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): July 10, 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 W. 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.

Warrant Amendment Transaction

On July 10, 2012, MHI Hospitality Corporation (“MHI” or the “Company”) entered into an amendment (the “Warrant Amendment”) of the warrant (the “Warrant”) to purchase 1,900,000 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), issued on April 18, 2011 (and previously amended on December 21, 2011) in favor of Essex Illiquid, LLC and Richmond Hill Capital Partners, LP (collectively, the “Investors”). The Investors are also the collective holders of all the issued shares of the Company’s Series A Cumulative Redeemable Preferred Stock (the “Preferred Stock”).

In connection with the Warrant Amendment, the Company’s board of directors (the “Board”) established a modified Excepted Holder Limit (as defined in the Company’s Articles of Amendment and Restatement) for the Investors, permitting the Investors and their affiliated group to acquire up to an aggregate of the lesser of (i) 500,000 shares of Common Stock and (ii) 5.0% of the issued and outstanding shares of Common Stock as of the effective date of the Warrant Amendment (excluding Common Stock held in treasury by the Company, if any) in addition to the Warrant Shares (as defined in the Warrant), subject to equitable adjustment for any stock splits, reverse splits or stock dividends in respect of Common Stock (the “Additional Authorized Shares”). Pursuant to the Warrant Amendment, if the Investors hold any Additional Authorized Shares at the time the Warrant is exercised, the Investors will be required to certify to the Company compliance with certain beneficial ownership limits. The Investors further agreed to vote any Additional Authorized Shares acquired by them in the same proportions as votes cast in respect of Common Stock held by other Company stockholders.

Ryan P. Taylor, a member of the Company’s board of directors as designated by the holders of the Company’s Preferred Stock, is the Managing Partner of Richmond Hill Investment Co., LP and a Managing Director of Richmond Hill Investments, LLC.

A copy of the Warrant Amendment is attached as Exhibit 4.4 to this report and is incorporated by reference herein. The foregoing summary description of the Warrant Amendment and the transactions contemplated thereby is not intended to be complete and is qualified in its entirety by the complete text of the Warrant Amendment.

Jacksonville Refinancing Transaction

On July 10, 2012, MHI Jacksonville LLC and other affiliates of MHI entered into a Loan Agreement and other loan documents to secure a new $14.3 million mortgage (the “Mortgage Loan”) on the Crowne Plaza Jacksonville Riverfront hotel property (the “Hotel”) with Fifth Third Bank.

Pursuant to the loan documents:

• the maturity date of the Mortgage Loan is July 10, 2015 with an extension option until July 10, 2016;

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• the Mortgage Loan carries a floating interest rate of the 30-day LIBOR rate plus 3.0% and amortizes on a 25-year schedule; and

• the Mortgage Loan contains an earn-out feature which allows for an additional $3.0 million in proceeds to be funded during its term, contingent upon the Hotel’s satisfaction of certain debt coverage and loan-to-value covenants.

Proceeds of the Mortgage Loan were used to pay off the existing mortgage on the Hotel, which had an outstanding principal balance of $14.0 million and carried a fixed interest rate of 8.0%, and to pay closing costs related to the transaction.

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 July 13, 2012, the Company issued a press release announcing the transactions effected pursuant to the Warrant Amendment. A copy of the press release is furnished as Exhibit 99.1 hereto.

On July 13, 2012, the Company issued a press release announcing the transactions effected pursuant to the debt financing of the Hotel. A copy of the press release is furnished as Exhibit 99.2 hereto.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

4.4	Amendment No. 2, dated July 10, 2012, to Warrant, dated as of April 18, 2011, as amended, by and among MHI Hospitality Corporation, Essex Illiquid, LLC and Richmond Hill Capital Partners, LP.
99.1	Press Release of MHI Hospitality Corporation dated July 13, 2012, announcing the transactions effected pursuant to the Warrant Amendment.
99.2	Press Release of MHI Hospitality Corporation dated July 13, 2012, announcing the transactions effected pursuant to the debt financing of the Crowne Plaza Jacksonville Riverfront 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: July 13, 2012

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

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Exhibit List

4.4	Amendment No. 2, dated July 10, 2012, to Warrant, dated as of April 18, 2011, as amended, by and among MHI Hospitality Corporation, Essex Illiquid, LLC and Richmond Hill Capital Partners, LP.
99.1	Press Release of MHI Hospitality Corporation dated July 13, 2012, announcing the transactions effected pursuant to the Warrant Amendment.
99.2	Press Release of MHI Hospitality Corporation dated July 13, 2012, announcing the transactions effected pursuant to the debt financing of the Crowne Plaza Jacksonville Riverfront hotel.

