
NVIDIA Corp
NASDAQ:NVDA

NVIDIA Corp





NVIDIA Corporation, founded in 1993 by Jensen Huang, Chris Malachowsky, and Curtis Priem, began its journey with a singular focus on graphics processing units (GPUs) for gaming. This venture coincided with the boom in demand for high-quality visuals, propelling the company to a prominent position in the tech industry. With gaming as its initial stronghold, NVIDIA’s GPUs quickly became the go-to choice for rendering stunning graphics, making the immersive experiences of modern video games possible. However, as technology advanced, so did NVIDIA's appetite for innovation, with the company diversifying its portfolio to apply its GPU technology to artificial intelligence (AI), data centers, and autonomous vehicles. This strategic pivot allowed NVIDIA to transform from a niche player in the gaming industry into a dominant force across multiple high-growth sectors.
Earning revenue primarily through selling its sophisticated GPU hardware and software solutions, NVIDIA capitalizes on several thriving markets. Its gaming segment continues to be a cash cow, fueled by a constant stream of enthusiasts and professionals alike who seek high-performance computing power. Meanwhile, in the data center and AI segments, NVIDIA sells its technology to cloud service providers, enterprises, and researchers eager to harness the power of AI and deep learning. These innovations demand powerful computation capabilities, which NVIDIA’s technology gracefully delivers. The company's reach extends to automation, where it partners with automobile manufacturers to integrate AI systems into vehicles, contributing to the nascent autonomous driving market. Through a blend of hardware prowess and forward-thinking software development, NVIDIA has positioned itself as more than just a graphics chip producer; it’s a versatile tech powerhouse that caters to the future of computing.
Earnings Calls
In Q3 2023, Branicks Group AG reported a robust like-for-like rental growth of 6.8%, driven by strong logistics demand, while the loan-to-value ratio improved slightly to 56.9%. The company anticipates a decline in property valuations of 4% to 7% but is actively pursuing disposals to enhance liquidity and reduce leverage. Year-end guidance for funds from operations remains at EUR 50 million to 55 million, with expected transaction fees bolstering this figure in Q4. Operational expenses are projected to decrease by 5% to 10% in 2024, reinforcing focus on operational efficiencies amidst a challenging market.
Management

Jen-Hsun (Jensen) Huang is a notable figure in the technology industry, primarily known as the co-founder, president, and CEO of NVIDIA Corporation, a leading company in graphics processing unit (GPU) technologies. Born on February 17, 1963, in Taipei, Taiwan, he moved to the United States at a young age. Huang attended Oregon State University, where he earned a bachelor's degree in electrical engineering. He later received his Master's degree in electrical engineering from Stanford University. Before founding NVIDIA, Huang worked at LSI Logic and Advanced Micro Devices (AMD), gaining significant experience in the semiconductor and computer industries. In 1993, Huang co-founded NVIDIA with Chris Malachowsky and Curtis Priem. Under his leadership, the company has become a dominant force in computer graphics, known for its cutting-edge GPUs that are widely used in gaming, professional visualization, data centers, and increasingly in artificial intelligence (AI) and machine learning applications. NVIDIA's technologies have also been pivotal in the development of self-driving cars and other high-performance computing applications. Huang is admired for his visionary leadership and innovative approach, steering NVIDIA through various technological evolutions. He has been instrumental in positioning NVIDIA at the forefront of AI and GPU advancements, significantly impacting industries beyond gaming, including healthcare, automotive, and manufacturing. His leadership style and strategic acumen have been recognized with numerous awards and honors, including being named one of the world's best CEOs by publications such as Harvard Business Review and Fortune. Huang is also known for his philanthropic efforts, primarily focusing on education and technology initiatives.

