PROMISSORY NOTE

Exhibit 10.35

PROMISSORY NOTE

FOR VALUE RECEIVED MHI HOTEL INVESTMENTS HOLDINGS, LLC, a Delaware limited liability company (“ Borrower ”), as maker, having its principal place of business at c/o MHI Hospitality Corporation, 4801 Courthouse Street, Suite 201, Williamsburg, Virginia 23188, hereby unconditionally promises to pay to the order of CRP/MHI HOLDINGS, L.L.C., a Delaware limited liability company (together with its successors and assigns, “ Lender ”), as payee, having an address at c/o The Carlyle Group, 1001 Pennsylvania Avenue, NW, Suite 220 South, Washington, D.C. 20004, or at such other place as the holder hereof may from time to time designate in writing, the principal sum of Four Million Seven Hundred Fifty Thousand and No/100 Dollars ($4,750,000.00), in lawful money of the United States of America, with interest thereon to be computed from the date of this Promissory Note at the Interest Rate (as defined below) with respect to this Promissory Note (as the same may hereafter be amended, supplemented, or otherwise modified from time to time, this “ Note ”), and to be paid in accordance with the terms of this Note.

BACKGROUND:

Borrower and Lender are the sole members of MHI/Carlyle Hotel Investment Program I, L.L.C., a Delaware limited liability company (the “ JV Entity ”). The JV Entity is the sole member of each of MHI/Carlyle Sian Owner I, L.L.C., and MHI/Carlyle Sian Lessee I, L.L.C., each a Delaware limited liability company (the “ SocGen Borrowers ”). The SocGen Borrowers are parties to that certain Loan Agreement between Société Générale New York Branch, the New York branch of a French banking corporation, as lender (“ SocGen ”), and the SocGen Borrowers, jointly and severally as borrowers, and dated as of August 8, 2007 (as amended from time to time, the “ Sian Loan Agreement ”). The promissory note evidencing the loan from SocGen to the SocGen Borrowers was split into two notes, Note A and Note B, pursuant to that certain Note Splitter and Modification Agreement by and among the SocGen Borrowers and SocGen, dated as of June 13, 2008. A portion of the loan from SocGen to the SocGen Borrowers is evidenced by that certain Promissory Note B, dated as of June 13, 2008, in the original principal amount of $22,000,000.00, made by the SocGen Borrowers, as maker, for the benefit of SocGen (the “ B Note ”). SocGen assigned the B Note to MHI/Carlyle B Note Holder I, L.L.C., a Delaware limited liability company (“ B Note Holder ”) pursuant to (i) that certain Assignment and Assumption Agreement between SocGen and B Note Holder, dated as of June 13, 2008, and (ii) that certain Allonge Endorsement to Promissory Note by SocGen, dated as of June 13, 2008, for the purchase price of $19,000,000.00 (the “ Purchase Price ”), paid by B Note Holder to SocGen. The Purchase Price was funded to B Note Holder by a capital contribution (the “ Capital Contribution ”) to B Note Holder from the JV Entity. The Capital Contribution was seventy-five percent (75%) funded by Lender and twenty-five percent (25%) funded by Borrower (“ Borrower’s Contribution ”). Borrower has elected to have Lender provide it with a loan in the amount of $4,750,000 (the “ Loan ”), which is equal to Borrower’s Contribution in accordance with Section 11.6 of that certain Limited Liability Company Agreement of MHI/Carlyle Hotel Investment Program I, L.L.C., between Lender and Borrower, dated as of April 26, 2007, as amended by that certain First Amendment to Limited Liability Company

Agreement of MHI/Carlyle Hotel Investment Program I, L.L.C., between Lender and Borrower, dated as of June 13, 2008 (as amended, the “ JV Agreement ”). Lender is making the Loan to Borrower subject to the terms and conditions set forth in this Note and the other Loan Documents (as defined below) and this Note represents and evidences the Loan made by Lender to Borrower.

ARTICLE 1: DEFINITIONS

For purposes of this Promissory Note to Borrower and except as otherwise expressly provided:

“ Business Day ” shall mean any day other than a Saturday, a Sunday or a legal holiday on which national banks are not open for general business in the District of Columbia.

“ Default Rate ” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (i) the maximum rate permitted by applicable law, or (ii) five percent (5%) above the Interest Rate.

“ Distributions ” has the meaning ascribed to it in the JV Agreement.

“ Event of Default ” has the meaning ascribed to it in Section 3.1.

“ Guarantor ” has the meaning ascribed to it in Article 4.

“ Guaranty ” has the meaning ascribed to it in Article 4.

“ Interest Period ” shall mean (a) for the first interest period hereunder, (i) if the closing of the Loan occurs on or before the fourteenth (14th) day of a calendar month, the period commencing on the date of such closing and ending on (and including) the fourteenth (14th) day of the calendar month in which such closing occurs and (ii) if the closing of the Loan occurs on or after the fifteenth (15th) day of a calendar month, the period commencing on the date of such closing and ending on (and including) the fourteenth (14th) day of the following calendar month and (b) for each interest period thereafter commencing February 15, 2009, the period commencing on the fifteenth (15th) day of each calendar month and ending on (and including) the fourteenth (14th) day of the following calendar month. Each Interest Period as set forth in clause (b) above shall be a full month and shall not be shortened by reason of any payment of the Loan prior to the expiration of such Interest Period.

