Investing in REITs: Real Estate Investment Trusts, 4th Edition

Internal Growth

When a REIT is able to increase profits from operating and managing its properties, through increased rental revenues (including higher rents and occupancy rates) and keeping expense growth under control, it is enjoying internal growth. Controlling corporate overhead expenses and interest expense are also very important; if these nonproperty expenses are rising faster than property net operating income, internal growth will be less than would otherwise be the case. As internal growth rates do not depend on acquisitions, development, or raising additional capital, they tend to be stable and reliable—albeit usually in the low to mid single digits—during most economic environments.

Before we examine the specific sources of REITs' ...