Real Madrid didn’t win any titles last year, but the Spanish football club still ended the season with a record €1.22 billion ($1.4 billion) in revenue — the third consecutive year Real Madrid has set a world record for football club revenues.
Real Madrid’s EBITDA reached €287.4 million ($327.6 million), 18% higher than the previous year. And the club was profitable for the 26th consecutive season, bringing in a €26.3 million ($30 million) post-tax surplus, an 8% increase.
But let’s not bury the lede. Real Madrid isn’t setting consecutive revenue records because its squad is winning trophies. Real Madrid is setting consecutive revenue records because its controversial stadium renovation project is paying dividends.
Many people thought Real Madrid was crazy when it initially embarked on its stadium renovation project. Rather than demolishing the 75-year-old Santiago Bernabéu Stadium and rebuilding it, Real Madrid borrowed over $1 billion to complete a gut renovation. The structure would keep all its history and tradition, but everything else — the pitch, seats, suites, and exterior — would be upgraded.
This was a gamble. For starters, the consensus was that if Real Madrid was going to spend between $1 billion and $1.5 billion on its stadium, they should just build an entirely new one. That’s because renovations are essentially a facelift. Sure, you can improve the aesthetics and add some new high-priced suites, but if the foundation itself keeps aging, you will run into the same problem decades later.
But Real Madrid didn’t agree, and their timing couldn’t have been better. By starting construction before the pandemic, Real Madrid secured three separate construction loans at extremely favorable rates and terms. That allowed the club to borrow more than $1 billion, with the largest loans carrying interest rates ranging from 1.5% to 2.5% and a blended interest rate of less than 3%. And since interest on the loans didn’t kick in until the project was complete, Real Madrid put itself in a position to pay off the debt with cash flow from the upgrades.
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