Goldman Sachs fiscal boost to Espai Barça

Article posted by Coliseum, October 7^th, 2020

Image: MJR Group Ltd./Coliseum

To inject funds in its extensive Espai Barça development plan, the Spanish LaLiga football club FC Barcelona has struck a €815m (£740m/$960m) loan deal with US investment bank Goldman Sachs.

The Espai Barça development plan goes well beyond modernization and reconstruction of its home venue Camp Nou. In addition to increasing the capacity of the current stadium to 105,000 from circa 99,000 and completely revamping the current structure of the Camp Nou, the Espai Barça project entails building a new Palau Blaugrana with a capacity of 15,000, an additional court with a capacity of 2,000, an ice rink, a new social area, a new commercial area, revamped Club offices, La Masía (read FC Barcelona’s youth academy) and an additional 5,000 parking spots.

Camp Nou is a football stadium in Barcelona, Spain. It opened in 1957 and has been the home stadium of FC Barcelona since its completion.

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William T. Mannarelli, Director, Real Estate and Espai Barça, FC Barcelona, Spain, will be one of the Speakers at the Coliseum Online Week US Worldwide to be held from October 19-23, 2020. He is also a Member of ‘Coliseum’s’ Strategic Committee.

Jordi Moix, Barcelona’s Vice-President, Finance and Real Estate and head of the Espai Barça project, revealed detailed plans on Monday to finance the development as the club announced losses of €97m for the 2019-20 financial years, largely attributed to the disastrous impact of COVID-19 which has also hit Spain real hard.

Barcelona said it has adopted an “innovative financial operation” for Espai Barça, which will remain in place despite the severe impact of the pandemic. The plan will ensure the project can be financed by selling part of the rights to future incremental revenue Espai Barça is expected to generate.

As part of the project, a new roof will also be fitted on the iconic stadium. The project will also see a new facility come up in lieu of the 7,500-seat Palau Blaugrana arena, which serves as the home of Barcelona’s basketball and handball clubs.

In August 2019, Barcelona completed the first phase of the project with the opening of Estadi Johan Cruyff, which serves as the home of the Barça B and women’s teams, as well as the U-19 side when it plays in European fixtures.

Barcelona has now confirmed that the financial operation will include Goldman Sachs, which has signed a loan agreement worth €815m. The loan will cover €725m for construction work and €90m in interest.

Goldman Sachs will give the club loan money for the project to move ahead and the bank will be repaid over 30 years (five years of construction and 25 years of management), with the 25-year payment period to begin from the 2024-25 seasons, when the project is scheduled to wrap up. Barcelona informed that the annual interest rate would be three to four percent plus amortization, with incremental income estimated at $50m annually.

A statement sent out by FC Barcelona stated, “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 €50m a year that it would obtain from the €150m extraordinary revenue that it would earn from the Espai Barça. The remaining €100m in revenue would be used for the club’s regular activities and to boost its competitiveness,” the statement added.

The club said that the €150m revenue would come from title rights to the stadium and new sponsorship deals (€50m), VIP boxes and seats (€50m), and new visitors to the museum, greater ticketing revenue, new catering, venue hire and parking (€50m).

The initial budget for the development, which was greenlighted in 2014, was €600m, which was to be split three ways between the club’s own funds, a stadium sponsor and a bank loan. The initial budget included the reconfiguration of Camp Nou, as well as construction of the 10,000-seat Palau Blaugrana, 2,000-seat Petit Palau, an ice rink and the Barça Campus.

The construction costs have since risen to €725m, which Barcelona said is down to developments in the project and a pact with the City Council and municipal groups for an urban modification plan amounting to €50m, along with compensations to the Council in the form of tertiary office buildings and hotels.

Other increases have been ascribed to transformations of the planned facilities, such as a 15,000-seat Palau Blaugrana instead of a 10,000-seat facility (€60m), and pumping in money into other areas such as museum modernization and a new adventure experience (€15m).

Barcelona said the key to the new financial model is the increased income the Camp Nou will generate once its expansion is finished. In 2014, the project was expected to provide incremental revenue of €50m a year but work carried out by ISG Legends (market leader in research and consulting across Europe) this year estimated that the club would earn more than €150m in the form of additional revenue each season from 2024-25 onwards.

Moix confirmed on Monday that an application has been given to the City Council seeking a license for the reconfigured Camp Nou, with a tender for the project presently in progress. The club hopes to bring the draft for the new Palau Blaugrana forward and plans on completing the design and license application phase by the end of 2021, with construction planned in 2022 and 2023.

The new finance plan for the Espai Barça project will require nod from club members, with the matter to be put to a referendum towards the end of the first half of 2021 ahead of work beginning on the Camp Nou in the summer.

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