Despite the club's stadium, Stamford Bridge, posing certain major challenges that cannot be rectified fast, Todd Boehly's consortium valued Chelsea at £4.25 billion.
There were multiple elephants in the room during the difficult and multi-faceted Chelsea sale process.
The majority of the difficult questions revolved around Roman Abramovich and Russia, but one of them centered on Stamford Bridge, Chelsea's home since 1905. While the details surrounding Abramovich and where the sale revenues would go provoked the majority of the questions and complications for the club, bidders, Premier League, and UK Government, the stadium itself sparked its own set of concerns.
Why are suitors willing to pay £4.25 billion for a club with the 11th-largest football stadium in the country, which is notoriously tough to develop?
We have yet to learn the answer to the aforementioned question, despite the fact that a consortium led by American investor Todd Boehly and private equity company Clearlake Capital completed their takeover on May 30. What we do know is that the consortium has indicated it will provide £1.75 billion to fund "investments in Stamford Bridge, the academy, the women's squad, and Kingsmeadow, as well as continuous funding for the Chelsea Foundation," according to a club statement released in early May.
Chelsea is unquestionably one of Europe's most successful and respected clubs. They only won the Champions League last season and have won 11 trophies in the last decade. The fact that they could only fit 41,837 people inside their stadium was of little importance during that period of sustained silverware. That's because, since purchasing the club for £140 million in 2003, Abramovich has been willing to put money into his passion project. But now that he's gone, the question mark over Stamford Bridge has been replaced by an exclamation mark.
The majority of the funding for Boehly's consortium comes from Clearlake Capital, a private equity firm based in the United States. The club will not be governed by the new ownership group.
To better grasp the challenges facing Chelsea's new owners, Mirror Football spoke with football financial specialist Kieran Maguire. "There are three main revenue streams for football clubs," he adds. "Broadcasting is negotiated centrally by the Premier League and is also determined externally based on Champions League progress." Chelsea's commercial partnerships are mostly fixed in stone — the club has long-term deals with Nike and Three, so it's tough to see how they could drastically expand them. There are just a few opportunities available.
"The one issue over which the club has some control is match day revenue. Abramovich was willing to put up £900,000 per week for 19 years because he effectively considered Chelsea as a trophy asset.
Of course, Chelsea and Boehly's consortium aren't happy about this. The club touted the possibilities of Stamford Bridge in an industry sales brochure viewed by the Daily Mail in March. It was believed that raising the stadium's capacity to 62,500 would result in a substantial increase in match-day revenue from £70 million to £200 million per year.
A boost of this magnitude is urgently required. Chelsea's smaller stadium has the potential to affect them in the near future, despite the fact that they have stayed up on the pitch in recent years, thanks in part to Abramovich's huge pockets.
"The issue Chelsea has is that when they compare themselves to their peer group, they are statistically and qualitatively behind in terms of what they have to offer.
"The issue Chelsea has is that they are lagging behind, both statistically and qualitatively, in terms of what they have to offer as compared to their peer group," Maguire argues. "They could well see themselves starting each season with match day revenue in the range of £30m to £40m, trailing Manchester United, Tottenham Hotspur, Arsenal, and others.
There's trouble on the horizon.
Match-day income numbers from 2019 — the final full year before the Covid epidemic – back up Maguire's allegations. Chelsea earned £67 million in matchday revenue that year, far less than rivals Manchester United (£111 million), Arsenal (£96 million), and Tottenham Hotspur (£82 million) while playing at Wembley before moving into their new stadium.
Something has to give for the Blues, who will be subjected to new financial fair play regulations beginning next season. Transitional laws will give them some latitude at first, but by 2024, they will only be permitted to spend 70% of their income on salaries. If their £40 million gap with opponents persists and no additional gains can be achieved, Tuchel's side may have to make concessions in other areas.
Infrastructure costs are not included in the FFP calculations, which is fortunate for Chelsea. Unfortunately for Chelsea, redeveloping Stamford Bridge is not an easy task.
Although Abramovich did not require the additional revenue from expanded capacity, he was still interested in redeveloping Stamford Bridge. But saying you want to and really executing it are two very different things, especially when the site you're working on is as complicated as Chelsea's.
