A coalition of 34 Arizona state legislators is calling for the $51.5 billion Arizona State Retirement System, Phoenix, not to invest in more Blackstone funds until labor disputes are resolved at three hotels in which prior Blackstone funds have invested.
In an Oct. 18 letter to Rene Guillen, chair of the pension fund system's board of trustees, legislators including House Democratic Leader Lupe Contreras and Senate Democratic Chair Lela Alston said that the system is at risk of undermining its investment returns in part because it committed $100 million to Blackstone Real Estate Partners Fund VIII in 2015. Fund VIII invested in the Fairfield and Aloft Hotels in Los Angeles, where hospitality workers went on strike in July.
The legislators said in the letter, "We write in the interest of strengthening and protecting ASRS returns" and cite a study by Brian Becker, associate professor of the State University of New York-Buffalo and Craig Wilson, associate professor at the University of Wisconsin-Madison, that strikes substantially affect shareholder value.
"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 letter said. "We urge ASRS to inform Blackstone Group in writing that, consistent with the fund's interest in mitigating investment risk, the fund will not re-invest with Blackstone 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."
According to the letter, Blackstone Real Estate Partners IX invested in the Sheraton Phoenix property. ASRS did not make a commitment to that fund.
In a statement, a Blackstone spokesman said: "Across the country, Blackstone has an excellent relationship with UNITE HERE, who has recognized us as a top employer in the hospitality industry. 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."
ASRS spokesman David Cannella said, "We received the letter and expect to have an exchange of information with legislators or other interested parties."
The Oct. 18 letter is posted on the website of hospitality workers union UNITE HERE.
