West Hamilton Holdings said 2012 profit rose 13 percent to $716,293 from $633,130 in 2011 as the company put in place a new financing strategy in a year that saw continued high vacancy rates and lower rental rates. West Hamilton owns and operates commercial property on Pitts Bay Road.Rental income for the year totalled $1,985,157 as compared with $2,120,159 in 2011, a decrease of 6.4 percent, the company said.The average pricing has been reduced to approximately $40.00 per square foot for the year as compared with a high of $49.00 per square foot in previous years, the company said.This reduction has been offset by increasing demand for parking spaces which is expected to continue, especially in 2014 when the parking facility is expected to be full and pricing is expected to rise.In a letter to shareholders, J. Michael Collier, company president and chairman stated: “During 2012, the commercial real estate sector continued to be under pressure with high vacancy rates, increased competition and lower rental rates. It is therefore pleasing to report that the Company earned net operating income in 2012 of $716,293 compared with $633,130 in 2011, an increase of $83,163 or 13.14 percent. This is the Company’s highest net operating income for the last six years.The Company enjoyed better operating results in 2012 primarily because of its financing strategy which in 2011 through the rights issue, reduced the Company’s borrowing and thus had a positive impact on the operating costs in 2012. Management has also focused on other cost reduction strategies which contributed to an increase in net income.The financial statements have been prepared in full compliance with International Financial Reporting Standards (IFRS) which were adopted by the Company in 2011 and permitted certain items to be brought into the income statement to calculate total comprehensive income. During the year ended December 31, 2012, the Company reported a gain of $112,746 within other comprehensive income compared with $72,823 in 2011. The change in comprehensive income is primarily related to the change in certain marketable securities that are held for resale.As a result of the adoption of IFRS, the total comprehensive income for the year was $829,039 compared to $705,953 in 2011, an increase of $123,086 or 17.4 percent. While the reported net income was higher in comparison with previous years, the gross rental income was lower because of reduced rental rates and higher vacancy rates.The compan y said operating expenses are relatively flat when compared with the previous year and it is expected to be lower in 2013 because of certain efficiencies that will be realised from operational enhancements. Interest expense decreased by $239,955 compared with the previous year while the Company’s borrowing rate remained fixed at 3.0 percent and will remain at that level until the 3 month Libor rate rises above 1.5 percent.Current assets, which include cash and other assets that could readily be converted into cash, totalled $5.30 million compared with $10.25 million in 2011. The decrease is directly related to the payment of $5.27 million to the Bank of N.T Butterfield & Son Limited as part repayment of the construction loan entered into by the Company in 2009 and the payment of $315,358 interest expense on the remaining loans. The Company generated $910,784 of cash from operations after deducting all operating expenses and used $648,435 for upgrades to operating systems, including structural changes to the Belvedere Building.Total assets amounted to $24.39 million compared with $24.10 million at the end of 2011 an increase of $0.29 million with the property measured on a cost basis.The company said property was appraised by Rego Realtors (Bermuda) Limited in 2011 and they valued the property at between $61.0 million and $64.0 million. Management has taken a prudent view considering the state of the Bermuda economy and is of the opinion that a value of approximately $49.0 million represents a reasonable estimate of the fair value of the property. Under IFRS the Company does have the option to record the value of the property at market price which would increase the Company’s total assets to more than $70.0 million, double the value currently reported in the balance sheet.Total liabilities decreased from $15.99 million at the end of 2011 to $10.49 million at the end of 2012. The decrease of $5.50 million is primarily attributed to the repayment of the construction loan of $5.27 million.The company said shareholders equity increased by $829,019. The net income from operations contributed $716,293 and the increase in market value of the investment portfolio contributed $112,746. Book value per share at the end of 2012 was $6.65 (2011: $6.36). This represents an increase of $0.29 cents per share or 4.56 percent.The commercial property market in Bermuda continues to be burdened with an oversupply of office space, mostly grades B and C which has pressured our renewal rates in 2012. In addition, the Belvedere Building’s largest tenant will not be renewing its lease in 2014. These two factors will impact our rental revenue in future years until the vacancy rates return to normal and rates begin to harden.“Rego Realtors (Bermuda) Ltd is assisting us in securing a tenant for the space that will be vacant in January 2014, which will be a challenge given the current market conditions. However, I am pleased to inform you that a new tenant was secured for approximately 1,778 square feet of office space on the ground floor,” the company said.“The remaining tenants have renewed their leases in 2013 albeit at reduced rental rates. Indeed a significant tenant issued a request for proposal in 2012 using the services of a realtor to seek interest from the market. After much deliberation, we were able to retain the tenant without concessions, although the offerings made by other landlords were more competitive.“The car park was not fully rented in 2012 because of the downturn in the economy and the reduction in staffing levels experienced by many international companies that are our primary tenants. This trend has since reversed towards the end of 2012 and more so during the first quarter of 2013. The vacancy rate for the car park was approximately 18 percent throughout 2012. However, it is expected to be fully occupied during the second half of 2013 and thereafter.“Our success in remaining competitive in a challenging market was realised from our focus on tenant retention by providing quality service on a timely basis. During the year several modifications and enhancements to the Belvedere Building and its operating systems were completed. We believe that the enhancements made to the Belvedere Building combined with competitive rates and quality service will provide us with every opportunity to retain our tenants in the future.“Our plan to develop the property by constructing four new buildings yielding 105,000 square feet of office space, 40,000 square feet of residential space and underground parking for 181 cars remains our long term objective. However, our short term plans will centre on providing complimentary products and services demanded by the occupants of luxury offices provided by Waterloo House and grade A offices in the Waterfront Properties. Our research indicates that these occupants would be receptive to quality residential accommodation, a fully fitted gymnasium, squash courts, concierge services and a convenience store.“I am pleased to inform you that the Company has commenced the planning process to develop a piece of vacant land located on the North West corner of the property and offer some of the products listed above. The use of this land will not impinge on our long term development plans.”The Belvedere properties consist of 2.1 acres of prime real estate along Pitts Bay Road directly across from Waterloo House which has been labelled a “trophy address” by a leading realtor. We share the same address and an opportunity for us to differentiate our products and services offered to the discerning professionals who will work and may wish to enjoy contemporary living in the area.The company said the area around the Belvedere properties is attracting new businesses and will continue to be of interest to international business with the upgrades planned for the Fairmont Hamilton Princess as well as a new marina. I am optimistic that our strategy in the near term to provide complimentary products and services in this market environment will diversify our business, reduce market risks and contribute to the Company’s profitability.The Company’s Board approved the adoption of a Share Buy-Back Programme on 3rd June 2013 as a means to improve shareholder liquidity and facilitate growth in the value of the Company’s Shares. Under this programme the Board has authorised the buy-back of up to 25,000 Shares at a price to be determined from time to time but in accordance with the regulations of the BSX.The Board of Directors at its meeting on 3rd June, 2013 approved a Dividend Reinvestment Plan which is an easy and convenient way for Shareholders to increase their holdings in the Company by reinvesting all of their cash dividends in additional Shares at a price to be determined from time to time. Participation in the plan by Shareholders is optional. If a Shareholder does participate in the plan, on each applicable dividend payment date, the dividends due will automatically be invested in Shares of the Company.The detailed Dividend Reinvestment Plan, application form and election notice will be distributed to all Shareholders following the approval from the BSX.