`
`
`
`UNITED STATES DISTRICT COURT
`MIDDLE DISTRICT OF TENNESSEE
`
`JASON GOLDMAN; JEFFEREY WEAVER;
`BILLIE JO WHITE; NANCY ALEXANDER;
`KATE KRAMER; BRANDON WATTERS;
`PRICILLA PARKER and PATRICK PARKER;
`and BARRY AMAR-HOOVER; Individually
`and on Behalf of All Others Similarly Situated,
`
`Plaintiffs,
`
`Case No.
`
`
`
`
`CLASS ACTION COMPLAINT
`
`JURY TRIAL DEMANDED
`
`v .
`
`REALPAGE, INC.; THOMA BRAVO L.P.;
`APARTMENT INCOME REIT CORP., d/b/a
`AIR COMMUNITIES; ALLIED ORION
`GROUP, LLC; APARTMENT
`MANAGEMENT CONSULTANTS, LLC;
`AVALONBAY COMMUNITIES, INC.;
`AVENUE5 RESIDENTIAL, LLC; BELL
`PARTNERS, INC.; BH MANAGEMENT
`SERVICES, LLC; BOZZUTO
`MANAGEMENT COMPANY; BROOKFIELD
`PROPERTIES MULTIFAMILY LLC;
`CAMDEN PROPERTY TRUST; CH REAL
`ESTATE SERVICES, LLC; CONAM
`MANAGEMENT CORPORATION; CONTI
`CAPITAL; TF CORNERSTONE, INC.;
`CORTLAND MANAGEMENT, LLC; CWS
`APARTMENT HOMES LLC; DAYRISE
`RESIDENTIAL, LLC; EQUITY
`RESIDENTIAL; ESSEX PROPERTY TRUST,
`INC.; FPI MANAGEMENT, INC.;
`GREYSTAR MANAGEMENT SERVICES,
`LP; HIGHMARK RESIDENTIAL, LLC;
`INDEPENDENCE REALTY TRUST, INC.;
`KAIROI MANAGEMENT, LLC;
`KNIGHTVEST RESIDENTIAL; LANTOWER
`LUXURY LIVING, LLC; LINCOLN
`PROPERTY COMPANY; LYON
`MANAGEMENT GROUP, INC.; MID-
`AMERICA APARTMENT COMMUNITIES,
`INC.; MISSION ROCK RESIDENTIAL, LLC;
`MORGAN PROPERTIES MANAGEMENT
`COMPANY, LLC; PINNACLE PROPERTY
`
`Case 3:23-md-03071 Document 291 Filed 06/16/23 Page 1 of 159 PageID #: 1697
`
`3:23-md-03071
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`

`

`
`
`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 INC.;
`SHERMAN ASSOCIATES, INC.; SIMPSON
`PROPERTY GROUP, LLP; THRIVE
`COMMUNITIES MANAGEMENT, LLC;
`TRAMMELL CROW COMPANY, LLC; B/T
`WASHINGTON, LLC d/b/a BLANTON
`TURNER; UDR, INC.; WINDSOR
`PROPERTY MANAGEMENT COMPANY;
`WINNCOMPANIES LLC;
`WINNRESIDENTIAL MANAGER CORP.;
`AND ZRS MANAGEMENT, LLC;
`
`
`Defendants.
`
`
`
`
`
`Plaintiffs Jason Goldman, Jefferey Weaver, Billie Jo White, Nancy Alexander, Kate
`
`Kramer, Brandon Watters, Pricilla Parker and Patrick Parker, and Barry Amar-Hoover,
`
`individually and on behalf of all others similarly situated (the “Class,” as defined below), upon
`
`personal knowledge as to the facts pertaining to themselves and upon information and belief as to
`
`all other matters, and upon the investigation of counsel, bring 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., and Thoma Bravo L.P.