Colette M. Kress is the Executive Vice President and Chief Financial Officer (CFO) of NVIDIA Corporation, a leading technology company known for its graphics processing units (GPUs) and advancements in areas like artificial intelligence and autonomous vehicles. Kress joined NVIDIA in 2013, bringing a wealth of experience in financial management and strategic planning. Before her time at NVIDIA, Kress held significant roles in prominent technology firms. She served as Senior Vice President and CFO of the Business Technology and Operations Finance organization at Cisco Systems, Inc. Her career also includes a tenure at Microsoft Corporation, where she was involved in finance for the Server and Tools division. Additionally, she has worked with Texas Instruments, further expanding her expertise in the tech sector. Kress is widely recognized for her financial acumen and leadership skills, contributing to NVIDIA's growth and success in the technology industry. She plays a crucial role in overseeing the company’s financial strategies, investor relations, and corporate development initiatives. Kress holds a Bachelor’s degree in Arts in Economics from the University of Arizona and an MBA from Southern Methodist University. Her strategic insights and financial stewardship have been instrumental in steering NVIDIA through its continued expansion and innovation.

Debora Shoquist serves as the Executive Vice President of Operations at NVIDIA Corporation. In her role, she is responsible for overseeing the company’s global operations, ensuring that NVIDIA's supply chain is robust and efficient to support the company's growth and technological advancements. Under her leadership, the operations team manages procurement, manufacturing, logistics, and quality assurance. Shoquist brings a wealth of experience from her previous roles in the technology industry, contributing significantly to NVIDIA’s infrastructure and operational strategies. Her leadership has been instrumental in supporting the company's innovation trajectory in the competitive tech landscape.

Timothy S. Teter is an accomplished legal professional who serves as the Executive Vice President, General Counsel, and Secretary at NVIDIA Corporation. He joined NVIDIA in 2017, bringing with him extensive experience in corporate law, governance, and intellectual property. Before joining NVIDIA, Teter had a successful legal career at the law firm Cooley LLP, where he was a partner in the litigation department. His practice focused on intellectual property and complex commercial litigation, providing legal strategy and defenses for high-profile technology companies. His work was particularly centered on patent law, making him well-suited for a leading role at NVIDIA, a company deeply involved in cutting-edge technology and innovation. At NVIDIA, Teter leads the company’s global legal matters, overseeing corporate governance, compliance, legal affairs, and intellectual property issues. His strategic leadership in navigating the complex legal landscapes of technology and innovation has been influential in NVIDIA’s growth and success. Teter holds a Juris Doctor degree from Stanford Law School and has a bachelor's degree in mechanical engineering from the University of California, Davis. His technical background in engineering, combined with his legal expertise, enables him to effectively manage and address the multifaceted legal challenges faced by a leading technology company like NVIDIA.

Ajay K. Puri is a long-serving executive at NVIDIA Corporation, where he plays a significant role in the company's operations and business strategies. He has held various leadership positions within the company, contributing to its growth and technological advancements. Ajay Puri is known for his expertise in semiconductor and technology sectors, leveraging his extensive experience to drive NVIDIA’s initiatives in graphics processing units (GPUs) and artificial intelligence (AI). His leadership has been instrumental in expanding NVIDIA's influence across different markets, such as gaming, professional visualization, data centers, and automotive technology. Throughout his tenure, Puri has been recognized for his strategic vision and ability to foster innovation within the company. While specific details about his educational background and early career might not be widely publicized, his impact on NVIDIA's success and reputation as a tech leader is well-regarded in the industry.

Chris A. Malachowsky is a prominent figure in the technology industry, best known as one of the co-founders of NVIDIA Corporation, which he helped establish in 1993. Malachowsky has played a vital role in shaping NVIDIA into a global leader in graphics processing technology. He co-founded the company alongside Jensen Huang and Curtis Priem, with the ambition of revolutionizing computing graphics and visualization. Malachowsky holds a Bachelor of Science degree in Electrical Engineering from the University of Florida and a Master of Science degree in Computer Science from Santa Clara University. Before founding NVIDIA, he worked at several notable companies such as Hewlett-Packard and Sun Microsystems, where he gained substantial experience and expertise in integrated-circuit design and computer graphics. Within NVIDIA, Malachowsky has held various roles and has been instrumental in driving the company's success through his contributions to engineering and technology development. Known for spearheading advancements in GPU architectures, he has significantly influenced the design and development of some of NVIDIA's most groundbreaking graphics technologies. In addition to his technical contributions, Chris Malachowsky is also recognized for his work in education and philanthropy. He is involved in initiatives that promote STEM education and research, further extending his impact beyond the immediate tech industry.
