Two of Sweden’s AP funds have sold local property company Norrporten in a SEK14bn (€1.5bn) cash-and-shares deal with Castellum.

AP2 and AP6, which have owned the company since 2001, said the time was right to sell their shareholdings and “realise a significant capital increase to the benefit of Swedish pensioners”.

The funds said 78% of the SEK14bn sales price would be paid in cash, while the remaining 22% would be issued in shares in Castellum, significantly growing AP2’s stake, valued at 0.62%, or SEK128m, at the end of last year.

Castellum said it would pay SEK10.4bn in cash, issue a further SEK3bn worth of shares to both funds and pay a dividend worth SEK464m to complete the deal.

Henrik Saxborn, chief executive at Castellum, said the deal was a step forward in its long-term growth strategy, which has recently also seen its six subsidiaries reorganised into four divisions.

“Norrporten has an attractive property portfolio that complements Castellum’s existing portfolio in growth markets around Sweden and Denmark,” Saxborn said.

He added that the portfolio of office and retail properties, worth SEK25bn, would add holdings in Gävle, Sundsvall, Östersund, Umeå, Luleå and Växjöand to Castellum’s portfolio, where it did not have a presence.

Karl Swartling, chief executive at AP6, said there was “clear logic” in his fund offloading its share now, despite an annualised return of 14% in its 15 years of ownership, noting that the 50% stake accounted for around one-quarter of AP6’s entire SEK26.4bn portfolio.

“It therefore makes sense for us to rebalance our portfolio through this transaction, which is the result of a comprehensive and well-structured sales process,” he added.

AP6 said the funds also considered floating Norrporten and jointly retaining a 50% stake, but they decided Castellum’s offer was more attractive than what could have been achieved by listing the developer.

Swartling’s counterpart at AP2, Eva Halvarsson, said her fund looked forward to increasing its stake in Castellum to around 5% as part of the deal.

“For AP2, the transaction will allow us to take another step in our investment strategy to increase the share of property investments on other markets,” she said.

AP2’s unlisted property portfolio will be reduced to stakes in three joint ventures as part of the sale – a 25% stake in Vasakronan, jointly owned with the four main AP funds, and stakes in Cityhold Office Partnership and US Office Holdings, latter jointly owned with South Korea’s National Pension Service.