`
`(collectively, “RealPage”); and Apartment Income REIT Corp., d/b/a Air Communities; Allied
`
`Orion Group, LLC; Apartment Management Consultants, LLC; AvalonBay Communities, Inc.;
`
`Avenue5 Residential, LLC; Bell Partners, Inc.; BH Management Services, LLC; Bozzuto
`
`Management Company; Brookfield Properties Multifamily LLC; Camden Property Trust; CH
`
`Real Estate Services, LLC; CONAM Management Corporation; Conti Capital; TF Cornerstone,
`
`2
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`
`Inc.; Cortland Management, LLC; CWS Apartment Homes LLC; Dayrise Residential, LLC;
`
`Equity Residential; Essex Property Trust, Inc.; FPI Management, Inc.; Greystar Management
`
`Services, LP; Highmark Residential, LLC; Independence Realty Trust, Inc.; Kairoi Management,
`
`LLC; Knightvest Residential; Lantower Luxury Living, LLC; Lincoln Property Company; Lyon
`
`Management Group, Inc.; Mid-America Apartment Communities, Inc.; 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 Inc.; Sherman Associates, Inc.; Simpson Property Group, LLP; Thrive
`
`Communities Management, LLC; Trammell Crow Company, LLC; B/T Washington, LLC d/b/a
`
`Blanton Turner; UDR, Inc.; Windsor Property Management Company; WinnCompanies LLC;
`
`WinnResidential Manager Corp.; and ZRS Management, LLC (collectively, the “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 across the country.
`
`Leveraging their control of the multifamily rental housing market from at least January 2016,
`
`Defendants each caused 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 10 discussed herein, rental price and occupancy data,
`
`economic evidence, and public investigations,1 confirm this anticompetitive conduct.
`
`
`1
`Heather Vogell, Rent Going Up? One Company’s Algorithm Could Be Why., PROPUBLICA
`15,
`2022),
`https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent
`(Oct.
`(ProPublica report shedding light on Defendants’ conspiracy and showing that rents in areas where
`
`
`3
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`

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`
`
`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 (“RMS”) called “AI Revenue Management” (previously known as
`
`“YieldStar”),2 and several managers of large-scale multifamily residential apartment buildings that
`
`used RealPage’s property management software to coordinate and agree upon rental housing
`
`pricing and supply.
`
`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 property management company ECI Group
`
`explained, “[W]e are all technically competitors . . . [but RealPage] helps us to work together . .
`
`. to make us all more successful in our pricing . . . [RealPage] is designed to work with a community
`
`
`RealPage clients control a high percentage of rental units have increased at a significantly higher
`rate).
`2
`RealPage’s revenuemanagement software solutions will be referred to collectively herein
`as “revenue management software.”
`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/.
`4
`RealPage Renewal Reporting Presentation, MEDVE, https://medve.com/assets/airm-
`renewal-reporting.pdf (last accessed June 14, 2023).
`
`4
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`
`
`in pricing strategies, not work separately . . . we rarely make any overrides to the [pricing]
`
`recommendations . . .”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 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. 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 collectively raise market prices and avoid price competition.6 Jeffrey
`
`
`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.
`ECI Group 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
`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=Cj0KCQjwmZ
`ejBhC_ARIsAGhCqndpmEtz_7CgdbVOuCLdRHSoZlU42vJD2ors4fYig6K9svH0xlSoJ9saAna
`dEALw_wcB&showPdf=true (last accessed June 14, 2023) (hereinafter, “RealPage Revenue
`Management FAQs”).
`
`5
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`
`
`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”8
`
`to monitor the client’s 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 have undergone extensive training provided by RealPage, to act in
`
`this capacity. 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
`
`
`
`7
`Vogell, supra, note 1.
`8
`RealPage AI Revenue Management, 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=Cj0KCQjwmZejBhC_ARIsAGhCqndpmEtz_7CgdbVOuCLdRHSoZlU42vJD2ors
`4fYig6K9svH0xlSoJ9saAnadEALw_wcB (last accessed June 14, 2023) (describing RealPage’s
`Revenue Management Advisory services as providing “expert oversight of [clients’] pricing
`strategy”).
`9
`(June 23, 2021),
`INC.,
`AI Revenue Management, THE MEDVE GROUP,
`https://medve.com/assets/airm-manager-training-medve-management-6.23.2021-(1).pdf.
`
`6
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`

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`
`
`approval for the proposed deviation. RealPage accepts very few justifications for any requested
`
`override, routinely rejecting client 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”),10 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 pricing decisions.11 As one leasing manager at a RealPage client
`
`(“Witness 2”)12 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”)13 who was instrumental in
`
`
`10
`Defendants and the Court will be provided with the identities of all Witnesses named
`herein, through separate correspondence.
`11 Witness 1 worked as a RealPage Pricing Advisor from 2015 through 2018.
`12 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 on was classified as affordable housing.
`13 Witness 3 is a data scientist and former innovation and marketing executive at RealPage,
`from 2015 through 2019.
`
`7
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`
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`the development of RealPage’s pricing software confirmed
`
`that RealPage’s pricing
`
`recommendations were accepted at “very high rates.”
