Sonder may be the next company to go public through a SPAC deal. The short-term rental company is reportedly looking for a valuation in the neighborhood of $2.5 billion.
More on Sonder
Sonder is one of the larger short-term rental providers in the U.S., working with apartment landlords to turn units into short-term rentals. Sonder handles the furnishing, listings, and property management.
While Sonder has its own listing site, the company also lists on Airbnb (NASDAQ: ABNB) and other platforms. Obviously, Sonder would prefer the rentals come through its own site, but a platform like Airbnb can't be ignored. It is estimated that less than 20% of guests book directly on Sonder.com.
Regardless of which platform guests book on, they interact directly with Sonder's 24/7 customer service line. Guests are provided with features like fully stocked kitchens and bathroom supplies and have access to Sonder's partnerships with on-demand service providers.
A rocky beginning to the pandemic
Sonder reportedly laid off or furloughed 400 employees during the pandemic, roughly a third of its workforce.
Much of the reason why Sonder had to make those cuts likely had to do with its business model. Sonder signs master leases with large property developers to secure its inventory of short-term rentals. When the pandemic hit, Sonder was left holding the bag. People weren't traveling, but Sonder still had its lease obligations to meet.
However, while the pandemic burned the hospitality industry, short-term rentals have been a well-reported success story. Although February of this year was generally a tough month, the future is looking bright for short-term rentals.
Refresher on SPACs
SPACs, or special purpose acquisition companies, are designed to raise money that will be used to take a private company public through a merger at a future date, which is why people sometimes refer to them as "blank-check" companies. An investment in a SPAC is really an investment in the management team's ability to find a suitable company to take public in the near future. In this case, the company is Sonder.
SPACs have become a popular way to take companies public in the real estate industry. Notable real estate players that have been involved with SPACs include RXR Realty, Tishman Speyer, CBRE Group (NYSE: CBRE), and Fifth Wall.
The Millionacres bottom line
It's impressive that Sonder has been able to fight through the pandemic after laying off a third of its people and being stuck with those master lease obligations. That said, if given the choice between being a landlord with Sonder as my master lease tenant or an investor in Sonder, I'd opt for the former. Business Insider doesn't love the model either, describing Sonder as, "a billion-dollar apartment-rental start-up billed as a hospitality industry disruptor." Stay tuned to see how this latest proptech SPAC merger plays out.