Verizon

(VZ) - Get Report

agreed Tuesday to sell its midtown Manhattan headquarters building to

Equity Office

(EOP)

for $505 million.

The agreement covers Verizon's 41-story tower at 1095 Avenue of the Americas. Equity Office intends to market the building as Class A office space.

The sale will allow Verizon to move its headquarters next year to 140 West St. in Lower Manhattan. Verizon owns that 34-story Art Deco landmark, which borders the northwest corner of the World Trade Center site.

The building, which will house Verizon's top execs, board and Northeast phone business, has been under reconstruction ever since it

sustained heavy damage in the 9/11 terrorist attacks.

Equity Office will buy 1.03 million square feet, or nearly 80%, of the Sixth Avenue tower, including some 30,000 square feet of retail space. Verizon plans to retain ownership of roughly 200,000 square feet.

Verizon also signed a short-term lease that will enable it to make the move downtown in 2006.

The deal comes as investors await the latest word from the

MCI

(MCIP)

board on the ongoing bidding war between Verizon and

Qwest

(Q)

.

140 West St. after 9/11

Source: PBS' America Rebuilds

Qwest has said it would withdraw its most recent $8.9 billion cash-and-stock offer if the MCI board failed to reply by Tuesday. Verizon shot back yesterday that it would bow out of the bidding should MCI fail to affirm its decision to merge with Verizon.

On Tuesday, Verizon rose 27 cents to $35.92, Qwest dropped 3 cents to $3.79, MCI added a nickel to $25.13 and Equity Office slid 23 cents to $30.13.