Annual Stockholder Meeting April 22, 2008 Williamsburg, Virginia AMEX MDH 1
Forward Looking Statement 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. Economic conditions generally and the real estate market specifically, management and performance of the Company s hotels, plans for hotel renovations, financing plans, supply and demand for hotel rooms in the Company s current and proposed market areas, the Company s ability to acquire additional properties and the risk that potential acquisitions may not perform in accordance with expectations, legislative/regulatory changes, including changes to laws governing taxation of real estate investment trusts and competition, and other factors, may affect the Company s future results, performance and achievements. These risks and uncertainties are described in greater detail under Risk Factors in the Company s Annual Report on Form 10-K and subsequent reports filed 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. 2
Company Overview & History The predecessor of the company was founded in 1957-51 years of continuous operation. Proven Track Record: Acquisition, Ownership, Disposition, and Management of Lodging Investments prior to the IPO. Calendar Year 2005: Successfully transitioned to public company status, became a Real Estate investment Trust (REIT) traded on the American Stock Exchange under the MDH in December 2004. Why we went Public: Create a growth platform for the future. Availability of Capital/Access to Capital Markets: Our strategy focuses on unique transactions, where capital procurement is complicated and expensive, notwithstanding our long history of success. Balance Sheet Restructuring: Low post-ipo leverage provided flexibility and capital capacity. 3
HOTEL PORTFOLIO 4
Our Portfolio Southeast & Atlantic Focus Strategic Growth: Rooms Under Control ME 3500 2984 3000 VT Hampton Crowne Plaza NY 2584 JV #2 2500 Rooms 2023 2000 MA MI Hollywood Crowne Plaza (JV) CT PA RI Tampa Crowne Plaza (Closed) 1837 Louisville Sheraton NJ Laurel Holiday Inn 1500 NH 1336 OH Jacksonville Hilton IN Louisville 1000 WV VA KY 500 NC TN 0 2004(IPO) 2005 2006 2007 2008 (est.) SC Year 4 Year Est. Compounded Annual Growth Rate in Rooms = 22.2% Portfolio Own Resort Leases Executed Contract Philadelphia DC Suburbs (Laurel) Hampton (Norfolk) Raleigh Wilmington Wrightsville Beach Savannah AL GA Jacksonville FL Tampa Hollywood (FT. Lauderdale) 5
Our Portfolio Starwood 7% Hilton 38% IHG 55% Hilton IHG Starwood Diverse Brand Affiliation with an UpScale Focus 6
Hilton Philadelphia Airport 7
Hilton Philadelphia Airport 8
Holiday Inn Brownstone -Raleigh 9
Hilton Savannah DeSoto 10
Hilton Savannah DeSoto 11
Hilton Wilmington Riverside 12
Hilton Wilmington Riverside 13
Shell Island Resort 14
Holiday Inn - Laurel 15
Holiday Inn Laurel 2007 IHG AWARD WINNNER Guest Room - Before Guest Room - After 16
Crowne Plaza Riverfront - Jacksonville 17
Sheraton Louisville Riverside 18
Sheraton Louisville Riverside 19
Crowne Plaza Hollywood, Florida 20
Crowne Plaza Hollywood, Florida 21
Crowne Plaza Tampa Westshore (under renovation) 22
Crowne Plaza Tampa Westshore (under renovation) 23
Purchase Agreement: Hampton Marina Hotel 24
Industry & Market Dynamics 25
Industry Statistics Late 2007 and early 2008 a significant downward trend in REIT pricing occurred after many years of above-average returns. Hotel fundamentals remain solid, but rate of growth is slowing and reverting to more historic levels. Some markets are weakening. Hotel asset pricing remains high by historic standards, but market is moving away from Sellers, as spreads widen, and capital availability evaporates. Certain strategies (condo conversions) already repricing. Credit expectations have been reset. Recent buyers of high-priced and highly leveraged assets are most at risk in a changing market environment. MHI CHOSE NOT TO CHASE YIELD DURING THE RECENT OVER-HEATED MARKET. 26
ADR Occupancy Industry Statistics Total U.S.: Occupancy and Rate $110.00 $109.03 64.0% 63.3% 63.1% 63.4% 63.2% $105.00 $103.64 63.0% 62.7% $100.00 62.0% $97.31 61.3% $95.00 61.0% $90.84 $90.00 60.0% $85.00 $85.37 $84.20 59.7% 58.9% $83.01 $83.12 59.1% $86.24 59.0% $80.00 58.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 est. Source: Smith Travel Research Year ADR Occupancy 27
RevPar % Change Industry Statistics Total U.S.: RevPar and % Change in RevPar $70.00 6.1% 7.6% 8.4% 7.6% $65.50 6.2% $68.36 9.0% 7.0% $61.69 4.4% 5.0% $60.00 $57.32 3.0% $50.00 $54.04 $50.27-2.7% $48.89 $49.12 0.5% $52.87 1.0% -1.0% -3.0% -5.0% -7.0% -7.0% $40.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 est. Year -9.0% RevPar RevPar % Change 28
PERFORMANCE 29
Stock Performance Very competitive market place Third full year as a public company our stock price ranged from $6.76 per share to $11.12 per share We believe our stock price carries a large discount due to our size and limited trading volume Disappointed that our improved financial performance and value enhancement of our assets has not been reflected corresponding increases in share price 30
Analyst Coverage Rating Price Target Hillard Lyons Tony Howard Buy $10.00 Ferris Baker Watts Charlie Place Buy $11.00 R W Baird David Loeb Neutral $9.00 Key and Janney Montgomery and BB&T (Krewson Janney/Forst Key) Coming in QII 2008 31
