REAL PAGE SUED

 DOJ Sues Large U.S. Landlords Over Alleged Price-Fixing — ProPublica

“While Americans across the country struggled to afford housing, the landlords named in today’s lawsuit shared sensitive information about rental prices and used algorithms to coordinate to keep the price of rent high,” said acting Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division. The suit seeks to end “their practice of putting profits over people” and to make housing more affordable.

The legal action is the latest development to follow ProPublica’s initial investigation. Since 2022, senators have introduced legislation seeking to ban the use of rent algorithms similar to RealPage’s, and tenants have filed dozens of ongoing federal lawsuits. Cities around the country, including San Francisco, Philadelphia and Minneapolis, have also moved to bar landlords from using similar algorithms to set rents.

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Revenue management software can help landlords manage rents “efficiently” and avoid discrimination, said a spokesperson for defendant Cushman & Wakefield, which also owns defendant Pinnacle. The spokesperson said that as a manager only, the company does not “set strategy, pricing, or occupancy targets,” decide which software to use, or whether to accept any software’s recommendations.

The lawsuit also named as a defendant Blackstone’s LivCor. Blackstone did not immediately respond to requests for comment.

In addition to naming landlords as defendants in the claim, it also added the attorneys general of Illinois and Massachusetts as co-plaintiffs, bringing the total number of participating states to 10. The states include the country’s most populous — California, which has 17 million renters.

RealPage said that “fewer than 10% of all rental housing units in the U.S. use RealPage software to suggest rental prices, and our software recommendations are accepted less than half the time.”

But a White House report in December said that number could be higher. It said RealPage and census data suggest that as many as 1 in 4 rentals nationwide use a RealPage pricing algorithm. And the company’s penetration is higher in some markets, it said.

Follow link to read the whole article 

FBI SUES REAL PAGE AS A CARTEL

 Office of Public Affairs | Justice Department Sues RealPage for Algorithmic Pricing Scheme that Harms Millions of American Renters | United States Department of Justice

RealPage’s Pricing Algorithm Violates Antitrust Laws

The Justice Department, together with the Attorneys General of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington, filed a civil antitrust lawsuit today against RealPage Inc. for its unlawful scheme to decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments. RealPage’s alleged conduct deprives renters of the benefits of competition on apartment leasing terms and harms millions of Americans. The lawsuit was filed today in the U.S. District Court for the Middle District of North Carolina and alleges that RealPage violated Sections 1 and 2 of the Sherman Act.

The complaint alleges that RealPage contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run RealPage’s algorithmic pricing software. This software then generates recommendations, including on apartment rental pricing and other terms, for participating landlords based on their and their rivals’ competitively sensitive information. The complaint further alleges that in a free market, these landlords would otherwise be competing independently to attract renters based on pricing, discounts, concessions, lease terms, and other dimensions of apartment leasing. RealPage also uses this scheme and its substantial data trove to maintain a monopoly in the market for commercial revenue management software. The complaint seeks to end RealPage’s illegal conduct and restore competition for the benefit of renters in states across the country.

“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” said Attorney General Merrick B. Garland. “We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents. Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”

“Today’s complaint against RealPage illustrates our corporate enforcement strategy in action. We identify the most serious wrongdoers, whether individuals or companies, and focus our full energy on holding them accountable,” said Deputy Attorney General Lisa Monaco. “By feeding sensitive data into a sophisticated algorithm powered by artificial intelligence, RealPage has found a modern way to violate a century-old law through systematic coordination of rental housing prices — undermining competition and fairness for consumers in the process. Training a machine to break the law is still breaking the law. Today’s action makes clear that we will use all our legal tools to ensure accountability for technology-fueled anticompetitive conduct.” 

“RealPage’s egregious, anticompetitive conduct allows landlords to undermine fair pricing and limit housing options while stifling necessary competition,” said Acting Associate Attorney General Benjamin C. Mizer. “The Department remains committed to rooting out illegal schemes and practices aimed at empowering corporate interests at the expense of consumers.” 

