Skift Take
Sonder is on a painful drive to rid itself of bad leases, to renegotiate others, and then it has to restate two years of earnings. This isn’t easy stuff.
Sonder gained $10 million in liquidity in a refinancing deal, and announced that it has exited 60 buildings, or 2,300 units, as it seeks to shed underperforming leases.
The company announced Tuesday that since it embarked on a portfolio optimization drive in November, that it signed pacts to exit buildings or reduce rents in 105 buildings, or 4,300 units. It has already left 60 of those buildings.
The contract changes in the 105 buildings is forecast to provide a $40 million annual improvement in free cash flow, Sonder stated. However, it would also cost an expected “less than $20 million” in termination fees.
Sonder Expects More Building Exits This Year
Sonder said it expects to exit 20 additional buildings this year.
Sonder operates both short-term rentals and hotels. Before the lease exits, most of its portfolio consisted of short-term rentals, many in multi-family buildings.
Sonder Needs to Restate Earnings for 2 Years
The company, which failed to file a 2023 10-K financial report and needs to restate 2022 and 2023 earnings, said Tuesday that the refinancing will “improve the company’s unrestricted liquidity.”
“Sonder’s business has shown remarkable resilience and we continue to take decisive action to optimize our cost structure and deliver sustainable positive free cash flow as soon as possible,” Sonder co-founder and CEO Francis Davidson said nb a statement. “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. With a stronger balance sheet and an optimized lease portfolio, we are on the right path to achieve our financial goals while delivering Sonder’s high-quality, design-forward guest experience in prime locations.”