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): June 15, 2012

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.)

410 West Francis Street

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.

Essex Transactions

On June 15, 2012, MHI Hospitality Corporation (the “Company”) entered into an amendment (the “Note Amendment”) of its existing Note Agreement dated April 18, 2011 (as previously amended on December 21, 2011) (the “Note Agreement”) with Essex Equity High Income Joint Investment Vehicle, LLC, as lender and agent (the “Lender”). The Note Amendment provides, subject to a $1.5 million prepayment under the Note Agreement which the Company has since made (the “Repayment”), that the amount of undrawn term loan commitments under the Note Agreement will be increased to $7.0 million, of which $2.0 million will be reserved to repay principal amounts outstanding on the Crowne Plaza Jacksonville Riverfront hotel property. A copy of the Note Amendment is attached as Exhibit 10.40 to this report and is incorporated by reference herein.

Additionally, the Company simultaneously entered into an agreement (the “Redemption Agreement”) with the holders of the Company’s Series A Cumulative Redeemable Preferred Stock (the “Preferred Stock”), Essex Illiquid, LLC and Richmond Hill Capital Partners, LP (collectively, the “Holders”), to redeem 11,513.602 shares of Preferred Stock (the “Redemption Shares”) for an aggregate redemption price of $12,295,234.24 plus the payment of accrued and unpaid cash and stock dividends. The Holders are affiliates of the Lender under the Note Agreement. The redemption contemplated in the Redemption Agreement was effected on June 18, 2012. A copy of the Redemption Agreement is attached as Exhibit 10.41 to this report and is incorporated by reference herein.

Ryan P. Taylor, a member of the Company’s board of directors designated by the Holders pursuant to the terms of the Articles Supplementary relating to the Preferred Stock, is the Managing Partner of Richmond Hill Investment Co., LP and a Managing Director of Richmond Hill Investments, LLC.

The foregoing summary descriptions of the Note Amendment and the Redemption Agreement, respectively, and the transactions contemplated thereby, are not intended to be complete and are qualified in their entirety by the complete texts of the Note Amendment and the Redemption Agreement, respectively.

Tampa Financing

On June 18, 2012, Tampa Hotel Associates LLC and other affiliates of the Company entered into a credit and security agreement and other loan documents to secure a $14.0 million mortgage (the “Mortgage Loan”) on the Crowne Plaza Tampa Westshore hotel property (the “Hotel”) with C1 Bank.

Pursuant to the loan documents:

• the maturity date of the Mortgage Loan is June 18, 2017; and

• the Mortgage Loan carries a fixed rate at 5.60% and amortizes on a 25 year schedule.

Per the above, the Company used proceeds of the Mortgage Loan to make the Repayment under the Note Agreement and to redeem the Redemption Shares.

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

The disclosure required by this item is included in Item 1.01 and is incorporated herein by reference.

Item 7.01. Regulation FD Disclosure.

On June 20, 2012, the Company issued a press release announcing the transactions effected pursuant to the Note Amendment and the Redemption Agreement and the debt financing of the Hotel. A copy of the press release is furnished as Exhibit 99.1 hereto.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

10.40	Amendment No. 2, dated June 15, 2012, to Note Agreement, dated April 18, 2011, by and between the Company and Essex Equity High Income Joint Investment Vehicle, LLC.
10.41	Agreement, Waiver and Consent by Preferred Stockholders, dated June 15, 2012, by and among the Company, Essex Illiquid, LLC, and Richmond Hill Capital Partners, LP.
99.1	Press Release of MHI Hospitality Corporation dated June 20, 2012, announcing the transactions effected pursuant to the Note Amendment and the Redemption Agreement and the debt financing of the Crowne Plaza Tampa Westshore hotel.

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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: June 20, 2012

MHI HOSPITALITY CORPORATION
By:	/s/ Andrew M. Sims
	Andrew M. Sims
	Chief Executive Officer

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Exhibit List

10.40	Amendment No. 2, dated June 15, 2012, to Note Agreement, dated April 18, 2011, by and between the Company and Essex Equity High Income Joint Investment Vehicle, LLC.
10.41	Agreement, Waiver and Consent by Preferred Stockholders, dated June 15, 2012, by and among the Company, Essex Illiquid, LLC, and Richmond Hill Capital Partners, LP.
99.1	Press Release of MHI Hospitality Corporation dated June 20, 2012, announcing the transactions effected pursuant to the Note Amendment and the Redemption Agreement and the debt financing of the Crowne Plaza Tampa Westshore hotel.

