SWEDEN - Första AP-fonden (AP1), Sweden's first national buffer fund, has created a new real estate company and will acquire more than SEK7bn (€767m) in domestic property assets.

The wholly owned Willhem AB will acquire 11,100 rental units in the Swedish cities of Stockholm, Gothenburg, Malmö, Jönköping, Borås, Karlstad and Linköping.

The portfolio of assets will include a total of approximately 860,000 square meters of real estate, of which 87% is residential.

The SEK202.6bn AP1 already co-owns Sweden's largest real estate company Vasakronan, which is estimated to hold some €7bn in real estate assets, alongside fellow buffer funds AP2, AP3 and AP4.

In June, Vasakronan sold €565m in residential assets to AP4 in what was one of the largest residential portfolio deals in Sweden's history, but AP1's latest purchase is even larger.

Johan Magnusson, managing director at AP1, said: "We have taken the opportunity to make a sound investment in residential properties where we see strong development potential.

"The investment is consistent with our mission in the pension system, which is to pursue long-term investments with a low level of risk and high returns.

"Through Willhem, we are building a long-term and responsible real estate company with an ambition to grow."

The formal transfer of ownership of the properties to Willhem is expected to take place at the start of 2011, and the company hopes to have taken over all operating activities by the spring.

Property management will be handled using the company's own resources.

Mikael Granath, managing director at Willhem, said: "Although we are a new real estate company, our management has longstanding experience of the housing and real estate industry.

"We take this acquisition very seriously and look forward to establishing good and lasting relationships with all of our tenants."