8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): May 9, 2006

MHI HOSPITALITY CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Maryland	333-118873	20-1531029
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

814 Capitol Landing Road

Williamsburg, Virginia 23185

(757) 229-5648

(Address, including Zip Code and Telephone Number, including

Area Code, of Principal Executive Offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

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

Item 1.01. Entry into a Material Definitive Agreement.

On May 9, 2006, MHI Hospitality Corporation (the “Company”) completed, effective as of May 8, 2006, a revolving credit facility for up to $60 million (the “Credit Facility”) syndicated by Branch Banking & Trust Company (“BB&T”), as the Administrative Agent pursuant to a credit agreement effective as of May 8, 2006 (the “Credit Agreement”) among the Company, certain of its subsidiaries, BB&T and participating lenders including Key Bank National Association, Regions Bank and Manufacturers and Traders Trust Company. The Credit Facility replaces the Company’s existing $23.0 million revolving credit facility with BB&T. The Credit Facility has a term of four years, and our borrowings under the revolving credit facility are expected to bear interest at a rate equal to LIBOR plus additional interest ranging between 2.0% to 2.5%. In some circumstances, the revolving credit facility may bear interest at BB&T’s prime rate. The Credit Agreement also contains an uncommitted accordion facility pursuant to which we may be able to increase the total commitment under the revolving credit facility up to $75 million. Any amounts drawn under the revolving credit facility mature at the expiration of the facility. The revolving credit facility contains customary default provisions which could, subject to certain conditions, result in the acceleration of any amounts drawn under the revolving credit facility. The Company’s Philadelphia Airport Hilton Hotel and the Brownstone Holiday Inn will initially secure the facility.

The Credit Agreement contains customary negative covenants and financial covenants including interest coverage, total leverage and minimum net worth covenants.

The Company intends to use the line of credit to acquire or renovate properties and for working capital purposes. Properties acquired using proceeds of the revolving credit facility will also secure the revolving credit facility.

The Company expects the lenders to fund the Credit Facility on May 10, 2006, and the Company expects to borrow approximately $7.6 million, of which approximately $7.3 million will be used to repay principal under the existing BB&T revolving credit facility, and to pay accrued interest and approximately $300,000 to pay related fees and expenses.

BB&T was the lead underwriter for the Company’s initial public offering which closed on December 21, 2004.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 of this report is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1 Press release dated May 9, 2006 by MHI Hospitality Corporation

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SIGNATURES

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

Date: May 10, 2006

MHI HOSPITALITY CORPORATION
By:	/s/ Andrew M. Sims
Name:	Andrew M. Sims
Title:	President and Chief Executive Officer

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EX-99.1

Exhibit 99.1

	RE:   MHI Hospitality Corporation
	814 Capitol Landing Road
	Williamsburg, VA 23185
	(757) 229-5648
	TRADED: AMEX: MDH

FOR YOUR INFORMATION:

AT THE COMPANY:	AT THE FINANCIAL RELATIONS BOARD:
Bill Zaiser	Georganne Palffy
Chief Financial Officer	General Information
(301) 220-5400	(312) 640-6768

FOR IMMEDIATE RELEASE

TUESDAY, MAY 9, 2006

MHI HOSPITALITY CORPORATION ANNOUNCES

INCREASE IN CREDIT FACILITY

Williamsburg, VA – May 9, 2006 – MHI Hospitality Corporation (AMEX: MDH), announced today that it has closed on a senior secured revolving line of credit for up to $60 million. The revolving line of credit replaces the Company’s existing $23 million senior secured revolving line of credit facility with BB&T and will be used to fund acquisitions and for working capital purposes. The new facility was syndicated by BB&T Capital Markets, with Branch Banking and Trust Company serving as the Administrative Agent. Key Bank National Association, Regions Bank, and Manufacturers and Traders Trust Company will comprise the remainder of the syndicated bank group. The Philadelphia Airport Hilton and the Brownstone Holiday Inn, located in Raleigh, North Carolina, initially secure the facility. As the Company acquires additional properties using proceeds of the revolving line of credit facility, those additional properties will also secure the revolving line of credit facility. The facility has a term of 4 years and is expected to bear interest at a rate equal to the London Interbank Offering Rate (LIBOR) plus additional interest ranging from 2.0% to 2.5%. In some circumstances, the revolving line of credit facility may bear interest at BB&T’s prime rate. Any amounts drawn under the revolving line of credit facility mature at the expiration of the facility. The revolving line of credit facility includes an uncommitted accordion facility, pursuant to which the Company may be able to increase the total commitment under the revolving line of credit facility up to $75 million.

Andrew M. Sims, the President and CEO of the Company stated, “The increase in the Company’s total capacity under the line of credit will provide us with additional liquidity and financial flexibility to fund our acquisition program. We are also extremely pleased with the structure and pricing of the facility and the support of our bank group, many of whom are new relationships to MHI, and ones we hope we can develop further as our company grows.”

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MHI Hospitality Corporation

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About MHI Hospitality Corporation

MHI Hospitality Corporation is a self-advised lodging REIT focused on the acquisition, redevelopment and management of mid-scale, upscale, and upper upscale full service hotels in the mid-Atlantic and southeastern United States. Currently, the company’s portfolio consists of seven properties for a total of 1,673 rooms, all of which operate under the Hilton and Intercontinental Hotels Group brands. In addition to these seven hotels, the company has a leasehold interest in the common area of a resort condominium property, Shell Island Resort, which has approximately 160 condominium suites owned by individual owners. The company is listed on the Russell Microcap™ Index, which is comprised of the smallest 1,000 securities in the small-cap Russell 2000™ Index along with the next 1,000 companies, based on a ranking of all U.S. equities by market capitalization. More information on the company may be found on its website at www.mhihospitality.com.

Forward-Looking Statements

This presentation includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Although the Company believes that the expectations and assumptions reflected in the forward-looking statements are reasonable, these statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond the Company’s control. Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements. General economic conditions, including the timing and magnitude of the recovery in the hospitality industry, future acts of terrorism, risks associated with the hotel and hospitality business, the availability of capital, the ability of the company to acquire additional hotel properties, the timely completion of planned hotel renovations, and other factors, may affect the company’s future results, performance and achievements. These risks and uncertainties are described in greater detail in the company’s current and periodic filings with the Securities and Exchange Commission. The company undertakes no obligation and does not intend to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Although we believe our current expectations to be based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that actual results will not differ materially.