Stamford Bridge is perfectly situated in several respects. It's adjacent to Fulham Broadway tube station, making it a quick trip into downtown London. It's on Fulham Road, with plenty of bars and shops around, making for a good day out. All of these features, on the other hand, conspire to make it a nightmare to develop. The District Line runs beneath the site from east to west and from north to south.
Meanwhile, in addition to the geographical constraints and the challenges of obtaining planning clearance, there is another complication: the fact that the pitch is not actually owned by the club. Chelsea has a unique situation in which the Chelsea Pitch Owners, a collection of fans from all over the world, possess the freehold to the stadium as well as certain intellectual property rights.
Chelsea commenced the construction of a new stadium at Stamford Bridge after considering relocation to Shepherd's Bush and the Battersea Power Station site. The Blues overcame the obstacles and received planning authorization for a new 60,000-seat stadium in January 2017, but Abramovich pulled the plug in May 2018 due to a "unfavorable investment climate." The new ownership group will now have to prove their worth.
"In addition to securing planning permission in the usual way, and in addition to ensuring it has secured sufficient ownership and/or rights over adjoining land to facilitate physical envelope of the redevelopment, the developer would have to listen carefully to the views of CPO and address any material concerns it may have," says Scott Keown, a commercial real estate lawyer at JMW.
According to Bernard Ralph, a real estate planning expert at JMW, this might easily take five to ten years. "I believe the challenge they'll face is that if they're not using the same design, it will be difficult for them to get their plans away," he explains. "The previous version, which obtained planning permission in 2017, was favorably accepted by planners, who were quite impressed by the architectural merit of what was being proposed." If they stick to the same design, they should have little trouble obtaining planning permission because not much should have changed in concept. However, local politics may be different; there may be more vocal resistance now; it's a well-known fact.
Beyond the vague promise that some of the £1.75 billion set aside will be spent on "investments in Stamford Bridge" and the sales brochure touting the commercial opportunities such a shift could bring, we don't know what the new ownership group's ambitions are for Stamford Bridge. Chelsea was contacted for comment by Mirror Football, but no response was received.
However, the wheels are in action for a group that has recently committed £4.25 billion to something. Boehly has hired property developer Jonathan Goldstein and met with David Hickey, the former project director for Abramovich's abandoned renovation, according to the Evening Standard. Janet Marie Smith, an architect who has overseen numerous significant sports stadium redevelopments in the United States and abroad,
Chelsea Pitch Owners, who effectively have a veto over any rebuilding of Stamford Bridge, are on board with Boehly's consortium as long as they stay on the same site the club has held since its birth 117 years ago. CPO head Chris Isitt told Mirror Football, "The Boehly consortium has been very, very positive, and we've had fantastic meetings with them." "The passion and commitment demonstrated by all members of their team to move the project ahead has greatly impressed us." We understand they have larger fish to fry right now - the transfer window is [about to be] open, and there are some huge things going on there – so it'll be a while, I guess, before we see anything.
Since the takeover was completed late last month, CPO has been in communication with Boehly's consortium. Despite the fact that stadium plans are still in the early stages, Isitt is optimistic that the new owners will deliver. "I have no reason to doubt that a big refurbishment of the stadium will take place in the near future," he continues. "To put it another way, London's best team deserves London's best stadium.
Boehly is the public face of Chelsea's takeover, and his background in American sports, particularly with the Los Angeles Dodgers, provides insight into what Blues fans might expect at Stamford Bridge. In 2012, Boehly and a syndicate, which included fellow Chelsea investor Mark Walter, paid $2.15 billion buy the Dodgers.
Boehly's background in American sport, according to Ben Peppi, head of sports law services at JMW, implies a commercial plan will be baked into any renovation of the Stamford Bridge. "Creating a new stadium, a better space for people to watch sport, and a better match day experience will attract new partners, which we know creates significant commercial revenue, but it will also offer brands and partners a reason to come back, and it will give fans a reason to attend," he says. "Because we know as customers that we're going there for the product on the field, but millennials and Gen Z and beyond want and need more than that today more than ever.
There are numerous obstacles for the new Chelsea owners to overcome, but
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