The Monian Group and Sonder
A computer rendering of Sonder and the Moinian Group's 2 Washington project.
- Sonder told Business Insider that it's planning to open a Manhattan apartment-hotel-hybrid with The Moinian Group in late spring or early summer of 2020.
- Coronavirus and social distancing measures have crippled the travel and hospitality business, with the potential for an 18-month disruption.
- The 13-story project, 2 Washington, in Manhattan's financial district was originally slated to be converted from an office into an apartment complex.
- "The whole hospitality industry, in general, should be hit, nothing particular," Moinian vice president for acquisitions and finance, Michael Zarifpoor, told Business Insider. "We are looking to wait this out overall. I don't think it will be an extended kind of thing."
- Moinian's portfolio is roughly 10% hospitality, and includes the W Hotel in downtown New York, a few blocks away in the financial district.
- Airbnb-backed competitor Lyric recently cut 20% of its staff and is closing close to 200 units, according to a report from The Real Deal in early March.
- While Sonder doesn't plan to open for at least two months, it says a recession-relief clause that it includes in 80% of its leases may help lower its financial burden if coronavirus triggers an extended recession.
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Sonder is planning to open a Manhattan apartment-hotel hybrid in partnership with developer and landlord The Moinian Group - despite a bleak outlook on travel and hospitality due to the novel coronavirus pandemic which a federal plan suggests could last at least 18 months.
Sonder, last valued north of $1 billion, leases and manages its own rentals, many of which are licensed as hotels, for tourists, business travelers, and people looking for flexible residences, and says it is expecting to open the doors to its largest Manhattan location so far sometime between late May and July.
The hospitality industry has been especially hard hit by the coronavirus pandemic, with industry groups projecting that 4 million hotel workers could lose their jobs and giants like Hilton, Marriott, and Airbnb adjusting their cancellation policies. Business travel has also been banned by many large companies to help reduce the spread of the virus.
"The whole hospitality industry, in general, should be hit, nothing particular," Moinian vice president for acquisitions and finance, Michael Zarifpoor, told Business Insider. "We are looking to wait this out overall. I don't think it will be an extended kind of thing. Hopefully by the time we're done, it's a thing of the past and a bookmark of history."
Sonder's subsector of the hospitality industry had already seen some bumps in the road. Airbnb-backed competitor Lyric recently cut 20% of its staff and is closing close to 200 units, according to a report from The Real Deal in early March.
A Bain Capital Ventures partner told Business Insider this January that the sector was overhyped.
While coronavirus may slow renting even after the building has opened, a recession-release clause that Sonder has begun to implement in some of their leases may provide some protection. A company spokesperson was unable to confirm the details of this lease, but said that 80% of the company's leases have some sort of recession-release clause.
"If there's a recession, our lease prices go down," Francis Davidson, CEO and cofounder of Sonder told Business Insider, explaining how the clauses work.
The 13-story project, 2 Washington, in Manhattan's financial district was originally slated to be converted from an office into an apartment complex, but roughly nine months ago Moinian decided to search for hospitality partners in the burgeoning and well-funded short-term rental space. Moinian's portfolio is roughly 10% hospitality, according to Zarifpoor, and includes the W Hotel in downtown New York, a few blocks away in the financial district.
Sonder, which last raised $210 million in July 2019, is the biggest fundraiser in a class of VC-funded short-term rental companies having raised a total of $400 million. Its most recent round was led by new investors Valor Equity Partners, Westcap, and Tao Capital Partners, which is co-founded by Nicholas Pritzker.
Short-term apartment rental startups have taken inspiration from Airbnb, traditional hotels, and the concepts of boutique hotel design to create a more appealing stay. From Airbnb, the companies inherit a tech-forward booking process and units that feel like apartments; from traditional hotels, the consistency of experience and access to cleaning and other amenities; and from boutique hotels, an attention to design.
This project is also a part of a recent Sonder initiative to open more full-building projects instead of single-unit or single-floor rentals. The company began by leasing out floors or even individual units in residential buildings, but has recently begun to lease entire buildings, such as its Dallas partnership with Rastegar Property.
Sonder's Davidson and Moinian's Zarifpoor both said that this model lowers operating costs, and can provide a more hospitality-like experience for guests, compared to a mixed-use residential and hospitality building.
Both Davidson and Zarifpoor noted that the Moinian and Sonder hope this is the first in a string of many partnerships between the two businesses.
"If you look at it from a much longer-term horizon, you could have a company very similar in size to the Marriotts and Hiltons of the world leasing your building," Zarifpoor said, indicating their confidence in the scalability of Sonder's model.