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NEW YORK CITY-Wall Street investment bank Lehman Brothers Holdings Inc. is reportedly in talks to sell its entire $40-billion real estate portfolio. Lehman is believed to have begun negotiations with firms such as BlackRock and Blackstone, according to reports, although Lehman’s New York City office was unable to be reached by press time to confirm reports.

Reports say that the firm will sell all of its assets as a whole or broken up to the highest bidder. Only two months ago, the firm revealed a net loss of $2.8 billion for the second quarter, compared to net income of $489 million for the first quarter of 2008 and $1.3 billion for the second quarter of 2007.

As GlobeSt.com previously reported, the firm’s loss in Q2 caused it to reduce exposure to residential mortgages, commercial mortgages and real estate investments by approximately 20% in each asset class. According to the report, during the Q2 ’08, along with reducing real estate exposure to mortgages, the firm further strengthened its liquidity and capital position by the following: the firm grew the Holding Co. liquidity pool to $45 billion from $34 billion at the end of the prior quarter. The firm reported gross assets and net assets of approximately $639 billion and $327 billion, respectively, which decreased approximately $147 billion and $70 billion, respectively, from the first quarter of fiscal 2008. It reduced acquisition finance exposures by approximately 35%. It also reduced aggregate non-investment grade inventory–including funded acquisition finance assets–by approximately 20%. Lehman also completed the budgeted full year fiscal 2008 unsecured funding plan and increased its long-term capital through the issuance of $4 billion of convertible preferred stock in April and approximately $5.5 billion of public benchmark long-term debt.

Chairman and CEO Richard Fuld Jr. said in the company’s Q2 report that the firm had begun to “take the necessary steps to restore the credibility of our great franchise and ensure that this quarter’s unacceptable performance is not repeated. GlobeSt.com will update the story as facts emerge.

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