US: Short-term rental apartment management company Sonder has announced significant reduction in its portfolio and a $10 million financing to “improve the company’s unrestricted liquidity”.
As of 10 June, Sonder said that it had signed agreements to exit or reduce rents in 105 buildings, which accounts for 4,300 units. Of that number, agreements have already been reached to exit 80 buildings [3,200 units] and Sonder has already vacated 60 of those buildings, accounting for 2,300 units.
Of the remaining buildings and units, the San Francisco-based firm revealed that it was expecting to leave them by the end of 2024.
Sonder’s most recent quarterly filing for Q3 of last year showed that the company had around 11,800 units remaining in its global portfolio, spanning 250 properties, at the end of September 2023. It now aims to achieve “estimated annualised run-rate free cash flow improvements of over $40 million” with termination fees costing less than $20 million as a result of the portfolio reduction.
The firm also announced that it had entered into an amendment to its existing note and warrant purchase agreement with a syndicate of investors, worth up to $10 million.
In a statement, Francis Davidson, co-founder and CEO of Sonder, said: “Sonder’s business has shown remarkable resilience and we continue to take decisive action to optimise our cost structure and deliver sustainable positive free cash flow as soon as possible. The confidence from our investors is a testament to the force of our global brand and the meaningful progress we have made to strengthen our financial foundation.”
Despite not yet posting any of its Q4 2023, 2023 full year or Q1 2024 earnings reports, the accommodation provider claimed that it had increased its fourth quarter revenue from $135 million to $164 million in the space of 12 months. Sonder attributed the delay in formally announcing its financial results to “non-cash accounting errors”.
Meanwhile in February, Sonder announced that it was cutting 106 jobs in its corporate team – representing 17 per cent of the company’s corporate workforce – in order to save around $11 million a year in the long term. At the time, the reasons given for the layoffs were an oversized portfolio with properties underperforming on their leases and a desire to further reduce overhead costs.
It represents the latest blow to the operator since going public via a business combination with special purpose acquisition company [SPAC] Gores Metropoulos II in January 2022.
That June, Sonder restructured its organisation to lay off 21 per cent of its corporate team and seven per cent of its frontline staff, and last March, the company laid off a further 100 corporate employees [14 per cent of its team] as it prioritised increasing its cash flow and “expanding into new industry segments”, including expanding its business travel segment.
Prior to that, Sonder cut its workforce by 22 per cent and furloughed an additional 11 per cent of its staff at the start of the Covid-19 pandemic.
Having previously traded at a high of $202.20 at the start of February 2022, the company’s trading price is currently $4.05 at the time of writing.
Since its founding ten years ago, Sonder has yet to reach profitability.