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EX-4.4

Exhibit 4.4

Execution Version

AMENDMENT NO. 2 TO WARRANT

To Purchase Common Stock of

MHI Hospitality Corporation

THIS AMENDMENT NO. 2 (this “Amendment”) to the Warrant dated as of April 18, 2011 (as further defined below, the “Warrant”), issued by MHI Hospitality Corporation, a Maryland corporation (the “Company”), to Essex Illiquid, LLC and Richmond Hill Capital Partners, LP as the Initial Holders identified on Schedule 1 to the Warrant, as amended by an Amendment to Warrant dated as of December 21, 2011, is made and entered into by the Company, and agreed and acknowledged by such Initial Holders, as of July 10, 2012 (the “Amendment Date”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Warrant.

WHEREAS, certain Affiliates of the Initial Holders, in their capacity as holders of the Company’s Series A Cumulative Redeemable Preferred Stock, and the Company have entered into that certain Agreement, Waiver and Consent by Preferred Stockholders dated as of June 15, 2012 (the “Preferred Stock Agreement”);

WHEREAS, as contemplated by the Preferred Stock Agreement, by resolution dated June 28, 2012, the board of directors of the Company has authorized the Initial Holders, with effect from the Amendment Date and subject to the terms and conditions of this Amendment, to acquire, in addition to the Warrant Shares, up to an aggregate of the lesser of (i) 500,000 shares of Common Stock and (ii) 5% of the issued and outstanding shares of Common Stock as of the Amendment Date (excluding Common Stock held in treasury by the Company, if any), in each case subject to adjustment as set forth below (such aggregate number of shares of Common Stock so authorized for acquisition, the “Authorized Additional Shares”); and

WHEREAS, the Company and the Initial Holders desire, for their mutual convenience and benefit, to amend the Warrant 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. Article I of the Warrant is hereby amended by:

(a) Adding thereto in proper alphabetical order the defined term “Ownership Certificate” to read as follows:

“‘Ownership Certificate’ means a certificate, in form and substance reasonably acceptable to the Company, duly executed by or on behalf of the holder by a duly authorized Person, confirming, representing and warranting to the Company that upon the issuance to the holder of the Warrant Shares specified in the Notice of Exercise, beneficial ownership of more than 9.9% of the equity interests in the Company will not be held (i) if the holder is a partnership or

limited partnership, by any direct or indirect partner or limited partner (or group of partners or limited partners who are Affiliates of one another) of the holder, (ii) if the holder is a limited liability company treated as a partnership or as a disregarded entity for U.S. federal income tax purposes, by any direct or indirect member (or group of members who are Affiliates of one another) of the holder, or (iii) if otherwise, by the holder.”

(b) Restating the definition of “Warrant” therein in its entirety, as follows:

“‘Warrant’ means the warrant dated as of the Closing Date issued to the Initial Holders, as amended as of December 21, 2011 and as of July 10, 2012, and as further amended or restated from time to time, and all warrants issued upon the partial exercise, transfer or division of or in substitution for any Warrant.”

2. Section 2.2 of the Warrant is hereby amended by restating the initial paragraph thereof in its entirety, as follows:

“To exercise this Warrant, a holder hereof shall deliver to the Company (i) a Notice of Exercise in the form of Exhibit 2.2 hereto duly executed by such holder hereof specifying the number of shares of Common Stock to be purchased, (ii) an amount equal to the aggregate Exercise Price for all shares of Common Stock as to which this Warrant is then being exercised, (iii) at any time when such holder directly holds shares of Common Stock other than Issued Warrant Shares, an Ownership Certificate, and (iv) this Warrant. At the option of each holder hereof, payment of the Exercise Price shall be made by (a) wire transfer of funds to an account in a bank located in the United States designated by the Company for such purpose, (b) certified or official bank check payable to the order of the Company, (c) deducting from the number of shares delivered upon exercise of the Warrant a number of shares which has an aggregate Current Market Price on the date of exercise equal to the aggregate Exercise Price for all shares as to which the Warrant is then being exercised or (d) any combination of such methods.”

3. The Initial Holders hereby undertake and irrevocably agree, at any time when any action is to be taken by holders of Common Stock (whether at a meeting, by written consent in lieu thereof or otherwise), that the Initial Holders will cast votes or give consents in respect of shares of Common Stock then held by them excluding Issued Warrant Shares (but including any shares of Common Stock acquired pursuant to the Participation Right described in Section 4.2 of the Warrant) in the same proportions as the votes cast or consents given (but excluding abstentions) with respect to all shares of Common Stock other than (i) those held by the Initial Holders or by entities owned, controlled or managed by the Initial Holders or their respective investment managers and (ii) those which are not eligible, in respect of the matter in question, to be voted or to consent or to have their votes or consents counted. For the avoidance of doubt, this undertaking will also apply in respect of any voting rights or securities obtained by the Initial Holders on the basis or by virtue of their ownership of Common Stock other than Issued Warrant Shares. This paragraph will be effective at any time when the Initial Holders hold any Common Stock other than Issued Warrant Shares and shall survive the expiration of the Exercise Period and the termination of the Warrant.

