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Braemar Hotels & Resorts, Inc. (BHR) Q2 2019 Earnings Call Transcript

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Braemar Hotels & Resorts, Inc.  (NYSE: BHR)
Q2 2019 Earnings Call
Aug. 01, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Braemar Hotels & Resorts Inc Second Quarter 2019 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Jordan Jennings. Please go ahead.

Jordan Jennings -- Manager, Investor Relations

Good morning, and welcome to today's call to review results for Braemar Hotels & Resorts for the second quarter of 2019 and to update you on recent developments. On the call today will be Richard Stockton, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; Jeremy Welter, Chief Operating Officer. The results as well as a notice of the accessibility of this conference call on a listen-only basis over the internet were distributed yesterday in a press release that has been covered by the financial media.

At this time, I want to remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the federal securities regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures. Reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on July 31st, 2019, and may also be accessed through the company's website at www.bhrreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.

I will now turn the call over to Richard Stockton. Please go ahead, Richard.

Richard J. Stockton -- President and Chief Executive Officer

Good morning. Thank you for joining us to discuss our second quarter results. In the second quarter, we continued to make progress on our portfolio realignment strategy, including completing the conversion of The Notary Hotel and revealing the name of The Clancy, our San Francisco Autograph property. We're excited about the meaningful progress we are making and believe the continued execution of the strategy will lead to solid growth and strong financial performance for the company going forward.

Our acquisition of the Ritz-Carlton Lake Tahoe in January of this year was our first purchase to utilize the ERFP program with Ashford Inc. We received $10.3 million from Ashford Inc related to that acquisition. We anticipate that the ERFP funding will increase our returns on this acquisition for a projected 10% to 12% unlevered IRR. We continue to be excited about the prospects of this acquisition as the hotel's performance during the first six months of this year have significantly exceeded our expectations with RevPAR growth of 23.3% over the prior year period.

Let me now turn to our second quarter results. For the second quarter, comparable RevPAR for all hotels declined by 2.3%, while comparable RevPAR for hotels not under renovation decreased 1.9%. Our portfolio is negatively impacted by the weak Seattle market and the renovation disruption at The Notary. If you exclude those two properties, comparable RevPAR growth for the portfolio was positive at 0.8%. We reported adjusted EBITDAre of $32.8 million and AFFO per share of $0.42 for the quarter. Our overall portfolio trailing 12-month comparable RevPAR of $231 continues to be the highest in the lodging REIT sector.

During the quarter, we continued to actively manage our insurance recoveries at the Ritz-Carlton, St. Thomas related to Hurricane Irma. We are working closely with our insurers, both to seek recoveries for physical damage to the hotel as well as to minimize the impact to the property's P&L through BI insurance recoveries, which totaled $6.6 million in the quarter. We expect recoveries to continue at least to our planned reopening, which remains on track for the fourth quarter 2019.

We have opened reservations starting December 1st and will allow earlier bookings as the completion date approaches. The market has lost approximately 35% of its rooms' inventory, positioning us well for a strong ramp up. Quoted rates at the property are approximately 10% higher than pre-hurricane levels. We are also pleased with the progress we have made on the conversions of our Courtyard Philadelphia and Courtyard San Francisco properties to Autograph Collection hotels. On July 17th, we announced the opening of the converted Courtyard Philadelphia as The Notary Hotel, an Autograph Collection property. Located in downtown Philadelphia, the property underwent a $20 million-plus renovation and features 499 guest rooms over 10,000 square feet of conference space throughout 12 event rooms.

We also recently announced the rebranding of the Courtyard San Francisco to The Clancy, an Autograph Collection property. Expected to be completed in January 2020, The Clancy is ideally situated in San Francisco's vibrant South of Market district, which has established itself as a hub for international visitors, regional day trippers and locals enjoining music, art, multimedia and technology-driven culture. The hotel, which features 410 guestrooms and almost 10,000 square feet of meeting space, is within walking distance of notable attractions, including Moscone Convention Center, Oracle Park, Union Square, Yerba Buena Gardens and the Metreon Complex.

During the second quarter, we reported 4.6% RevPAR growth at the hotel, even while the property was under renovation, which when combined with only modest supply growth and the recent reopening of the expanded Moscone Convention Center near the hotel, continues to fuel our excitement for the upcoming repositioning of this property. Thus far, we have spent approximately $37 million on these conversions and anticipate spending an additional $20 million during the remainder of 2019 in the first quarter of 2020.

