The financial aftershocks from Sonder’s collapse just hit Lower Manhattan again. A $131.5 million commercial mortgage tied to the Moinian Group’s 2 Washington Street in the Financial District was moved into special servicing this week, tightening the screws on refinancing and conversion plans for the 22-story property and raising fresh questions for lenders and landlords watching the deal.
As first reported by The Real Deal and summarized by NNN Triple Net, the $131.5 million commercial mortgage-backed securities loan landed in special servicing after cash-flow problems tied to Sonder’s wind-down. The debt is split among three conduit deals, two issued by Citigroup and Bank of America and a third securitized in 2021, and it is not scheduled to mature until August 2031.
Moinian sues, guests left in limbo
The Moinian family, which leased 14 floors at 2 Washington Street to Sonder under a 2020 master lease reportedly worth about $1.3 million a month, has already gone to court. The landlords filed suit seeking at least $10 million, alleging that guests were left unable to retrieve belongings or refused to leave after Sonder abruptly shut down operations.
Bisnow reports that the owners want the courts to return control of 2 Washington and a NoMad property. The case captures how fast a master-lease collapse can turn into a tangle of legal fights, stranded guests and operational headaches for everyone in the building.
30-day rules complicate any conversion
A special-servicer note and loan documents indicate that most of the building’s 345 units are restricted to stays of 30 days or less, with roughly 60 exceptions. That limitation makes any move to convert the asset into conventional long-term apartments both expensive and slow.
As detailed by The Real Deal and in a prospectus on the SEC’s EDGAR site, a “Residential Reversion” would require new permits, updated certificates of occupancy and minimum debt-yield thresholds before units could be recoded for multifamily use. Those technical and zoning hurdles leave servicers with very few quick exit options.
What servicers and investors are watching
Special-servicing activity has been elevated across the CMBS market as office and hospitality loans struggle to refinance, according to S&P Global Ratings. Industry coverage notes that servicers typically chase extensions, loan sales or borrower recapitalizations, and sometimes advance payments while they try to engineer a longer-term workout.
For 2 Washington Street, the playbook will hinge on whether a buyer steps up, bondholders accept a haircut or the owner finds a way to rebuild dependable long-term cash flow from a building that was designed for short stays.
Legal stakes and next steps
Sonder announced an immediate wind-down in November 2025 and said it would pursue Chapter 7 liquidation. Interim CEO Janice Sears said the firm was “devastated” to liquidate after integration delays and a slide in revenue. Sonder’s press release and reporting from Bloomberg lay out the shutdown in stark detail.
Because the CMBS debt on 2 Washington Street has years to go before its hard maturity date, servicers technically have room to work through a restructuring. Still, the shift into special servicing and Moinian’s lawsuit all but guarantee that any resolution will be slow, heavily negotiated and closely watched by other New York owners who inked similar master leases at the top of the market.
What to watch next: filings in state court on the Moinian case, special-servicer notices that spell out workout terms, and any bids or restructuring moves for the loan or the building itself. NNN Triple Net and Multi-Housing News provide background on the property’s financing and prior conversion plans, details that will matter if a buyer or lender takes another run at a residential reversion.
