Today, RealClear Policy published the following op-ed co-written by AIC President and CEO Drew Maloney and North America’s Building Trades Union President Sean McGarvey discussing how organized labor is partnering directly with private equity to support jobs and generate stronger pension returns on the current redevelopment of Terminal One at JFK Airport. Read the full op-ed here.
Union Partnerships With Private Equity Create Jobs & Strengthen Retirements
By Drew Maloney and Sean McGarvey
November 19, 2019
The long-anticipated renovation of Terminal One at John F. Kennedy Airport (JFK) represents the next chapter of financial empowerment for organized labor.
Big public-works projects like the Terminal One revitalization at JFK used to mean union jobs during the construction phase, but those jobs slowly disappeared once construction was complete. And these projects rarely produced long-term financial gains for the unions or their members. Now, they do.
Ullico, the only labor-owned insurance and investment company, is partnering with the Carlyle Group and JLC Loop Capital on the $13 billion Terminal One redevelopment project at JFK. That means the same workers who help rebuild JFK will benefit financially from the project in the form of stronger pension returns. In other words, sweat equity will be rewarded with financial equity.
This project is part of a broader push by organized labor to direct its financial resources toward projects that result in more member and investment returns that strengthen member pensions. Increasingly, unions are partnering with private equity to invest in these projects, a collaboration that might surprise those not familiar with our longstanding alliance.
Ullico partnered with the Carlyle Group on the Terminal One project at JFK. Similar ventures are in the works with Blackstone and KKR. These investments generate good-paying union jobs and competitive quality returns for union pension funds.
These partnerships between unions and private equity represent a promising model for ongoing collaboration. Pension funds can amplify their returns by investing alongside private equity, and private equity ensures these projects are built by the most highly skilled workers. These partnerships are the definition of win-win, even if they confound critics of both private equity and organized labor.
This alliance between organized labor and private equity stretches back to the early days of PE investments. Almost from the beginning, private equity relied on pension funds as a major source of capital. In exchange, those pension funds benefited from the above-average returns private equity generates for members’ retirements. This collaboration has strengthened with time.
Private equity consistently outperforms public equity, fixed income and real-estate investments. Private equity averaged an annual return of 10.2 percent over the last decade, according to a recent survey of public pension data by the American Investment Council. The returns were 8.5 percent for public equity, 4.8 percent for fixed income and 4.8 percent for real estate.
The benefits extend beyond those jobs directly created by construction. Big projects allow unions to train the next generation of members with a mastery of high-skilled trade through the vast, privately-funded construction registered apprentice system. The Terminal One redevelopment project represents an historic opportunity to train local workers with new skills and trade expertise they will carry with them for the rest of their career, long after construction is complete at JFK. The federal registered apprenticeship program for construction is essential to protecting these jobs.
The Terminal One redevelopment project at JFK is one of the largest public-private partnerships in the country. The project will employ more than 5,000 people during the five-year construction phase that begins next year. Once complete, it will be an architectural achievement that links New York City to the rest of the world, processing more passengers, faster, with a state-of-the-art baggage facility and a far smaller environmental footprint.
The revitalized Terminal One at JFK will employ thousands of people at the airport itself. The team behind this project is establishing an Airport Academy to train people in the area with the skills they need to work in airport operations. They also made a commitment to invest as much as possible in the local community by hiring workers from areas around the airport and contracting with local businesses.
For North America’s Building Trades Unions these investments are part of a broader commitment to use every resource to benefit our members, both in their careers and in retirement. By harnessing the value and power of members’ retirement funds, we can drive job creation and strengthen retirements for generations to come.
This evolving partnership between organized labor and private equity has become an increasingly important engine for job and economic growth. This collaboration proves workers can benefit directly from these investments in the form of new jobs and indirectly in the form of stronger retirements.
Sean McGarvey is president of North America’s Building Trades Unions, and Drew Maloney is president and CEO of the American Investment Council.