Theming Drupal Panels block panes as blocks

I wanted to theme Panels block panes as blocks… not as a block-pane. To do so, simply add this code to your template.php. This also has the added benefit of making block panes recognizable to the Admin module as blocks (meaning anyone with privileges get the handy “Configure” contextual link when you hover over it).

function chhs_panels_pane($content, $pane, $display) {
  if (!empty($content->content)) {
    if($pane->type == 'block') {
      $output = theme('block', $content);
      return $output;
    }
  }
}

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