On the capital markets front, as a result of our recent financing activity over the last year, we continue to have a very attractive maturity schedule. Our next target maturity is not until March 2020 and is the amount representing less than 10% of our assets. We have also been active on the Investor Relations front. During the remainder of 2019, we will continue to get out on the road to meet with investors to communicate our strategy and the attractiveness of investment in our platform. We'll have our Annual Investor Day in New York City on October 3rd and hope to see many of you there.

We believe we have made great progress executing on our strategy this past quarter. And we're optimistic about the upcoming performance of the portfolio as demand continues to be strong in our markets with limited new supply. We also continue to believe there are several unique stories in our portfolio that could result in RevPAR performance in excess of the broader market.

I will now turn the call over to Deric.

Deric S. Eubanks -- Chief Financial Officer

Thanks, Richard. As Richard mentioned, during the second quarter, we've recognized $6.6 million of business interruption income for the Ritz-Carlton, St. Thomas, which is reflected in the other hotel revenue line of our income statement. These insurance recoveries related to the months of March 2019 through May 2019, and we expect business interruption income to continue until at least the reopening of the hotel at the Ritz-Carlton, which is anticipated to occur in the fourth quarter of this year. As a reminder, in the prior year quarter, we recorded business interruption income of $5.2 million at the Ritz-Carlton, St. Thomas; a $172,000 at Bardessono; $19,000 at Hotel Yountville; and $3.3 million for the Tampa Renaissance for lost profits related to BP Deepwater Horizon oil spill in the Gulf of Mexico in 2010 for a total of $8.7 million.

For the second quarter of 2019, we reported a net loss attributable to common stockholders of $7 million, or $0.22 per diluted share, and we reported AFFO per diluted share of $0.42. Adjusted EBITDAre for the quarter was $32.8 million. At quarter's end, we had total assets of $1.8 billion. We had $1.1 billion of mortgage loans of which $49 million related to our joint venture partners' share of the loan on the Capital Hilton and Hilton La Jolla Torrey Pines. Our total combined loans had a blended average interest rate of 4.7%.

Our loans are entirely floating rate and the vast majority of interest rate caps in place. As of the end of the second quarter, we had approximately 49% net debt to gross assets and our trailing 12-month fixed-charge coverage ratio was approximately 1.6 times. Our next loan maturity is not until March 2020. Our cash and cash equivalents at the end of the quarter was $80 million with an additional $70 million of restricted cash. The majority of that restricted cash is earmarked for CapEx projects, including our Autograph conversions. So we have already set aside a significant amount of cash we plan to spend in 2019. We also ended the quarter with net working capital of $75 million.

As of June 30, 2019, our portfolio consisted of 13 hotels with 3,484 net rooms. Our share count currently stands at 37.7 million fully diluted shares outstanding, which is comprised of 32.9 million shares of common stock and 4.8 million OP units. In our financial results, we included approximately 6.6 million shares and our fully diluted share count associated with our Series B Convertible Preferred Stock. With regard to dividends, the Board of Directors declared a second quarter 2019 cash dividend of $0.16 per share, or $0.64 per diluted share on an annualized basis. This equates to an annualized yield of approximately 7% based on yesterday's stock price.

I'd also like to point out that during the quarter, we booked a $1.7 million property tax refund at our Park Hyatt Beaver Creek, which related to the 2017 and 2018 tax years. Our asset management team aggressively appeals our property tax assessments, and we are pleased to report the significant refund.

This concludes our financial review. I'd now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Jeremy J. Welter -- Chief Operating Officer

Thank you, Deric. Comparable RevPAR for our portfolio decreased 2.3% during the second quarter. Comparable RevPAR for hotels not under renovation decreased 1.9%. This RevPAR decrease led to a gap of 0.7 percentage points relative to our hotels' submarket chain scales. Despite revenue contracting, second quarter hotel EBITDA flow-through for the entire portfolio was 60%. Year-to-date, comparable RevPAR has grown 0.3%. Easter occurring later in April 2019 hurt April this year relative to 2018.

The Pier House Resort did not show any signs of suffering from the Easter shift and was our portfolio's best-performing asset during the second quarter. On our call last quarter, we mentioned Pier House's strong group pace, which led to comparable RevPAR growth of 6.5% during the second quarter. This robust RevPAR growth resulted in Pier House increasing its share relative to both the Key West, Florida submarket and the Florida Keys market by 2.9 and 1.9 percentage points, respectively.