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EX-10.40

Exhibit 10.40

AMENDMENT NO. 2

TO NOTE AGREEMENT

THIS AMENDMENT NO. 2 (the “Amendment”) to the Note Agreement dated as of April 18, 2011 (as previously amended by Amendment No. 1 thereto dated December 21, 2011, the “Agreement”), by and among MHI Hospitality Corporation, a Maryland corporation (the “Borrower”), and each lender a party thereto from time to time (together with their successors and assigns, each, a “Lender”, and collectively, the “Lenders”) and Essex Equity High Income Joint Investment Vehicle, LLC, a Delaware limited liability company, as agent for the Lenders (the “Agent”, and collectively with the Borrower and the Lenders, the “Parties”), is made and entered into by and among the Parties as of June 15, 2012 (subject to the conditions precedent to effectiveness set forth in Section 2 hereof, the “Amendment Date”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Agreement.

WHEREAS, the Parties desire, for their mutual convenience and benefit, to amend the Agreement as set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. Upon the making of the Prepayment (as defined below), the Parties agree that the aggregate outstanding balance of the Loans (including, without limitation, accrued and unpaid interest) shall be zero and that the amount of undrawn Term Loan Commitments under the Agreement shall be $7,000,000, and references in the Agreement to the maximum aggregate principal amount of all Loans and to the Term Loan Commitments shall be interpreted accordingly. Of such undrawn Term Loan Commitments, $2,000,000 shall be solely reserved for Loans the proceeds of which the Borrower shall use to cause its Subsidiary to repay principal amounts outstanding under the existing mortgage on the Crowne Plaza Jacksonville Riverfront Hotel Property. For the avoidance of doubt, the Borrower’s ability to borrow, and the Lenders’ obligation to make, Loans up to the Term Loan Commitments shall be governed by the terms and conditions of the Agreement as amended hereby.

2. Section 7 of the Agreement is hereby amended by adding the following sentence at the end thereof:

“No part of the proceeds of the Loans borrowed hereunder will be used for the purpose of redeeming shares of Preferred Stock.”

3. The effectiveness of this Amendment is subject to and contingent upon the fulfillment of each and every one of the following conditions:

(a) the Borrower or one of its Subsidiaries shall have closed on a financing transaction with C1 Bank, as lender, in respect of the hotel property known as the Crowne Plaza Tampa Westshore (the “Tampa Financing”);

(b) the Borrower shall have made or caused to be made, from the proceeds of the Tampa Financing, (i) a prepayment of outstanding Loans in an amount of not less than $1,500,000 (the “Prepayment”) and (ii) payment of all accrued and unpaid interest with respect to the Prepayment; and

(c) the redemption of certain issued and outstanding shares of the Preferred Stock held by Essex Illiquid, LLC and Richmond Hill Capital Partners, LP (together the “Preferred Stockholders”) in the manner contemplated in that certain Agreement, Waiver and Consent by Preferred Stockholders dated as of June 15, 2012 shall have occurred.

4. This Amendment shall be deemed to be incorporated into the Agreement and made a part thereof. All references to the Agreement in any other document (including, without limitation, that certain promissory note made and delivered by the Borrower to the Agent dated as of April 18, 2011) shall be deemed to be references to the Agreement as modified by this Amendment. Except as specifically amended or modified herein, the Agreement shall continue in full force and effect and shall be enforceable in accordance with each of the terms thereof. To the extent that the terms of this Amendment conflict with the terms of the Agreement, the terms of this Amendment shall be deemed to govern.

5. This Amendment may be executed simultaneously in one or more counterparts, and by different Parties in separate counterparts, each of which when executed will be deemed an original, but all of which taken together will constitute one and the same instrument.

6. This Amendment will be governed by, and construed in accordance with, the laws of the state of New York applicable to contracts executed in and to be performed entirely within such jurisdiction, without reference to conflicts of laws provisions.

7. This Amendment may not be amended, modified or waived except by an instrument in writing signed on behalf of each of the Parties.

[Signature page follows.]

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IN WITNESS WHEREOF, the Parties, intending to be legally bound, have executed this Amendment as of the Amendment Date.

