Sonder, the short-term rental company sounding the alarm last week about its future, is trying to dodge trouble.
The San Francisco-based company is negotiating with landlords and seeking partners to keep itself afloat, the Wall Street Journal reported. The push comes as Sonder remains unprofitable and is facing large lease obligations in a dilemma similar to WeWork, the co-working giant that is working through bankruptcy proceedings.
Sonder’s business model sees the company sign long-term leases for apartment units and hotel rooms to operate as furnished short-term rentals. The model comes with risks if demand peters out, since Sonder would still be on the hook for the leases.
That’s why Sonder has been renegotiating part of its portfolio, which is spread across 10 countries and more than 40 cities, hoping to either cut down rents or exit properties altogether. In the last 11 months, Sonder has reduced rent on or left roughly 4,300 units across 105 buildings.
The company said in its annual report it expects annual cash flow to improve by more than $40 million as a result of the culling.
For the past two years, Sonder has also exclusively made “capital light” deals, putting landlords on the hook for any initial capital improvements.
In August, Sonder raised $146 million in additional liquidity, including $83 million from existing bondholders. At the same time, it also partnered with Marriott to make 9,000 units available on the latter’s platforms by year’s end, the first time Marriott has partnered with a short-term rental company in this manner; Marriott is providing Sonder $15 million by March 2025.
Sonder lost $296 million last year, $51 million more than it lost in 2022. The company laid off 17 percent of its workforce early this year, expected to result in $11 million in annual savings.
Sonder went public via a SPAC merger with Gores Metropoulos II in 2022, valued at $1.9 billion. Since shares opened during the initial public offering at $199.91, they have dropped precipitously to $4.58, as of 10:50 a.m. on Thursday morning. The stock is down almost 40 percent in the last year, though up 41 percent year-to-date.
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