As the Key West market continues to recover from Hurricane Irma, we strategically increased length of stay restrictions for our OTA business, especially on weekends, in order to drive higher-rated retail in AAA business. The strategy worked as evidenced by the hotel's 4.6% rate growth during the second quarter. Year-to-date, comparable RevPAR has grown a robust 8.5%.

During the second quarter, hotel EBITDA grew 18.2%, or $485,000, resulting in a 9.2% increase in hotel EBITDA margin and 100% hotel EBITDA flow-through. Not far behind the Pier House Resort, the iconic Hilton La Jolla Torrey Pines also performed well during the second quarter. Comparable RevPAR grew 4.4%, driven by strong rate growth of 5.7%. As RevPAR growth represents 5.3 and 4.6 percentage point growth relative to the upper upscale San Diego, California market class and the upscale and above chains in San Diego La Jolla, California submarket, respectively.

Last year, a lot of emphasis was placed on attracting groups for the second quarter of 2019, and the strategy was successfully brought to fruition by means of more corporate meetings as well as convention and association business. Because of the increased group business, banquet revenues grew substantially, leading to food and beverage revenue increasing by $880,000. This cost-effective banquet business also led to food and beverage department profit margin increasing 54.2%. Hotel EBITDA increased 23%. Hotel EBITDA margin increased 10.5% and hotel EBITDA flow-through was 63%. Year-to-date, hotel EBITDA flow-through has been an even stronger 68%.

The successful conversion of the Courtyard Philadelphia Downtown to The Notary Hotel, a member of Marriott's Autograph Collection, occurred a couple of weeks ago on July 16. In conjunction with the conversion, the new restaurant and bar opened serving a local twist on Spanish tapas. In the common areas, Premier Project Management used a combination of original finishes coupled with new historical collections, including antique typewriters, bronze art sculptures and a neon sculpture in the lobby vestibule. Given the ongoing renovation, comparable RevPAR during the second quarter did suffer and decreased 13.1%. However, the hotel is positioned well for growth during the second half of 2019.

In addition to The Notary Hotel, I wanted to quickly touch on a number of our hotels that faced unique obstacles during the second quarter. Comparable RevPAR at the Marriott Seattle Waterfront decreased 12.7%, driven by fewer citywides compared to 2018 and the opening of the 1,200-room Hyatt Regency in December 2018. Group at the airline crew at the hotel were also both down. This RevPAR decrease was actually less than the decrease for upscale and above chains in the Seattle CBD submarket and the hotel's competitors by 1.8 and 1.4 percentage points, respectively. Also, comparable RevPAR at the Park Hyatt Beaver Creek decreased 21.9% due to a number of factors, including commencement of the lobby renovation on April 8, and GM and Director of Sales turnover during the quarter. Despite these hurdles, hotel EBITDA actually grew $1.2 million, with hotel EBITDA flow-through up 268%.

Finally, the Hotel Yountville had comparable RevPAR decrease of 7.5% during the second quarter. The hotel continues to feel the impact of the similarly priced Villagio and Vintage supply in the market. In particular, group business at our hotel was down. Again despite the top line decrease, hotel EBITDA grew with hotel EBITDA margin increasing 3.3% and hotel EBITDA flow-through at 109%.

Looking ahead a few more months, I continue to be excited about the Courtyard San Francisco Downtown and its upcoming conversion to the Autograph Collection under the name, The Clancy. The lobby, restaurant bar and coffee shop are all shut down with Premier Project Management focusing on minimizing the impact to guest during the conversion renovations. The hotel's performance continues to be strong. Comparable RevPAR grew 4.6% during the second quarter, driven by 3.5% rate growth. This RevPAR growth represents increases of 5.8 and 3.3 percentage points relative to upscale and above chains in the San Francisco market, street submarket and the San Francisco, San Mateo market, respectively.

Occupancy during the second quarter reached 92.4%, driven by nearly double the citywide business in the market relative to the second quarter of 2018. Hotel EBITDA flow-through was also strong at a 100%. Year-to-date, comparable RevPAR growth has been 15.9%, and hotel EBITDA has increased $891,000. The soon-to-be Clancy remains on track to complete its conversion in January 2020.

I will now turn to capital investment. During 2019, we will continue to invest in our portfolio in order to maintain competitiveness. In total, we estimate spending approximately $80 million to $90 million in capital expenditures during the year, excluding insurance. As I mentioned, we recently completed the conversion of the Courtyard Philadelphia Downtown to The Notary Hotel, which is now part of Marriott's Autograph Collection. We continue to make capital expenditures comprised predominately of the strategic acceleration of capital projects in order to mitigate renovation impact, specifically pulling forward additional amenity enhancements at the Ritz-Carlton, St. Thomas, while the resort is under renovation and work related to the Courtyard San Francisco Downtown, which will be completed early next year. Finally, we have identified highly accretive opportunities to add additional keys within our portfolio.