Donald F. Robertson Jr. is an accomplished legal and corporate governance professional, serving as the Chief Legal Officer and Secretary at NVIDIA Corporation. In his role, Robertson oversees NVIDIA's legal affairs, which encompasses corporate governance, intellectual property, litigation, compliance, and other legal matters critical to the company’s growth and innovation in the technology sector. His leadership and expertise support NVIDIA’s strategic initiatives and ensure adherence to legal and regulatory requirements in the rapidly evolving tech landscape. Robertson's experience and contributions have been integral in navigating complex legal challenges and fostering an environment of compliance and ethical business practices at NVIDIA.

Prof. William J. Dally is a renowned computer scientist and engineer, currently serving as the Chief Scientist and Senior Vice President of Research at NVIDIA Corporation. He is widely recognized for his contributions to computer architecture and parallel computing. Dr. Dally obtained his B.S. in Electrical Engineering from Virginia Tech in 1980, an M.S. from Stanford University in 1981, and a Ph.D. in Computer Science from the California Institute of Technology in 1986. Early in his career, he was involved with the development of high-speed interconnection networks and processing architectures. His work laid the foundation for subsequent advancements in the field of high-performance computing. Before joining NVIDIA, Dr. Dally held academic positions at prestigious institutions such as the Massachusetts Institute of Technology (MIT) and Stanford University. At Stanford, he was the Willard R. and Inez Kerr Bell Professor of Engineering and also served as the Chair of the Computer Science Department. At NVIDIA, Dr. Dally has been instrumental in advancing GPU computing and developing innovative technologies that leverage parallelism to improve computing efficiency and performance. His leadership in research and development has propelled NVIDIA to the forefront of artificial intelligence and graphics technology. In addition to his corporate role, Dr. Dally remains involved in academia, mentoring students and contributing to scholarly research. He has authored numerous publications and holds several patents in the areas of computer architecture and digital systems. Dr. Dally's contributions to the field have been recognized through various awards and honors, reflecting his impact on both theoretical advancements and practical applications in computing.

Mylene Mangalindan is an executive at NVIDIA Corporation, a leading technology company known for its graphics processing units (GPUs) and innovative advancements in AI and computing. At NVIDIA, Mangalindan serves as the Head of Internal Communications, where she is responsible for developing and executing communication strategies that engage and inform employees across the organization. Her role involves crafting messages that align with the company's objectives, culture, and vision, ensuring that the internal audience is well-informed about key initiatives and developments. Mangalindan has a rich background in communications, with extensive experience in both corporate and media environments. Before joining NVIDIA, she held various communication roles and was associated with prominent media outlets, where she honed her skills in storytelling and strategic messaging. Her leadership at NVIDIA is characterized by a deep commitment to fostering transparent and effective communication, which is crucial in maintaining a cohesive and motivated workforce, especially in a rapidly evolving tech landscape. Mylene Mangalindan’s role is pivotal in facilitating the flow of information within NVIDIA, contributing to the company's continued innovation and success.

Tommy Lee is a notable executive at NVIDIA Corporation, a leading company in the field of graphics processing units (GPUs) and AI technology. He currently serves in the capacity of Vice President, Embedded and Edge Computing. In his role, he is responsible for overseeing the strategic development and deployment of NVIDIA’s embedded systems and edge computing solutions, which are pivotal for applications in various industries including automotive, robotics, and IoT devices. Lee holds a significant background in technology and business management, having accumulated years of experience in driving innovation and leading high-performing teams. His leadership at NVIDIA is instrumental in expanding the company's computing platforms beyond PCs and data centers, bringing sophisticated AI capabilities to edge devices, which operate in application environments where low latency and high efficiency are critical. Throughout his career, Tommy Lee has been recognized for his contributions to advancing the integration of AI in everyday technology.
Dear ladies and gentlemen, and a warm welcome to Q3 2023 presentation of Branicks Group AG.I now hand you over to your host, Sonja Warntges, CEO of Branicks Group AG.