`
`9.
`
`Property management companies’ executives also placed pressure on their leasing
`
`managers to implement RealPage’s prices. For example, Defendant 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 corporate 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 software 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,”14 compensation for certain property
`
`management personnel are tied to compliance with RealPage’s pricing recommendations.
`
`10.
`
`As the stated goal of RealPage’s software is for its clients to “outperform the market
`
`[by] 3% to 7%,”15 the inevitable outcome of Defendants’ coordinated price setting was that rents
`
`
`14
`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.
`15
`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 June 14, 2023).
`
`8
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`
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`have been pushed above competitive levels. Figure 1 below shows the steady increase in rental
`
`prices in various metropolitan areas as more and more property managers adopted RealPage:
`
`Figure 1: Average Rents in Various Metro Areas, 2015-2023
`
`
`Average Rents In Selected Metro Areas 2015-2023
`
`2000
`1900
`1800
`1700
`1600
`1500
`1400
`1300
`1200
`1100
`1000
`900
`800
`700
`
`
`
`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
`
`Chicago, IL
`Nashville, TN
`Durham, NC
`
`Atlanta, GA
`Raleigh, NC
`Fayeeville, NC
`
`Charloe, NC
`Greensboro, NC
`St. Louis, MO
`
`Las Vegas, NV
`Winston, NC
`
`11.
`
`RealPage and the Lessor Defendants admit the impact of Defendant RealPage’s
`
`
`
`
`pricing software 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.16
`
`12.
`
`Individuals who previously worked for RealPage and its clients express dismay
`
`with the way RealPage has enabled Lessor Defendants to collectively set and raise rents and
`
`16
`
`Vogell, supra, note 1.
`
`
`
`9
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`
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`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 on 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 (“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, “completely agrees” that rental prices in her region were artificially inflated upon the
`
`adoption of RealPage pricing recommendations.
`
`13.
`
`Indeed, a former RealPage executive who was directly involved in the creation of
`
`the original software that is now RealPage’s revenue management software 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 consistently raising rental rates as having
`
`“bastardized” RealPage’s original “supply and demand model.”
`
`14.
`
`In 2017, RealPage acquired the revenue management software developed by Lease
`
`Rent Options (“LRO”). By integrating LRO into its own revenue management system, RealPage
`
`acknowledged 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.”17 According to RealPage, “[t]his acquisition extended our revenue management
`
`
`17
`(Mar. 1, 2018),
`(Form 10-K) at 39
`Inc., 2017 Annual Report
`RealPage
`https://www.sec.gov/Archives/edgar/data/1286225/000128622518000008/rp-20171231x10k.htm
`(hereinafter, RealPage 2017 10-K Form).
`
`10
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`
`
`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.”18 RealPage’s acquisition of LRO indeed increased market
`
`penetration of its revenue management software, precipitating a structural shift in the forces of
`
`supply and demand.
`
`15. Witness 3 explained that in facilitating ever increasing prices, RealPage warped the
`
`model and ultimately created what he described as “massive collusion.”19 Another early developer
`
`of RealPage’s pricing software (“Witness 7”)20 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.”
`
`16.
`
`Aside from raising rents, Defendants’ collective delegation of their decision-
`
`making authority to Defendant RealPage also raised vacancy rates and impacted the supply of
`
`multifamily apartments.
`
`17.
`
`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
`
`
`18
`RealPage 2017 Form 10-K.
`19
`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.
`20 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.
`
`11
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`know that their competitors are setting rental prices using the same algorithm and thus would not
`
`attempt to undercut them.
`
`18.
`
`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.
`
`19.
`
`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.”21 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, the company began targeting 3%-4% revenue
`
`growth while operating at a 95% occupancy rate (i.e., 5% vacancy rate).22
`
`20.
`
`The impact of the Lessor Defendants’ shift from a “heads in beds” strategy to
`
`RealPage’s revenue maximization strategy is apparent from comparing 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
`
`21
`22
`
`Vogell, supra, note 1.
`Id.
`
`
`
`12
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`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,23 (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.
`
`
`
`
`
`
`23
`As used throughout this Complaint, the Greater Nashville Metro Area is coterminous with
`the Nashville-Davidson -Murfreesboro-Franklin, TN Metropolitan Statistical Area, as established
`by the United States Office of Management and Budget. Specifically, the Greater Nashville Metro
`Area consists of the Tennessee cities of Nashville, Davidson, Murfreesboro, Franklin, and their
`surrounding areas. References to Nashville throughout this Complaint, unless specifically limited,
`refer to the Greater Nashville Metro Area. Metropolitan Statistical Areas are discussed further in
`§V.