Specifically, we will be adding 10 keys at the Ritz-Carlton Sarasota, two keys at the Hilton La Jolla Torrey Pines and completing work on the three-key presidential villa at Bardessono.

Construction at the Ritz-Carlton, St. Thomas remains on track for an expected opening by the end of the year. Building B is nearly complete with the five other lodging buildings progressing on schedule. Construction on the family pool is under way. Reservations as a Ritz-Carlton are open for December 1st, 2019, and beyond, and that date could move up as we gain more certainty on the remaining time line. U.S. Virgin Islands are primed for strong growth going forward. The St. Thomas airport is 100% operational and in final stages of planning a $230 million renovation and expansion. Most island attractions and amenities are at or near 100% pre-storm capacity. However, lodging supply is trailing at roughly 65%, provided ample growth potential for our hotel.

We are currently experiencing some favorable supply dynamics, not only with the Ritz-Carlton, St. Thomas but throughout our portfolio. Over the past few years, our portfolio's markets have experienced slightly greater than 3% annual supply growth. We estimate this number to reduce to roughly 2% annually over the next two years. Recently, we have seen how our hotel's performance can benefit from modest supply growth, specifically supply growth has been muted in San Diego, San Francisco, Chicago and Florida Keys markets, all markets in which our hotels have performed well. Although group bookings generally represent only 25% of our rooms' revenue, looking forward, our group pace for full year 2020 is 4%.

I will now hand it back to Richard.

Richard J. Stockton -- President and Chief Executive Officer

Thank you, Jeremy. We are pleased with our second quarter performance and continue to believe Braemar is well-positioned for strong growth in the second half of 2019. While industry forecast remained muted, demand continues to be strong in our markets with limited new supply. Our specific portfolio of investments has a number of unique stories that should allow us to continue to drive material RevPAR growth and increased profitability.

This concludes our prepared remarks, and we'll now open up the call for Q&A.

Questions and Answers:

Richard J. Stockton -- President and Chief Executive Officer

Thank you. [Operator Instructions] We'll take our first question from Tyler Batory from the Janney Capital Markets.

Tyler Batory -- Janney Capital Markets -- Analyst

Hi, thank you. Good morning. So just a couple of questions for me. And I want to start on in Philadelphia with that conversion all concluded in that. Could you just remind us --

Richard J. Stockton -- President and Chief Executive Officer

Tyler, are you still there?

Operator

Mr. Tyler? We'll take our next question from Bryan Maher from the B. Riley FBR.

Bryan Maher -- B. Riley FBR -- Analyst

No. Actually skipping Philadelphia for a moment. Can you talk a little bit more kind of holistically here with your cash position that you have? How you are now thinking about acquisitions utilizing the ERFP versus buybacks with the stock here in the mid-8s at the moment?

Richard J. Stockton -- President and Chief Executive Officer

Yeah. Thanks, Bryan. Yeah, I think at the moment, acquisitions are not top priority. I think we've got excess cash, as you know, that is earmarked for the completion of our capital expenditure projects. And you know we do have an authorization for a share buyback program in place. So we will continue to assess the share price and figure out if that's an option for us. The benefits of the share buyback, of course, are always weighted against the resulting increase in leverage and a reduction in flow. And so it has to be very attractive price to tip the scales for us. That's all what I have to say on the cash point.

Bryan Maher -- B. Riley FBR -- Analyst

Yeah. And then as we look at Beaver Creek, we are a bit little surprised by the performance there. And I understand that there was the lobby issue, and I guess you have a turnover in the GM. Is the new GM in place yet?

Jeremy J. Welter -- Chief Operating Officer

Yeah. The new GM is in place. And then we had a bad situation with our sales team. And so we did turnover in that as well. And we have a new Director of Sales at the property. But that person has not started just yet because his wife just recently had a baby.

Bryan Maher -- B. Riley FBR -- Analyst

Okay. And then kind of lastly, on St. Thomas. I know because I was just at the property about a month ago that it's pretty far along at this point. When will the new family pool actually be completed? And also, when you look at new supply in that market, specifically Frenchman's Reef, which I know is pretty far away from being updated, probably at least a year or year-and-a-half, is there any other news about coming online in the next, let's say, 12 months to 24 months?

