Sonder Secures Financial Lifeline and Rebrands with Marriott

Marriott International is further expanding its offerings by partnering with Sonder Holdings, a short-term rental platform specializing in apartment-style accommodations in major cities.

Jordan B. & Han-Gwon Lung
August 20, 2024

Together with

Good morning. Marriott is venturing further into the short-term rental market through a new partnership with Sonder Holdings.

Today's issue is sponsored by Wall Street Prep—elevate your real estate career with institutional-grade analysis training.

The Holy Trinity: Sanjay Chandra on Leading Investors to $7B Deals

Market Snapshot

S&P 500

GSPC

5.554,25

Pct Chg:
+2.30%

FTSE NAREIT

FNER

788.77

Pct Chg:
-0.95%

10Y Treasury

TNX

3.883%

Pct Chg:
-0.009

SOFR

1-month

5.35%

Pct Chg:
0.0%

*Data as of 8/18/2024 market close.

HOTEL HELP

Sonder Secures $126M and Rebrands with Marriott Partnership

Marriott International is further expanding its offerings by partnering with Sonder Holdings, a short-term rental platform specializing in apartment-style accommodations in major cities.

Financial lifeline: Sonder Holdings secured $126 million in new capital and will rebrand under Marriott to regain its footing. The funding includes $43 million in preferred equity and $83 million in loans, shoring up liquidity as the company’s market value plunged 98.7% from $2.3 billion to $29 million in just two years.

The partnership: Under a 20-year licensing agreement with Marriott International, Sonder will rebrand its 9,000 boutique hotel rooms and apartment-style rentals as “Sonder by Marriott Bonvoy.” This rebranding effort will allow Sonder to leverage Marriott’s extensive platform and global customer base, including the 180 million members of Marriott Bonvoy’s loyalty program. The integration is expected to be completed by 2025.

Wall St. is onboard: Sonder’s stock surged 131% following the announcement, reflecting renewed investor confidence. The partnership with Marriott is seen as a key move to reduce financial pressures by providing a cheaper way to secure bookings compared to online travel agencies like Expedia.

Operational challenges: Despite this boost, Sonder continues to face hurdles. The company reported a negative cash flow of $108 million last year and has been embroiled in legal disputes, including a lawsuit for $1.2 million in unpaid rent for the century-old Hotel Carlton in San Francisco. Additionally, Sonder has faced rounds of layoffs and had to renegotiate leases to cut costs.

➥ THE TAKEAWAY

Looking ahead: Marriott’s partnership with Sonder signals a strategic push into the short-term rental and apartment-style lodging market, further taking on rival AirBnb in the extended stay market. The Marriott deal is expected to ease financial pressure by providing a more cost-effective way to secure bookings, potentially reducing reliance on expensive online travel agencies like Expedia.

TOGETHER WITH WALL STREET PREP

Learn from the professionals shaping the CRE industry

Over the course of 8 weeks (self-paced), the Wharton Online and Wall Street Prep Real Estate Investing Certificate teaches the concepts and practical technical methods that CRE professionals deploy in analyzing and executing real estate transactions.

The video-based curriculum includes:
Introduction to the real estate asset class
The real estate investment framework
Financing and taxation of real estate
Deal process and deal documents
Investment analysis and financial modeling
Analyzing marketing risk, and more!

Plus live weekly office hours with Wharton faculty and exclusive networking events! Join our growing graduate network of 3,000+ participants and save $300 when you use coupon code CREDAILY.

✍️ Editor’s Picks

Fear and Greed: Your insights are needed. Please take 3 minutes to provide your perspective on the current sentiment within the CRE industry and your predictions on future price trends.
Tenant protections: LA may enhance its Tenant Anti-Harassment Ordinance thanks to landlords still harassing their tenants, with 13K complaints and minimal enforcement since 2021.
Renting triumphs: Renters in San Jose’s South Bay are spending half the cost of actual homeownership over 20 years, or $750K in rent, while the city’s median home price is currently $1.5M.
Buyer’s remorse: The Stahl Organization was forced to secure a massive $750M, 5-year loan with a significant $250M investment for 277 Park Avenue, a trophy Manhattan office tower.
Lab lament: The US lab/R&D property market's positive net absorption streak ended in 2024, with availability up to 26.4%, driven by speculative construction.

🏘️ MULTIFAMILY

Insurance innovation: Insurance premiums for affordable housing providers in the US are surging, with some facing increases of over 100% in places like NYC.
Affordable initiative: NYBG leased 43.2 KSF in the Bronx to Albanese for affordable housing development, with $15.2M paid and up to 105 KSF of development rights.
Building better: LA just approved a four-story, 111-unit apartment building in Lake Balboa, including 13 units for very low income housing.
Power play: Rockrose acquired a Cobble Hill site in Brooklyn that was part of a former LICH campus project for $65M from Madison Realty.

🏭 Industrial

Brighter future: Otto Environmental Systems leased 60 KSF of Class A warehouse space with rooftop features in Brooklyn’s Canarsie submarket as citywide asking rents rise.
Largest lease: Four Hands leased 570 KSF at Airport Logistics Center in Del Valle, the largest industrial lease in greater Austin in 2024.

🏬 RETAIL

Manhattan mega-deal: RYCO Capital secured a $128M loan to help acquire 22 retail and 171 residential units in Manhattan.
Shopping spree: Longpoint Realty Partners bought Pompano Beach's Palm Aire Marketplace, a 143.2 KSF strip mall, for $33.1M (or $231 PSF).

🏢 OFFICE

Office oasis: A recent survey by Lincoln Property Co. & Big Village found that over 50% of US workers prefer 4–5 days in the office weekly, challenging many remote work assumptions.
Offloading offices: Starwood Capital (STWD) plans to sell three Austin offices amid a record 25% vacancy rate, attracting buyers with discounts.
Taxing troubles: Unify Financial Credit Union sued Opal Holdings for failing to pay property taxes on a Corporate 500 campus in Deerfield.

🏨 HOSPITALITY

Deal of the day: RIDA Development and Ares Management purchased the 315 KSF Hyatt Regency Orlando, with 1,641 rooms, for an eye-popping $1.07B.

📈 CHART OF THE DAY

Vacancy rates for mid-priced, three-star multifamily properties in Dallas-Fort Worth are at a decade-high of 9.3%. Despite strong competition for residents, pricing power is weakening, leading to a 1.2% decline in asking rents.