hospitality Trust 2008 Equity Incentive Plan (filed as Appendix B to the Company’s  Definitive Proxy Statement on Schedule 14A, filed on April 18, 2008 and incorporated by reference herein).†                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.28      |   | Form of Stock Award Agreement under the Hersha Hospitality Trust 2008 Equity Incentive Plan (filed as Exhibit 10.2 to the Current Report on Form 8-K filed on May 29, 2008 and incorporated by reference herein).†                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.29      |   | Contribution Agreement, dated as of June 13, 2008, by and among Shree Associates, Kunj Associates, Devi Associates, Shanti III Associates, Trust FBO Jay H Shah under the Hasu and Hersha Shah 2004 Trust dated August 18, 2004, Trust FBO Neil H Shah under the Hasu and Hersha Shah 2004 Trust dated August 18, 2004, PLM Associates LLC, David L. Desfor and Ashish R. Parikh and Hersha Hospitality Limited Partnership (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on June 19, 2008 and incorporated by reference herein).†                                                                                                                                                                                  |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.30      |   | Contribution Agreement, dated as of June 26, 2008, by and among Akshar Limited Liability Company and Hersha Hospitality Limited Partnership (filed as Exhibit 10.1 to the Current Report on Form 8-K  filed on July 2, 2008 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.31      |   | Contribution Agreement, dated as of August 1, 2008, by and among Hersha Northeast Associates, LLC, Kirit Patel, K&D Investment Associates, LLC, and Ashwin Shah, as contributors, and Hersha Hospitality Limited Partnership and Hersha Smithfield Managing Member, LLC, as acquirer (filed as Exhibit 10.1 to the Current Report on Form 8-K  filed on August 7, 2008 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.32      |   | Revolving Credit Loan and Security Agreement, dated October 14, 2008, by and between Hersha Hospitality Limited Partnership, Hersha Hospitality Trust and TD   Bank, N.A. (filed as Exhibit 10.1 to the Current Report on Form 8-K  filed on October 14, 2008 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                              |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.33      |   | Purchase Agreement, dated August 4, 2009, by and among Hersha Hospitality Trust, Hersha Hospitality Limited Partnership and Real Estate Investment Group L.P. (filed as Exhibit 10.1 to the Current Report on Form 8-K  filed on August 6, 2009 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.34      |   | Investor Rights and Option Agreement, dated August 4, 2009, by and among Hersha Hospitality Trust, Real Estate Investment Group L.P. and IRSA Inversiones y Representaciones Sociedad Anónima. (filed as Exhibit 10.2 to the Current Report on Form 8-K  filed on August 6, 2009 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                     |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.35      |   | Registration Rights Agreement, dated August 4, 2009, by and among Hersha Hospitality Trust, Real Estate Investment Group L.P. and IRSA Inversiones y Representaciones Sociedad Anónima (filed as Exhibit 10.3 to the Current Report on Form 8-K  filed on August 6, 2009 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.36      |   | Trustee Designation Agreement, dated August 4, 2009, by and among Hersha Hospitality Trust, Real Estate Investment Group L.P. and IRSA Inversiones y Representaciones Sociedad Anónima (filed as Exhibit 10.4 to the Current Report on Form 8-K  filed on August 6, 2009 and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                             |

