Feb. 1 (Bloomberg) -- New York real estate developer Harry Macklowe plans to sell the General Motors Building on Manhattan's Fifth Avenue this month to help repay debts from his purchase last year of seven office buildings, people with knowledge of the situation said.

Bids for the GM Building are due Feb. 15, said one of the people, who declined to be identified because he wasn't authorized to discuss the plan. The developer pledged his stake in the 50- story tower as collateral for a $1.2 billion bridge loan from Fortress Investment Group LLC that financed the buildings Macklowe bought from Sam Zell's Equity Office Properties Trust, according to the Wall Street Journal.

Macklowe is selling as lenders limit the availability of credit in the wake of rising delinquencies in the subprime mortgage market. Since he bought the seven buildings, the cost of borrowing has climbed by one-third, said Scott A. Singer, executive vice president of New York-based Singer & Bassuk Organization, which arranges financing for property sales.

``The market has totally changed,'' said Howard L. Michaels, chairman of New York-based Carlton Advisory Services Inc., which helped Macklowe refinance the GM Building in January 2004. ``He paid an appropriate price at the time he bought the properties. It was a major score for him. And it was unforeseeable by him or anybody else that the market would change so drastically.''

Sam Zell's Properties

Macklowe, 70, bought the seven office towers for $7 billion on Feb. 9, 2007. That was the same day Blackstone Group LP purchased Equity Office for $39 billion including debt, in the biggest leveraged buyout up to that time.

Macklowe reached an agreement to turn the properties over to Deutsche Bank AG because he was unable to refinance, the Wall Street Journal reported yesterday.

The deal would allow Macklowe to continue to manage the midtown buildings, the New York Times reported yesterday.

``They are in serious negotiations with Deutsche Bank,'' said Macklowe spokesman Steve Solomon. ``It's not finalized yet but they're very optimistic that it will be a good outcome.''

A trip by Macklowe to the Middle East to drum up equity partners proved fruitless, the people said.

Hired Broker

Earlier this month, Macklowe hired CB Richard Ellis Group Inc., the world's largest commercial real estate broker, to find a buyer or investor for the GM Building.

Macklowe's son and business partner, William, declined to comment, as did Deutsche Bank spokesman John Gallagher.

This isn't the first time Macklowe has faltered. During the real estate recession of the early 1990s, he was forced to return the Riverbank West tower on 42nd Street and the Hotel Macklowe to creditors, according to the New York Times.

Macklowe is a college dropout who got into the New York real estate business in 1959 as a broker, according to Forbes magazine. He left three colleges, including New York University and the University of Alabama, to pursue real estate.

In the mid-1960s, he founded Macklowe Properties to move from brokering deals to developing office and residential buildings. He amassed 12 million square feet of office space and owned buildings including 666 Fifth Avenue.

`Visionary'

In the 1980s, he built several skyscrapers, including the black glass Metropolitan Tower on 57th Street and the residential RiverTower on the East Side. Macklowe was worth about $2 billion as of October, according to Forbes.

``He's a visionary,'' said Eric Anton, a principal at Eastern Consolidated Properties Inc., a New York-based commercial property broker with $3 billion in transactions annually. ``There's no question he'll come back. This is really going to hurt him and I think it's bad for the market, but he'll come back.''

In 2003, Macklowe acquired the GM Building for a record $1.4 billion from Donald Trump and Conseco Inc.

It was constructed for General Motors Corp. in 1968 and once included a showroom featuring its automobiles. Now, tenants include hedge funds and financiers such as billionaire Carl Icahn, and a recent renovation of the plaza in front of the building includes a two-story-high glass cube entrance to the underground Apple Inc. retail store.

The building could be sold for as much as $3.5 billion, according to Michaels of Carlton Advisory Services. That would be $1,750 a square foot and set a record for a building sale in New York. In October, 450 Park Ave. sold for $1,566 a square foot.

Lack of Lenders

Office building prices have come down from their peak in the third quarter of 2007, said Sam Chandan, chief economist for Reis Inc., a New York real estate data provider. By the end of the year, the falling prices had returned most of the gains that followed Macklowe's purchase, he said.

Just as much of an issue for Macklowe is the lack of lenders willing to fund such large deals, said David Tobin, a principal at Mission Capital Advisors LLC in New York, which advised on $5 billion of property sales last year.

``There is simply no expanding demand for $150-per-square- foot office space in New York City,'' Tobin said. ``All of this excess in the real estate markets has been fueled by financing and the financing isn't coming back for a long, long time.''

To contact the reporters on this story: Bob Ivry in New York at bivry@bloomberg.net; David Levitt in New York at dlevitt@bloomberg.net.

Last Updated: February 1, 2008 10:37 EST