I experienced the same thing last summer. I wanted to take my size down... while still holding my strength. I brought myself down from 240-250 lbs to 205-208 lbs (dehydrated) and 210-212 lbs (hydrated).
I found I was able to reduce my size significantly while maintaining strength. Then, when I reveresed the process I experienced new strength gains when I took my size back up.
You can definitely reduce bodyfat and maintain muscle mass. You just have to do it smart.