Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 1 of 214
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF GEORGIA
`ATLANTA DIVISION
`
`
`
`
`Case No.
`
`
`
`
`CLASS ACTION
`
`JURY TRIAL DEMANDED
`
`MAYA HAYNES, Individually and on
`Behalf of All Others Similarly Situated,
`
`Plaintiff,
`
`v .
`
`REALPAGE, INC.; THOMA BRAVO
`FUND XIII, L.P.; THOMA BRAVO
`FUND XIV, L.P.; THOMA BRAVO
`L.P.; APARTMENT INCOME REIT
`CORP., d/b/a AIR COMMUNITIES;
`APARTMENT MANAGEMENT
`CONSULTANTS, LLC; AVENUE5
`RESIDENTIAL, LLC; BELL
`PARTNERS, INC.; BH
`MANAGEMENT SERVICES, LLC;
`BOZZUTO MANAGEMENT
`COMPANY; 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; FIRST
`COMMUNITIES MANAGEMENT,
`INC.; GREYSTAR MANAGEMENT
`SERVICES, LLC; HIGHMARK
`RESIDENTIAL, LLC;
`INDEPENDENCE REALTY TRUST,
`INC.; LINCOLN PROPERTY
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF GEORGIA
`ATLANTA DIVISION
`
`
`
`
`Case No.
`
`
`
`
`CLASS ACTION
`
`JURY TRIAL DEMANDED
`
`MAYA HAYNES, Individually and on
`Behalf of All Others Similarly Situated,
`
`Plaintiff,
`
`v .
`
`REALPAGE, INC.; THOMA BRAVO
`FUND XIII, L.P.; THOMA BRAVO
`FUND XIV, L.P.; THOMA BRAVO
`L.P.; APARTMENT INCOME REIT
`CORP., d/b/a AIR COMMUNITIES;
`APARTMENT MANAGEMENT
`CONSULTANTS, LLC; AVENUE5
`RESIDENTIAL, LLC; BELL
`PARTNERS, INC.; BH
`MANAGEMENT SERVICES, LLC;
`BOZZUTO MANAGEMENT
`COMPANY; 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; FIRST
`COMMUNITIES MANAGEMENT,
`INC.; GREYSTAR MANAGEMENT
`SERVICES, LLC; HIGHMARK
`RESIDENTIAL, LLC;
`INDEPENDENCE REALTY TRUST,
`INC.; LINCOLN PROPERTY
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 2 of 214
`
`COMPANY; MID-AMERICA
`APARTMENTS L.P.; MISSION ROCK
`RESIDENTIAL, LLC; MORGAN
`PROPERTIES MANAGEMENT
`COMPANY, LLC; PINNACLE
`PROPERTY MANAGEMENT
`SERVICES, LLC; THE RELATED
`COMPANIES L.P.; RELATED
`MANAGEMENT COMPANY L.P.;
`RPM LIVING, LLC; SIMPSON
`PROPERTY GROUP, LLC; CROW
`HOLDINGS, LP; TRAMMELL CROW
`RESIDENTIAL COMPANY;
`WINDSOR PROPERTY
`MANAGEMENT COMPANY;
`WINNCOMPANIES LLC;
`WINNRESIDENTIAL MANAGER
`CORP.; AND ZRS MANAGEMENT,
`LLC;
`
`
`Defendants.
`
`
`
`
`
`CLASS ACTION COMPLAINT
`
`Plaintiff Maya Haynes, individually and on behalf of all others similarly
`
`situated (the “Class,” as defined below), upon personal knowledge as to the facts
`
`pertaining to herself and upon information and belief as to all other matters, and
`
`upon the investigation of counsel, brings this class action complaint to recover treble
`
`damages, injunctive relief, and other relief as appropriate, based on violations of
`
`federal antitrust laws and state laws against Defendants RealPage, Inc., Thoma
`
`2
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 3 of 214
`
`Bravo Fund XIII, L.P., Thoma Bravo Fund XIV, L.P., and Thoma Bravo L.P.
