Bayern Munich attempted to keep Toni Kroos, but contract talks stalled before he was sold to Real Madrid.
"We tried to convince him to stay at the club but I understand," said Pep Guardiola. "He is young and wants new challenges. It is his decision and we have to respect that," he told a press conference.
"I hope he is happy in Madrid. It was an honor to be his coach. I wish the very best to him and his family. At the same time I want to say thank you for what he did last season."