A first-of-its-kind report found that IBEW pension plans' real estate investments have created thousands of union jobs and generated more than half a billion dollars in wages and benefits for IBEW members since 2012.

The trustees of the National Electrical Benefits Fund and the National Electric Annuity Plan — International President Lonnie R. Stephenson and International Secretary-Treasurer Kenneth W. Cooper and the two senior leaders of the National Electrical Contractors Association — wanted to put hard numbers to something they had always suspected.

"We always believed that the real estate investments our pension plans we're already making were also benefiting union workers today, but that is a hard thing to prove," Stephenson said. "We knew in our bones that there was a virtuous cycle — investing for the future while creating jobs in the present — but with this groundbreaking study we are bringing hard data."

Between 2012 and 2020, the two IBEW/NECA pension plans invested more than $6.25 billion in more than 835 real estate and construction projects. Once completed, rents, leases and potential sales bring in a reliable, profitable stream of income to the pension funds.

The real estate projects have been some of the highest-profile projects in the country, including New York by Gehry, which was the tallest residential tower in the Western Hemisphere when it opened; Sales Force Tower in Chicago; and the East Market neighborhood redevelopment project in Philadelphia. The NEBF also owns a significant portion of Sabey Data Centers, the largest private developer of data centers in North America.

The study found that, over the nine years, nearly $2.4 billion was paid in construction wages and another $1.5 billion in benefits. Nearly $1 billion in wages and benefits went to union electrical workers, including more than $117 million in direct pension contributions from signatory union contractors.

"This is a blue-collar fortune, built up over the decades, dime by dime, dollar by dollar, and what we are seeing is that when we invest it as intended for the benefit of our retirees, it also benefits working people now," Cooper said. "For nearly 40 years, corporate America has been selling the lie that to be a good business you have to put the screws to working people. That's always been wrong, and we have the proof right here."

Stephenson and Cooper were quick to say that investment decisions are always made to make money for the fund and to diversify and manage risk to build that blue-collar fortune. As an additional benefit, when those decisions are made intelligently, they also create jobs.

But touting an investment strategy that is a success for workers and current and future retirees was bound to rile up opponents of organized labor and defined-benefit pension plans generally.

"We anticipated that if we went down this road, opponents would come gunning for us. We needed to make sure our report is objective and transparent. We relied on proven methodology, used Bureau of Labor Statistics data on the construction industry, and did not take any more credit than we obviously deserve. It had to be bulletproof," said Monte Tarbox, executive director of investments for NEBF.

Using the savings of blue-collar workers to benefit blue-collar workers seems like it would be obvious, but that is far from reality. Until 2021, it was forbidden for fund managers to consider anything but fund growth in their investment decisions. The Trump administration went further, trying to make it illegal for a pension to take into consideration the economic impact of its investments, including creating jobs for pension beneficiaries today, even if it didn't affect returns in any way.

Happily, Tarbox said, this opinion was overturned once the Biden administration took back the reins of power in January.

"We never said it was the top priority; we always said it is a collateral benefit and a consideration in what we are doing anyway," Tarbox said. "Our belief is that using the best workforce leads to the best real estate product, and that is how you make money in real estate over the long term. We have been proven correct on that over the decades."

A Blue-Collar Fortune

The first IBEW pension plan is nearly 100 years old. After World War II, the IBEW and NECA created the NEBF for inside wiremen and then the NEAP was created in the 1970s to bring some of that security to outside wiremen and utility workers.

In that time, paycheck contribution by paycheck contribution, the two plans amassed nearly $30 billion. It was a testament to the collective economic power of working people.

It is also a promise: income deferred to the future so that every participant who has gotten used to dignity on the job can look forward to a retirement just as dignified and filled with possibility.

Those assets — the NEBF is the third largest multiemployer pension plan in the U.S. and the 117th largest pension plan of any kind in the world — are marshaled and invested.

Throughout its history, commercial and industrial real estate have been a core part of the pension plans' investments, as well as a major source of IBEW jobs and an economic boon to the places where we invested.

Since commercial rents are not controlled, as residential rentals are in some areas, owning and leasing commercial and industrial real estate is one of the best hedges against inflation. Real estate has typically held its value through recessions better than assets like stocks and cash.

According to the model developed by Pinnacle Investments for NEBF, 835 commercial and industrial projects led to more than $14 billion in economic activity, including more than $4 billion in construction labor income.

"Every $1 million invested in real estate generated $427,000 in income and benefits to construction workers now," Tarbox said.

Of the 70 million labor hours, nearly 10 million went to 4,800 electrical jobs, providing made more than $600 million in wages and benefits, including $117 million in pension payments.

"Nothing is more beneficial to the health of any pension plan than employer contributions. Investment earnings are great. Keeping costs down is great, but nothing matters more to the health of our pension than the health of our industry," Stephenson said. "It supports our contractors, supports the industry, creates jobs and, further down the line, it results in more employer contributions into the plan."

And the benefits to working people didn't stop at the union paycheck. The study looked further into the impact those wages had on the places where union workers live.

If you include the supply chain and the jobs of the people providing the material and equipment, the $6.25 billion in real estate investments led to $80 billion in total economic activity, more than $30 billion in income and an astonishing 435,000 jobs.

While Tarbox was proud of the results of the study, his hope is that other multiemployer pension funds will use it for themselves, adding more evidence to back the benefits of using the best trained, most productive construction workers in North America.

And now that the first report is out, Tarbox anticipates using the same research method to look at infrastructure investments.

"If you believe in the high-road approach, we created the gold standard for thinking about job creation and economic impact for pension fund investors," Tarbox said. "You can be rigorous, not set out to prove anything right or wrong, and show what collectively working people can do to make North America better. We hope others will take this on."