----

Index

| ExhibitNo. |   | Description                                                                                                                                                                                                                                                                                                                                            |
|------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.37      |   | Form of Performance Share Award Agreement (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 5, 2009 and incorporated by reference herein).†                                                                                                                                                                          |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.38      |   | Contribution Agreement, dated as of November 4, 2009, by and among Hersha Northeast Associates, LLC and Kirit Patel, as Contributors, and Hersha Hospitality Limited Partnership, as Acquirer (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 5, 2009 and incorporated by reference herein).                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.39      |   | Amendment to Revolving Credit Loan and Security Agreement, dated December 11, 2009, by and among Hersha Hospitality Limited Partnership, Hersha Hospitality Trust, TD Bank, N.A, as Agent, and the other lenders (filed as Exhibit 10.1 to the Current Report on Form 8-K  filed on December 15, 2009 and incorporated by reference herein). |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 12.1       |   | Statement regarding computation of ratio of earnings to combined fixed charges and preferred share dividends.**                                                                                                                                                                                                                              |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 14.1       |   | Hersha Hospitality Trust Code of Ethics Adopted May 1, 2008 (filed as Exhibit 14.1 to the Current Report on Form 8-K filed May 5, 2009 and incorporated by reference herein).                                                                                                                                                                          |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 21.1       |   | List of Subsidiaries of the Registrant.**                                                                                                                                                                                                                                                                                                              |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 23.1       |   | Consent of KPMG LLP.**                                                                                                                                                                                                                                                                                                                                 |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.1       |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                  |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.2       |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                  |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 32.1       |   | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                  |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| 32.2       |   | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**                                                                                                                                                                                                                                                  |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
|       |   |                                                                                                                                                                                                                                                                                                                                                   |
| *          |   | Filed as an exhibit to Hersha Hospitality Trust’s Registration Statement on Form S-11, as amended, filed June 5, 1998 and incorporated by reference herein.                                                                                                                                                                       |
| **         |   | Filed herewith.                                                                                                                                                                                                                                                                                                                                        |
| †    |   | Indicates management contract or compensatory plan or arrangement.                                                                                                                                                                                                                                                                                     |

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Index

SI

|          | HERSHA HOSPITALITY TRUST |   |
|---------------|--------------------------|--------|
|          |                     |   |
| March 4, 2010 | /s/ Jay H. Shah          |   |
|          | Jay H. Shah              |   |
|          | Chief Executive Officer  |   |

| Signature                   |   | Title                                 |   | Date          |
|-----------------------------|--------|---------------------------------------|--------|---------------|
|                        |   |                                  |   |          |
| /s/ Hasu P. Shah            |   | Chairman and Trustee                  |   | March 4, 2010 |
| Hasu P. Shah                |   |                                  |   |          |
|                        |   |                                  |   |          |
|                        |   | Chief Executive Officer and Trustee   |   |          |
| /s/ Jay H. Shah             |   | (Principal Executive Officer)         |   | March 4, 2010 |
| Jay H. Shah                 |   |                                  |   |          |
|                        |   |                                  |   |          |
|                        |   | President and Chief Operating Officer |   |          |
| /s/ Neil H. Shah            |   | (Chief Operating Officer)             |   | March 4, 2010 |
| Neil H. Shah                |   |                                  |   |          |
|                        |   |                                  |   |          |
|                        |   | Chief Financial Officer               |   |          |
| /s/ Ashish R. Parikh        |   | (Principal Financial Officer)         |   | March 4, 2010 |
| Ashish R. Parikh            |   |                                  |   |          |
|                        |   |                                  |   |          |
|                        |   | Chief Accounting Officer              |   |          |
| /s/ Michael R. Gillespie    |   | (Principal Accounting Officer)        |   | March 4, 2010 |
| Michael R. Gillespie        |   |                                  |   |          |
|                        |   |                                  |   |          |
| /s/ Donald J. Landry        |   | Trustee                               |   | March 4, 2010 |
| Donald J. Landry            |   |                                  |   |          |
|                        |   |                                  |   |          |
| /s/ Thomas S. Capello       |   | Trustee                               |   | March 4, 2010 |
| Thomas S. Capello           |   |                                  |   |          |
|                        |   |                                  |   |          |
|                        |   | Trustee                               |   | March 4, 2010 |
| Eduardo S. Elsztain         |   |                                  |   |          |
|                        |   |                                  |   |          |
| /s/ Thomas J. Hutchison III |   | Trustee                               |   | March 4, 2010 |
| Thomas J. Hutchison III     |   |                                  |   |          |
|                        |   |                                  |   |          |
| /s/ Kiran P. Patel          |   | Trustee                               |   | March 4, 2010 |
| Kiran P. Patel              |   |                                  |   |          |
|                        |   |                                  |   |          |
| /s/ John M. Sabin           |   | Trustee                               |   | March 4, 2010 |
| John M. Sabin               |   |                                  |   |          |

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