Real Madrid's $700 Million Stadium Renovation

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Hey Friends,

Real Madrid is the most valuable soccer club in the world, and soon, they will have a 365-day-a-year event center, attraction, and stadium to match.

Real Madrid Financial Overview

• Team Value: $5.1 billion (#1 globally)

• Controlling Owners: Club Members

• League: Spanish La Liga

• Revenue: $792 million

• Operating Income: $92 million

The Spanish club initially expected the renovation of its 75-year-old stadium to begin in the Summer of 2017, but financing was slow to come together. So construction began in 2019, and with COVID-19 only making things more complicated, the club has postponed the stadium’s inauguration until the 2023-24 season.

The $700 million-plus stadium renovation is expected to turn one of the world’s most iconic venues into one of the world’s most modern. They are adding about 4,000 seats to the already 81,000-seat venue. The club’s museum will be expanded, and premium shopping will be added to the concourse.

But the most significant changes will be much more visible, with the introduction of a retractable roof and a retractable pitch system. This will enable Real Madrid to host various events, from soccer matches and concerts to trade shows and basketball games, throughout the year, independent of the weather.

For example, take three minutes to watch this video. There are a few stadiums with a similar system in place (Las Vegas Raiders, Tottenham Hotspur, Arizona Cardinals, etc.), but Real Madrid’s new pitch removal system is probably one of the most incredible feats of engineering I’ve ever seen.

And yesterday, Real Madrid provided an update on the construction:

But what does this mean for Real Madrid, financially? And its supporters?

Of course, they will have a shiny new stadium to brag about. It will be one of the world's largest and most technologically advanced stadiums. It will immediately rival the billion-dollar stadium that Tottenham recently opened, and it will most certainly make Manchester United supporters even more upset with Old Trafford’s current condition and the Glazer family.

But more importantly, it will give a wealthy club even more financial power.

For example, Real Madrid has already signed a partnership deals with Legends Hospitality and Sixth Street, a US-based investment firm with $60 billion in assets under management.

These deals provided Real Madrid with $380 million upfront and created a new company from which Legends and Sixth Street will help manage non-football-related events and experiences at the soon-to-be remodeled stadium — each entity will reportedly own a portion of the revenue that is created in the new company.

But that’s not all: as part of the deal, Legends has also reportedly guaranteed Real Madrid more than $400 million a year in return for their split of the stadium revenue.

That’s $250 million more than the club makes yearly from its stadium operations today, and if $400 million in annual revenue is not generated, Legends will reportedly pay the difference.

And keep in mind, this is $400 million being sent to a club that is already highly profitable, at least in non-COVID-impacted years.

But outside of up-front cash from partnership deals, Real Madrid also has the ability to make significantly more revenue in the long run. Their stadium will now be available 365 days a year and further diversifies their revenue streams — I’m talking about museum visits, concerts, trade shows, basketball games, tennis matches, and more.

Hell, maybe it’s just a pipe dream, but Real Madrid President Florentino Pérez has even hinted at the possibility of hosting a Super Bowl in the stadium.

Of course, a regular-season NFL game is much more likely, but you get the point: the stadium is super nice, and Real Madrid will make billions of dollars from the renovation.

Real Madrid’s Annual Operating Revenue (in million euros)

Yet the most impressive part is how Real Madrid has gone about this renovation. So many clubs, teams, and franchises across sports end up putting their organizations hundreds of millions of dollars in debt for a new stadium or even end up angering fans by not appropriately respecting the franchise's history.

Real Madrid appears to be doing the opposite. They took on an appropriate level of debt when interest rates were at an all-time low to complete the project. They are renovating a 75-year-old structure instead of tearing it down and starting over. And now, they will emerge with a happy fanbase and a new asset that will fortify the club’s balance sheet, and in turn, strengthen the overall quality of the squad.

I hope everyone has a great day. We’ll talk tomorrow.

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