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News
Real Madrid have just sent Tottenham a £270m warning
Real Madrid have indirectly given Tottenham and Daniel Levy something new to worry about after the latest news from Spain.
Once upon a time following Luka Modric‘s move to the Bernabeu in 2012, Real Madrid and Tottenham formed a strategic partnership focused on commercial and sporting performance.
However, Spurs confirmed that the formal affiliation had ended a few years later, with there seemingly having been little in the way of cooperation between the two sides.
They last faced each other in November 2017, when Tottenham triumphed 3-1 in the group stage of the Champions League, which Real Madrid ultimately went on to win.
That clash was held at Wembley, where Spurs played for one-and-a-half years before construction of the Tottenham Hotspur Stadium was completed.
The Tottenham Hotspur Stadium is worth more than £118m per year for Spurs in matchday income alone, with further benefits including commercial prestige and the ability to host blue-chip non-football events.
The likes of Beyonce and the Red Hot Chilli Peppers have performed at the 62,850-seater arena, while heavyweight boxing clashes and the NFL’s London Games have also been staged.
With the initial arrangement with Haringey Council, the Tottenham Hotspur Stadium was able to generate eight-figure returns from this revenue stream annually.
Now, Spurs have been granted a new license to host twice as many non-football events every year, potentially doubling their income.
But expanding their offering to events promoters will not come without its challenges, as Real Madrid have just demonstrated.
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Why Real Madrid’s finance issue could spell trouble for Spurs
Like Spurs, Real Madrid are also feeling the benefits of their home stadium being open to the public well beyond 20-30 matchdays per year.
The bulk of a £1.5bn revamp of the Bernabeu has now been completed, with capacity increased and facilities improved in order to expand their ability to host non-football events.
Significantly, much of the project has been financed by private equity firm Sixth Street, who loaned the club £270m to help deliver new business at the Bernabeu.
However, are now reporting that deal may be in jeopardy due because an embargo on music concerts has been forced upon Real Madrid because of noise complaints from locals.
Spurs’ debt picture relating to their stadium is complex, but they borrowed from the Bank of America Merrill Lynch, Goldman Sachs, and HSBC to finance it.
Most analysts agree that the fixed interest rate deal they got represents extraordinarily good value – there is no chance they would be able to secure the same rate in today’s market.
But the prospect of the stadium’s earning potential being reduced by complaints will be being carefully considered by Levy and his peers in the Spurs boardroom.
While the new license with Haringey Council is a major boon for Spurs, councillors have stressed over ‘noise pollution, ticket touting, littering, and the impact on the traffic and transport’.
The Real Madrid situation will act as a cautionary tale in this regard.
The Tottenham Hotspur Stadium, a potential part-takeover, and the transfer market
The Tottenham Hotspur Stadium is the club’s biggest and best asset.
With Levy seeking minority investment in Spurs, the revenues that the facility guarantees every year are a major selling point.
The stadium has given Spurs some of the best statistical performances in terms of key financial metrics in European football and future-proofs the club on several levels.
And while ENIC and Levy have suggested that a part-takeover could increase spending in the transfer market, the revenue the stadium delivers is absolutely critical to their recruitment strategy at present.
The current regime do not want Spurs to spend more than they earn, in contrast to the majority of clubs in the Premier League whose owners are content to bankroll losses to create growth.