Short-term rental operator Sonder now master leasing at New Orleans’ Jung Hotel

United States: The short-term rental provider Sonder – now New Orleans’ largest single operator of vacation rentals – has master leased 111 apartments in the renovated Jung Hotel building.

The deal with hotel developer Joe Jaeger’s MCC Group was closed in early September and no details surrounding the deal have been disclosed.

Jaeger has retained control of the hotel’s operations, and Sonder is handling the advertising and operations of the 110 high-end luxury units, which were listed on Apartments.com last month for between $3,900 and $5,900 per month. None of those units were ever leased, so Sonder approached MCC Group to master lease the units and rent them out on short-term rental sites.

General manager of Sonder New Orleans Peter Bowen said: “Jaeger is a visionary and he had this forward-thinking idea to have effortless living – you could lease an apartment and have access to housekeeping, they’d stock your fridge. They just couldn’t lease any of them up.”

Bowen said Jaeger had considered putting the apartments on the market with a broker after the hotel opened in January, but he was concerned it would be a slow period for leasing. Sonder’s offer was to lease all 111 units straight away.

The 111 units at the Jung Hotel are the latest gambit Sonder has made in its effort to gain inventory in apartment buildings and other multi-family properties throughout New Orleans. News of the master lease came after Sonder announced it had come to an agreement with landlord Mike Motwani to redevelop three buildings along Canal Street.

Those 200 units coming to the upper floors of Canal Street combined with the 111 at the Jung Hotel will eventually bring Sonder’s local portfolio up to 500 units.

According to the most recent city database of short-term rental licences, Sonder had 202 licences in apartment buildings in the Central Business District, as well as some smaller buildings there and in other neighbourhoods in the city.

Bowen said the company’s goal is to help landlords stabilise their holdings.

In Motwani’s case, the three leases for the upper floors have allowed him to secure financing to redevelop the buildings and the master lease created an immediate revenue stream without needing to wait to lease to individual renters.

The New Orleans branch of the venture capital-funded company, which operates in 11 cities worldwide, is now Sonder’s second largest in terms of its rate of listings in operation. Bowen said he was looking to grow the company by using exclusive commercial corridors to fit the company’s model and comply with local regulations.

New Orleans City Council is aiming to restrict short-term rentals to commercial zones after about 18 months of allowing ‘temporary’ licences in residential zones. While not objecting to the regulations, Sonder is opposed to a proposal which would limit short-term rentals in commercial multifamily buildings to 25 per cent.

Bowen said: “Each deal is unique, and a 25 per cent cap can hamper and slow developers.”

Unlike in other Sonder buildings, which don’t feature many traditional hotel amenities, guests will have access to housekeeping and room service.

Sonder has applied for and received a hotel licence for the apartments, making the Jung Hotel a unique building for operating under two business models: a 111-unit short-term rental section atop its 207 traditional guest rooms. Sonder’s licence will also exempt the units from future short-term rental regulations.

Bowen said Sonder’s model, which primarily handles its transactions online and through a smartphone app, was like that of a ‘deconstructed hotel’, representing a ‘different expectation of service’.

“That’s why I think we’re the future,” he added.