“As Americans struggle to afford housing, RealPage is making it easier for landlords to coordinate to increase rents,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “Today, we filed an antitrust suit against RealPage to make housing more affordable for millions of people across the country. Competition – not RealPage – should determine what Americans pay to rent their homes.”

The complaint cites internal documents and sworn testimony from RealPage and commercial landlords that make plain RealPage’s and landlords’ objective to maximize rental pricing and profitability at the expense of renters. For example:

• RealPage acknowledged that its software is aimed at maximizing prices for landlords, referring to its products as “driving every possible opportunity to increase price,” “avoid[ing] the race to the bottom in down markets,” and “a rising tide raises all ships.”
• A RealPage executive observed that its products help landlords avoid competing on the merits, noting that “there is greater good in everybody succeeding versus essentially trying to compete against one another in a way that actually keeps the entire industry down.”
• A RealPage executive explained to a landlord that using competitor data can help identify situations where the landlord “may have a $50 increase instead of a $10 increase for the day.”
• Another landlord commented about RealPage’s product, “I always liked this product because your algorithm uses proprietary data from other subscribers to suggest rents and term. That’s classic price fixing…”

The complaint alleges that RealPage’s agreements and conduct harm the competitive process in local rental markets for multi-family dwellings across the United States. Armed with competing landlords’ data, RealPage also encourages loyalty to the algorithm’s recommendations through, among other measures, “auto accept” functionality and pricing advisors who monitor landlords’ compliance. As a result, RealPage’s software tends to maximize price increases, minimize price decreases, and maximize landlords’ pricing power. RealPage also trained landlords to limit concessions (e.g., free month(s) of rent) and other discounts to renters. The complaint also cites internal documents from RealPage and landlords touting the fact that landlords have responded by reducing renter concessions.

The complaint separately alleges that RealPage has unlawfully maintained its monopoly over commercial revenue management software for multi-family dwellings in the United States, in which RealPage commands approximately 80% market share. Landlords agree to share their competitively sensitive data with RealPage in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data. This creates a self-reinforcing feedback loop that strengthens RealPage’s grip on the market and makes it harder for honest businesses to compete on the merits.

RealPage Inc., is a property management software company headquartered in Richardson, Texas.

Updated August 23, 2024

REAL PAGE SOFTWARE AND THE CURRENT HOUSING CRISIS

 Another must-read article from The Prospect and Maureen Tkacik 

https://prospect.org/infrastructure/housing/2024-06-18-how-algorithm-turned-apartment-pools-green/?fbclid=IwZXh0bgNhZW0CMTEAAR01jXhY8ueja6JANhjlQUJvz0EqvHkcB7fLoA2eyOLL1516vY5oTb78Tl8_aem_ZmFrZWR1bW15MTZieXRlcw

By now, you have probably heard of Yieldstar, the private equity–owned software that numerous plaintiff’s attorneys, tenant advocates, and state attorneys general say is actually a front for a sprawling nationwide cartel that fixes rent prices to ludicrous heights and has caused the cost of an apartment to surge between 50 and 80 percent over the past seven years in several of the markets where the software is employed. In theory, and in its early days, Yieldstar offered property managers “recommendations” for pricing and duration of leases based on real-time data on what competitors were offering. But by the time Yieldstar parent RealPage acquired its biggest competitor, Lease Rent Options, from the hotel price-fixing giant Rainmaker in 2017, the algorithm had metamorphosed from a tool for informing pricing decisions into a weapon for systemically and liberally hiking them to “way too high” levels, to quote a leasing manager in one of the many lawsuits. RealPage has also been accused of retaliating against anyone who balked or attempted to circumvent the program, with newer “clients” especially singled out for indoctrination and surveillance to root out “rogue” leasing agents and ensure maximum compliance with the system’s demands.

RealPage not only raised the rent, but it baked eternal rent hyperinflation into the forecasting math of multifamily housing.

