TENNESSEE Attorney General Jonathan Skrmetti JD announced Friday, Aug. 23, that his office has joined the U.S. Department of Justice and seven other states in a lawsuit against cloud-based, AI-augmented fintech-proptech RealPage Inc., a global platform provider based in Richardson, Texas.

USDOJ et al hold that RealPage tech-driven influence on regional and subregional multi-family rental markets often has, or could have deleterious effect on renters' negotiating and purchasing power, while encouraging illegal sharing of occupancy and pricing information among independent landlords, discouraging rent concessions for otherwise qualifiable renters, imposing burdensome move-in requirements, cacheing units to limit renter options -- particularly 1- and 2-bedroom units, and other market-shaping moves.

AG Jonathan Skrmetti

Skrmetti was quoted in a brief State press release Friday afternoon as saying, "My office has been looking at RealPage since 2023 following concerns about the company's efforts to keep rents artificially high in cities across Tennessee. We're glad to be part of this bipartisan effort to protect consumers and hold RealPage accountable."

RealPage President and CEO is Dana Jones.

CEO Dana Jones

Jones, 49, has a sizable record in tech-forward enterprises and early-growth companies, including Boston- and Nashville-linked Zapata Computing and Alpharetta-based Agilysys.

In June, the company published as "The Real Story" a compendium of its strenuous objections to "false allegations concerning its revenue management software," available here.

The company has also continued its pro bono affordable housing initiative, is pushing to expand adoption of its Lumina GenAI copilot offering - and earlier this month announced AI-assisted LOFT Leasing product and other innovations.

Yesterday, USDOJ issued a statement on this matter by U.S. Attorney General Merrick B. Garland. Related DOJ video here.

RealPage, a 1998-vintage startup, now stands accused in the USDOJ filing of, among other things, using both unlawful agreements with landlords and RealPage's AI- and machine-learning-powered platform and tools in order "to share nonpublic, competitively sensitive information for use in pricing conventional multifamily rentals" in ways that "have harmed, or are likely to harm, competition and thus renters."

Those and other practices, USDOJ and fellow plaintiffs argue, unlawfully further alignment of financial interests of all landlords in individual markets and submarkets, while stealthily reducing rental-market transparency for would-be renters.

Coincidentally or otherwise, the latest collective complaint against RealPage comes ahead of what, in its court filing, USDOJ avers are near-term RealPage plans to phase-out yet this year two of its offerings -- YieldStar and Lease Rent Options (LRO) -- while continuing to offer its most significant solution -- AI Revenue Management (AIRM) -- in a move which in the eyes of the petitioning attorneys general reduces landlords' options for opting-out of some information-sharing.

VNC also notes that USDOJ's announcement also came two weeks after RealPage's annual RealWorld conference in Las Vegas, with one session including discussion of "the role of AI in shaping the future affordable housing," and housing and urban development legislation.

In addition to AG Skrmetti, yesterday's filing listed among plaintiff attorneys Tennessee's Deputy AG David McDowell and Assistant AGs Ethan Bowers and Daniel Lynch.

Thus far, the other states petitioning alongside USDOJ are California, Colorado, Connecticut, Minnesota, North Carolina, Oregon and Washington.

In February this year, Arizona's AG independently announced similar legal action against RealPage in Superior Court. The Arizona action named nine lesser defendants, including real estate major Trammell Crow. Document.

Nashville's U.S. District Court for the Middle District of Tennessee became an important RealPage venue in 2023. Other big names have varying stakes in RealPage-related litigation, including, e.g., Greystar Real Estate Partners and BH Management Services.

Chicago-based Thoma Bravo has since 2021 held controlling interest in RealPage, which had IPO'd in 2010. The Thoma Bravo take-private was reportedly an all-cash $10.2BN transaction. In 2023, Thoma Bravo says it returned more than $13BN to investors.

We've found no indication of a Thoma Bravo exit from RealPage, which we understand has two Thoma Bravo board members. VNC research indicates that, pre-Thoma, RealPage's principal backers included growth-equity-oriented Camden Partners Strategic Fund III.

In the 2021 RealPage take-private, BofA Securities acted as financial advisor to RealPage, and Wachtell Lipton Rosen & Katz was legal counsel. Financing for the transaction was provided by Goldman Sachs & Co., which was also financial advisor to Thoma Bravo, alongside Kirkland & Ellis as legal counsel.

Since its founding in 1998, RealPage has often been among go-to sources for Multifamily real estate trends for property owners, consumer advocates, municipalities, journalists and others. RealPage has north of 6,000 FTE, according to several sources.

The political sensitivity of rising rents for multifamily units, the surging cost of home ownership, plus shifting Federal signals on the cost of credit may lend this story greater emphasis in the context of the urban "housing crisis" than it might otherwise garner.

Note: VNC has attempted to reach representatives of the state's Attorney General and of RealPage, to no avail, thus far. This story will be updated, as warranted.

This recent column on AI governance by Barbara Bennett JD of Frost Brown Todd may be of interest to readers of this story, whether founders, investors or startup team members. VNC

. last edited 1614 24 August 2024