`
`(collectively, “RealPage”); and Apartment Income REIT Corp., d/b/a AIR
`
`Communities; Apartment Management Consultants, LLC; Avenue5 Residential,
`
`LLC; Bell Partners, Inc.; BH Management Services, LLC; Bozzuto Management
`
`Company; 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; First
`
`Communities Management, Inc.; Greystar Management Services, LLC; Highmark
`
`Residential, LLC; Independence Realty Trust, Inc.; Lincoln Property Company;
`
`Mid-America Apartments, L.P.; Mission Rock Residential, LLC; Morgan Properties
`
`Management Company, LLC; Pinnacle Property Management Services, LLC; The
`
`Related Companies L.P.; Related Management Company L.P.; RPM Living, LLC;
`
`Simpson Property Group, LLC; Crow Holdings, LP; Trammell Crow Residential
`
`Company; Windsor Property Management Company; WinnCompanies LLC;
`
`WinnResidential Manager Corp.; and ZRS Management, LLC (collectively, the
`
`“Lessors” or “Lessor Defendants,” and together with RealPage, “Defendants”).
`
`I.
`
`INTRODUCTION
`
`1.
`
`From at least January 2016, through the present, Defendants engaged
`
`in a nationwide conspiracy to fix and inflate the price of multifamily rental housing
`
`3
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 4 of 214
`
`across the country. Leveraging their control of the multifamily rental housing
`
`market from at least January 2016, Defendants each caused substantial damages to
`
`Plaintiff 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 9 discussed herein, rental price and occupancy data, economic
`
`evidence, and public investigations,1 confirm this anticompetitive conduct.
`
`2.
`
`Defendants are RealPage, the developer of an integrated technology
`
`platform that provides a host of software solutions for the multifamily rental housing
`
`markets, including revenue management software solutions – a category which
`
`includes at least RealPage products branded “RealPage Revenue Management,”
`
`Lease Rent Options (“LRO”), YieldStar, and AI Revenue Management – and several
`
`owners and operators of large-scale multifamily residential apartment buildings that
`
`used RealPage’s Revenue Management Solutions2 to coordinate and agree upon
`
`rental housing pricing and supply (“Lessor Defendants”).
`
`
`1 Heather Vogell, Rent Going Up? One Company’s Algorithm Could Be Why.,
`PROPUBLICA (Oct. 15, 2022), https://www.propublica.org/article/yieldstar-rent-
`increase-realpage-rent (ProPublica report shedding light on Defendants’ conspiracy
`and showing that rents in areas where RealPage clients control a high percentage of
`rental units have increased at a significantly higher rate).
`2 RealPage’s revenue management software solutions, including RealPage Revenue
`Management, LRO, YieldStar, and AI Revenue Management, will be referred to
`collectively herein as “Revenue Management Solutions” or “RMS.”
`
`4
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 5 of 214
`
`3.
`
`Each Lessor Defendant agreed that: they would delegate their rental
`
`price and supply decisions to a common decision maker, RealPage; share the
`
`proprietary data necessary for RealPage to make those decisions; and, then abide by
`
`RealPage’s price and supply decisions. As RealPage put it, it offered clients the
`
`ability to “outsource daily pricing and ongoing revenue oversight”3 to RealPage,
`
`allowing Defendant RealPage to set prices for its clients’ properties “as though we
`
`[RealPage] own them ourselves.”4
`
`4.
`
`Rather than function as separate economic entities, Lessor Defendants
`
`agreed to make key competitive decisions regarding the price and supply of
`
`multifamily apartments, collectively. As Emily Mask, an executive from Defendant
`
`ECI Group, Inc. explained in 2019, “[t]he design and functionality of [RealPage’s]
`
`LRO offers detailed insight into how actual competitors impact pricing strategies . .
`
`. With LRO we rarely make any overrides to the [pricing] recommendations . . . [W]e
`
`are all technically competitors, LRO helps us to work together . . . to make us all
`
`
`3 Press Release, RealPage, Inc., YieldStar Offers Revenue Advisory Services to
`Multifamily
`Owners
`and
`Managers
`(Mar.
`1,
`2010),
`https://www.realpage.com/news/yieldstar-offers-revenue-advisory-services-to-
`multifamily-owners-and-managers/.
`4RealPage
`MEDVE,
`Presentation,
`Renewal
`Reporting
`https://medve.com/assets/airm-renewal-reporting.pdf (last accessed June 14, 2023).
`
`5
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 6 of 214
`
`more successful in our pricing . . . LRO is designed to work with a community in
`
`pricing strategies, not work separately.”5
`
`5.
