Roland Stephenson has a better understanding of the perils of
real estate investing than many investors, so he eschews lower-risk (and
lower-return) REITs in favor of private equity property funds. "Private equity
gives a better return than [investing via] the markets," Stephenson says. "It’s
a little higher risk, but I’m a contractor, so I’m used to risk."
 Stephenson, chief executive of Faith Technologies, an Appleton,
Wis., electrical and specialty systems contracting firm with 1,400 employees
spread across a number of states, has stakes in four real estate private equity
funds. His property portfolio, he says, is of a "comfortable seven-figure
number" magnitude. But he expects to be paid well for sacrificing the market
liquidity and the diversification one enjoys in REITs. "I would expect on the
low side around 15 percent and on the high side around 30 percent annual
return," he says.
Stephenson has invested in McKinley Reserve’s Buena Vista fund,
which operates in the United States and Dubai. The fund works with local
governments on large-scale initiatives, operating as both principal investor and
developer. Overall, Stephenson feels more comfortable taking domestic, rather
than international, exposures. "I like to have something where I can walk up and
look at it," he says. However, the return opportunities in the fund’s
international portfolio make it worth the additional risk. "If you have a
sophisticated private equity manager that has a good track record, then you’re
more apt to go into these international funds," he says.
Even so, he insists on performing his own research on the markets in which
his funds invest. Although the private equity manager is the real expert, he
recommends that investors ensure they are happy with the demographic and
economic trends for the regions in which their funds invest. Art by John Webber.  Back to Main Article: Building Your Global Real Estate Portfolio
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