Sonder, a hospitality company, has been facing challenges with bad leases and the need to restructure its portfolio. In an effort to address these issues, the company recently gained $10 million in liquidity through a refinancing deal. As part of its strategy to improve its financial position, Sonder has exited 60 buildings, totaling 2,300 units, and renegotiated contracts in 105 buildings, totaling 4,300 units. These changes are expected to result in a $40 million annual improvement in free cash flow, with termination fees estimated at “less than $20 million”.
Moving forward, Sonder plans to exit an additional 20 buildings this year as part of its efforts to optimize its lease portfolio. The company’s business model includes both short-term rentals and hotels, with a focus on delivering high-quality guest experiences in prime locations. Despite these challenges, Sonder’s co-founder and CEO, Francis Davidson, expressed confidence in the company’s ability to achieve its financial goals and strengthen its financial foundation. Davidson highlighted the resilience of Sonder’s business and the progress made towards delivering sustainable positive free cash flow.
In addition to addressing its lease portfolio, Sonder also needs to restate its earnings for the past two years. The company failed to file its 2023 10-K financial report and is in the process of restating its 2022 and 2023 earnings. Despite these challenges, Sonder remains focused on optimizing its cost structure and achieving financial stability. The refinancing deal is expected to improve the company’s unrestricted liquidity, providing a stronger balance sheet to support its operations.
Sonder’s announcement of building exits and contract renegotiations reflects its commitment to streamlining its operations and improving financial performance. By shedding underperforming leases and renegotiating contracts, the company aims to achieve sustainable positive free cash flow and strengthen its financial foundation. With the support of investors and a focus on delivering high-quality guest experiences, Sonder is positioning itself for future success in the hospitality industry. The challenges faced by Sonder highlight the complexities of managing a diverse portfolio of properties and the importance of strategic decision-making in optimizing financial performance.
