Yardi Faces Federal Lawsuit Amidst Antitrust Accusations

Yardi Systems and 18 property management firms face a federal class-action lawsuit, accused of orchestrating rent-fixing through Yardi's RENTmaximizer tool to create an automated rent-hiking cartel.

Standing trial: The suit alleges that this coordinated manipulation eliminated competition in the rental market, enabling landlords to collectively raise rents while minimizing vacancies, ultimately harming millions of renters. The lawsuit claims Yardi's tool eliminated market competition by coordinating rent hikes among landlords, violating antitrust laws.

Unfair advantage: Yardi promoted the product as a way to boost rental income by a minimum of 6% annually. The lawsuit claims Yardi and other property managers used RENTmaximizer to set prices well above competitive levels. A confidential witness from Bridge Property Management revealed the software gave landlords an unfair advantage because they effectively set rents higher by consensus, limiting renter options.

Playing defense: Yardi has defended its software, claiming it adjusts prices based on supply and demand and does not use confidential or competitor data. The company dismissed the allegations in the suit, asserting there is nothing illegal about revenue management, and vowed to vigorously defend themselves. The complaint also named several major US landlords, including JLL, Bridge Property Management, Kushner Real Estate Group, and McWhinney.

➥ THE TAKEAWAY 

Industry implications: This lawsuit comes after similar allegations against RealPage, currently under investigation by the DOJ’s Antitrust Division. Tenants accused RealPage of promoting anticompetitive rent hikes by recommending prices based on what other RealPage customers were charging. The allegations against Yardi and other major property management firms highlight the growing scrutiny in the real estate industry regarding automated rent-recommendation tools and their impact on tenants.

Future-proof your properties with the #1 EV charger

Did you know that 84% of prospective renters prefer properties with EV charging stations, and 16% of your current tenants will likely switch to EVs in the next year? Electric vehicles aren’t only coming, they’re already here, and 90% of charging happens at home or work (i.e. your properties).

Xeal is the world’s most advanced and reliable smart EV charger – seriously, they have full smart functionality with zero IT dependency and industry-leading uptime.

They're happy to already work with some of the top names in real estate, and would love to explore partnering with you.

Get your complimentary EV strategy today.

*Past performance is not indicative of future results. This post contains sponsored content.

European Mall Owner Still Betting on US High-End Shopping

The European owner of Westfield malls is shifting its strategy, opting to retain some top-performing high-end malls in the US rather than exit the market entirely as initially planned.

Strategy shift: Unibail-Rodamco-Westfield initially planned to sell most of its American malls by the end of 2023. But they’re reconsidering, as solid performance has offered more options. While they still aim for a significant reduction in their US portfolio, they intend to retain some top-performing malls, including flagship properties like Westfield Century City and Westfield Garden State Plaza, which are currently experiencing improved occupancy and sales compared to 2022.

High-end resurgence: Some high-end shopping centers, like those operated by Simon Property Group (SPG) and Macerich (MAC), have steadily recovered. Unibail's flagships have also rebounded, reaching 2019 occupancy levels, with higher customer foot traffic and tenant sales compared to 2022. Notably, Unibail's Westfield Valley Fair Mall in CA’s Bay Area, which underwent a $1.1B expansion before the pandemic, enjoyed 66% more tenant sales in 2022 than in 2019.

Strategic investments: Unibail is investing in its top properties and developing projects in various locations, including IL, NJ, and Bethesda, MD while adding apartments and open-air retail. The company is holding onto its valuable properties, which account for over half its US portfolio value, as it seeks to maximize value. Unibail has sold lower-quality malls at discounts up to 12%, with Westfield Valencia Town Center recently selling at a sub-3% discount.

➥ THE TAKEAWAY

Balancing act: While Unibail is holding onto its most valuable US mall properties, it still faces the burden of reducing a heavy debt load. Selling assets remains crucial to the company's strategy to improve its financial health. According to analysts at Green Street, the company's approach focuses on reducing its debt burden while seeking to maintain value and gradually exit the US market.

📖 Read: US banks saw an 86% increase in brokered deposits, totaling over $1.2T in 2Q23, raising regulator concerns due to the risk associated with high-cost deposits that can go sideways in challenging times.

▶️ Watch: John Burns Research recaps operator responses from their August 2023 Burns Single Family Rental Survey in a one-minute video.

🎧 Listen: PGIM's Cathy Marcus discusses opportunities in multifamily, industrial, and retail as global markets await asset repricing and tapering interest rates.

NYC Property Owners Get Flexibility Under Local Law 97

New York City has unveiled its rules for Local Law 97, aimed at reducing building emissions, offering some flexibility for owners who have already begun compliance efforts.

Compliance countdown: City officials are giving some grace to landlords not compliant with emissions and water use goals due to COVID-19 delays and a short timeline for rule implementation in 2024. Building owners can avoid fines if they demonstrate efforts to meet the goals, such as obtaining work permits and contracts with builders, with completed upgrades expected between 2024–2029.

Offset opportunity: Building owners who complete electrification upgrades and replace fossil fuel equipment ahead of deadlines will receive credits, though financial benefits remain unclear. The issue of whether landlords can purchase renewable energy credits (RECs) to offset their building's electricity usage is uncertain, with real estate advocates supporting RECs and environmentalists expressing concerns about potential loopholes.

Forecasting fines: Under Local Law 97, around 13,544 properties may face fines of up to $902M by 2030 for non-compliance, with approximately 3,780 properties potentially owing a collective $213M in penalties by the end of 2023. By 2040, this could escalate to 15,832 buildings owing fines amounting to $1.3B, and city officials anticipate spending $12–$15B to bring buildings into compliance by 2030, with only $6B recouped through cost savings.

➥ THE TAKEAWAY

Striking a balance: Property owners have previously requested a state-created tax abatement and incentive program to help offset upgrade costs. While NYC is attempting to strike a balance between environmental goals and economic considerations by offering some leniency and incentives under Local Law 97, the financial implications for property owners remain a subject of concern.

Spread the word, earn free merch

🎉 Share CRE Daily with colleagues and friends, and you'll earn free merch every time a new subscriber signs up. Here's your tracking link: https://newsletter.credaily.com/subscribe?ref=PLACEHOLDER

Refer 3 people today, and you’ll unlock your first reward milestone: Back of the Napkin Multifamily Deal Screener.

The robust recovery of US retail, marked by record-low store space availability and surging demand from tenants like experiential, discount, medical, and food and beverage, has defied expectations, largely thanks to flourishing population growth in the Sun Belt.

📣 HIT THE INBOX OF 65K+ CRE PROFESSIONALS
Advertise with CRE Daily to get your brand in front of the Who's Who of commercial real estate. Subscribers are high-income decision makers, investors, and C-suite executives. For more information, please email partnerships@credaily.com. The Battle Over Rent-Setting Software