Yet another REIT is being acquired -- but instead of being purchased by private equity, Pan Pacific Retail Properties (NYSE:PNP) has agreed to a buyout from KimcoRealty (NYSE:KIM). Pan Pacific will sell for $70 per share, or approximately $4 billion in all.

Roughly $2.9 billion of the purchase price represents equity, while the rest accounts for Pan Pacific's debt. Both of the companies are REITs focused on shopping centers.

One of Kimco's actions over the past five years, as outlined in the supplemental materials issued with its recent earnings release, is further expansion into West and East Coast markets. The acquisition of Pan Pacific Retail Properties certainly fits the strategy, since Pan Pacific's shopping-center properties are located exclusively in West Coast markets.

In the press release announcing the acquisition, Kimco stated that it's planning to take many of the Pan Pacific properties and move them into the company's coinvestment programs. In other words, Kimco will sell a percentage of its ownership in many of these properties to joint ventures. The company will earn property management fees and should still earn healthy returns, but will participate in only a percentage of the earnings and increases in property value.

It's hard to find fault with the portfolio Kimco is picking up from Pan Pacific. Pan Pacific's largest tenants include Safeway (NYSE:SWY), Albertson's, Kroger (NYSE:KR), Rite-Aid (NYSE:RAD), and Wal-Mart (NYSE:WMT). Grocers aren't the most attractive investments, but they are fairly stable tenants and good anchors for shopping plazas. Aside from being in desirable locations, it also seems that Pan Pacific's portfolio meets Kimco's goals of owning properties with strong demographics, highly diversified tenant bases, and properties that allow for regular rent increases.

Pan Pacific shareholders may not feel happy, since there is no premium being paid to the recent share price. However, having done a back-of-the-envelope look at Pan Pacific's net operating income and the purchase price being paid, I get a capitalization rate (net operating income divided by the $4 billion price paid) of around 6% -- subject to math errors, I'll admit. I find that rate hard to argue with. In fact, if Kimco didn't have a history of focusing on properties with below-market rents, which it can increase over time, and a proven co-investment strategy, I'd probably think Kimco had overpaid. But taking all of the factors into account, it looks like a good fit for all parties.

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At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.