LOS ANGELES--(BUSINESS WIRE)--UNITE HERE Local 11 sent the following letter to current and prospective investors in commercial real estate lender Acore Capital and insurer Delphi Financial Group:
We write to inform you of a pending labor dispute that could include a boycott, strikes and picket lines at the Hotel Figueroa, which is owned by GreenOak Real Estate with financing from Acore Capital and Delphi Financial Group. The hotel, which has been closed for renovations, is accepting reservations for February 19, and faces risks associated with labor unrest because GreenOak has failed to sign a labor peace agreement covering all workers at the hotel.
Instead of scaling back expectations in advance of a labor dispute at the hotel, Acore Capital and Delphi Financial Group have doubled down, increasing the hotel’s indebtedness from $80.5 million as of February 9, 2016 to $93.5 million as of December 27, 2017, according to property records.
The Hotel Figueroa will be surrounded by numerous hotels whose workers are members of UNITE HERE Local 11. The developers of the new Hotel Indigo and InterContinental in Los Angeles signed labor peace agreements before the hotels opened, and workers there are now Local 11 members. Furthermore, other investment managers, including CIM, Blackstone and Apollo Management Group, have signed labor peace agreements providing for card-check neutrality at hotel properties throughout the country.
If no labor peace agreement is in place, a boycott can negatively impact hotel performance. Workers at the Embassy Suites Irvine called for a boycott of the property in September 2010 after striking over being repeatedly denied the 10-minute breaks they are entitled to under state law. In the wake of the boycott announcement, some major clients at the Embassy Suites Irvine moved their business elsewhere. We estimate that if those groups had remained with the hotel and maintained the same rates of usage as prior to the boycott, they would have generated an additional $2.1 million in room revenue for the hotel during the 12 months following the boycott declaration.
Acore Capital is currently raising capital for ACORE Credit IV, LP. Current and potential Acore investors should ask whether Acore will continue to expose investors to risks associated with labor disputes by partnering with managers unwilling to sign labor peace agreements that would prevent boycotts, strikes or picket lines at hotel properties.