`
`RealPage’s clients provide RealPage with vast amounts of their non-
`
`public proprietary data, including their lease transactions, rent prices, and occupancy
`
`and inventory levels. Each client’s proprietary data is fed into a common data pool,
`
`along with additional data collected by Defendant RealPage’s myriad other data-
`
`analytics, business
`
`intelligence, and rental-management software products.
`
`RealPage then trains its machine learning and artificial intelligence across that pool
`
`of its clients’ proprietary data and uses algorithms to generate rental prices daily for
`
`each of RealPage’s client’s available units through its RMS. Property managers
`
`agree to adopt RealPage’s pricing up to 80%-90% of the time, knowing that if they,
`
`alongside their co-conspirators, adhere to RealPage’s pricing decisions, they will
`
`
`5 The RealPage e-book, PROVEN: B & C Assets Ace the Market with RealPage:
`How Two Companies Pushed Performance Over 3+% Above Market (2019)
`(hereinafter, “RealPage e-book B & C Assets Ace the Market”) (detailing two case
`studies in which RealPage clients achieved revenue growth and outperformed the
`market after adopting RealPage’s pricing recommendations. Defendant ECI
`achieved 5%-7% year-over-year revenue growth after adopting RealPage’s pricing
`recommendations and BH Management saw a 4.8% “outperformance to the market,”
`and 4% between its own properties using RealPage’s pricing recommendations
`against those that had not yet adopted RealPage pricing).
`
`6
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 7 of 214
`
`collectively raise market prices and avoid price competition.6 Jeffrey Roper,
`
`RealPage’s main architect, publicly described the dilemma as: “If you have idiots
`
`undervaluing, it costs the whole system.”7
`
`6.
`
`To prevent their staff from exercising independent judgment when
`
`setting rents, Lessor Defendants and Defendant RealPage have established a
`
`rigorous monitoring and compliance system to ensure decision making on pricing
`
`remains with RealPage.
`
`7.
`
`For example, Defendant RealPage assigns many of their clients
`
`“Pricing Advisors,” also called “Revenue Managers,”8 to monitor the client’s
`
`
`6 Moreover, witness accounts, discussed below, confirm that RealPage clients were
`aware that their proprietary information was being collected and pooled with that
`provided by their regional competitors and that RealPage’s pricing algorithm made
`use of this data superset. Indeed, RealPage is transparent about its use of pooled
`data in its “Revenue Management FAQs,” section, providing that in addition to a
`“variety of [other] sources, . . . competitor rent data is one of several data inputs”
`into the pricing algorithm. Frequently Asked Questions About Revenue Management
`Software, REALPAGE, INC., https://www.realpage.com/asset-optimization/revenue-
`management/?utm_source=google&utm_medium=cpc&utm_campaign=Spear+-
`+HDDR+
`Revenue+Management+-
`+Search&utm_content=search&utm_adgroup=Revenue+Management
`&utm_device=c&utm_keyword=ai%20revenue%20management&gad=1&gclid=C
`j0KCQjwmZejBhC_ARIsAGhCqndpmEtz_7CgdbVOuCLdRHSoZlU42vJD2ors4f
`Yig6K9svH0xlSoJ9saAnadEALw_wcB&showPdf=true (last accessed Aug. 24,
`2023) (hereinafter, “RealPage Revenue Management FAQs”).
`7 Vogell, supra, note 1.
`8RealPage
`Management,
`Revenue
`AI
`https://www.realpage.com/asset-optimization/revenue-
`
`
`REALPAGE,
`
`INC.,
`
`7
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 8 of 214
`
`compliance with RealPage’s pricing decisions, and to disseminate confidential and
`
`commercially sensitive information provided to RealPage by the client’s competitors
`
`to encourage compliance with RealPage’s decisions. As RealPage put it to its
`
`property management clients, “[y]our Pricing Advisor is an extension of your team
`
`and empowered with the authority required for success.”9 Not all RealPage revenue
`
`management clients are assigned a Pricing Advisor. Indeed, some of RealPage’s
`
`largest property management clients have their own internal revenue managers who
`
`
`management/?utm_source=google&utm_medium=cpc&utm_campaign =Spear+-
`+HDDR+Revenue+Management+-+Search&utm_content=search&utm_adgroup
`=Revenue+Management&utm_device=c&utm_keyword=ai%20revenue%20manag
`ement&gad=1&gclid=Cj0KCQjwmZejBhC_ARIsAGhCqndpmEtz_7CgdbVOuCL
`dRHSoZlU42vJD2ors4fYig6K9svH0xlSoJ9saAnadEALw_wcB
`(last
`accessed
`Aug. 24, 2023) (describing RealPage’s Revenue Management Advisory services as
`providing “expert oversight of [clients’] pricing strategy”).