Yes. Good morning, ladies and gentlemen. Also from my side, a very warm welcome to Branicks 2023, 9 months results conference call.Today, as usual, I'm joined by my colleagues from Accounting and Investor Relations. We will give you a short presentation of our results and highlights for the first 9 months, followed by a Q&A session.Overall, also in the third quarter, we were still facing a challenging market environment. Especially the transaction activity remained affected by the low macroeconomic outlook and the interest rate environment in Germany. Apart from the individual transactions, there was still little movement in the third quarter. Expectations for a full recovery of the transaction market are now focusing on 2024.Despite this difficult environment, we made further progress on our path in the third quarter and performed well operationally. I will give more detail on the development of the individual and key figures in a moment.First, I would like to give you an update on the action plan we presented to you in the half year conference call in August. We are working intensively on the specification and implementation of all elements of our Performance 2024 action plan and we are making progress step by step.We look back on a successful financing track record, and were able to demonstrate this once again by repaying the EUR 150 million bond, 18/23 as planned.In the light of the challenges involved in further reducing our leverage, we are working on all available options to improve our financial structure and strengthen our liquidity position. And as already mentioned, the transaction market continues to be characterized by uncertainty.Nevertheless, we have been able to realize disposals year-to-date, which have led to a positive LTV effect in the third quarter. We are also in advanced talk for further disposals. At the end of September, the LTV ratio stood at 56.9% as a result of the sales that were already completed. This is a slight improvement on the previous quarter with a value of 57.6%.Our operations were driven by the positive letting performance. We are seeing unchanged and continued strong demand for logistics space as well as robust office letting. We have let 17% more space than in the previous year. And we are also seeing positive developments from rent indexation, resulting in a like-for-like rental growth of 6.8%.With regard to the upcoming year-end valuation, we can confirm our expectations of minus 4% to minus 7% after receiving the first valuation indications from external appraisers.In Institutional Business, we achieved a partial equity placement of EUR 10 million for the so-called Offenbach Unite property in the reporting period.Our forecast remains also currently on the active portfolio management of the almost EUR 10 billion in assets under management in the Institutional Business.An important milestone of our Performance 2024 action plan is the reduction of our operational expenses from next year onwards. In total, we expect to reduce our OpEx by 5% to 10% versus this year.Ladies and gentlemen, as usual, I would like to give you a snapshot of our financial profile as of balance sheet date. As announced in our last conference call, we have repaid roughly EUR 200 million of the so-called bridge loan in July. The repayment of the remainder of the bridge loan is on top of our agenda as this is the most expensive financing in place. This is also reflected in the average interest rate of 3% overall and 4.8% for 2024 only.But also for most of the other maturities in 2024, we are in negotiations with banks and investors regarding a mixture of repayment and refinancing via new debt instruments. Overall, we target to reduce our leverage through disposals in the midterm.The covenants of our green bond maturing in 2026 have sufficient headroom. While we see some pressure on the increased interest costs and lower fee income on our bond ICR with coverage of 2.3x, we are still comfortably above the threshold of 1.8x. According to our business plan, we expect the stabilization and turning point for this metric in 2024.The bond LTV will also benefit from the equity release of our disposal, thereby mitigating the expected negative effect from the portfolio devaluation.Let's now take a brief look at the results of our real estate platform in the first 9 months. As already mentioned, our letting performance remained strong. And our teams once again performed exceptionally well. The letting performance of the Branicks platform in the first 9 months rose by 17% year-on-year to 346,100 square meters.In total, as was under management with EUR 13.9 billion were slightly down by 4%, mostly due to disposals, which became effective in the course of the year. Our Commercial Portfolio saw a decrease from EUR 4.5 billion, down to EUR 4 billion, which was a direct result of the disposal activities year-on-year. The Institutional Business was also affected by the end of larger property management mandate.Like-for-like, the rental income rose by 6.8% for the entire portfolio, both in the Commercial Portfolio with a plus of 3.5% and in the Institutional Business with a plus of 8.3%. Rent increases were realized primarily through indexation.As of today, only 1.2% of the total annualized rental income would expire in 2023 if these contracts