Dozens of Arizona elected officials wrote a letter this week asking their state’s retirement fund to not invest with the private equity firm Blackstone until it meets the demands of California’s striking hotel unions out of concern that labor strife will negatively affect pensions.
The Thursday open letter was organized by UNITE HERE Local 11—which represents 32,000 hospitality workers in Los Angeles, and Orange County, California and Phoenix, Arizona—and was penned by Representative Oscar De Los Santos of Arizona. It was sent to the chair of the Arizona State Retirement System (ASRS), making an economic argument that investing in Blackstone while strikes are ongoing—a sprawling private equity firm with its hands in real estate across the country—risks bringing down returns for the Arizona teachers, janitors and bus drivers whose pensions are wrapped up in the firm. The letter is signed by 34 state representatives and state senators, all Democrats, and urges the pension board to restrict investments in Blackstone until it meets the demands of striking workers.
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“ASRS’s real estate investments are dragging down overall performance,” the letter says, adding that the real estate portfolio has only returned 6.43% versus the fund’s overall performance of 9.55 percent.
The letter points to the ongoing strike at the Blackstone-owned Fairfield and Aloft Hotel as risking exacerbating this. Both are owned by the same Blackstone real estate fund where ACRS has invested. The retirement system has $840 million invested with Blackstone as of last June, according to the letter, amounting to 2.43 percent of ACRS’ privately-managed assets. (A Sheraton hotel where workers are also on strike is owned by a separate Blackstone fund that ACRS did not invest in).
According to the letter, “Workers at Blackstone-owned hotels are asking for living wages, affordable health care and a safe and humane workload.”
The letter says that labor disputes can decrease the value of investments, citing research they decreased stock prices, saying, “This risk can be mitigated through labor peace agreements, which protect investors from strikes, picket lines, boycotts and other disruptions associated with labor disputes.”
The company said it did reach an agreement with workers at Hilton Irvine, which is represented by UNITE HERE Local 11. The private equity company said that the two hotels in question, Fairfield and Aloft, represent less than 1 percent of hotel employees represented by Local 11. It said it is not part of the formal bargain unit for the current labor agreement.
“Across the country, Blackstone has an excellent relationship with UNITE HERE, who has recognized us as a top employer in the hospitality industry,” a Blackstone spokesperson said in an emailed statement. “The Local 11 chapter involved here is isolated from UNITE HERE’s International Organization. The hotel is available to negotiate at any time Local 11 is willing to come to a long-term agreement in Arizona.”
Activists, especially housing activists, have increasingly been pushing pension funds on their investments in private equity firms that own large chunks of real estate, as Motherboard covered in May. According to Pitchbook, Blackstone is the second-largest private equity investor in leisure and hospitality in the country.
Workers represented by UNITE HERE Local 11 have engaged in rolling strikes since July, demanding wage increases to compensate for the high cost of living in Los Angeles, which forces workers, many of whom are immigrants to commute long distances. Among the demands the union proposed a housing fund for workers funded by a 7 percent fee on all guest rooms. A spokesperson for the hotels told NPR that the fee is not on the table and issuing the demand was an unfair labor practice. A group representing the hotels also made a formal complaint with the National Labor Relations Board in June along these lines. While Blackstone does not publicly oppose the 7 percent fee, it cited this demand as a reason that negotiations have gone on for so long.
“My coworkers and I have been on strike this summer because, somehow, a company with $1 trillion has failed to provide us with living wages and the ability to retire,” a striking worker named Fernando Perez said in a statement sent by UNITE HERE. “I have traveled to Phoenix twice to urge ASRS to tell Blackstone to do the right thing and resolve this dispute. ASRS hasn’t listened to me, so I hope ASRS listens to these legislators.”
A UNITE HERE spokesperson told Motherboard that workers in Arizona have not yet gone on strike, but they have been in contract dispute since June 30.
The letter asked ASRS to inform Blackstone in writing that it will no longer invest “until the firm resolves contract disputes at the Fairfield, Aloft and Sheraton Phoenix and ensures that Blackstone can guarantee labor peace at its hospitality investments in Southern California and Arizona.”
A spokesperson for ASRS said, “We received the letter and expect to have an exchange of information with legislators or other interested parties.”
Update: This article was updated with comment from a Blackstone spokesperson.
