CORRECTED - UPDATE 1-Downey to sell certain real estate assets for $110 mln

(Corrects first paragraph to show that assets have been sold) (Recasts; adds details, share movement)

Sept 5 (Reuters) - Downey Financial Corp DSL.N said it had sold certain real estate assets for $110 million as part of its agreement with regulators to enhance its financial strength by the year end, and its shares fell about 23 percent.

The company said it expects to report a net pre-tax gain of about $68 million from the sale.

The gain, combined with a dividend from a subsidiary of the company, will increase the bank's regulatory capital by about $109 million.

The Office of Thrift Supervision (OTS) had asked the California-based savings and loan holding company to meet and maintain a minimum Tier 1 capital ratio of 7 percent and a minimum total risk-based capital ratio of 14 percent at each quarter end, Downey said.

"Downey's board and management will continue to diligently explore a broad range of strategic alternatives," Chief Executive Michael Bozarth said in a statement.

The OTS has asked the company to submit plans on asset reduction and strengthening its executive management, among other things, within 45 days, Downey said.

Last month, the OTS had restricted the company from paying dividends, making management changes, increasing assets beyond a certain level, paying severances or compensations, and making any transaction with any affiliate or subsidiary.

Shares of the company were trading at $2.40 after the bell. They closed at $3.10 Friday on the New York Stock Exchange. (Reporting by Adheesha Sarkar in Bangalore; Editing by Deepak Kannan)