FC Barcelona gets a unique financing model for Espai Barça based on incremental revenue generated by the Camp Nou over 25 years
The vice-president for finance and real estate and head of the Espai Barça project, Jordi Moix, used his speech to present the financial results for the 2019/20 season and to also deliver an explanation of the current status of the Espai Barça project and the plan to finance its construction. This innovative financial operation remains in force despite the effects of the pandemic, and is fully adapted to the club’s needs, respects the red lines set out in the referendum and means that the Espai Barça can be financed by the sale of part of the rights to the future incremental revenue that the project is expected to generate when it is finished.
This operation will be conducted in association with Goldman Sachs, a world leader in investment banking that in recent years has been directly involved in financing the infrastructure of 45 stadiums around the world with more than $20 billion, and other local and international financial institutions that are also interested in participating in this operation.
FINANCING PLAN FOR ESPAI BARÇA
The conditions for the new financing plan consider that the aggregate amount of the agreement is 815 million euros (725 for investment and to pay for the work and 90 million for capitalizable interest over the five years of work plus the initial financial costs).
The duration of the contract would be 30 years (5 years of construction and 25 years of management), and the payment period would be 25 years from the 2024/25 season, when the project is completed. As for the interest rate, the estimated annual cost would be 3-4% for an annual interest repayment plus amortization with the incremental income estimated at $50 million annually.
The formula for the operation is technically a sale of a part of the rights to collect the additional revenue from the Espai Barça generated by the club to an instrumental vehicle managed by Goldman Sachs. The club would return the investment over those 30 years in the form of 50 million a year that it would obtain from the 150 million extraordinary revenue that it would earn from the Espai Barça. The remaining 100 million in revenue would be used for the club’s regular activities and to boost its competitiveness.
The incremental 150 million would come from the new assets created via Espai Barça, such as the title rights to the stadium and new sponsorship deals (50 million), VIP boxes and seats (50 million) and new visitors to the new museum, greater revenue from ticketing due to the expanded capacity, new catering, venue hire and parking (50 million).
Moix pointed out that when the Espai Barça referendum was approved in 2014, the budget for the project was 600 million euros that was to be paid with 200 million of the club’s own funds, 200 million from a sponsor whose trade name would be attached to that of the Camp Nou (title rights) and 200 million from a bank loan. In the original funding plan, the club undertook not to cross three red lines: the work would not cost the members anything, payment could never jeopardise the sporting side of the club and the club’s assets would never be mortgaged as collateral.
Evolution of construction costs
The construction costs have risen since 2014 from 600 million to 725 million. The initial budget included the complete remodelling of the future Camp Nou, the construction of a new Palau Blaugrana for 10,000 spectators, with a Petit Palau for 2,000, an Ice Rink for 500, as well as the Barça Campus.
The investment in the construction of the Espai Barça has evolved over the years with the addition of new costs that have arisen from developments to the project and the agreement with the City Council and municipal groups for a urban modification plan (MPGM) amounting to 50 million, plus compensations to the City Council in the form of 49,000 m2 of tertiary office buildings and hotels. The rest of the increase in costs is due to modifications to the projected facilities, such as a new Palau Blaugrana for 15,000 rather than 10,000 spectators (60 million), and certain investments in the future Camp Nou to improve services and thereby achieve further incremental revenue, such as improvements to the museum and a new adventure experience (15 million).
Improved business plan and incremental revenue
The key to this finance plan lies in improving the Espai Barça business plan and the incremental income that the project will generate once the Camp Nou is finished. While in 2014 the project was expected to provide incremental revenue of 50 million euros a year, in 2020 an expert consultant in the valuation of commercial assets associated to stadiums, ISG Legends, estimated that Barça will earn more than 150 million additional euros each season thanks to Espai Barça, from the 2024/2025 season onwards. The construction process was also audited by a highly prestigious international real estate consultant in the sector, JLL, which expressed absolute confidence in the management of the project and its schedule.
The club’s commitments
However, FC Barcelona assumes a series of commitments that must be met, such as always playing at the Camp Nou, competing in one of world’s top five football leagues, complying with financial Fair Play, having a guaranteed maximum price stipulated in the construction contract to avoid deviations from the budget and the right for banks to hire a commercial consultant if the club does not generate the expected incremental revenue to return the investment.
Another of the great advantages of this finance plan is that the club will be able to use 100 of the 150 million annual increments that the Espai Barça will generate for ordinary usage after using the remaining 50 million for the repayment of the finance structure. This income can be invested in making the club stronger and more competitive, and will allow Barça to compensate for the increase in income that other rival clubs in Europe are already benefitting from due to the improvements made to their own stadiums.
In addition, through this operation the club would be protecting its current revenue, by not offering as a guarantee amounts received from contracts that it has already signed, such as TV rights and shirt sponsorship, nor the ownership of its assets or the transfer of their management.
Moreover, the risk is borne by the funds. If the planned incremental income is not generated there is no possibility of any claim against the club. The fund could hire a commercial consultant to monitor the sale of the new assets.
These are two of the differences between this operation and what has been done by other leading clubs to finance their stadiums.
In short, with this new financing plan, the three red lines of the 2014 referendum are not crossed, the club’s current assets are not used as guarantees (land and facilities, stadium ticketing, TV rights and sponsorships), there is greater flexibility for reaching the best title rights agreement when the Camp Nou is finished, the risk is assumed by the financial institutions and banks, and finally, it boosts competitiveness as the 100 million euros a year in incremental revenue can be allocated to other uses.
Construction status and schedule
Jordi Moix also spoke about the status of the current project, now that the Estadi Johan Cruyff Stadium is complete, an application has been made to Barcelona City Council for a license for the future Camp Nou and with the tender for the project in progress. Work on phase 1 of the exterior development (Avinguda Joan XXIII and the Cemetery) has begun together with preliminary studies of the car park, and work is also underway on the Barça Campus project and the interior development plan in liaison with the City Council and local residents.
The draft project for the new Palau Blaugrana for 15,000 spectators and the preliminary design of the Petit Palau, Ice Rink and coach park is to be executed in two phases due to the impact of metro Line 9. The club hopes to bring the draft for the new Palau Blaugrana forward in order for the design and license application phase to be completed by the end of 2021, and thus be able to physically construct the new Palau Blaugrana between 2022 and 2023.
All of this work is being carried out in parallel with the fulfilment of the club’s sustainability goals, for which the Espai Barça project has already been awarded DNGB Gold Standard pre-certification.
As for the revised timetable, it is envisaged that this new finance plan, which still need to be approved by the club members, should be submitted to a referendum towards the end of the first half of 2021 before work can begin on the stadium next summer. Given that there shall be presidential elections next March, Jordi Moix will offer candidates who so wish the chance to receive an in-depth explanation of the project and the new finance plan so that a referendum can be called in sufficient time for work to be able to commence in the summer and thus comply with the planned schedule.