FBI raids Cortland Management in Atlanta as part of US DOJ antitrust probe of rental housing market

29 May 2024
By Khushita Vasant

The Federal Bureau of Investigation conducted an unannounced inspection at Cortland Management in Atlanta as part of a criminal antitrust investigation by the US Department of Justice into a conspiracy to artificially inflate rents for apartment units, MLex has learned.

The raid took place on Wednesday, May 22 at Cortland's headquarters in Atlanta, Georgia, it is understood.

"Agents were at that address conducting court authorized activity,” Tony Thomas, a spokesperson for the FBI in Atlanta, told MLex. “That is all we can say at this point."

A spokesperson for the DOJ's antitrust division declined to comment.

Allison Worldwide, which handles press communications for Cortland, didn't respond to an email seeking comment.

Cortland, which owns and manages apartment communities across the US, was founded in 2005 with a focus on multifamily development in Atlanta, according to the company's website. It has regional offices in Charlotte, Dallas, Denver, Greenwich, Houston, Orlando, and Phoenix.

The inspection comes as the DOJ's antitrust division deepens its investigation into the rental housing market and the use of a price-setting software provided by RealPage, whose clients include some of the largest US residential real estate owners and management companies. According to a March report by Politico, the DOJ issued subpoenas earlier in the year on behalf of a federal grand jury in Washington.

RealPage is the developer of a technology platform that provides software for the multifamily rental housing markets. This includes revenue management software, or RMS, now called “AI Revenue Management” and previously known as YieldStar.

Cortland is named among dozens of defendants in a putative class action in Tennessee alleging the use of RealPage’s software platform to coordinate and agree upon rental housing pricing and supply. The lawsuit says Cortland uses RealPage’s revenue management software to manage some or all of its more than 58,000 apartments nationally. The lawsuit accuses RealPage, Cortland and several other managers of large-scale multifamily residential apartment buildings of using RealPage’s property management software to fix, raise, stabilize, or maintain at artificially high levels the rental prices for multifamily residential real estate across the US.

RealPage is headquartered in Richardson, Texas, and provides software and services to managers of residential rental apartments, including the YieldStar/AI Revenue Management software. When it was acquired in December 2020 by Chicago-based private equity firm Thoma Bravo, LP for roughly $10.2 billion, RealPage had over 31,700 clients. This includes each of the 10 largest multifamily property management companies in the US.

The US housing market has also been the subject of congressional concern in recent years. In late 2022, US Senator Sherrod Brown wrote to Federal Trade Commission Chair Lina Khan to urge the agency to review property owners’ and landlords’ use of price optimization software following reports that the software’s algorithm inflated rents and suppressed competition in the housing market.

US Senators Elizabeth Warren, Ed Markey, Tina Smith, and Bernie Sanders also wrote to the DOJ in March 2023, calling for a review of RealPages’s YieldStar algorithm following new findings from their own investigation. They warned that Yieldstar, which is used to set prices on millions of rental properties, could be “facilitating de-facto price setting and driving rapid inflation”.

In late 2023, RealPage and 14 of the largest residential landlords in the District of Columbia were hit with a lawsuit by the DC attorney general for allegedly conspiring to forgo competition, share sensitive information and delegate rent-setting authority to RealPage to charge inflated rents.

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