May 29, 2024
The Federal Bureau of Investigation (FBI) executed a surprise inspection at the Atlanta headquarters of Cortland Partners, a prominent apartment management company. This action is part of an ongoing criminal antitrust investigation by the US Department of Justice (DOJ) into alleged conspiracies to artificially inflate rental prices across the apartment sector.
The unannounced raid occurred on Wednesday, May 22, at Cortland Partners’ main office in Atlanta, Georgia.
When contacted, FBI Atlanta spokesperson Tony Thomas confirmed the operation to MLex, stating, “Agents were at that address conducting court authorized activity. That is all we can say at this point.” The DOJ antitrust division spokesperson declined to provide any comments on the matter. Similarly, Allison Worldwide, Cortland Partners’ press communications contact, did not respond to requests for comments.
Cortland Partners, established in 2005 and headquartered in Atlanta, specializes in owning and managing apartment communities throughout the United States. The company’s website highlights its focus on multifamily development, with regional offices located in Charlotte, Dallas, Denver, Greenwich, Houston, Orlando, and Phoenix.
This FBI inspection underscores the DOJ’s intensifying scrutiny of the rental housing market, particularly concerning the use of RealPage’s pricing software. RealPage provides revenue management software, previously known as YieldStar and now branded as “AI Revenue Management,” to major players in the residential real estate industry. Earlier in the year, as reported by Politico in March, the DOJ issued subpoenas to multiple entities through a federal grand jury in Washington, signaling a deepening investigation.
Cortland Partners is a key defendant in a class action lawsuit filed in Tennessee. The lawsuit alleges that Cortland Partners and numerous other companies utilized RealPage’s software to collude on rental pricing and supply strategies. Specifically, the lawsuit claims Cortland Partners employs RealPage’s revenue management tools across its portfolio of over 58,000 apartments nationwide to manipulate rental prices. The core accusation is that RealPage, Cortland Partners, and other large multifamily residential apartment managers conspired to fix, raise, stabilize, and maintain artificially high rental rates for multifamily residential properties throughout the US.
RealPage, based in Richardson, Texas, boasts a vast clientele, including the top ten multifamily property management companies in the nation. Acquired by private equity firm Thoma Bravo, LP in December 2020 for approximately $10.2 billion, RealPage served over 31,700 clients at the time of acquisition.
The US housing market has been under increasing scrutiny from lawmakers. In late 2022, Senator Sherrod Brown urged the Federal Trade Commission (FTC) Chair Lina Khan to investigate the use of price optimization software by property owners and landlords, citing concerns that these algorithms were inflating rents and stifling market competition.
Further adding to the pressure, Senators Elizabeth Warren, Ed Markey, Tina Smith, and Bernie Sanders penned a letter to the DOJ in March 2023. Following their own investigation, they called for a review of RealPage’s YieldStar algorithm, warning that its widespread use in setting rental prices for millions of properties could be “facilitating de-facto price setting and driving rapid inflation.”
In late 2023, the Attorney General of Washington, D.C., filed a lawsuit against RealPage and 14 of the largest residential landlords in the District of Columbia. This lawsuit alleges a conspiracy to eliminate competition, share confidential data, and delegate rent-setting authority to RealPage, resulting in inflated rental prices.
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