Reading the most recent version of a class action complaint, brought by 12 tenants in federal court in Tennessee, it’s easy to see why the FBI is digging into the case. The effect of Yieldstar’s market dominance and discipline has been utterly staggering, and neither RealPage nor its clients betray any uncertainty over the role the company has played in gouging tenants. Since 2016, rents have climbed 76 percent in Phoenix, 63 percent in Las Vegas, 80 percent in Atlanta, 66 percent in Wilmington, North Carolina, and more than 50 percent in Portland, Seattle, Charlotte, Nashville, and Dallas. One multifamily executive quoted in an antitrust lawsuit recalls, “We let [Yieldstar] push as hard as it would go, and we saw increases as high as 20 percent … Left to our own devices, I can assure you we would have never pushed rents that hard.” And in a 2021 promotional video cheering on the nation’s unprecedented 14 percent year-over-year average rent increase, RealPage executive Andrew Bowen said, “I think [Yieldstar is] driving it, quite honestly.”

And yet, to blame RealPage for the fact that rents are too damn high may actually understate the company’s impact on the state of apartment living in America. Because as the Morningstar DBRS report—and multiple others that directly reference Yieldstar—suggests, RealPage not only raised the rent, but it baked eternal rent hyperinflation into the forecasting math of multifamily housing, fueling a dramatic plunge in underwriting standards (and attendant rise in valuations) that lined the pockets of every manner of real estate speculator in 2021 and 2022. This maneuver led to extreme blowback when interest rates—and the floating-rate interest payments owed on the thousands of apartment buildings that changed hands during those years—began to balloon. Perhaps even more insidiously, when mortgage payments rose in 2022 and landlords should have, by conventional market logic, been jumping to fill empty apartments, RealPage instead gave them the tools to extract ever-higher revenues out of powerless renters, no matter how trash-strewn, roach-infested, or crime-ridden their homes had become.

How an ‘Algorithm’ Turned Apartment Pools Green

RealPage, the rent-fixing software company currently under FBI investigation, also has apps for bogus fees, monetizing vacant apartments and inflating toxic property bubbles.

BY MAUREEN TKACIK

 

JUNE 18, 2024

MORE DEVASTATION FROM REAL PAGE AND CORPORATE REAL ESTATE CARTELS

This is a must-read article:

https://prospect.org/infrastructure/housing/2024-05-22-hell-underwater-landlord/?fbclid=IwZXh0bgNhZW0CMTEAAR1Tg-tp-OESBaxixMzjZMzGsUkL2z_Xwujj5ySjDzegqr3-tm7FXhnsALc_aem_ZmFrZWR1bW15MTZieXRlcw

Hell Is an Underwater Landlord

Millions of tenants are trapped in a rotten cycle of overflowing trash, daily water outages, and a healthy rat population.

BY MAUREEN TKACIK

 

MAY 22, 2024

...four years earlier, Matt Picheny had been an internet advertising consultant in Brooklyn, Brent Ritchie was selling industrial motors in Canada, and Koteswar “Jay” Gajavelli had been running an IT consultancy in Irving, Texas, that claimed Qualcomm and ESPN as clients. But by the start of the pandemic, all three men had begun rebranding themselves as “finfluencers,” social media mavens who promised their growing audience of upper-middle-class telecommuters whose savings had been temporarily inflated by stimulus checks emancipation from wage slavery through the magic of “passive income” generated by apartment complexes. Like a lot of their peers, they immediately set their sights on Houston, which had topped the national population growth charts for decades and boasted such lax tenant protections that two law professors at the University of Texas at Austin wrote a study in 2018 on the city’s “epidemic of dangerous apartments.”

Gajavelli, Ritchie, Picheny, and friends bought the Estates in a package deal with three other buildings in Houston’s Westchase neighborhood, through Gajavelli’s company Applesway Investment Group. The 1,330 apartments in all sold for $119 million, or just under $90,000 a unit, a steep price for buildings that currently advertise one-bedroom apartments starting at $699 a month. But within a few months, Gajavelli would pay $56 million for a massive but severely dilapidated apartment complex across town in East Houston, where a police officer had just been killed trying to arrest a suspect on drug charges, in a transaction that would fail so spectacularly it would become the subject of city council sessions, newspaper editorials, and a tour from the lame-duck mayor.