`In a video posted on RealPage’s website titled “Best Practices for Revenue
`Management Webcast,” hosted by RealPage’s Chief Economist, Greg Willett, Tracy
`Paulk, who holds two titles at RealPage according to LinkedIn – VP Consumer
`Solutions and Revenue Management and VP, LRO Professional Services –
`explained “You’ll hear someone referred to as a revenue manager or pricing advisor,
`they’re the same thing.” Best Practices for Revenue Management Webcast, RealPage
`Videos, at (10:39-10:58), https://www.realpage.com/videos/best-practices-revenue-
`management-webcast/ (last accessed Aug. 24, 2023) (herein, “Best Practices
`Webcast”). Reference to “Pricing Advisors” herein refers to both Pricing Advisors
`and Revenue Managers.
`9 AI Revenue Management, THE MEDVE GROUP, INC., (June 23, 2021),
`https://medve.com/assets/airm-manager-training-medve-management-6.23.2021-
`(1).pdf.
`
`8
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 9 of 214
`
`have undergone extensive training provided by RealPage, to act in this capacity.10
`
`For many, any attempt to diverge from RealPage’s daily unit pricing required the
`
`client to provide a justification to a Pricing Advisor, or if the client did not subscribe
`
`to RealPage’s advisory services, to an internal RealPage-trained revenue manager in
`
`order to obtain their approval for the proposed deviation. RealPage accepts very few
`
`justifications for any requested override, routinely rejecting clients’ claims that
`
`RealPage’s prices were off-market or out-of-step with local property conditions.
`
`While RealPage claims that all pricing decisions are ultimately left to its clients,
`
`various witnesses confirm that, in their experience, no modifications to RealPage’s
`
`recommended pricing can be made without RealPage’s prior approval. According
`
`to one former RealPage Pricing Advisor (“Witness 1”),11 at least some Pricing
`
`Advisors informed their assigned Lessors that they were without discretion to
`
`override pricing determined by RealPage and that Lessors had to adhere to those
`
`
`10 According to RealPage’s VP of Consumer Relations and Revenue Management,
`and VP of LRO Solutions, “often times when you hit that 20,000 units or more, you
`start to see the value [in hiring an internal revenue manager].” Best Practices
`Webcast, supra note 9 (17:40-18:53).
`11 Defendants and the Court were provided with the identities of all Witnesses named
`herein, at the time of the filing of Multifamily Plaintiff’s Amended Consolidated
`Complaint, (ECF 291) in In re: RealPage, Inc., Rental Software Antitrust Litigation
`(No. II), Case No. 3:23-md-3071 (M.D. Tenn.).
`
`9
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 10 of 214
`
`pricing decisions.12 As one leasing manager as a RealPage client (“Witness 2”)13
`
`put it, “I knew [RealPage’s prices] were way too high, but [RealPage] barely budged
`
`[when I requested a deviation].”
`
`8.
`
`Aside from daily and weekly interactions, RealPage provides many of
`
`its RMS clients with quarterly one-on-one “Performance to Market” meetings,
`
`designed to identify how compliant the client was with RealPage’s pricing
`
`recommendations during the prior quarter, and quantify any purported revenue loss
`
`that RealPage attributed to the client’s deviations from its pricing recommendations.
`
`A former RealPage executive (“Witness 3”)14 who was instrumental in the
`
`development of RealPage’s RMS confirmed
`
`that RealPage’s pricing
`
`recommendations were accepted at “very high rates.”
`
`
`12 Witness 1 worked as a RealPage Pricing Advisor from 2015 through 2018.
`13 Witness 2 worked as the Assistant Community Manager for Sunrise Management
`(now “CloudTen Residential”) from 2020 through August 2022, where she had
`regular, direct interactions with RealPage Pricing Advisors and was responsible for
`reviewing RealPage’s daily price recommendations for the properties she managed.