are not launched. Roughly 70% of annualized rental income has a lease length until 2027 and longer. For larger expiries in 2024 and 2025, we already proactively started discussions with our tenants.On our next slide, let me highlight the development of our main income streams. As expected, on the one hand, there was a strong increase in net rental income due to the takeover of VIB and the like-for-like growth of our rental contracts.On the other hand, we saw a sharp decline in the real estate management fees due to the still muted transaction market. Therefore, our recurring income on the platform was slightly higher year-on-year. And the share of recurring income in relation to the total income rose to almost 100% in the first 9 months.From the total of EUR 33.3 million of real estate management fees, EUR 0.2 million were generated from transactions. In addition, we generated income from associated companies of EUR 4.5 million, which is below the previous year result of EUR 18 million. And this is mainly due to the sale of a joint venture investment for EUR 10.1 million in the prior year period.Let's take a closer look on the development of the FFO year-on-year now. The rental income saw a strong increase of EUR 17 million. As previously mentioned, this was due to like-for-like rental growth of our Commercial Portfolio and the VIB consolidation.Also, the recurring management fees saw an increase of EUR 6.2 million, but couldn't compensate for the decline in transaction related fees, which led to a negative effect of EUR 29.8 million.The net interest result was down by EUR 27.2 million, hereof EUR 15.3 million was due to the VIB consolidation and the refinancing activities and EUR 11.9 million was due to the unhedged interest costs for the VIB bridge.Our OpEx, excluding the VIB transaction costs of the prior year, were slightly improved by EUR 0.4 million. This was despite the fact that in the third quarter, we had one-off admin expenses for IT security checks and moving, our headquarter in Frankfurt into new premises. All in all, this resulted in FFO of EUR 33.1 million for the first 9 months of this year.Ladies and gentlemen, as usual, I'm concluding my presentation with a final remark on our guidance for the current fiscal year. We confirm the recently updated guidance numbers as of today. Our focus during the next weeks until year-end is on achieving further disposals in the light of our repayment and deleveraging targets.Before I'm ending my presentation now, I would like to say thank you to Peer, who has been our Head of Investor Relations and Corporate Communications for a long time and will leave the company end of the month to take on new challenges. And also Max will leave end of the year.So I would like to take the opportunity to say thank you to both for their long-term engagement at Branicks. I wish you all the best for your next steps.I'm also happy to announce that with [indiscernible] we have found someone with prudent IR expertise to take over the Investor Relations responsibilities at Branicks. [indiscernible] has a very long experience in this business and a very warm welcome to her.Ladies and gentlemen, thank you for taking the time to join our conference call today. We are now happy to answer your questions.
[Operator Instructions] So the first question is from Stefan Scharff.
The question is about Slide 3 of your presentation. You mentioned LTV covenants and that would be challenged by expected portfolio devaluation, but stabilized by transferred disposals. Perhaps you can say a bit more here.
Stefan, thank you for the question. So yes, as I said, we expect that we will do some disposal until the end of the year, so therefore, the LTV will go down, so to say. And yes, that's all I can say at the moment. So we are in the latest discussions on this disposal. So we expect them to come, end of the month, beginning of December and this will be reflected in the LTV then.
Okay. Okay. Perhaps you can also give us an update on the trading activities. You did some trading. But it was not too much until now, I would say. So it has to do with the challenging market environment. But what might we expect to come in the last 6 weeks of this year and what might perhaps come at the earliest in the first quarter next year?
Yes. So we do not change our guidance. And we expect to come the trading activities, as you said, as guided. As I said, we are in close discussions with some NOIs on hand. And if there is nothing especially happening, they will come until the end of the year. Whether the liquidity comes or not, it's always the question. Yes, it depends on the communities and so on. But the signing, I have no doubt that they will come as on time.Stefan, and so the developments during the year, and since years, there's always the last quarter where we did most of the transactions. And I think it's also this year that also we, as the potential buyers will close or want to close before end of year 2023.
Okay, okay. And what is your general impression about the office market? You had some good letting success and you could increase your letting performance like-for-like. What is your impression about the demand in the business hubs in Germany? And what is your impression about the square meter rents and where could they develop next year?
