Kilroy Shares Rise 9.8% in First Trading

Shares of El Segundo-based Kilroy Realty Corp. rose 9.8% on Wednesday in their first day of trading, as investors rushed to get in on the ground floor of the resurgent Southern California economy and its recovering office property market.

“It’s the market with the most upside potential left, and investors are hoping for the type of recovery there that they have been able to witness in the rest of the country,” said Chris Hartung, a real estate analyst at Montgomery Securities.

Office rents and occupancy rates in Southern California, where recovery has lagged the rest of the U.S., have just started to rise. Average rental costs in the rest of the country have risen as much as 15% in recent months, Hartung said.

Shares of Kilroy, run by veteran California developer John Kilroy Sr., rose $2.25 to close at $25.25 on the New York Stock Exchange, after trading as high as $25.75.

In the initial public offering, Kilroy raised $287.5 million before fees by selling 12.5 million shares at $23 each through an underwriting group led by Prudential Securities Inc.

Demand for Kilroy’s stock was so great that it boosted the number of shares it would sell. It said in November it would sell 9.26 million at $19 to $21 each when it filed the proposed IPO with the Securities and Exchange Commission.

Proceeds from the stock sale will be used to repay debt and buy more office and industrial properties, the company said.

Kilroy owns 14 office properties with a combined 2 million square feet of space and 12 industrial properties with a total of 1.3 million square feet.

The properties are mainly in El Segundo, Long Beach and Anaheim. The company also has holdings in Seattle and Phoenix. The properties include the Kilroy Airport Center in El Segundo, the Kilroy Airport Center in Long Beach and SeaTac Office Center in Seattle.

Hughes Electronics Corp.’s Space & Communications Co., Mattel Inc. and Northwest Airlines Inc. are some of its tenants.