July 11 (Bloomberg) -- A joint venture led by Wachovia Corp. agreed to sell a 21-story office building in midtown Manhattan's garment district at a $41 million loss, people with knowledge of the decision said.

Wachovia, owner of 85 percent of 1372 Broadway, and minority owner SL Green Realty Corp. agreed to sell the building for $294 million, or about $542 a square foot, to a partnership led by New York investor Lloyd Goldman, they said. Wachovia, the fourth- largest U.S. bank, acquired its interest in July 2007 from SL Green in a deal that valued the property at $335 million.

Wachovia said two days ago it expects to report a second- quarter loss of at least $2.6 billion because of residential mortgage losses. The Charlotte, North Carolina-based bank ousted Chief Executive Officer Kennedy Thompson June 2 after cutting its dividend 41 percent and raising $8 billion in capital.

``Financial institutions generally speaking are looking for ways to make more capital available for their business operations,'' said Nat Rockett, senior vice president at property brokerage Jones Lang LaSalle's New York office, who wasn't involved in the transaction.

The Broadway property's sale for 14 percent less than its value in last year's deal, reflects a ``relatively modest'' decline in office building values in New York since last year's market peak, Rockett said.

`Quite Positive'

``In that respect it's quite positive,'' Rockett said. ``It's not a trophy asset that's going to attract'' foreign buyers ``with currency considerations.''

The Abu Dhabi Investment Council, a sovereign wealth fund controlled by the Persian Gulf emirate's government, bought a majority stake in the Chrysler Building on July 8. In June, Boston Properties Inc. bought the General Motors Building in partnership with Goldman Sachs Group Inc. and an investment fund from Dubai.

Elise Wilkinson, a Wachovia spokeswoman, said the company has no comment, as did Rick Matthews, an SL Green spokesman. Lloyd Goldman, developer Larry Silverstein's biggest partner in the World Trade Center office redevelopment, didn't return calls seeking comment.

SL Green, Manhattan's largest office landlord, recorded a $215 million gain last year when Wachovia bought into 1372 Broadway. The building was the biggest property in SL Green's portfolio in 1997, when it went public.

Tenants

The 541,752 square-foot tower, built in 1914, houses six floors of offices for Ross Stores Inc., and four floors for AnnTaylor Stores Corp., both fashion retailers, according to CoStar Group Inc., a real estate data service. Together they account for about half the building's space, and their leases expire in 2016 and 2010, respectively.

The building, two blocks north of Macy's Herald Square flagship store, is almost fully leased, with rents for the few spaces available listed at $52 and $56 a square foot, plus electricity, which is around the market average for the Times Square South submarket reported by Cushman & Wakefield, a New York-based brokerage. It was fully renovated in 1999, according to SL Green's Web site.

Wachovia provided the Goldman partnership with $235 million of financing for the transaction, people familiar said.

Eastdil Secured Inc. Senior Managing Director Doug Harmon represented the sellers, and Carlton Group Inc. arranged the financing, the people said. Both declined to comment.

Wachovia fell $1.54, or 12 percent, to $11.54 in New York Stock Exchange composite trading. Shares are down 77 percent in the last 12 months. SL Green fell 15 cents to $82.09; its shares have lost 36 percent in 12 months.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net.

Last Updated: July 11, 2008 16:50 EDT