Yes, that's a very good question. So starting with the letting side. As said, we are in a very good shape on an operational basis, especially meaning letting. So we have a lot of indexations. And we are not challenged from the tenants that they will not pay the indexation. Now the inflation goes down, so don't expect indexation for next year. But we expect indexations. We plan this 2% to 4% for next year. And also if the tenants go out and we find new tenants, they pay or are willing to pay the index rents. So the rents are not going down.We also see a lot of demand on lettings, especially in the areas like here in Frankfurt in one area, so to say, but also on the other hand, in suburb areas. So we do not see the letting questions going down, so to say.The transaction markets are very special, especially in the office market, where we have office buildings in trading, so to say. And we expect some of them to come until year-end, as I said some minutes ago. But these are special cases, so to say. It's not a common market where you bring some assets on the market and you have some bidders and then you have transaction market and comparables.It's very special and it's a very deep negotiations and especially only for experts. I would like to say to know the market and to know who is a special buyer, so to say, at the end of the day. I cannot say more now. But we will talk about this when we have done the signings and then you will see what I mean, yes. But it's not a market, so to say.I think that will come back because what we hear now from other -- yes, other markets by name one so to say, is that they also hear that there is more traction, especially from foreign investors from outside Germany. But I don't think this year; it will come second quarter, second half year next year.
So also from our side, all the best to Peer and Max for the future.
Thank you.
So the next question comes from Andre Remke.
Yes, good morning, Sonja, and Max and Peer. A couple of questions from my side. Sonja, you mentioned possible options to reduce debt even further. It doesn't boil down only to the point of disposals? Or could you be so kind to elaborate a bit about other opportunity you have in mind.
Andre, as I said in the presentation, we are working on different streams and we are working on them. We are not only elaborating them. So at the end of the day, it's disposals because it's for the goal to reduce the leverage and to bring the liquidity in. But on the other hand, we are also working on plans to refinance and to bring liquidity in other ways, and all possible ways, we can imagine so that we are secured on the liquidity side, so to say. We are in deep discussions here. And we are working on all these streams.But at the moment, I cannot say what option we take at the end of the day. But it's all about to develop options and to be prepared that we can -- yes, that we have secured an option that we can finalize them.
Okay. And second question is concerning your mentioned advanced talks on further disposals. Could you indicate a potential volume here? Are you within the range of EUR 300 million to EUR 500 million given in your outlook? And would the disposal come at similar discount to book value as you are expecting for the year-end valuation, i.e., 4% to 7%?
Yes. So as I said, we stay with our guidance. So this is the range we expect for the end of the year. Until now, we have for the Commercial Portfolio EUR 120 million done roundabout. So at the end of the day, we expect EUR 250 million to up to EUR 500 million in total by end of the year. And as also said, we expect the signing and whether the liquidity comes until end of the year. We have -- this is not in our hands, so to say. And that's the guidance and that's our target. And as also said, it will be a mix of office and logistics.As such, we see more interest on logistics side. It's a broader basis of investors who want to invest in logistics. We have also said in our last call, there is a spread of discount. So, on the one hand we have sold an asset nearly at market value. On the other hand, we have bought an asset with a higher discount because it was more or less developing asset -- efforts with a lot of CapEx.And this is also the case here for the assets we have in place and we want to sell until end of the year. These are very special cases. And yes, we are still in discussions. So I cannot talk a lot about prices and discounts. But at the end of the day, it's a mix of both of that.
And as those [Technical Difficulty] is it -- sorry, lots of question. But I have another one. On your valuation outlook of 4% to 7%, is this on the Commercial Portfolio only or also for the EUR 10 billion in the Institutional Business?
No, the outlook is for both of our segments. So it's nearly the same, so to say. For the Institutional Business, we are -- we have the accounting of the fair value. So we have evaluations during the year depending when the asset were sold, so to say. So overall, we have there until now, a decrease of around about 4% during the year. And we don't think that this will change with the upcoming evaluations. And therefore, also we expect for the Commercial Portfolio, something around about 4% to 7%. So we have got the first impression, but this is our some efforts and we are still in the evaluation phase. So we stay with our comments we made on this middle of the year.
