There have been plenty of quality retail assets that Mark Yale, chief financial officer of Columbus, OH-based REIT Glimcher Realty Trust, has been eyeing for acquisition this year. However, it was the Town Center Plaza shopping center in Leawood, KS that he zeroed in on. Anchored by Macy’s and Dick’s Sporting Goods, the 650,000-square-foot mall met the REIT’s core investment criteria for its portfolio.

As it happened, the seller, DDR (the rebranded Developers Diversified Realty), felt the same way—about Glimcher’s Polaris Towne Center power center in Columbus, that is. The two REITs negotiated a strategic swap to bring down the total acquisition price, a rare transaction among property trusts as it is not often that investment goals are so complementary between buyer and seller.

Glimcher is funding the deal with life money; it is in the process of securing a $55-million to $60-million loan now. The rest will be supplied by equity the REIT raised earlier this year in an at-the-market offering. “It’s a great deal because we are bringing in an asset that’s very valuable,” Yale says. “It is accretive to earnings so it checks all the boxes.”

If a strategic swap hadn’t been involved, however, Yale has his doubts as to whether the deal would have happened. “There were other acquisitions we would have loved to add to our portfolio and didn’t because we have to be realistic about cost of capital,” Yale explains.

So it goes in the life of a REIT these days. Given the volatile capital markets and uncertain global and US economy, acquisitions have become a high-stakes chess game for REITs: not only must they map out how a particular acquisition will add value but also exactly how they will pay for it.

Such calculations have always been part of commercial real estate dealmaking, of course. Now, though, the considerations have multiplied significantly…

...To read the rest of the story, visit the November 2011 issue of Real Estate Forum.