"With the TRS acquiring the leases, we will more closely alignthe interests of all involved parties through the management feestructure and together focus on improving the bottom line," saysJay H. Shah, president and COO of the locally based hospitalityREIT. Hersha Hospitality Management will continue to operate theproperties under long-term management contracts. "Compared to theoriginal lease structure, the termination agreement allows themanagement company to operate the hotels to maximizeprofitability.

"We have been migrating all of our properties to our TRS overthe past 18 months as part of a program to participate in theimprovement of hotel fundamentals and to better align theowner/operator relationship," says Shah. "We are now wellpositioned to take advantage of the upside potential available inthe current rebound in the hotel industry. In addition, the movewill make the REIT's results more transparent and eliminate anyfuture potential re-pricings for the properties. No cashconsideration was paid to the lessee as part of the leasetermination," he adds, "which underscores the alignment ofinterests between our management companies, affiliates, and theREIT."

As part of the lease termination, the entities that sold theeight hotels to Hersha have waived all purchase price adjustmentsin the original purchase agreements for each of the properties. Thewaivers eliminate potential liability for any future re-pricings ofany properties owned by Hersha.