As a syndicator of other people’s money, Gajavelli had a strong incentive to overpay for properties. His take of every deal, according to a lawsuit filed by 123 of his investors, was calculated as a fixed percentage of the acquisition price, plus a percentage of the monthly rental revenue, and then a percentage of the resale price. The Wall Street Journal reported last year that syndicators like Gajavelli raised $111 billion for real estate investments during the pandemic, and generally collected commissions of between 2 and 5 percent of each deal. In Houston, valuations surged to more than $150,000 per unit, from about $90,000 pre-pandemic, as transaction volume exploded to nearly $10 billion in the fourth quarter of 2021 alone.

The overheated multifamily market would take a devastating toll on apartment dwellers like McMullen-Clarke and her neighbors when the Federal Reserve began to hike interest rates in early 2022, quickly doubling and then tripling the interest payments on Gajavelli’s floating-rate loans. Sidney Beaty, a researcher with the Austin-based low-income housing information resource Texas Housers who previously worked for the state housing department, says it felt like the state was suddenly awash in squalid, barely inhabitable apartment buildings. “You just had a lot of buildings that maybe had decent inspection scores a couple years ago, that were suddenly so deplorable they’re making the evening news,” Beaty said.

LAWSUIT AGAINST REAL PAGE IN TENNESSEE

We need more lawsuits like this! 

https://www.courtlistener.com/docket/67174489/728/in-re-realpage-inc-rental-software-antitrust-litigation-no-ii/?fbclid=IwZXh0bgNhZW0CMTEAAR01-NSOhPI8hmj2WbiXjLWbncudvt1k2iNpXNjAFKGykrwhuP2clwDsUuE_aem_ZmFrZWR1bW15MTZieXRlcw

 I. INTRODUCTION 1. From at least January 2016, through the present (the “Conspiracy Period”), Defendants engaged in a nationwide conspiracy to fix and inflate the price of multifamily rental housing across the country. Leveraging their control of the multifamily rental housing market from at least January 2016, Defendants conspired to limit supply and raise multifamily rental housing Case 3:23-md-03071 Document 728 Filed 02/05/24 Page 3 of 302 PageID #: 9023 4 prices, causing substantial damages to Plaintiffs and other members of the Class whose ability to obtain affordable housing depended on getting competitive prices for the units they rented. Several witness accounts, including 12 discussed herein, rental price and occupancy data, economic evidence, and public investigations,1 confirm the anticompetitive conduct taken pursuant to this agreement.

The Defendants:

RealPage, Inc., Thoma Bravo Fund XIII, L.P., Thoma Bravo Fund XIV, L.P., and Thoma Bravo

COMPANY; MID-AMERICA

COMMUNITIES, INC.; MID-AMERICA

APARTMENTS, L.P.; MISSION ROCK

RESIDENTIAL, LLC; MORGAN

PROPERTIES MANAGEMENT COMPANY,

LLC; PINNACLE PROPERTY

MANAGEMENT SERVICES, LLC;

PROMETHEUS REAL ESTATE GROUP,

INC.; THE RELATED COMPANIES, L.P.;

RELATED MANAGEMENT COMPANY L.P.;

ROSE ASSOCIATES, INC.; RPM LIVING,

LLC; SARES REGIS GROUP COMMERCIAL,

INC.; SECURITY PROPERTIES

RESIDENTIAL, LLC; SHERMAN

ASSOCIATES, INC.; SIMPSON PROPERTY

GROUP, LLC; THRIVE COMMUNITIES

MANAGEMENT, LLC; CROW HOLDINGS,

LP; TRAMMELL CROW RESIDENTIAL

COMPANY; UDR, INC.; WINDSOR

PROPERTY MANAGEMENT COMPANY;

WINNCOMPANIES LLC;

WINNRESIDENTIAL MANAGER CORP.;

AND ZRS MANAGEMENT, LLC.

Defendants.

