SIOUX FALLS, S.C. -- The newly formed parent company of the Dakota, Minnesota & Eastern Railroad is buying the former IBM Building in downtown Sioux Falls to serve as its corporate headquarters, the Argus Leader reports.

The parent company, Cedar American Rail Holdings Inc., also plans to oversee a second railroad from Sioux Falls.

Cedar is buying I&M Rail Link, which will be renamed the Iowa, Chicago & Eastern Railroad - IC&E, for short - and become a bigger-sister company to the DM&E.

Cedar's purchase of the IBM Building from a group of investors is contingent on completion of the I&M sale.

Kevin Schieffer, president and chief executive officer of Cedar and DM&E, announced Tuesday that he expects the new headquarters to start operations in July with about 100 employees.

"There is tremendous growth opportunity for the company," he said.

In addition to combining two regional railroads under one parent company, Schieffer and Cedar are trying to rebuild DM&E track that runs through Minnesota and South Dakota and extend that line into the coal fields in northwestern Wyoming. The success or failure of that DM&E project will influence the number of employees eventually based in Sioux Falls, Schieffer said.

The DM&E will retain an office of undetermined size in Brookings, its present headquarters, Schieffer said.

The DM&E currently has about 300 employees scattered in South Dakota and Minnesota, with the largest concentrations in Rapid City, Huron, Brookings and Waseca, Minn.

The parent company also will retain a branch office in Davenport, Iowa, present headquarters of the I&M, which employs about 700 people in the region.

I&M operates on about 1,700 miles of track in Iowa, Minnesota, Missouri, Illinois and Wisconsin. The DM&E runs on about 1,134 miles through central South Dakota and southern Minnesota, connecting with the Mississippi River. Cedar's pending acquisition of the I&M, which was announced in February, will give the DM&E better access to markets in cities such as Chicago, Minneapolis and Kansas City, Mo., as well as the Mississippi River ports and Iowa grain producers.

Schieffer's announcement about creating a centralized headquarters for the two railroads was welcomed by business and civic leaders in Sioux Falls, including new Mayor Dave Munson, at a news conference outside the IBM Building. Several dozen community leaders attended.

"This is exciting for Sioux Falls and for the downtown area," Munson said. "They are a quality organization, and they have a real bright future."

Other officials said that attracting a new corporate headquarters is good for downtown development and important to the whole city.

"It's big stuff," said Dan Scott, president of the Sioux Falls Development Foundation. "We just don't know how big it's going to get yet."

The 52,000-square-foot IBM Building, which includes four floors and a basement, is at the southeast corner of Eighth Street and Phillips Avenue.

Schieffer declined to disclose the purchase price.

IBM has not occupied the building for about four years, said Michael Bender, a commercial real estate broker who assisted Schieffer and Cedar. A more recent tenant, Wellmark, moved out of the building within the past few months.

The building currently has three office tenants, but most of the space is unoccupied. Cedar, which already has started remodeling the building, plans to sublease some of the space.

The company also is soliciting applications, such as accountants and public service representatives.

Richard Smith, executive director of the Brookings Economic Development Corp., and Schieffer talked about the headquarters decision on Monday, the day before public announcement.

"Brookings is disappointed that it will lose at least part of its headquarters. But we're encouraged we won't be losing it all," Smith said.

"Most of the employees will be able to select the office of their choice," he said. About 70 DM&E employees are based in Brookings.

Schieffer said that his 12-year-old daughter, Brooke, played an important role in helping check prospective sites in Sioux Falls for the corporate headquarters and that she favored the IBM Building.

"This one was closest to Zandbroz," Schieffer said with a laugh. "She likes the chocolate shakes over there."