`
`13
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`Figure 2: Rent vs. Occupancy in the Greater Nashville Metro Area (2014-2019)
`
`
`
`
`Nashville Metro Apartment-Rental Effecve Rent and
`Annual Vacancy Rate 2014-2019
`
`Vacancy Rate %
`
`12
`
`024681
`
`0
`
`
`
`
`
`2014
`
`2015
`
`2016
`
`2017
`
`2018
`
`2019
`
` Effecve Rent
`
` Vacancy Rate
`
`$1,200
`
`$1,150
`
`$1,100
`
`$1,050
`
`$1,000
`
`$950
`
`$900
`
`$850
`
`$800
`
`Monthly Effecve Rent Per Unit
`
`
`Figure 3: Rent vs. Occupancy in the Dallas Metro Area (2014-2022)
`
`
`
`
`
`14
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`21.
`
`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 the market.24 A former business manager for Defendant Pinnacle (Witness 6)25
`
`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.
`
`22.
`
`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,26 and maintains standing committees of cartel members – including the 1,000 member
`
`
`24
`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”).
`25 Witness 6 worked as a Business Manager for Defendant Pinnacle from 2019 through 2022.
`26
`See Susan Gaide, Real World 2022 Customer Conference Recap, REALPAGE, INC., (July
`29, 2022), https://www.realpage.com/blog/realworld-2022-customer-conference-recap/ (three-
`day conference hosted by RealPage in Las Vegas with over 1,500 industry attendees, including
`keynote speakers, “Lynne Ann Chase, Chief Accounting Officer for Winn Residential (the ninth
`
`
`15
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`strong User Group – to advise on pricing strategy.27 RealPage hosts webinars, screen sharing
`
`training modules, frequent calls, in-person “roundtables,” and annual conferences in efforts to
`
`combine forces with the largest property management companies in the United States and align on
`
`price-setting methods in the multifamily rental housing market.28 RealPage would use these events
`
`to explain the many financial benefits of working together instead of as competitors. According
`
`to James M. Nelson, the researcher whose work sparked the ProPublica report regarding RealPage
`
`rental software, “the cartel [took] root in these various summits.”
`
`23.
`
`RealPage also encourages its clients to communicate directly with one another to
`
`exchange pricing information. In training materials that RealPage provides to clients, in a section
`
`addressing how property managers should answer initial pricing inquiries titled “Overcoming
`
`Objections Guide,” RealPage gives the following “Protips” on how its clients can obtain
`
`confidential, competitively sensitive information directly from one another:
`
`
`largest apartment manager in the country with more than 103,000 units under management across
`affordable housing, military housing and conventional), Yetta Tropper, Head of Multifamily Asset
`Manager for PGIM (the real estate investment arm of Prudential) and Scott Pechersky, Chief
`Technology Officer for RPM Living (#7 on the NMHC manager list with more than 112,000
`units.”)).
`27
`User Group Overview, REALPAGE, INC., https://www.realpage.com/user-group/overview/
`(last accessed June 14, 2023) (hereinafter, “User Group Overview”) (formed in 2003, the User
`Group “is the organization recognized by RealPage to improve communications between RealPage
`and the user community, and to promote communications between users.”
`Since 2000, every year the executive-level users of RealPage convene for a three-day
`28
`conference called the “RealWorld User Conference” (“RealWorld”). See RealPage Sets Stage in
`Vegas for 11th Annual RealWorld User Conference, REALPAGE NEWS (Mar. 14, 2011),
`https://www.realpage.com/news/realpage-sets-stage-in-vegas-for-11th-annual-realworld-user-
`conference/; see also Chris Wood, New Expectations in Multifamily Technology ROI: Q&A With
`RealPage’s
`Steve Winn, MULTIFAMILY
`EXECUTIVE
`(July
`15,
`2009),
`https://www.multifamilyexecutive.com/technology/new-expectations-in-multifamily-technology-
`roi-q-a-with-realpages-steve-winn_o.
`
`
`16
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`Figure 4: Excerpt from RealPage’s Overcoming Objections Guide
`
`24.
`
`Interviews with witnesses who worked at various Lessor Defendants confirm this
`
`
`
`practice. One former Leasing Consultant from Defendant Lessor MAA