With Covid restrictions lifting, people are back on the roads, and the demand for used and new vehicles is soaring. Companies are having to expand their footprint to keep up with this demand. Given that, Autosports Group (ASX: ASG), through its wholly-owned subsidiary, Prestige Group, has signed an agreement with Dexus Wholesale Management Limited to buy land and buildings at 586 Wickham Street and 10 Light Street, at Fortitude Valley, Queensland. 

Since 2016, Autosports Group has occupied the Wickham Street property under a lease from Dexus. In 2026, the lease expires, giving Autosports two additional five-year options. Once this agreement is finalised, the Company will get to save on rental payments and tax surcharges which were passed on to the tenant as an outgoing. 

The property is valued at $98 million plus stamp duty. The Company plans on paying 80% of it through existing financiers and the rest through cash reserves. The Fortitude Valley property spans 7,793 sq. m. and is a purpose-built automotive dealership featuring a showroom and service and parts facilities. Plus, it provides operational synergies with several brands represented at this central Brisbane location. 

In FY22, Autosports gave due attention to acquisitions to reach a greater market and meet growing demand for vehicles, parts and services. Since December 2021, the Company noted that new vehicle orders increased by 66%. In fact, new vehicle orders exceeded deliveries by 25% in FY22 as demand was too high to match supply.

Evidently, the Company had a rather profitable year, with NPAT up 29% on FY21 to $54.6 million, a record for Autosports. More and more people appear to be using their pent-up savings from Covid to finally invest in a car, and it bodes well for automotive companies. 

Autosports also transitioned into New Zealand’s luxury car brands market this year. On August 1 2022, it settled the acquisition of Auckland City BMW Limited in New Zealand for $45 million. Through this transaction, the Company is able to reach a greater market beyond Australia.

 With the Fortitude Valley property acquisition, Autosports is aiming to control strategically important retail sites and improve its capacity to actively manage retail locations. It will utilise OEM financiers to preserve capital, improve balance sheet strength and gradually reduce occupancy costs.

This purchase brings the Group’s total property holdings to nearly $200 million. Expanding its property portfolio has reduced Autosports’s occupancy costs, increasing its ability to make the most of its sites. Still, over the past year, the Company’s statutory revenue was affected, declining by 5.2%, as supply chain constraints failed to meet new vehicle orders. However, now that supply is picking up and Autosports is increasing its presence in key trading locations, the Company expects FY23 to have a more positive outcome. 

The Fortitude Valley acquisition relies on a replacement Council permit, and it is scheduled to be completed on June 15, 2023.