BORROWER:	MHI HOSPITALITY CORPORATION
	By:	/s/ David R. Folsom
	Name:	David R. Folsom
	Title:	President and Chief Operating Officer

[SIGNATURE PAGE TO AMENDMENT NO. 2 TO NOTE AGREEMENT]

LENDER:	ESSEX EQUITY HIGH INCOME JOINT INVESTMENT VEHICLE, LLC
	By:	Richmond Hill Investments, LLC, the Investment Manager
	By:	/s/ Ryan P. Taylor
	Name:	Ryan P. Taylor
	Title:	Managing Director and Authorized Signatory
AGENT:	ESSEX EQUITY HIGH INCOME JOINT INVESTMENT VEHICLE, LLC
	By:	Richmond Hill Investments, LLC, the Investment Manager
	By:	/s/ Ryan P. Taylor
	Name:	Ryan P. Taylor
	Title:	Managing Director and Authorized Signatory

[SIGNATURE PAGE TO AMENDMENT NO. 2 TO NOTE AGREEMENT]

EX-10.41

Exhibit 10.41

AGREEMENT, WAIVER AND CONSENT BY PREFERRED STOCKHOLDERS

This Agreement, Waiver and Consent by Preferred Stockholders (the “Agreement, Waiver and Consent”) is entered into as of June 15, 2012 among Essex Illiquid, LLC, a Delaware limited liability company (“Essex Illiquid”), Richmond Hill Capital Partners, LP, a Delaware limited Partnership (“Richmond Hill”, and together with Essex Illiquid, the “Preferred Stockholders”), and MHI Hospitality Corporation, a Maryland corporation (the “Corporation”). Capitalized terms used in this Agreement, Waiver and Consent but not otherwise defined herein have the respective meanings ascribed thereto in the Articles Supplementary for Series A Cumulative Redeemable Preferred Stock, executed by the Corporation on April 18, 2011 (the “Articles Supplementary”).

WHEREAS, MHI Hospitality Corporation, a Maryland corporation (the “Corporation”), is the issuer of Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), issued pursuant to the Articles Supplementary;

WHEREAS, pursuant to Section 6(b) of the Articles Supplementary, the Corporation has elected to redeem, on June 18, 2012 (the “Redemption Date”), 11,513.602 shares of the Series A Preferred Stock (the “Redemption Shares”), such transaction to be referred to herein as the “Redemption”;

WHEREAS, the Preferred Stockholders are collectively the holders of record of all of the outstanding shares of Series A Preferred Stock as of the date hereof, and have agreed to provide the representations, warranties, covenants and waivers herein set forth with respect to the Redemption; and

WHEREAS, in connection with the contemplated Redemption, the Company has agreed to use its good faith best efforts to provide the Preferred Stockholders a limited and conditional waiver of certain capital ownership restrictions applicable to the Preferred Stockholders;

NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. All Redemption Shares are to be redeemed on the Redemption Date; provided, however, that the Company shall be under no obligation to proceed with the Redemption except to the extent funds are legally available therefor in accordance with the Maryland General Corporation Law. Set forth in the table below, with respect to each of the Preferred Stockholders as of the date hereof, are (i) the number of shares of Series A Preferred Stock held by such Preferred Stockholder prior to the Redemption, (ii) the number of Redemption Shares held by such Preferred Stockholder to be redeemed on the Redemption Date and (iii) the number of shares of Series A Preferred Stock to be held by such Preferred Stockholder immediately after giving effect to the Redemption.

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Stockholder of Record	Number of Shares  of Series A Preferred Stock Held Prior to Redemption		Number of Redemption Shares to be Redeemed on the Redemption Date		Number of Shares  of Series A Preferred Stock Held Immediately After the Redemption (excluding accrued but unpaid Stock Dividends)
Essex Illiquid		23,441.710		10,592.514		12,849.196
Richmond Hill		2,038.408		921.088		1,117.320
TOTAL		25,480.118		11,513.602		13,966.516

2. The per-share redemption price payable with respect to each of the Redemption Shares (the “Redemption Price”) will be $1,067.89 (which figure includes a premium offered by the Corporation as an inducement to the Preferred Stockholders to enter into this Agreement, Waiver and Consent), and the aggregate Redemption Price for all Redemption Shares (including the aforementioned premium) will be $12,295,234.24. Accrued and unpaid dividends in respect of the Redemption Shares will become due and payable, if Cash Dividends, on the Redemption Date, and if Stock Dividends, on the next payment date provided therefor in the Articles Supplementary, in addition to the aggregate Redemption Price in accordance with Schedule II hereto.