Yes. And coming back to your disposals and the liquidity, which may be only kick in beginning of next year. What does it mean for your bond LTV and [ processes ] based on the year-end effective balance sheet? Would you be -- still have enough headroom here, having in mind the 4% to 7% devaluation?
Definitely. So that we are focusing very closely on our plans and our forecast and also the covenants we have. And be sure that we have this in mind and that we planned this very closely. And so as I said in the presentation, we have no doubt at the moment that we get this covenants done. And we have enough headroom also if one or the other closing of the trading transaction will not come this year. But as now, we see the signing coming and also the closing for this year -- for end of the year.
And Max and Peer, thank you from my side also. [Technical Difficulty] last couple of years. Good luck.
Thank you.
So the next question comes from [ Markus Schmitt ].
I have a couple. First one, on your secured LTV. I think this increased quarter-on-quarter. Maybe you can explain the reason here. And in the last quarter, I think you said that left unencumbered assets are very small for Branicks. But you have secured LTV of only 29% in the LTV of I think 54%. So how can it be? That's my question that there are no encumbered -- unencumbered assets left.I mean it's still something I'm a bit puzzled on. I think you need to take out the NAV of the Institutional Business from the denominator. But even then there is a huge gap for me -- that's the first question, and then I have 2 additional.
Thanks, Markus. Peer speaking. Yes, thanks for the question. As already mentioned, this is due to the methodology on how you calculate the LTVs under the bond documentation. So maybe we can go through it after the call and where the differences are, on -- especially on secured LTVs, how they are calculated.
[Technical Difficulty] which I don't understand, but I'd like to maybe more on this. The second question is on your ICR, which is more important than the LTV because it's maintenance based. When you internally model the next quarters, how close do you get to the minimum level of 1.8x because you said you expected stabilization in '24, maybe on the back of a better transaction market and which gives you a tailwind.But when I annualized the Q3 EBITDA, when I get to the 1.8x minimum levels quite close. So how comfortable are you that you will not breach that ICR covenants?
Yes. Thanks also. As Sonja mentioned, we have a close look on this and how it develops, especially in Q4. As we noted, this is calculated on the basis of the last 4 quarters. But I can assure that we will stay above the 1.8x threshold here. Even if it will go down again in Q4 compared to what we see now in Q3. But yes, it will stay above the 1.8x threshold, yes.
Okay. And in fact the second question also that debt due within the next, let's say, 12 to 18 months will probably be refinanced at a higher interest rate. I mean you do that sensitivity analysis when you calculate the ICR, do you?
For sure. Well, as said, we have different streams, so to say, to prepare options. And at the end of the day, ICR and the covenant sort of bonds have the highest priority. So we have this in a very close shape so to say.
And as we look at here for the ICR covenants, definitely the payback of the bridge loan here, because the high cost of debt associated to that bridge loan. And if we're going to pay that down through the disposals in the liquidity we generate here, then it would be definitely a turning point in the ICR.
Okay. Okay. And maybe to address this point regarding refinancing and maybe opening the box of Pandora. Is the Institutional Business an option for you to sell, to manage debt maturities or is that absolutely not on the table?
It's not on the table at the moment.
Now the next question is from Manuel Martin.
Yes. 2 questions from my side. One follow-up question on the outlook for 2023, the FFO outlook. So it's still EUR 50 million to EUR 55 million. Just to understand it, do I understand it correctly that you expect in Q4 an acceleration in the -- in fees from real estate management to reach the guidance or how can I understand that?
Yes. That's right. Because as you see in our guidance, we have also a guidance for our management fees and we have not changed this. So we expect most of the fees coming until the end of the year. This occurs that we finalized some things here and we'll be able to account for it. And therefore, we have no doubt that we will reach this as well as the FFO guidance.
Okay. Okay. Does this have to do with -- I think there were some placement of fund participation and part at VIB assets. I can't remember very well. Maybe you can give me some color on that. Is that including that topic?
This is mainly driven by development fees and transaction fees. So at the end of the day, it's also a mix. And as said, we are in disposals also in the Institutional Business. We are working on 2 disposals here, finalizing at the end of the month, I think. And on the other hand, we have some developing fees and management fees also coming until the end of the year.