`Prior to that, Witness 2 worked as a leasing consultant for Defendant Greystar
`(October 2019 to June 2020), utilizing RealPage’s pricing platform. Witness 2 also
`worked as a leasing consultant with Defendant FPI Management, Inc. (“FPI
`Management”), however she did not use RealPage’s pricing platform at Defendant
`FPI Management as the building she worked at was classified as affordable housing.
`14 Witness 3 is a data scientist and former innovation and marketing executive at
`RealPage, from 2015 through 2019.
`
`10
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 11 of 214
`
`9.
`
`Property management companies’ executives also placed pressure on
`
`their leasing managers to implement RealPage’s prices. For example, Defendant
`
`Lincoln Property Company (“Lincoln”) forced leasing managers wishing to deviate
`
`from RealPage’s prices to submit a request to the corporate office. A former Lincoln
`
`leasing consultant in Nashville (“Witness 4”) recalls that these deviation requests
`
`were rejected almost 99% of the time, and that Lincoln’s corporate office would
`
`reiterate that RealPage’s “rates are what they are.” Similarly, one former RealPage
`
`Pricing Advisor (“Witness 5”) recalls the agitation expressed by Christina Agra-
`
`Hughes, President of the property management company First Pointe Management
`
`Group, upon learning about her staff’s deviation from Defendant RealPage’s prices
`
`during a meeting with RealPage staff and asked rhetorically, “why the hell aren’t my
`
`teams following the model!?” To help their clients discipline staff, RealPage rolled
`
`out a new version of its RMS products in 2019, referred to internally as “Price
`
`Optimization 2” or “POV2.” That update tracked not only a client’s acceptance rate,
`
`but the identity of the client’s staff that requested a deviation from RealPage’s price.
`
`Additionally, to discourage any “temptation to override the [RealPage pricing]
`
`algorithm if rents appear too aggressive,”15 compensation for certain property
`
`
`15 Paul R. Bergeron III, Revenue Management: Why It Works, NAT’L APARTMENT
`ASS’N (July 30, 2015; updated Oct. 27, 2016), https://www.naahq.org/revenue-
`management-why-it-works.
`
`11
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 12 of 214
`
`management personnel are
`
`tied
`
`to compliance with RealPage’s pricing
`
`recommendations.
`
`10. As the stated goal of RealPage’s RMS is for its clients to “outperform
`
`the market [by] 3% to 7%,”16 the inevitable outcome of Defendants’ coordinated
`
`price setting was that rents have been pushed above competitive levels. Figures 1(a)
`
`and 1(b) below show the steady increase in rental prices in Atlanta, Georgia (Fig.
`
`1(a)) and throughout various metropolitan areas (Fig. 1(b)) as more and more
`
`property managers adopted RealPage:
`
`Figure 1(a): Average Rents in Atlanta Georgia, 2015-2023
`
`
`Average Rents In Atlanta, Georgia (2015-2023)
`
`3/1/2023
`11/1/2022
`7/1/2022
`3/1/2022
`11/1/2021
`7/1/2021
`3/1/2021
`11/1/2020
`7/1/2020
`3/1/2020
`11/1/2019
`7/1/2019
`3/1/2019
`11/1/2018
`7/1/2018
`3/1/2018
`11/1/2017
`7/1/2017
`3/1/2017
`11/1/2016
`7/1/2016
`3/1/2016
`11/1/2015
`7/1/2015
`3/1/2015
`
`2000
`1900
`1800
`1700
`1600
`1500
`1400
`1300
`1200
`1100
`1000
`
`
`16 Vogell, supra, note 1 (citing RealPage website, YieldStar Predicts Market Impact
`Down
`to Unit
`Type
`and
`Street
`Location, REALPAGE,
`INC.,
`https://www.realpage.com/videos/yieldstar-data-scientists-help-manage-supply-
`demand/) (last accessed Aug. 24, 2023).
