Sonder Bankruptcy Could Claim Victim in Moinian FiDi Debt

More than six months later, the demise of short-term rental company Sonder continues to echo through New York real estate.

A $131.5 million commercial mortgage-backed securities loan backed by the Moinian Group’s 2 Washington Street in the Financial District was transferred to special servicing, the Commercial Observer reported. The culprit for the transfer to the workout station was cash flow problems, according to Morningstar Credit Analytics.

The loan is split between a trio of conduit deals and is not due to mature until August 2031. Citigroup and Bank of America issued two of those deals, while 3650 Capital securitized the third, all unfolding in 2021.

Shortly before that debt came about, Sonder began occupying 345 rental units at the property under a master lease. Moinian leased 14 floors at 2 Washington under a 10-year deal signed in 2020 for roughly $1.3 million a month, according to filings.

Tenants had access to fully-furnished apartments with kitchens and access to amenities like a Life Time fitness center, a golf simulator, a music room, a roof deck and coworking spaces.

But that all changed in November when Sonder collapsed after Marriott International terminated a key partnership, citing a default under a 2024 licensing deal. Interim CEO Janice Sears said the firm was “devastated” to liquidate after costly integration delays with Marriott’s systems and a steep revenue slide.

Operations quickly ceased, cutting off cash flow to landlords across the city, including at Moinian’s 2 Washington Street. A further issue, according to a special servicer note, is that all but about 60 of the units at the property can only be rented for a maximum of 30 days, meaning there would be obstacles for a conversion to multifamily use.

Moinian did not respond to a request for comment.

The 22-story, 483,000-square-foot building has a past existence as an office complex, opened in 1972 as part of 17 Battery Place complex. Moinian partnered with Collaborative Construction Management to undertake a partial residential conversion, supported by $131.5 million in financing provided by Square Mile Capital in 2018.

After Sonder’s fall, the Moinian family sued the collapsed hospitality firm for at least $10 million in damages. The lawsuit claimed that guests at the Moinians’ buildings — 2 Washington Street and 37 West 24th Street in NoMad — either refused to vacate their rooms or were locked out and unable to retrieve their belongings after Sonder shuttered operations.

— Holden Walter-Warner