Lehman Brothers Holdings Inc is preparing to sell its stake in a Manhattan building that once housed the International Toy Center to JPMorgan Chase & Co for about $700 million, the Wall Street Journal said on Monday, citing people familiar with the matter.

The bankrupt investment bank plans to sell its more than 90 percent stake in the 800,000-square-foot building to a real-estate fund run by J.P. Morgan Asset Management, the newspaper said. L&L Holding Co had partnered with Lehman in 2007 to buy the building for $480 million.

A Lehman spokeswoman declined to comment. Representatives for JPMorgan and L&L did not return calls seeking comment.

The building, located at 200 Fifth Avenue in Manhattan, is home to Tiffany & Co and Eataly, the Italian food center.

A sale would come on the heels of a decision by U.S. Bankruptcy Judge James Peck, who oversees Lehman's bankruptcy, to let the company auction a nearby building on which it was forced to foreclose when a developer could not repay nearly $230 million in loans.

The firm has reached a $161.5 million minimum or stalking horse agreement with an entity called 1107 Broadway LLC, and plans to hold an auction on Wednesday.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

(Reporting by Nick Brown; Editing by Gary Hill)

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