Last question from my side, maybe a bit out of the box. We learned that we were signing for insolvency, any implications for your portfolio or a general opinion on this co-working topic?
Manuel, thanks for the question and I really expected that one to be honest today. But again, I 100% assure you that -- this is not a tenant in our Commercial Portfolio and also not in the Institutional Business segments.
Peer and Max also all the best from my side.
Thank you, Manuel.
And the next question comes from [ Adam Botton ].
I had 2 questions. In terms of your commentary and your guidance with regards to transactional fees, it looks like you're going to have a big pickup in Q4, that's great. I just want to get a better sense of how that comes down to your EBITDA then. Can you maybe give us a split of what you expect your EBITDA [Technical Difficulty] Institutional versus the initial Commercial Portfolio?
Well, I mean, if you look on the guidance and what we've achieved by Q3, especially in this Institutional Business segment, you can see that the recurring income here is, around EUR 11 million per quarter. So an additional EUR 11 million, you can expect in the Q4 just from the recurring business and doing the asset and property management for our third-party clients. So this adds up to around EUR 44 million-ish.And if you look on the guidance number, which is around EUR 50 million to EUR 55 million in total volume management fees, you can see the remainder has to come then from transaction-related fees here.
Okay. And then how should I think about going forward, you're essentially seeing a bounce in H1 next year in the transaction and kind of the investment markets. Are the Institutional Business is clearly going to be lifted, while you're selling from your Commercial Portfolio? And specifically, maybe around your recent APRA indexation, and obviously, I'm very aware that you need to have in excess of 85% of your EBITDA coming from your Commercial Portfolio, which you're now selling and your Institutional Business is now growing quite rapidly. So does that put you at risk there?
Yes, thanks for the question, and we're also closely looking at that. And we're happy to be in the APRA Index and also our goal is to stay in that index. And if I remember correctly, the EBITDA threshold here is 75% or 85% to stay in the index. So even that we're seeing Commercial Portfolio coming down from disposals, also then the recovery in the Institutional Business. We expect when the transaction markets will pick up again. We still see that from the numbers in the first planning we have for 2024 that we will also stay in the index next year. And yes, that's we see so far.
And just to confirm the EBITDA you're accounting for VIB is on a fully consolidated basis, i.e., if you were to start some [Technical Difficulty] ability to fully consolidate?
Yes. Yes.
At the moment, there no further questions. [Operator Instructions] And there is one question from [indiscernible].
I was wondering how you can benefit from the asset disposals on the VIB level that you're talking about, given that it's easier to sell logistics properties in this market. How can you upstream that liquidity to use it for debt repayments.
Yes, thanks for the question. I mean this has been also a topic in the past and we thought about it. You may have read in the news that we have grant or that VIB has a granted a loan to DIC to also use that funds to pay down EUR 200 million of the bridge loan. So in the case, we're seeing also selling of logistics assets on the VIB level. If something we might think about it again. But to be honest, quite frankly, I mean, if we see that in the next month happening, the disposals and the liquidity on -- as well on credit level and VIB level, we have to decide then how we can use it then for paying down debt.
Would it considered another loan from the VIB up to the Holdco?
Please understood that we are checking, of course, all options like in the past and also in the future. But I can't comment on this is as this is really something we are going to do, yes. And the decision lies definitely on VIB management level and not Branicks level.
And the next question comes from Philipp Kaiser.
Just one question, last one for my side. It's more like a clarification. So you have already calculated like EUR 45 million, EUR 44 million should come from the recurring management fee for the full year. So the EUR 6 million to EUR 11 million fees left with regard to your guidance will come from transaction performance fee, which are linked to those 2 potential sales of assets in the Institutional Business. Am I got that right?
Yes, you have got this right.
Peer and Max, thanks a lot for your service. All the best from my side.
Thank you very much.
There are no further questions. So I hand over back to Sonja Warntges.
Hi, this is Peer speaking again. Also a big thank you from my side and Max, thanks to the community. And yes, looking forward to your questions. We are available all the day. And yes, thank you again, and bye-bye.
Guys thank you.