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Like with all things it depends. If the plan is to go on a buying spree then most likely you would raise cash through an equity offering. For smaller transactions most REITs have revolving lines of a credit to fund equity portions of acquisitions.
Also keep in mind that REITs are required to distribute 90% of their taxable income which may be a lot less than their FFO. So there's a good chance there is cash around from FFO for acquisitions.
Not trying to snarky at all... but, they are public REITs... they raise capital via issuance of stock and bonds in the public market, that is the whole reason to go public. They can use bank loans, lines of credit, and other forms of financing too.
They usually have lines of credit that they use to do acquisitions which are then repaid after the issuance of debt and equity at a later date.
I guess my experience is limited to the REPE world...which is simply raising fund after fund. Seems like a stock issuance would be tough to execute bc it would dilute existing shares, then take years to actually deploy that capital and get it working, right?
They tend to 'acquire first' via the use of credit lines, this allows them to better time the issuance of stocks and bonds as they also like to 'play the market'. When they go through all the expense and time to go public, report public, etc. the cost of SEOs is considerably less than an IPO, in fact they just 'shelf register' most of the shares they create.
They can also use program like 'at the market' or ATMs to sell shares through a process that's like daily trading (a bit more like a open-end mutual fund or ETF process).
Remember, public financing is often (at least historically) way cheaper than raising private funds. It really isn't always a given that 'simply raising fund after fund' is easy, many investors want to trade their shares daily for liquidity purposes and don't want the lock up of years.
Finally, remember than REIT prices are often at a premium to NAV (private value in theory), thus they get a value lift in selling share publicly (when this is true). When REIT prices are at a discount the REPE shops try to take public REITs private, then they list with a new IPO when it reverses itself. Look at how PE exits their funds, its often via an IPO or sale to a public entity.
This is the real answer. There was also a mega wave of unsecured new issue at the end of last year and beginning of this year from various REITS, and (if I remember right) I don't think it was all for refi'ing so there's dry powder for sure.
Of course, I didn't mean that raising private funds was "easy"...the concept is just easier to grasp holistically.
I'm curious about your last paragraph. Why/how would an REPE shop take a REIT private?
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