`
`
`
`12
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 13 of 214
`
`Figure 1(b): Average Rents in Major Metro Areas, 2015-2023
`
`
`
`
`
`
`
`
`11. RealPage and the Lessor Defendants admit the impact of Defendant
`
`RealPage’s RMS on rental prices. After praising a 14% increase in average rental
`
`prices across 2021 at an industry event, RealPage Vice President Jay Parsons asked
`
`Andrew Bowen, RealPage’s then Vice President of Investor Markets, what role he
`
`thought RealPage had played in the unprecedented increase. “I think it’s driving it,
`
`quite honestly,” Bowen replied.17 Individuals who previously worked for RealPage
`
`17 Vogell, supra, note 1.
`
`
`
`13
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 14 of 214
`
`and its clients express dismay with the way RealPage has enabled Lessor Defendants
`
`to collectively set and raise rents and confirm that rental prices were artificially
`
`raised. For example, one Leasing Manager (Witness 2) reported that, in 2021, the
`
`first year the property she worked at employed RealPage to set rents, rents for the
`
`building’s standard two-bedroom units were raised from $1,650/month to
`
`$2,100/month, an increase of approximately 27%, despite no improvements made to
`
`the units. A business manager at Defendant Pinnacle Property Management
`
`Services, LLC (“Witness 6”) said that RealPage caused them to raise monthly rents
`
`on some units by several hundreds of dollars during the beginning and middle of the
`
`Covid-19 pandemic: “[RealPage] was recommending that I raise rents $400 to $500
`
`a month per unit[.] It was a nightmare. It was embarrassing. It was absolutely
`
`ridiculous.” Witness 2, who also worked with RealPage in connection with her role
`
`as a leasing consultant with Defendant Greystar Property Management Services,
`
`LLC, “completely agrees” that rental prices in her region were artificially inflated
`
`upon the adoption of RealPage pricing recommendations.
`
`12.
`
`Indeed, a former RealPage executive who was directly involved in the
`
`creation of the original software that is now integrated into RealPage’s RMS
`
`expressed dismay with the way RealPage has enabled Lessors to collectively raise
`
`rents at record pace. Witness 3 described this practice of centrally setting, and
`
`14
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 15 of 214
`
`consistently raising rental rates as having “bastardized” RealPage’s original “supply
`
`and demand model.”
`
`13.
`
`In 2017, RealPage acquired the revenue management software
`
`developed by the Rainmaker Group, LRO. By integrating LRO into its own revenue
`
`management system, RealPage acknowledged that the combined “data science talent
`
`and modeling tools through these acquisitions allows our customers to achieve better
`
`harvesting and placement of capital in the rental housing industry.”18 According to
`
`RealPage, “[t]his acquisition extended our revenue management footprint,
`
`augmented our repository of real-time lease transaction data, and increased our data
`
`science talent and capabilities. We also expect the acquisition of LRO to increase
`
`the market penetration of our YieldStar Revenue Management solution and drive
`
`revenue growth in our other asset optimization solutions.”19 RealPage’s acquisition
`
`of LRO indeed increased market penetration of its RMS, precipitating a structural
`
`shift in the forces of supply and demand.
`
`14. Both parties to the acquisition were excited by the concentration of data
`
`that would result from the deal, and in the hands of RealPage. In a February 28,
`
`
`18 RealPage Inc., 2017 Annual Report (Form 10-K) at 39 (Mar. 1, 2018),
`https://www.sec.gov/Archives/edgar/data/1286225/000128622518000008/rp-
`20171231x10k.htm (hereinafter, RealPage 2017 10-K Form).
`19 RealPage 2017 Form 10-K, supra note 18.
`
`15
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 16 of 214
`
`2017 article concerning the pending deal, Tammy Farley, President of the
`
`Rainmaker Group was quoted as saying, “[w]e’re obviously proud of our LRO
`
`successes over the past decade and this combining of two powerhouse players
`
`presents exciting opportunities and the ideal platform for our multifamily team to
`
`execute in a much bigger way on a global scale.”20 Likewise, RealPage’s Chairman
`
`and CEO, Steve Winn, echoed, “With many apartment markets softening around the
`
`US, now is the right time to bring together the best data-science talent, a
`
`comprehensive lease-transaction database and RealPage’s powerful suite of pricing,
`
`demand and credit optimization tools into one comprehensive platform.”21
`
`15. RealPage has since made “enhancements” to LRO and integrated both,
`
`YieldStar and LRO to “form the industry’s most comprehensive suite of solutions
`
`for precision data analytics and asset optimization for rental housing assets,”22
`
`introduced as “AI Revenue Management” in 2020.
