REITs have to distribute out most of their earnings to shareholders. This deprives REITs the needed cash to reinvest into their business to grow organically. Wouldn't this stunt REITs' business growth and price appreciation? If REITs need capital, they ask money from shareholders. This is bad for shareholders and hold back the share price.

How do REITs' price appreciate, given that they do not retain earnings to reinvest back into their business like ordinary companies?

  • If REITs need money to expand, don’t they just borrow it from a bank? – chili555 Dec 17 '17 at 2:39
  • Although REITs have a high payout ratio, their retained earnings are/can be used towards investing in other properties in which they collect rent; thus allowing them to grow. If they need the funds they finance it. – NuWin Dec 17 '17 at 5:08
  • @NuWin that should be an answer. – RonJohn Dec 17 '17 at 19:02

REITs increase in value because the underlying assets (the real estate) increase in value.

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