“ Interest Rate ” shall mean the Applicable Interest Rate (as defined in, and calculated by SocGen pursuant to, the Sian Loan Agreement) minus fifty (50) basis points.

“ Loan Documents ” shall mean this Note and the Guaranty.

“ Maturity Date ” has the meaning ascribed to it in the Sian Loan Agreement.

“ Monthly Payment Date ” shall mean the first (1st) calendar day of each calendar month during the term of the Loan, and if such day is not a Business Day, then the Business Day immediately preceding such day, commencing on February 27, 2009 and continuing to and including the Maturity Date.

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All capitalized terms not defined herein shall have the respective meanings set forth in the Sian Loan Agreement.

ARTICLE 2: THE LOAN AND PAYMENT TERMS

Section 2.1 The Loan.

2.1.1 Agreement to Lend and Borrow . Subject to and upon the terms and conditions set forth herein and in the other Loan Documents, Lender has made the Loan to Borrower and Borrower has accepted the Loan from Lender on the date hereof.

2.1.2 Single Disbursement to Borrower . Borrower shall receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed.

Section 2.2 Interest Rate.

Section 2.2.1 Interest Rate . Interest on the principal balance of the Loan from time to time shall accrue from the date hereof up to and including the Maturity Date at the Interest Rate.

Section 2.2.2 Interest Rate and Payment after Default . In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal balance of the Loan and any other sums due and payable by Borrower under the Loan Documents shall accrue interest at the Default Rate, calculated from the date the Event of Default occurred.

Section 2.2.3 Late Payment Charges . If any principal, interest or any other sum due under the Loan Documents, other than the payment of principal due on the Maturity Date, is not paid by Borrower on or before the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Any such amount shall be secured by the Guaranty.

Section 2.3 Loan Payments.

2.3.1. Payment Before Maturity Date .

(a) Borrower shall make a payment to Lender of interest only on the Monthly Payment Date occurring on February 27, 2009 and on each Monthly Payment Date thereafter to and including the Maturity Date in an amount equal to the Interest Rate times the principal balance of the Loan then outstanding during the Interest Period in which such Monthly Payment Date occurs.

(b) Until the Loan is fully repaid, including any and all amounts due under this Note, fifty percent (50%) of all Distributions payable to Borrower from the JV Entity (the

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“ Distribution Share ”) shall be paid directly to Lender, which Distribution Share, if and when paid, shall be applied to pay down the then-outstanding principal balance of the Loan and any other amounts then due and payable under this Note.

2.3.2 Payment on Maturity Date . Borrower shall pay to Lender on the Maturity Date the outstanding principal balance of the Loan, all accrued and unpaid interest thereon and all other amounts due hereunder, including, without limitation, all interest that would accrue on the outstanding principal balance of the Loan through and including the end of the Interest Period in which the Maturity Date occurs (even if such Interest Period extends beyond the Maturity Date).

2.3.3 Method of Payment . All payments of interest, principal and fees shall be made in lawful money of the United States in immediately available funds, without counterclaim or setoff and free and clear of, and without any deduction or withholding for, any taxes or other payments, by wire transfer to Lender or to such other bank or address as the holder of the Loan may designate in a written notice to Borrower. Payments shall be credited on the Business Day on which immediately available funds are received prior to three o’clock P.M. Eastern Time; payments received after three o’clock P.M. Eastern Time shall be credited to the Loan on the next Business Day. Payments which are by check or which are not in the form of immediately available funds shall not be credited to the Loan until such funds become immediately available to Lender, and, with respect to payments by check, such credit shall be provisional until the item is finally paid by the payor bank.

ARTICLE 3: EVENTS OF DEFAULT; REMEDIES

Section 3.1 Events of Default

(a) Events of Default : Each of the following events shall constitute an event of default hereunder (an “ Event of Default ”):

(i) if any regularly scheduled installment of principal and/or interest due under this Note or other payment due under the Loan Documents (other than the payment due on the Maturity Date) is not paid prior to the fifth (5th) day after the same is due;

(ii) if any representation or warranty made by Borrower or Guarantor herein or in any other Loan Document shall have been false or misleading in any material respect as of the date the representation or warranty was made;

(iii) if Borrower or Guarantor shall make an assignment for the benefit of creditors;

(iv) if a receiver, liquidator or trustee shall be appointed for Borrower or Guarantor, or if Borrower or Guarantor shall be adjudicated bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower or Guarantor, or if any proceeding for the dissolution or liquidation of Borrower or Guarantor shall be instituted; provided , however , if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower or Guarantor, upon the same not being discharged, stayed or dismissed within sixty (60) days;

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(v) if Borrower or Guarantor, as applicable, attempts to assign any of its rights and obligations under this Note or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents;

(vi) if Borrower or Guarantor, as applicable, shall continue to be in default under any of the other terms, covenants or conditions of any of the Loan Documents not specified in subsections (i) through (v) above, for ten (10) days after notice to Borrower or Guarantor, as applicable, from Lender, in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other default; provided , however , that if such non-monetary default is susceptible of cure but cannot reasonably be cured within such 30-day period and provided further that Borrower or Guarantor, as applicable, shall have commenced to cure such