A consortium led by U.S. financier Todd Boehly has been chosen as the preferred bidder to buy Premier League giant Chelsea from sanctioned Russian oligarch Roman Abramovich, it emerged over the weekend.
And in one way or another, real estate plays a huge role in the deal.
Inside Stamford Bridge
From the make-up of the ownership consortium to the bizarre idiosyncrasies that hold Chelsea back from building a new stadium, there are several ways real estate will influence the future of one of the most successful football teams of recent times.
First, there’s the consortium chosen as the preferred bidder, which could end up paying more than £3B for Chelsea after sanctions against Abramovich forced him to sell.
The reported members of the joint venture leading the race to buy Chelsea are Boehly, who runs a private equity firm, Eldridge Industries, and is part-owner of the Los Angeles Dodgers baseball team and Los Angeles Lakers basketball team; his partner at Eldridge, 86-year-old Swiss medical equipment billionaire Hansjörg Wyss; real estate firm Cain International, which Boehly part-owns and is run by property veteran Jonathan Goldstein; and private equity firm Clearlake Capital.
Boehly made his money in the fixed-income department of investment banks like Credit Suisse, before joining and becoming part-owner of investment firm Guggenheim Partners. When he left Guggenheim in 2014 to set up Eldridge, he bought numerous sports and media businesses, including The Hollywood Reporter, and took a personal ownership stake in the Dodgers alongside Guggenheim.
He also bought an insurance company called Security Benefit from Guggenheim, according to a 2019 interview with Barron’s, and uses the company as a platform to invest in other businesses.
Real estate has been a big part of that. He is a co-owner of Cain, which was set up in 2014 after his departure from Guggenheim. It is co-owned and run by Goldstein, a former lawyer who for more than a decade was the right-hand man to UK real estate grandee Gerald Ronson, running his Ronson Capital investment business.
Cain invests equity and is also a lender, with some significant assets in both the U.S. and UK. Its most prominent is a 17.5-acre site in Los Angeles that comprises the Beverly Hilton and adjacent Waldorf Astoria Beverly Hills hotels. The hotels will be upgraded and new luxury apartments built that could have an end value of $2B.
In the UK, it owns the Stage mixed-use development in Shoreditch, east London, and has invested in restaurant chain Prezzo.
In 2014, Cain was the vehicle used by Boehly and Goldstein to mount a bid to buy Chelsea’s London Premier League rivals Tottenham Hotspur, though Tottenham’s billionaire financier owner Joe Lewis decided not to sell. Boehly is also the majority owner of another European real estate investment firm, Blackbrook Capital, which focuses on sale-and-leasebacks and net lease assets.
With that much real estate capital and expertise at the heart of the consortium buying Chelsea, one would be forgiven for thinking that it’s a driver behind the team’s purchase. But that’s where it gets complicated as the buy is unlikely to be the simple story of a new owner coming in and increasing revenue by building a bigger stadium.
Stamford Bridge in west London, from the air.
Real estate plays a major part in explaining Chelsea’s recent history and the reason why, with a capacity of 41,000, its Stamford Bridge stadium in the wealthy Fulham area of west London isn’t even among the 10 largest grounds in the Premier League.
In the 1970s and 1980s, Chelsea was in financial trouble after an attempt to renovate Stamford Bridge went wrong. To bring in cash, the club sold the freehold of the stadium to a property development firm, meaning the club did not control the stadium. It almost lost the right to play there in the 1980s.
The property crash of the early 1990s saw the company that owned the stadium fall into bankruptcy and club owner Ken Bates was able to buy it back from the lenders.
In 1997, to ensure the same situation could not arise again, a unique structure was put in place. A new company called Chelsea Pitch Owners was set up, which bought the freehold — essentially, the ownership — of the Stamford Bridge pitch, from the turnstiles to the ground, as well as the right to use the name Chelsea Football Club. It is owned by more than 15,000 small shareholders, fans of the club, and no one person can cast more than 100 votes in any decisions the company takes to stop any one person hoovering up shares and taking control.
As a result of this structure, the owner of the club can’t force a sale of the ground as any new owner would not be allowed to build on the site. And if the club was moved to a new site, CPO would be able to deny the club the right to use the name Chelsea FC.
This has protected the club against the possibility of a nefarious owner selling the ground — ground that would be incredibly valuable given its prime west London location. But it has also held back the possibility of building a bigger stadium and bringing in more revenue.
In 2011, Abramovich put forward a proposal to buy out the shareholders of CPO to facilitate an extension of the ground. Almost two-thirds of the shareholders voted in favour, but the proposal needed 75% approval to go through.
The following year, Chelsea weighed a bid for the Battersea Power Station site across the river Thames, which would have seen Almacantar build a new stadium inside the structure of the famous but then-derelict power station. That proposal ultimately fell away.
Chelsea unveiled plans in early 2018 to extend and renovate Stamford Bridge at a cost of £1.4B, a complicated proposal because the ground is hemmed in by homes in its west London location. But that proposal was dropped later in the year, with reports speculating the decision may have been caused by the UK government delaying the renewal of Abramovich’s visa.
When Abramovich was bankrolling Chelsea to the tune of an average £150M a year, the fact that Chelsea’s stadium was smaller and generated less income than its rivals was not so much of an issue. With a new ownership group coming in, one that is unlikely to fund consistent losses, Chelsea’s real estate becomes a more pressing issue.
The majority of Premier League clubs’ revenue comes from TV revenue today, and Boehly has spoken in the past about global TV revenue growth being behind his interest in buying a team. (Boehly also bid for Chelsea in 2019.)
But the amount of real estate expertise in the consortium means the issue of the stadium is unlikely to be totally ignored.