3. On the Redemption Date, dividends on the Redemption Shares will cease to accrue, all accrued and unpaid dividends with respect to the Redemption Shares will be paid as defined by the Articles Supplementary, the Redemption Shares will no longer be deemed to be outstanding, and all powers, designations, preferences and other rights of each holder thereof (except the right to receive the Redemption Price and accrued dividends through the Redemption Date) shall cease and terminate with respect to such shares; provided, however, that in the event that a Redemption Share is not redeemed due to a default in payment by the Corporation or because the Corporation is otherwise unable to pay the Redemption Price in cash in full, (i) such Redemption Share will remain outstanding and will be entitled to all of the powers, designations, preferences and other rights (including without limitation the accrual and payment of dividends) as provided in the Articles Supplementary and (ii) notwithstanding anything to the contrary in this Agreement, Waiver and Consent, from and after the date hereof, the Corporation shall retain all rights held by the Corporation under the Articles Supplementary with respect to such Redemption Shares, including without limitation the right to redeem, at its option and election, any outstanding shares of Series A Preferred Stock in the manner provided in the Articles Supplementary.

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4. The Redemption Price payable to such Preferred Stockholder in exchange for the Redemption Shares held by such Preferred Stockholder shall be paid by wire transfer to the respective accounts identified for each Preferred Stockholder on Schedule I hereto. On or before the Redemption Date, each Preferred Stockholder shall deliver to the Corporation a certificate representing the Redemption Shares held by such Preferred Stockholder, duly endorsed (or accompanied by duly executed stock powers). Delivery of share certificates representing Redemption Shares to an address other than to the Corporation at 410 West Francis Street, Williamsburg, VA 23185 will not constitute a valid delivery.

5. Each Preferred Stockholder shall, upon request by the Corporation, execute and deliver any additional documents deemed by the Corporation (or its successor) to be necessary or desirable to complete the surrender of the certificate representing the Redemption Shares.

6. Each Preferred Stockholder:

(a) represents and warrants to the Corporation, solely on behalf of itself, that such Preferred Stockholder is, and will on the Redemption Date be, prior to giving effect to the Redemption, the record and beneficial owner of that number of shares of Series A Preferred Stock indicated in the relevant column of the table set forth in Section 1 hereof; in each case, free and clear of any liens, claims, encumbrances, security interests, options, charges or restrictions of any kind (collectively, “Encumbrances”), and, on the Redemption Date, such Preferred Stockholder shall deliver to the Corporation good and valid title to the Redemption Shares held by such Preferred Stockholder, free and clear of any Encumbrances;

(b) to the extent (and in each case only to the extent) required to effect the Redemption, hereby waives the provisions of Section 6(b) of the Articles Supplementary that would entitle such Preferred Stockholder to receive, in addition to the Redemption Price, the amount of the Make Whole in respect of the Redemption Shares, and any and all other provisions of the Articles Supplementary that would require the Redemption Price to be greater than that set forth in Section 2 hereof;

(c) agrees that payment by the Corporation of (i) the aggregate Redemption Price and (ii) any and all accrued and unpaid dividends with respect to the Redemption Shares as of the Redemption Date as set forth in this Agreement, Waiver and Consent will constitute full and exclusive consideration and satisfaction for the redemption of the Redemption Shares; and

(d) to the extent (and in each case only to the extent) required to effect the Redemption, hereby waives the provisions of Section 6(c) of the Articles Supplementary that would require no less than thirty (30) days notice prior to the Redemption Date for the Redemption, and each Preferred Stockholder hereby acknowledges its timely receipt of such prior notice and the validity of such notice.

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7. The Company undertakes to use its good faith best efforts to provide the Preferred Stockholders an accommodation whereby certain limitations on the Preferred Stockholders’ ability to hold additional capital stock in the Company would be waived in part to permit the Preferred Stockholders to acquire in open market purchases up to the aggregate of the lesser of 500,000 shares or 5% of the issued and outstanding Common Stock of the Company, subject to (i) the approval of the Company’s Board of Directors and (ii) the parties’ agreement on reasonable written terms, conditions and restrictions to ensure the Company’s continued compliance with legal and regulatory requirements for the Company to continue to operate as a real estate investment trust for U.S. federal income tax purposes notwithstanding the prospective acquisition by the Preferred Stockholders of shares of Common Stock.

8. Except as expressly waived hereby with respect to the Redemption, the Articles Supplementary shall continue to be, and shall remain, in full force and effect in accordance with the provisions thereof. To the extent the Redemption Date with respect to the Redemption does not occur on or before July 31, 2012, the waivers contained in this Agreement, Waiver and Consent shall terminate in their entirety and the Articles Supplementary shall continue in full force and effect in accordance with the provisions thereof.