Case 3:23-md-03071 Document 728 Filed 02/05/24 Page 2 of 302 PageID #: 9022

3

L.P. (collectively, “RealPage”); Apartment Management Consultants, LLC; Avenue5 Residential,

LLC; Bozzuto Management Company; First Communities Management, Inc.; FPI Management,

Inc.; Highmark Residential, LLC; Mission Rock Residential, LLC; Thrive Communities

Management, LLC; and ZRS Management, LLC (collectively the “Managing Defendants”);

Apartment Income REIT Corp., d/b/a Air Communities; Allied Orion Group, LLC; Bell Partners,

Inc.; BH Management Services, LLC; Brookfield Properties Multifamily LLC; Camden Property

Trust; CH Real Estate Services, LLC; CONAM Management Corporation; Cortland Management,

LLC; CWS Apartment Homes LLC; Dayrise Residential, LLC; ECI Group, Inc.; Equity

Residential; Essex Property Trust, Inc.; Greystar Management Services, LLC; Independence

Realty Trust, Inc.; Kairoi Management, LLC; Knightvest Residential; Lantower Luxury Living,

LLC; Lincoln Property Company; Mid-America Communities, Inc., and Mid-America

Apartments, L.P.; Morgan Properties Management Company, LLC; Pinnacle Property

Management Services, LLC; Prometheus Real Estate Group, Inc.; The Related Companies, L.P.;

Related Management Company L.P.; Rose Associates, Inc.; RPM Living, LLC; Sares Regis Group

Commercial, Inc.; Security Properties Residential, LLC; Sherman Associates, Inc.; Simpson

Property Group, LLC; UDR, Inc.; Windsor Property Management Company; WinnCompanies

LLC; and WinnResidential Manager Corp. (collectively, “Owner-Operators”); and CONTI Texas

Organization, Inc., d/b/a CONTI Capital; Crow Holdings, LP; and Trammell Crow Residential

Company (collectively “Owners”). 

MF1 IS EVIL EVEN WHEN VIEWED THROUGH A TRADITIONAL REAL ESTATE LENS

 Worth reading for many reasons. MF1 is just one of many. Oh,  BTW, you will hear a lot of traditional investors say that CLO's are more stable than CDO's. That used to be true, but it is not anymore. The market will crash, and it will cause problems for investors. Then we will hear some outrage. And like 2008, taxpayers will finance the bail outs.

https://therealdeal.com/magazine/national-august-2023/when-the-tides-go-out/?fbclid=IwZXh0bgNhZW0CMTEAAR3AsbG4ZvL3_63Ckzm_64Bazi8LzDw0dnRc8SbrVKz2fUFzRB09ceYcLYU_aem_ZmFrZWR1bW15MTZieXRlcw

“You could make an argument the writing was on the wall by the end of 2021, and especially the first quarter of 2022,” one Sun Belt-focused investor said.

Through summer 2022, however, MF1 kept issuing floating-rate loans on deals that hinged on the ability to substantially raise cash flows. Now, across MF1’s almost $11 billion amortizing loan book, almost half of the deals are either watchlisted or delinquent, according to The Real Deal’s analysis of Morningstar data. MF1 declined to comment.

The Tides problem is particularly acute: At least $425 million in MF1-issued loans in its portfolio have landed on servicer watchlists after rising rates hurt cash flow and made it tough for the firm to make interest payments on its debts.

The bulk of MF1’s issued loans come due in the next 18 months, at a time of rising defaults and a dearth of new financing. Lenders will be left to make tough choices — take back the keys or sell loans at a loss.

LANDLORD BLACKLISTS SHOULD BE ILLEGAL

Every person needs a place to live.  Landlords should not have the right to deny housing for any reason.  

We also need more public housing and more co-op housing.  And definitely corporate ownership of residential properties needs to be eliminated altogether. 

This article is about Australia, but these blacklists need to be outlawed everywhere.

https://www.abc.net.au/news/2023-04-24/rental-blacklists-tenancy-databases-should-you-be-worried/102249222