The short-term rental company, once a proptech darling and $2 billion publicly traded company, announced it is preparing to file for Chapter 7 liquidation in the US, with parallel insolvency proceedings abroad. Activities stopped almost immediately.
The collapse did not come out of nowhere. By the time interim CEO Janice Sears stepped in earlier this year, the company was juggling $1.5 billion in liabilities against $1 billion in assets, negotiating with creditors and seeing its cash position collapse. Still, the speed of the unraveling has caught many hosts and guests off guard.
The final straw came last weekend, when Marriott abruptly terminated its year-old licensing agreement, removing approximately 9,000 “Sonder by Marriott Bonvoy” units from the system overnight. For Marriott, the move has little impact on the expected net room growth. For Sonder it was catastrophic.
The 20-year deal was supposed to be a lifeline, bringing in $126 million in financing and the credibility of a global brand. Instead, integration tensions, reporting errors, investor lawsuits and an already shaky balance sheet pushed Sonder past the point of recovery.
And once operations stopped, the fallout began immediately. In New York, the Moinian family sued Sonder for at least $10 million, alleging the company abandoned two buildings — 2 Washington Street and 37 West 24th Street — during the crisis. Guests reportedly refused to leave or were completely locked out, unable to access their rooms or belongings. Similar scenes played out in the buildings of other owners, from Silverstein to BLDG Management, all suddenly left to find stranded residents and unclear lease obligations. Even employees said they had no meaningful leadership whatsoever.
It’s a messy, very public ending for a company that sold itself as a sleek alternative to Airbnb. And it leaves the industry with two questions: What happens to these master-lease properties, and what happens to the model that Sonder helped popularize?
In the short term, landlords with exposure to Sonder will likely have to wait out months of legal wrangling. Chapter 7 means that a court-appointed trustee will liquidate assets rather than restructure them, causing owners to wait a while before regaining full control of their units. Operators who competed with Sonder for inventory may see short-term opportunities as units come back onto the market, but that also depends on how much work is needed before they can be repositioned. In the longer term, the industry is likely to reconsider how much risk it is willing to take on from players with aggressive growth plans and tight margins.
Demand for flexible, hotel-style apartments won’t go away, but owners and lenders may push harder for management agreements or hybrid structures that won’t leave them in the lurch if an operator stumbles.
There was plenty of other real estate news this week. The Alexander brothers suffered a legal setback, Michael Shvo faced RICO conspiracy charges, and record listings hit the market in South Florida. These stories and more below.
Judge denies Alexander brothers’ requests to dismiss sex trafficking charges
A federal judge has ruled that sex trafficking charges against the Alexander brothers will go to trial in January, rejecting most of the defense’s motions to dismiss. Judge Valerie Caproni of the Southern District of New York said prosecutors had sufficiently alleged that the brothers “conspired to entice women and girls to travel” for sex using “coercion and drugs.”
Shvo foes unite to charge embattled developer with civil RICO conspiracy
A new lawsuit accuses developer Michael Shvo, who dramatically exited a Miami project and fended off lawsuits over some of his developments, of being involved in a years-long Racketeer Influenced and Corrupt Organizations (RICO) conspiracy. The lawsuit was filed by some of Shvo’s known enemies, including the Core Club and its founder and CEO Jennie Enterprise, and two disgruntled residents of Shvo’s troubled Mandarin Oriental apartment project at 685 Fifth Avenue in Manhattan.
Trophy Homes for Sale: Record-Breaking Listings Hit the Market as South Florida’s Busy Season Gets Underway
There are nine single-family homes on the market in South Florida asking $100 million or more, with some reaching as high as $285 million. Sellers are seeking unprecedented prices for sprawling sites with amenities such as shooting ranges, bowling alleys, jazz lounges, theaters, spas, gyms and enormous garages for storing and displaying car collections.
Kathleen McCarthy, co-director of Blackstone Real Estate, is leaving after fifteen years
Blackstone’s Kathleen McCarthy, who helped build the company’s real estate arm into a $320 billion behemoth, will leave at the end of the year after 15 years at the company. McCarthy, 47, has been global co-head of Blackstone Real Estate – the world’s largest private real estate investor – since 2018 and will step down to “explore new opportunities,” the company said.
FARE Act, a year later: This is how the brokerage law has evolved
A year after New York City passed the Fairness in Apartment Rental Expenses (FARE) Act, the rental market is still adjusting to a rule that reverses who pays agent fees. The law, which prohibits landlords from forcing tenants to cover agents they haven’t hired, immediately caused listings to disappear from StreetEasy and REBNY’s platforms as landlords rushed to comply.
Malibu exception: Boutique hotel deal among most expensive in California history
Luxury fashion brand Chrome Hearts, owned by Richard and Laurie Stark, bought a small Malibu hotel called the Surfrider for $37.5 million, landing one of California’s most expensive per-key deals ever. It’s an exception to the general rule of the Los Angeles hotel market these days, where countless properties are experiencing sellouts and a tough sales environment.
Fannie Mae sues Jon Venetos’ Lurin Capital for defaulting on $77 million
Fannie Mae has filed a lawsuit against Jon Venetos’ Lurin Capital accusing the company of defaulting on a $77.2 million loan tied to a Houston apartment complex. Fannie Mae further accuses Lurin of failing to keep the property in good condition. In addition to mold, roof leaks and cracked stairs, Fannie claims that some residents of the Houston apartments do not have access to running water.
Vornado, Rudin’s 350 Park office tower should be ready for construction
Vornado Realty Trust has submitted a building permit application for a high-rise at 350 Park Avenue. Vornado is working with Rudin Management and hedge fund Citadel to develop the tower located between East 50th and 51st Streets.
Here’s what you missed at The Real Deal’s Miami Forum
Miami’s status as a top destination for real estate developers, brokers, foreign investors and New Yorkers was on full display last week at The Real Deal’s Miami Real Estate Forum. The two-day conference attracted thousands of participants and dozens of developers, real estate agents, lenders, architects and other vendors who presented their products and projects during the showcase.
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Sonder files for bankruptcy and liquidation under Chapter 7
Marriott briefly ends partnership with Sonder after “default”
Moinian family sues Sonder over ‘chaos’ in Manhattan hotels
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