[Signature page follows.]

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IN WITNESS WHEREOF, the Preferred Stockholders and the Corporation have executed this Agreement, Waiver and Consent as of the 15^th day of June, 2012.

ESSEX ILLIQUID, LLC		RICHMOND HILL CAPITAL PARTNERS, LP
By:	Richmond Hill Investments, LLC,	By:	Richmond Hill Investment Co., LP,
	the Investment Manager		the Investment Manager
By:	/s/ Ryan P. Taylor	By:	/s/ Ryan P. Taylor
	Ryan P. Taylor		Ryan P. Taylor
	Authorized Signatory		Authorized Signatory
MHI HOSPITALITY CORPORATION
By:	/s/ David R. Folsom
	David R. Folsom
	President and Chief Operating Officer

[SIGNATURE PAGE TO AGREEMENT, WAIVER AND CONSENT BY PREFERRED STOCKHOLDERS]

SCHEDULE I

Preferred Shareholder Bank Account Data

RICHMOND HILL CAPITAL PARTNERS LP

State Street

ABA: 011000028

Acct Number: DDA# 10032720

Acct Name: Richmond Hill

Ref: RICHMOND HILL CAPITAL PARTNERS LP/ RMH1 / DDA# 10032720

ESSEX ILLIQUID, LLC

JPMorgan Chase Bank, N.A.

ABA: 021000021

Account Number: 3227530000

Account Name: Essex Illiquid-2011

SCHEDULE II

Preferred Stock Redemption Spreadsheet

[see attached]

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

WEDNESDAY JUNE 20, 2012

MHI HOSPITALITY CORPORATION ANNOUNCES PARTIAL REDEMPTION

OF SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK;

FINANCING OF TAMPA HOTEL ASSET

Williamsburg, Virginia – June 20, 2012 – MHI Hospitality Corporation (NASDAQ: MDH) (the “Company”) announced today that the Company has entered into an agreement with the holders of the Company’s Series A Cumulative Redeemable Preferred Stock (the “Preferred Stock”) to redeem approximately 11,514 shares of Preferred Stock for an aggregate redemption price of approximately $12,295,234, plus the payment of related accrued and unpaid cash and dividends.

The Company also entered into an amendment of its existing Note Agreement with Essex Equity High Income Joint Investment Vehicle, LLC (“Essex”) whereby the Company made a $1.5 million prepayment under the Note Agreement. In addition, the amount of the undrawn term loan commitments under the Note Agreement increased to $7.0 million, of which $2.0 million is reserved with certain use restrictions.

The Company also announced that it successfully executed a $14.0 million secured loan with C1 Bank collateralized by a first mortgage on the Crowne Plaza Tampa Westshore Hotel in Tampa, Florida. The loan carries a fixed interest rate of 5.60% and amortizes on a 25 year schedule. The maturity date is June 18, 2017. Per the above, proceeds from the loan were used to redeem a portion of the Preferred Stock and to prepay the Company’s Note Agreement.

Andrew M. Sims, Chief Executive Officer of the Company, commented, “The financing of our Tampa asset has enabled us to redeem nearly half of the Company’s outstanding shares of Preferred Stock, thereby replacing 12.0% capital with 5.6% capital, resulting in an annual interest savings of approximately $800,000 on a normalized basis. These transactions are wholly consistent with our continuing balance sheet restructuring that, over the past ten months, has included the closing of five single-asset mortgages and the elimination of our syndicated credit facility.”

About MHI Hospitality Corporation

MHI Hospitality Corporation is a self-managed and self-administered lodging REIT focused on the acquisition, renovation, upbranding and repositioning of upscale to upper upscale full-service hotels in the Mid-Atlantic and Southern United States. Currently, the Company’s portfolio

consists of investments in ten hotel properties, nine of which are wholly-owned and comprise 2,113 rooms. All of the Company’s wholly-owned properties operate under the Hilton Worldwide, InterContinental Hotels Group and Starwood Hotels and Resorts brands. The Company has a 25.0 percent interest in the Crowne Plaza Hollywood Beach Resort. MHI Hospitality Corporation was organized in 2004 and is headquartered in Williamsburg, Virginia. For more information please visit www.mhihospitality.com.

Contact at the Company:

Scott Kucinski

Director - Investor Relations

(757) 229-5648