Jeremy J. Welter -- Chief Operating Officer

Yes. This is Jeremy. As far as the supply coming on, it kind of remained to be proven out because [Indecipherable], I just don't see a near-term resolution, given this is on a government ground lease. And so I think you can expect that to be offline for quite some time. And then there's Sugar Bay, which is another pretty nice size hotel but not really compared to the Ritz-Carlton, but that's been actively shopped in the market. And I don't know what they're going to do with the property. It needs a tremendous amount of capital. So it really has a -- they haven't moved forward with any type of redevelopment, renovation plans. So I will expect that to be well beyond DiamondRock's, Frenchman's Reef. So I would expect that it's going to be relatively slow for a lot of that supply to come back.

In terms of the kids' pool, our expectation is to have that open when we open the resort. I was there recently in July, and it was moving along really, really well but didn't hit -- just basically a stall just in terms of getting access to concrete to pour the other half of the pool. And so we're competing with other demands on the island for supplies and subcontractors. Once we get that done, the pool should move pretty quickly. I mean it's all formed. It looks great but there is quite a bit of more work to be done on the pool itself. Our deadline for that is in October, but that may slip, but I would expect that to be done certainly before we open the resort.

Bryan Maher -- B. Riley FBR -- Analyst

And then just lastly, and maybe this was Tyler's question. On The Notary, which is now, I guess, fully opened as The Notary, and my suspicion is all construction is done. Can you give us a little idea about how trends have been in the past few weeks?

Jeremy J. Welter -- Chief Operating Officer

Yeah. I think it's -- it takes a little bit of time to ramp up, and it's actually -- I would say that it's been a little bit more difficult transition initially in the short term just because we're moving from Marriott's select service management team to their full-service management team. And there was a period of time both in terms of Expedia and Booking.com that we were dark in the property. And so it's just -- it's going to take a little bit of time, and I don't think you're going to see a huge increase necessarily in the third quarter, but by the fourth quarter is when you're going to really see the ramp begin, and we do have a little bit of headwind -- or a tailwind because you have a year-over-year comparison where it was under renovation the year before. But I do expect Q4, the property to really start to ramp up pretty aggressively.

Bryan Maher -- B. Riley FBR -- Analyst

Alright. Thanks, Jeremy.

Operator

Thank you. We'll take our next question from Mr. Chris Woronka from Deutsche Bank.

Chris Woronka -- Deutsche Bank -- Analyst

Yes. Want to start off with the question about the Ritz Sarasota. I noticed in the quarter you had roughly flat RevPAR growth, but rate was up, I think, 10%. Occ was down, but you lost a fair amount of EBITDA or margin anyway and a little bit of EBITDA. Can you explain what kind of what -- was that a mix shift or something else there?

Jeremy J. Welter -- Chief Operating Officer

You just picked up on it, mix shift. The rooms' profit was up because it had changed from occupancy to ADR, but because we had a much bigger increase in transient versus group, our banquet and catering revenue was down pretty significantly, and the profit in banquet and catering was down $700,000 to $800,000 roughly, which is, I think, the property itself was down $400,000 to EBITDA. And so that really comprises all -- more than the decrease itself. But then in addition to that, we did have an increase in property taxes of $170,000, and that was associated with the reset of the valuation upon acquisition of the property.

Chris Woronka -- Deutsche Bank -- Analyst

Okay. That's --

Richard J. Stockton -- President and Chief Executive Officer

Hey, Chris, just to make another point on Sarasota that's worth noting. Remember the last summer we had an infestation of red tide at the property. There's no evidence of an algae bloom this season. And so I think that's something to kind of keep your eye on, which should be very helpful to the performance of the property and the market as a whole.

Chris Woronka -- Deutsche Bank -- Analyst

Okay. Great. Appreciate that. And then on the -- just going back to the Philadelphia opening of The Notary, do you -- you mentioned the transition from Marriott's select serve to full serve, can you remind us if there is a -- do you have any kind of performance guarantees or anything that would protect you in the ramp-up?

Jeremy J. Welter -- Chief Operating Officer

Not really. And it's going to be a immaterial wash when it's all said and done because you're talking about a relatively short time period. And so -- when we're talking in terms of the ramp itself, it's really just a year-over-year comparison. We're not -- we haven't really seen it in the first few weeks. And it's not going to be that material over the long term of the transition.

