UPDATE 1-Deutsche Bank selling block of Vornado shares in Penney

(Adds share movement, detail on Vornado, Roth)

March 4 (Reuters) - Deutsche Bank is offering a block of 10 million shares in retailer J.C. Penney that is being sold by Vornado Realty Trust, a source familiar with the offering said on Monday.

The news, which saw shares of J.C. Penney fall in after-hours trade, came less than a week after the department store chain reported its sharpest sales drop since announcing a grand transformation plan 13 months ago.

Vornado is the Penney's third-largest shareholder and its chairman, Steven Roth, sits on the retailer's board.

Vornado investors have been unhappy with the firm's investment in Penney, which has been struggling to turn around under Chief Executive Ron Johnson.

The second-largest U.S. real estate investment trust after Simon Property Group Inc, Vornado last week said it recorded a $224.9 million non-cash charge in connection with its Penney investment.

"J.C. Penney is a newer investment, which is struggling right now," Roth told investors on the earnings call.

Representatives for Penney and Roth could not be reached for comment on Monday.

Shares of J.C. Penney were down 3.5 percent to $16.15 in after-hours trading on Monday.

(Reporting By Ben Berkowitz, Olivia Oran, Ilaina Jonas; Writing by Dhanya Skariachan; Editing by Bernard Orr and Tim Dobbyn)