`
`
`20 The Rainmaker Group Announces Sale of Multifamily Housing Assets to
`RealPage,
`Inc.,
`HOSPITALITY
`NET
`(Feb.
`28,
`2017),
`https://www.hospitalitynet.org/news/4081257.html (last accessed Aug. 24, 2023).
`21 Paul Bubny, RealPage Adds LRO to Analytics Platform, ALM GLOB., LLC (Feb.
`28, 2017), https://www.globest.com/sites/paulbubny/2017/02/28/realpage-adds-lro-
`to-analytics-platform/ (last accessed Aug. 24, 2023) (emphasis added).
`22 “RealPage Closes Acquisition of Lease Rent Options, LRO®,” BUSINESS WIRE
`(Dec. 4, 2017),
`https://www.businesswire.com/news/home/20171204006136/en/RealPage-Closes-
`Acquisition-of-Lease-Rent-Options-LRO%C2%AE (last accessed Aug. 24, 2023).
`
`16
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 17 of 214
`
`16. Witness 3 explained that in facilitating ever increasing prices, RealPage
`
`warped the original model and ultimately created what he described as “massive
`
`collusion.”23 Another early developer of RealPage’s pricing software (“Witness
`
`7”)24 reflected on how RealPage’s facilitation of collusion among Lessors has
`
`pushed rents higher at a breakneck pace: “[T]hese optimization systems are really
`
`efficient at extracting value and they will push things until they start to break.”
`
`17. Aside from raising rents, Lessor Defendants’ collective delegation of
`
`their decision-making authority to Defendant RealPage also raised vacancy rates and
`
`impacted the supply of multifamily apartments.
`
`18. Vacancy rates rose because each Lessor Defendant could (and did)
`
`allow a larger share of their units to remain vacant, thereby artificially restricting
`
`supply, while maintaining higher rental prices across their properties. This behavior
`
`is only rational if Lessor Defendants know that their competitors are setting rental
`
`prices according to the same algorithmic outputs, and thus would not attempt to
`
`undercut them.
`
`
`23 Upon the announcement of a potential antitrust investigation by the Department
`of Justice into RealPage’s algorithmic pricing, on or around November 2022,
`Witness 3 turned around and disclaimed these statements.
`24 Witness 7 worked in project management with the Rainmaker Group (developer
`of Lease Rent Options (“LRO”)), from 2011 through 2017, at which time RealPage
`acquired LRO. Discussed further infra.
`
`17
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 18 of 214
`
`19. This was a departure from prior practice. Before the introduction of
`
`coordinated rent-setting software, residential property managers independently set
`
`prices, and generally did so to maximize occupancy. If supply was high, market
`
`prices would drop, as allowing apartments to stand vacant at their advertised rental
`
`prices made little sense when similar apartments in the area were available for less.
`
`Thus, in the past, property managers of multifamily housing properties had incentive
`
`to lower rents until all available units were occupied.
`
`20. Defendant RealPage has not been shy about its desire to raise vacancy
`
`rates. During a 2017 earnings call, then-CEO of RealPage, Steve Winn, described
`
`how one large client, managing over 40,000 units, drastically increased its profit by
`
`operating at a vacancy rate that “would have made [that property manager’s]
`
`management uncomfortable before.”25 The client had previously targeted 97% or
`
`98% occupancy rates in markets where it was a leader. After outsourcing rent prices
`
`and lease terms to RealPage’s RMS, the company began targeting 3%-4% revenue
`
`growth while operating at a 95% occupancy rate (i.e., 5% vacancy rate).26
`
`21. The impact of the Lessor Defendants’ shift from a “heads in beds”
`
`strategy to RealPage’s revenue maximization strategy is apparent from comparing
`
`25 Vogell, supra, note 1.
`26 Id.
`
`
`
`18
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 19 of 214
`
`average rental and vacancy rates as depicted in Figures 2 and 3, below. These graphs
`
`demonstrate that the forces of supply and demand no longer control the price of rent
`
`in some of the most populated and sought out metropolitan areas in the country.
