HOUSTON-IBM Corp. has protected its interests in the 350,000-sf Two Riverway, built 23 years ago in Houston for the computer giant, by exercising a purchase option and then flipping the asset at the closing table to locally based Radler Enterprises. Sources say the selling price fell between $25 million and $29 million.

The Galleria submarket sale closed with IBM buying out its master lease, working up another for significantly less space and adding five years to the term. Danny Miller in the Houston office of CB Richard Ellis Inc. tells GlobeSt.com that IBM’s master lease was set to expire Dec. 31, 2006.

The Shorenstein Co. of San Francisco acquired the asset in 1981 in a sale/leaseback with IBM. Shorenstein’s broker, Robert Williamson of Granite Partners in Houston, says the tables turned when a Houston team for Grubb & Ellis Co. introduced a buyer from Miami. IBM, clutching a first right of refusal, bought the building and flipped it at the closing table to Radler, says Williamson. He adds that IBM contributed funds at closing to cancel the master lease.

The Armonk, NY-headquartered IBM went from occupying the entire 17-story building through the early 1990s down to two floors or 50,000 sf. IBM has managed to sublease 170,000 sf, but 35% balance of the class A space remains empty.

Miller says IBM has reworked the lease for its two floors and added another five years to the term while all subleases, most of which are good through 2006, have been reassigned to Radler. With the deed now transferred, Radler is drafting a repositioning plan and considering a major renovation for the lobby. Miller and CBRE’s Steve Rigby in Houston represented IBM and Radler in the deal.

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