Stock: Total Return Comparison 3-12 Month & YTD Competitive Set: Total Returns Source: SNL Securities 7.0% 2.0% -3.0% -8.0% -13.0% -18.0% -23.0% -28.0% -33.0% -12.1% 9.0% MHI Hospitality Corporation FelCor Lodging Trust Incorporated -17.0% -17.1% -19.2% -32.9% -32.0% -10.8% Hersha Hospitality Trust Strategic Hotels & Resorts, Inc. -7.9% -8.0% -27.8% -22.8% Sunstone Hotel Investors, Inc. -3.4% -30.2% -33.0% 3 Month Total Return 12 Month Total Return YTD Total Return 32
Comparative Statistics SNL Data Source Pricing, Yield, and Cap Rates as of March 31, 2008 120.0% 120.0% 100.0% Source: SNL Financial 80.0% 78.2% 60.0% 60.5% 59.5% 48.6% 40.0% 20.0% 10.9% 12.4% 11.6% 10.9% 8.5% 8.0% 8.1% 7.3% 8.7% 13.0% 0.0% MHI Hospitality Corporation FelCor Lodging Trust Incorporated Hersha Hospitality Trust Strategic Hotels & Resorts, Inc. Sunstone Hotel Investors, Inc. Current Yield LTM FFO Payout Ratio Implied Cap Rate (most recent qtr) 33
Comparative Statistics SNL Data Source Price/ LTM FFO as of March 31, 2008 18.0x 16.0x 16.4x 14.0x 12.0x 10.0x 8.0x 7.2x 7.5x 6.0x 5.6x 5.8x 4.0x 2.0x 0.0x MHI Hospitality Corporation FelCor Lodging Trust Incorporated Hersha Hospitality Trust Strategic Hotels & Resorts, Inc. Sunstone Hotel Investors, Inc. Price/ LTM FFO Source: SNL Financial 34
2007 Year End Financial Highlights RevPAR $82.97 RevPAR Change +6.0% FFO per share $0.87 FFO Multiple 8.3x Dividends $0.68 Market Value Equity 68% Debt Equity Debt 32% Equity 48% January 1 Book Value Debt Equity December 31 Book Value of Assets $127.6M $160.0M Total Market Value +/-$207.7M $238.0M Leverage $56.8M $ 89.4M Debt 52% 35
MDH Growth December 31, 2004 v. December 31, 2007 2004¹ 2007 3 Yr- CAGR Room Sales $ 32,217,561 $ 46,544,928 13.0% F&B Sales $ 13,721,554 $ 19,549,325 12.5% Total Sales $ 47,721,703 $ 69,814,379 13.5% GOP $ 10,702,747 $ 19,906,102 23.0% NOI $ 9,752,747 $ 17,199,243 20.8% Occupancy 67.9% 69.8% 0.9% ADR $ 94.11 $ 118.86 8.1% RevPAR $ 63.92 $ 82.97 9.1% Gross Asset Value (market est.) $ 183,000,000 $ 238,000,000 9.2% Net Market Value after Debt $ 135,000,000 $ 149,600,000 3.4% NAV/Share $ 12.50 $ 14.01 3.8% Stock Price $ 10.00 $ 7.20 (10.4%) Notes: 1. Represents operating results of properties in the portfolio as of the last day of the fiscal year. 2004 financial data is prior to public company formation. 36
Management Initiatives 37
2007 Major Initiatives - Update FFO Guidance: $1.00-$1.10; an 8% increase over prior year at mid point of range. Adjusted FFO@ Continue with above market dividend policy. Complete a joint venture agreement with a private equity group; target QII. Make accretive acquisitions execute on pipeline. Minimum deal flow of 2 major transactions. One less than $30.0M via direct investment. (Tampa) One or more than $30.0M investment via the newly formed joint venture. (Hollywood) Maintain disciplined acquisition strategy do not chase yield. Complete Louisville renovation and branding ; QI 2008 opening. Complete Wilmington relicensing with Hilton and associated renovation; QI 2008 completion. Refinance Wilmington first mortgage; QII target closing. Refinance Savannah first mortgage; QIV target closing. Identify brand for Savannah, execute license, and complete planning for relicensing and associated renovations; target QIV. Complete Ruth s Chris lease in Wilmington; QI. Complete restaurant tenant lease in Louisville; QII. The Bristol 38
2007 Major Initiatives - Update Complete National restaurant tenant lease in Savannah; QIV. Not economically feasible. Renegotiate Line of Credit. Reduce interest rate Increase value of assets to increase borrowing base 39
2008 Major Initiatives FFO Guidance: $1.08-$1.16; an increase of 11% over prior year at the mid-point of the range. Continue our above market dividend policy with a bias toward increasing the dividend. Complete the renovation of the Wilmington asset and open the Ruth s Chris restaurant by March 31, 2008 and comply with budget. Ruth Chris will not open until 6/5/08. Complete the renovation of the Louisville asset and open the Bristol restaurant in April 2008 and comply with budget. Complete the renovation of the Savannah asset by year end and comply with budget. Commence the renovation of the Tampa asset and keep a pace that will allow the hotel to open by first quarter of 2009 and comply with budget. Identify a restaurant tenant for the Tampa asset, execute a lease, and complete the build out which provides for an opening by Super Bowl 2009. Complete the Hampton asset acquisition, commence renovation, and enter the Crowne Plaza system by year end. By year end make one accretive acquisition with Carlyle (or other joint venture partner) for a project cost in excess of $30.0M, or make one acquisition for the company s account by year end. Initiate a public relations campaign to expand the Company s coverage and stockholder base to enhance shareholder value. 40
Our Value Proposition Our proven ability to reposition hotels and provide long-term returns is our value proposition to shareholders and is what we believe differentiates us from other REITs in the sector. - Andrew Sims, Chairman & CEO 41