`
`Specifically, these graphs show that from 2016 to the onset of the COVID-19
`
`pandemic in 2020, Defendants were able to increase rents every year, whether
`
`vacancies were rising or falling, and in most instances, both rents and vacancy rates
`
`trended higher from 2014-2020, across various metropolitan regions where
`
`RealPage operates. For example, in the Greater Nashville Metro Area,27 (Figure 2),
`
`despite rising vacancies, with the help of RealPage, Defendants were able to
`
`continue to raise rents year-over-year-over-year, demonstrating the disconnect
`
`between supply and demand. Likewise, Figure 3 demonstrates that beginning on or
`
`around 2016, rental prices continued to climb notwithstanding a consequent increase
`
`in vacancies in the Dallas metro area.
`
`
`
`
`
`
`
`
`27 As used throughout this Complaint, the Greater Atlanta Metro Area and Greater
`Nashville Metro Area are coterminous with the Metropolitan Statistical Area
`established by the United States Office of Management and Budget. References to
`Atlanta and/or Nashville throughout this Complaint, unless specifically limited, refer
`to the Greater Atlanta and Nashville Metro Areas, respectively. Metropolitan
`Statistical Areas are discussed further in §V.
`
`19
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 20 of 214
`
`Figure 2: Rent vs. Occupancy in the Greater Nashville Metro Area (2014-2019)
`
`
`
`
`
`
`
`
`20
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 21 of 214
`
`Figure 3: Rent vs. Occupancy in the Dallas Metro Area (2014-2022)
`
`
`
`
`
`
`
`
`22. Defendants also worked together to avoid periods of oversupply that
`
`might detrimentally impact rental prices. Using its record of its clients’ lease
`
`expirations and housing
`
`inventory, Defendant RealPage’s daily pricing
`
`recommendations are accompanied with suggested lease terms that are staggered to
`
`avoid temporary periods of oversupply resulting from the natural ebb and flow of
`
`21
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 22 of 214
`
`the market.28 As one executive explained in 2019, about one of RealPage’s RMS
`
`products, “LRO is mapping out for our teams how they should be pacing their [lease]
`
`expirations.”29 Witness 6,30 a former business manager for Defendant Pinnacle
`
`Property Management Services, LLC (“Pinnacle”) explained how RealPage helped
`
`Pinnacle avoid a situation where there were a significant number of units renewing
`
`at the same time RealPage “would recommend a 10-month lease instead of a 12-
`
`month lease on certain people [to avoid simultaneous renewals],” he said. “Or a 13-
`
`month lease – to try to get it to that next month [so that] instead of having 15
`
`renewals, you would end up with 10 renewals.” Collectively manipulating supply
`
`to minimize naturally occurring periods of oversupply removes a source of periodic
`
`downward price pressure on rents, which is the strongest during these temporary
`
`oversupply periods.
`
`
`28 Revenue Management: Proven in Any Market Cycle: See How These Top
`Companies
`Outperformed
`During
`Downturns
`(2020),
`https://www.realpage.com/ebooks/outperform-in-a-down-market/
`(hereinafter,
`“Revenue Management: Proven in Any Market Cycle”) (“ . . . identifying the excess
`supply period and time horizon will allow [property managers] to strategize which
`lease terms will allow expirations to be minimized during the excess supply time
`horizon, therefore reducing the number of expirations and potential [revenue]
`exposure [property managers] will experience during this excess supply time”).
`29 RealPage Revenue Management Maximizes Market Opportunity, RealPage
`Videos (Dec. 7, 2019), https://www.realpage.com/videos/revenue-management-
`maximizes-market-opportunity/
`30 Witness 6 worked as a Business Manager for Defendant Pinnacle Property
`Management Services, LLC from 2019 through 2022.
`
`22
`
`
`
`Case 1:23-cv-03813-VMC Document 1 Filed 08/25/23 Page 23 of 214
`
`23. Not content to limit their conspiracy through indirect contact via
`
`RealPage, the Lessor Defendants also pursued direct contacts amongst themselves
`
`to facilitate information exchanges and coordinate prices. RealPage hosts online
`
`forums, organizes in-person events for its clients,31 and maintains standing
`
`committees of cartel members – including the 1,000 member strong User Group –
`
`to advise on pricing strategy.32 RealPage hosts webinars, screen sharing training
`
`modules, frequent calls, in-person “roundtables,” and annual conferences in efforts
`
`to combine forces with the largest property
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
