Item 1.01. Entry into a Material Definitive Agreement.

On August 5, 2011, Laurel Hotel Associates LLC (the "Borrower") and other affiliates of MHI Hospitality Corporation (the "Company"), entered into a Deed of Trust and Security Agreement, Deed of Trust Note, Security Agreement and other loan documents to secure a new $7.5 million mortgage (the "Mortgage Loan") on the Holiday Inn Laurel West hotel property with Bank of Georgetown (the "Lender").

Pursuant to the loan documents:

• the term of the Mortgage Loan is ten (10) years; and

• the interest rate applicable to the Mortgage Loan will be fixed at 5.25% for the first five years, after which the Mortgage Loan will adjust to a rate of 3.00% plus the current 5-year U.S. Treasury bill rate of interest, with a floor of 5.25%.

• The Company used proceeds of the Mortgage Loan to pay down a related portion of Company indebtedness under its credit facility.

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 7.01. Regulation FD Disclosure.

On August 8, 2011, the Company issued a press release announcing the new debt financing of the Holiday Inn Laurel West. A copy of the press release is furnished as Exhibit 99.1 hereto.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1 Press Release of MHI Hospitality Corporation dated August 8, 2011, announcing the new debt financing of the Holiday Inn Laurel West.

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