How REITs grow. Let's take a closer look at the balance sheet. All companies of all types more or less look the same on paper in that a group of core assets, which drive earnings at the company, are funded by some combination of debt and equity. As discussed, a traditional non-REIT company may or may not pay dividends but generally does not pay out all of its earnings in the form of dividends. Therefore, those earnings are plowed back into the company, allowing the balance sheet to grow. The earnings, or more appropriately, cash flow, allow the company to reinvest in the company's assets in order to generate higher levels of earnings in the future. REITs look the same to start, however, their primary concern is growing earnings to grow dividends. REITs have three ways to grow. One, increasing earnings and cash flow from existing assets. The amount of earnings the company can retain or spend on new assets is limited by the dividend policy. Two, raising debt to fund new purchases. Three, raising equity to fund new purchases. Now, it should be stated that traditional non-REIT companies also raise debt and equity to purchase other assets and other companies. But for REIT, access to capital is critical as it cannot rely on cash flow alone. Raising debt or equity both have their associated costs. Well-managed REITs manage the assets to generate as much earnings and cash flow as possible. There are two paths to growth for a REIT. One is using existing assets. Some methods of generating revenues from existing assets are rent increases, expense efficiency, enhanced services, tenant upgrades, property redevelopments. The other is through new assets. This includes acquiring new assets and also recycling and redeveloping existing assets to free up capital for new assets.