Chris Woronka -- Deutsche Bank -- Analyst

Okay. Great. And then just a final question, maybe for Richard. Richard, I guess since coming up onto three years, you've done a lot of -- I think a lot or maybe everything that you kind of set out to do at the beginning with the portfolio. And the stock, obviously, it's been kind of a rough ride, especially recently. What do you think the disconnect is? I mean, obviously, you have a lot of projects. You've a lot of moving parts. You've a lot of things coming online later this year and we can model it the best we can. But I mean, what do you think The Street's miss -- why -- it just seems like there's some kind of disconnect, and I'm curious as to your thoughts and what you think possibly kind of remedies that?

Richard J. Stockton -- President and Chief Executive Officer

Yeah. I think as we look at how we're setting up ourselves for 2020, I think that's the year that's going to really matter. We've got major capital expenditure projects that are completing this year, right? It's The Notary, it's The Clancy. We've got the presidential villa at the Bardessono, three-key presidential villas that's completing this year. And we've Ritz-Carlton, St. Thomas reopening and coming back online. All those projects will bear fruit in 2020, and that's kind of how I'm thinking about it. And I think the market will start to see that in our results, and we hope to get rewarded for it. So there is, you're right, some bumpy road between where we are now and getting there. But we're going to keep kind of marching forward and keep our eye on the ball, and I think that's the strategy that ultimately will pay off.

Chris Woronka -- Deutsche Bank -- Analyst

Okay. Got it. And just kind of given all those things, I mean is there some kind of internal measuring stick that you're trying to hit or maybe a different way to ask it differently is, I know historically you haven't given guidance, but I mean to the extent that you have the market's continuing to kind of -- there's this disconnect, do you think at some point as you head in next year, it makes sense to consider at least kind of framing some of the numbers and providing people framework to -- even if it's not a formal number, just to see the trajectory. Is that something you guys would consider?

Richard J. Stockton -- President and Chief Executive Officer

Yeah. It's something we wrestle with all the time. And with such a small portfolio, it's a real challenge to be able to do that accurately. So we continue to assess it, but we hate to provide any sort of guidance that's inaccurate, and with such a small portfolio, there's a high possibility of that, right? So we're going to continue to look at it and test our own kind of forecasting capabilities internally. And yeah, if there is a reason to do it, we will, but we haven't determined that yet.

Chris Woronka -- Deutsche Bank -- Analyst

Okay. Very good. Thanks guys.

Operator

[Operator Instructions] We'll take our next question from Amanda Sweitzer from Baird. Please go ahead.

Amanda Sweitzer -- Robert W. Baird -- Analyst

Good morning. Thanks for taking my question.

Richard J. Stockton -- President and Chief Executive Officer

Good morning.

Amanda Sweitzer -- Robert W. Baird -- Analyst

Can you just talk about how the board is thinking about the dividend today? Just kind of balancing some of the slower industry fundamentals we've seen with the better outlook for your portfolio, particularly given now you don't necessarily need to maintain your current payout based on your taxable income.

Richard J. Stockton -- President and Chief Executive Officer

Yeah. So we increased the dividend by 33% at the beginning of 2017. And while we've had these major capital expenditure projects ongoing, we've held it constant, right, for '17, '18 and now '19. I think as I kind of referenced before, if we get into 2020, we'll be able to take a look at the contributions to EBITDA from these various CapEx projects, and at that point, I think the Board will reassess and say, "Do we have right payout ratio? Is it too low?" That sort of thing, but that's -- I think that's a little bit far off because we need to really see the results of these capital expenditure projects.

Amanda Sweitzer -- Robert W. Baird -- Analyst

That's helpful. That's it from me. Thank you.

Richard J. Stockton -- President and Chief Executive Officer

Thank you.

Operator

This concludes today's question-and-answer session. I will now turn the call back to management for any closing remarks.

Richard J. Stockton -- President and Chief Executive Officer

Thank you. We would like to thank you all for joining us on our second quarter earnings call today. And we hope to see you at our Investor Day in New York on October 3rd, and look forward to speaking with you again on our next call. Bye.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Jordan Jennings -- Manager, Investor Relations

Richard J. Stockton -- President and Chief Executive Officer

Deric S. Eubanks -- Chief Financial Officer

Jeremy J. Welter -- Chief Operating Officer

Tyler Batory -- Janney Capital Markets -- Analyst

Bryan Maher -- B. Riley FBR -- Analyst

Chris Woronka -- Deutsche Bank -- Analyst

Amanda Sweitzer -- Robert W. Baird -- Analyst

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