Hersha to Acquire Hyatt Hotel in Union Square, New York City

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. July 01, 2011

June 30, 2011 - Hersha Hospitality Trust (NYSE: HT) announced that the Company has entered into a purchase and sale agreement to acquire the 175-room Hyatt Union Square hotel in New York City for total consideration of $104.1 million, or approximately $595,000 per key.

The transaction is expected to close shortly after the seller completes the hotel's construction. The consideration to the seller consists of $36 million paid to the seller in cash, the cancellation by the Company of a $10 million development loan made to the seller, accrued interest on the loan and the assumption by the Company of two mortgage loans secured by the hotel in the original aggregate principal amount of $55 million. While this purchase and sale agreement secures the Company's right to acquire the completed hotel, the Company is not assuming any construction risk, including the risk of schedule and cost overruns. The hotel is expected to open in 2012.

“The addition of this extremely well located, efficient full service Hyatt hotel greatly enhances our already strong presence in Manhattan,” commented Jay H. Shah, Chief Executive Officer. “The Company continues to execute on its long-term plan of establishing itself as one of the premier providers of top quality hotels in high growth urban gateway markets with strong barriers to entry. The Union Square hotel will benefit from some of the most robust lodging demand in the country, and we believe this property is strategically positioned to leverage New York's strong recovery and the multiple demand generators in Midtown South, Greenwich Village and Downtown. These vibrant market characteristics, combined with the desirability of this new asset, should drive attractive growth in revenue per available room and cash flow as the hotel matures into the recovery."

The hotel, at the corner of 4th Avenue and 13th Street, will be the closest major hotel to New York University and will be close to the entertainment, fashion and design districts of Manhattan. The hotel is expected to perform favorably relative to its competitive set, which includes the W Union Square, the Gramercy Park Hotel and the Gansevoort Park.”

The Hyatt Union Square will be a 4-star hotel with a historic facade and 23?foot lobby ceilings that will create a unique space for guests. Amenities will include an upscale restaurant, a destination lobby bar, an exclusive rooftop lounge, private terraces, a state of?the art fitness facility, and a pool.

The Company sourced this off-market transaction through its development loan program and the acquisition, if completed, will further the Company's stated goal of reducing the outstanding principal balance of its development loan portfolio. The Company has stopped recording interest income on the $10 million development loan made to the seller as of the signing of the purchase and sale agreement. As of March 31, 2011, on a pro forma basis and assuming the completion of the Hyatt Union Square acquisition and the previously announced Hampton Inn Pearl Street acquisition, the outstanding principal balance of the Company's development loan portfolio will represent approximately one percent of Hersha's total assets.

Based on the Company's current underwriting assumptions and estimates, the total consideration to be paid for the hotel, including the cancellation of the development loan and the assumption of the mortgage loans, is expected to represent a first year economic capitalization rate of approximately 6.4% and a hotel EBITDA multiple of 14.8x. The Company estimates, based on its current underwriting assumptions and estimates, that on a stabilized basis the hotel is being purchased at a stabilized capitalization rate of approximately 10.1% and a hotel EBITDA multiple of 10.0x.

Upon completion of the acquisition, the hotel will be managed by Hersha Hospitality Management, L.P.

The Company's acquisition of the hotel is subject to a variety of conditions, including the substantial completion of the hotel by the seller and completion of the construction within the contractual scope, as well as the satisfaction of other customary closing conditions. As a result, there can be no assurance that the Company will complete the acquisition of the Hyatt Union Square described above on the schedule or on the terms described above or at all.