CEO UPDATE - A YEAR OF TRANSFORMATION
A Year of Transformation
As we approach the close of 2024, it is a moment of reflection on what we have collectively achieved this year. We ended 2023 by introducing and presenting investors and shareholders with a strategy to take advantage of the negative economic environment for commercial real estate in general and consolidate many of our best buildings into one single structure or “fund.” We have successfully completed the full consolidation of buildings into “AccretivMED Real Estate Fund 1”, a USA-domiciled property fund. The majority ownership of this fund is “AccretivPLUS Healthcare Portfolio Limited” where all of our international investors hold their investments. We have also transformed our business structure, aligning with our new strategy of being active managers, positioning ourselves as a completely integrated full-service commercial real estate company in the United States. This transformation has equipped us with the people and process to acquire, lease, and manage properties internally, ensuring greater control and efficiency while maximizing value creation for our investors.
One of the most notable achievements of 2024 was our success in reclaiming and stabilizing two previously troubled projects from a derelict sponsor that had collapsed. These properties are now on a path to recovery and well poised for a positive turnaround. This accomplishment reflects our commitment to resolving legacy issues while driving forward with a vision of excellence and performance.
The U.S. Economy and Real Estate Outlook
The U.S. economy in 2024 has been marked by resilience in the face of global challenges. Inflation has moderated significantly, with rates nearing the Federal Reserve’s long-term target. This has provided the Fed with room to begin cautiously reducing interest rates, a welcome development for real estate investors. Lower borrowing costs and stabilizing operating expenses are set to enhance property values and investor returns.
The presidential election added a layer of uncertainty to the economic landscape, as such events often do. While the politics has kept many markets on edge, the healthcare real estate sector—our focus area—has remained remarkably insulated from broader economic volatility. Medical office buildings (MOBs) continue to demonstrate strong demand, consistent occupancy rates, and stable rental growth, reaffirming the sector’s reputation during a period of significant challenges that have faced the real commercial estate sector.
Interest rates and cap rates have been critical themes this year. As borrowing costs begin to normalize, we anticipate a recalibration in cap rates, unlocking renewed opportunities for acquisitions. This dynamic positions us well to capitalize on the value-add properties we have acquired and enhances the appeal of our diversified healthcare portfolio.
The Path Forward
2024 has been a year of reorganizing. Apart from the significant value-add Highpoint Towers and Forest Plaza, we have not acquired new buildings during 2024 that could make the underwriting work under the current high-interest rate cycle. Our new internal property management division, Accretiv Management (AccMan), has already yielded positive results, driving leasing activity and improving tenant relations across our portfolio. Notably, we signed over 24,000 square feet of leases this year, a testament to our hands-on approach.
As we look ahead, our focus remains on delivering consistent and competitive returns for our investors while identifying new opportunities to expand our portfolio. We believe that the coming year will present a unique window of opportunity to acquire high-quality properties at attractive valuations, leveraging our strengthened capabilities and market expertise.
We also intend to be more active managers and sell buildings that have no potential for growth now that the market will match our asking prices.
Gratitude and Best Wishes
To our investors across the globe, your continued trust and support are the foundation of our success. We are honored to work alongside you in creating lasting value and securing a prosperous future.
On behalf of the entire team, I wish you and your loved ones a joyous holiday season and a wonderful year-end break. Here’s to an exciting and successful 2025 ahead