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4. If the number of shares of Common Stock outstanding changes after the Amendment Date due to the occurrence of an event specified in clauses (i) through (iii) of Section 4.2(a) of the Warrant, the number of Authorized Additional Shares shall be adjusted to become the number obtained by multiplying the number of Authorized Additional Shares in effect immediately prior to such event by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately following such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such event (treating as outstanding, to the extent so provided in such Section 4.2(a), shares of Common Stock issuable upon conversions or exchanges of Convertible Securities and exercises of Stock Purchase Rights).

5. The Initial Holders acknowledge that they have received and reviewed the Insider Trading Policy of the Company, as amended from time to time (the “Policy”), and agree that it and the procedures and processes implemented by the Company related thereto shall be binding upon any individuals that are Affiliates of the Initial Holders and who are or become Insiders (within the meaning of the Policy), including, without limitation, in connection with any acquisition or other trading activity of Common Stock by the Initial Holders.

6. This Amendment shall be deemed to be incorporated into the Warrant and made a part thereof. All references to the Warrant in any other document shall be deemed to be references to the Warrant as modified by this Amendment. Except as specifically amended or modified herein, the Warrant 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 Warrant, the terms of this Amendment shall be deemed to govern.

7. This Amendment may be executed simultaneously in one or more counterparts, and by different parties hereto 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.

8. 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.

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

[Signature page follows.]

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IN WITNESS WHEREOF, the Company, intending to be legally bound, has executed this Amendment effective as of the Amendment Date.

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

Attest:

/s/ Rhonda Smith

Name: Rhonda Smith

Title: Executive Assistant

AGREED AND ACKNOWLEDGED

BY THE INITIAL HOLDERS

ESSEX ILLIQUID, LLC
By:	Richmond Hill Investments, LLC,
	its Investment Manager
By:	/s/ Ryan P. Taylor
	Name:	Ryan P. Taylor
	Title:	Managing Director and Authorized Signatory
RICHMOND HILL CAPITAL PARTNERS, LP
By:	Richmond Hill Investment Co., LP,
	its Investment Manager
By:	/s/ Ryan P. Taylor
	Name:	Ryan P. Taylor
	Title:	Authorized Signatory

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

FRIDAY JULY 13, 2012

MHI HOSPITALITY CORPORATION ANNOUNCES AMENDMENT TO WARRANT

Williamsburg, Virginia – July 13, 2012 – MHI Hospitality Corporation (NASDAQ: MDH) (the “Company”) announced today that the Company has entered into an amendment (the “Amendment”) of the warrant (the “Warrant”) to purchase 1,900,000 shares of the Company’s common stock issued on April 18, 2011, as amended, in favor of Essex Illiquid, LLC and Richmond Hill Capital Partners, LP (collectively, the “Investors”). Via the Amendment, the Investors and their affiliated group are permitted to acquire up to an aggregate of the lesser of (i) 500,000 shares of common stock and (ii) 5.0% of the issued and outstanding shares of common stock, in addition to the Warrant shares. Pursuant to the Amendment, if the Investors hold any additional authorized shares at the time the Warrant is exercised, the Investors will be required to certify to the Company compliance with certain beneficial ownership limits. The Investors further agreed to vote any additional authorized shares acquired by them in the same proportions as votes cast in respect of common stock held by other Company stockholders.

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

EX-99.2

Exhibit 99.2

FOR IMMEDIATE RELEASE

FRIDAY, JULY 13, 2012

MHI HOSPITALITY CORPORATION COMPLETES $14.3 MILLION

SECURED DEBT FINANCING

Williamsburg, VA – July 13, 2012 – MHI Hospitality Corporation (NASDAQ: MDH) (the “Company”) today announced that it has successfully executed a new $14.3 million secured loan with Fifth Third Bank, collateralized by a first mortgage on the Crowne Plaza Jacksonville Riverfront Hotel in Jacksonville, Florida. The loan carries a floating interest rate of the 30-day LIBOR rate plus 3.0% and amortizes on a 25-year schedule. The maturity date is July 10, 2015 with an extension option until July 10, 2016. The loan also contains an earn-out feature which allows for an additional $3.0 million in proceeds to be funded during the term of the loan, contingent upon satisfaction of certain debt coverage and loan-to-value covenants. Proceeds from the loan were used to pay off the Hotel’s existing $14.0 million mortgage, which carried a fixed interest rate of 8.0%, and to pay closing costs related to the transaction.

Andrew M. Sims, Chief Executive Officer of the Company, commented, “We are very pleased with the terms of this transaction as it results in an annual interest savings of approximately $650,000 on a normalized basis. Further, with the completion of this transaction, we have successfully completed a strategic initiative to restructure our balance sheet by closing six new mortgage loans over the past 11 months for combined proceeds of $86.0 million and a current weighted average interest of 4.50%, while also eliminating our syndicated credit facility and redeeming nearly half of our outstanding preferred stock.”

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