Dive Brief:

• Executives at two of the REITs involved in the class-action litigation surrounding RealPage's pricing model, which was filed last year, recently shared updates with their investors about how they view the suit.
• Palo Alto, California–based Essex Property Trust President and CEO Angela Kleiman defended her company against the suit brought by tenants in California and Oregon. “We believe that their claim is without any merit, and we're very confident about our defense prospects,” she said during the firm’s first-quarter earnings call last month.
• Chicago-based Equity Residential CEO Mark Parrell indicated that a small part of the company’s increase in litigation reserves was related to the RealPage suits. “The reason for that is the case is in its early stages, and you should think about that going on for a longer period of time,” he said during the company’s earnings call last month. “[Lawsuits] aren’t resolved in weeks or months. It’s more like years.”

Dive Insight: 

Essex and EQR were among the apartment owners and managers sued by five renters — three in California and two in Washington state — last October. The tenants filed a class action lawsuit in the U.S. District Court for the Southern District of California against RealPage and some of the largest property operators in the country, alleging antitrust violations under the Sherman Act. 

In addition to Essex and EQR, managers named in the suit included: 

• Greystar Real Estate Partners
• Lincoln Property Co. 
• FPI Management
• MAA
• Avenue 5 Residential

Thrive Communities Management and Security Properties, both based in Seattle, were also named in the suit, which came in the wake of a ProPublica report questioning whether RealPage’s algorithm has allowed the nation’s largest apartment owners to indirectly coordinate rent prices, possibly in violation of the law, according to the plaintiffs. Many of the article’s points were echoed in the class-action suit.

Like Kleiman, Parrell defended his company against the charges. “We feel very strongly about our position,” he said. “We think the claims are without merit, and we’re going to defend ourselves. We continue to feel really confident in our prospects there.”

In a company statement provided to Multifamily Dive last year, RealPage denied the allegations in the lawsuit and vowed to vigorously defend itself against the lawsuit. “Beyond that, we do not comment on pending litigation,” it told Multifamily Dive.

Last year, Lincoln responded to Multifamily Dive with a statement saying the allegations are without merit, and that it denies that the company or any of its employees have engaged in conduct in violation of U.S. antitrust laws. “Lincoln looks forward to the opportunity to bring the facts to the attention of the court,” it said in the statement.

Different adoption strategies

Long before the ProPublica article and class action suit, Essex had begun to develop its own system.

“We actually have been reducing our usage of RealPage as we developed our new revenue management system over the past several years,” Kleiman said. 

Essex rolled out the system earlier this year. Jessica Anderson, senior vice president of operations, said the system allows the company to price at a portfolio level with its property collections model instead of the commercially available systems where companies often price at the property level. In addition, it allows the company to optimize amenities.

However, RealPage’s software still has strong traction in the market. When Glen Allen, Virginia–based apartment owner Capital Square decided to build a property management platform, the firm adopted revenue management software from RealPage. 

“It's a RealPage product that took the best of YieldStar and the best of LRO,” said Gus Remppies, president of Capital Square Living. “It is just light years from where we were.”

Capital Square did consider the legal issues surrounding RealPage but decided to move forward with adoption. 

“When we were contemplating rolling out revenue management, it was a question that legal counsel asked and one that I think that we need to be cognizant of,” Remppies said. “But it's so widespread, and I think that when people truly understand the technology behind it, some of the concerns will go away. So we decided that it was worth the risk.”

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