Owners Of Former Sonder Properties Face Challenging Market In Hunt For Buyers, New Operators

Property owners that had leases with the defunct short-term rental company Sonder face an uphill battle as they seek to reestablish cash flow at the properties that were abruptly vacated last month.

Owners must now find new operators or sell, but the properties are going to be harder to backfill today than they were three and four years ago when many property owners signed leases with Sonder, particularly in places like Los Angeles, where the hotel market remains depressed. 

“From a buyer standpoint, this is going to be a good opportunity,” Los Angeles-based Atlas Hospitality Group President Alan Reay said. “From an owner-slash-seller standpoint, it’s going to be extremely difficult.”

Los Angeles landlords that had Sonder locations in operation this year, when financial difficulties came to a head for the company, claim in pending lawsuits that Sonder owes them more than $18.9M in unpaid rent and other fees, court records show. 

Bankruptcy proceedings have pushed pause on these cases, and similar suits were filed in New York last month after Sonder abruptly shut down.

Sonder did not respond to Bisnow's request for comment.

Owners seeking another operator will be hard-pressed to find one that will pay the high rates that Sonder offered. 

“First and foremost, they're not going to find anyone to replicate the income that was promised to them by Sonder, which is why Sonder collapsed, right?” Reay said. “It's WeWork applied to the hotel industry.”

With the region’s efforts to add new housing, some owners might explore turning these former Sonders into multifamily. Generally speaking, that might be complicated and very expensive, as Sonder rooms do not usually contain a kitchen, RJA Hotels President Rod Apodaca said. 

Measure ULA, the real estate transfer tax on property sales over $5M in Los Angeles, might be enough of an obstacle for some owners that they would put off or rule out a property sale, Apodaca said. 

For the buildings that haven't operated as a traditional hotel for years — or ever, as is the case with two shuttered Downtown LA Sonder locations — lack of recent proof that the property can operate as a successful hotel may result in additional challenges to a sale or new operator coming on. 

"I have a vacant hotel where the only operating history could be years old, from before Sonder,” Apodaca said. “No one's going to rely on that, and they're going to want some type of discount if they're going to buy a property based on a future income stream that is untested." 

Some hotel management companies are already targeting former Sonder properties and shopping their services, knowing that the owners are in a tight spot and have little to no hotel operating experience, Reay said. 

The challenges of reactivating their buildings come as some owners are also still trying to collect rent. 

Despite challenges, ownership of one former Sonder in Santa Monica was successful in finding a new operator. The property, formerly the Shangri-La Hotel, had been a Sonder for less than two years when it abruptly shuttered in May. By June, the Art Deco city landmark had reopened with a new independent operating team. 

According to a lawsuit filed by the hotel’s ownership, when Sonder vacated the property in May, it hadn’t paid rent for that month or the previous two. A lease agreement included with the suit, which was filed with Los Angeles County Superior Court, showed base rent for the 70-room Shangri-La was $344K per month with a 3% annual rent escalation.

The owner, Indus Investment, is suing Sonder for $15.2M in damages. In court documents filed in September, Sonder disputed that it owed Indus any money at all. 

It's a different story at other former Sonder properties, including one the company moved into at Seventh and Hill streets in the Jewelry District in September 2023. According to court documents, Sonder agreed to lease the property, which operated as The Winfield, through September 2033. 

In the first week of February 2025, less than two years after the lease began, Sonder failed to pay its $565K rent and received a notice of default, ownership of the 125-unit property at 701 Hill St. alleges in court documents. 

Sonder did pay rent for June 2025, amounting to approximately $572K, but as of June 2025, ownership said no defaults had been cured and sued Sonder for $3.48M. That building sits vacant and is in receivership. 

Los Angeles’ hotels are treading water this year. Despite optimism about the financial boost that major sporting events between now and the 2028 Olympic and Paralympic Games will bring to the region, the industry is still struggling from the drop in international travel numbers, typically a critical portion of LA’s hotel guests.

It’s likely that softness in the Los Angeles hotel market is what made the propositions Sonder offered owners so enticing, Reay said. There is also the likelihood that inability to find a timely solution could add distress to the LA hotel market and depress values further. 

“They're good assets, and, from a new operator standpoint or a new buyer standpoint, they will do well,” Reay said. “But all of the owners right now are in a very, very tough position, because if they want to try and sell these deals, they're not going to have good historical performance numbers and they're in a market that is definitely a buyer's market today.”