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THE owners of the InterContinental Singapore at Bugis Junction are seeking buyers for the 409-room five-star hotel, which is said to be priced in the region of $200 million.

The 99-year leasehold hotel is 90 per cent-owned by CapitaLand and Keppel Land, with British-based InterContinental Hotels Group (IHG) holding the rest.

The indicative price for the InterContinental is based on an estimated investment cost of $500,000 per room, which market watchers say is the benchmark price for a five-star leasehold hotel here.

Interest in the InterContinental - which is operated by IHG - is believed to be 'keen', with sources pointing to regional hoteliers and international funds as likely buyers. Foreign players have expressed interest in Singapore's recovering hotel sector over the past year.

Hong Kong's Park Hotel Group, which bought the freehold Crown Hotel on Orchard Road for $300 million in June last year, is one such contender, as is Indonesia's Lippo Group, which acquired the Meritus Mandarin Hotel on Orchard Road in May.

United States fund Colony Capital has also been mooted as a possible buyer, with its high-profile purchase last year of Raffles Holdings' hotels, including the historic Raffles Hotel, for $1.7 billion.

Sources said IHG is likely to stay on as the InterContinental's operator after the sale, which may make the hotel less attractive to owner-operators looking to rebrand the property as their own.

As such, institutional investors like LaSalle Investment Management and Lehman Brothers, which in 2004 bought Hotel New Otani on River Valley Road - now Novotel Clarke Quay Hotel - may be more interested in buying the hotel, said sources.

Talk of the InterContinental being sold surfaced as early as last year, when CapitaLand and Keppel Land took full control of Bugis City Holdings, the company that owns almost all of Bugis Junction, comprising a mall, an office tower, and the hotel.

Market watchers said at the time that the two property giants were likely to sell InterContinental as the hotel did not dovetail with their core property development businesses.

Since then,the retail portion of Bugis Junction has been bought by CapitaLand's property fund CapitaMall Trust, while the office component has been absorbed into Keppel Land's office trust, K-Reit Asia, earlier this year.

This leaves only the hotel.

Neither CapitaLand nor Keppel Land owns any other hotels in Singapore, although the latter has stakes in other hotels in the region, including two in Myanmar and at least three in Indonesia.

Jones Lang LaSalle was appointed the exclusive marketing agent for the InterContinental sale last month, a sign that CapitaLand and Keppel Land are now stepping up marketing activities for the hotel deal.

The Straits Times understands the 16-storey hotel, which opened in 1995 with an estimated building floor area of 495,054 sq ft, was unsuccessfully put up for sale on at least one other occasion.

But property consultants said that favourable market conditions, such as an improving hotel sector, may help seal the deal this time.

'Market sentiment is now stronger and hotel performance - in terms of rates, occupancy, and therefore revenues - has been going up in the last two years,' said Mr David Ling, managing director of hotel consultants HVS International Asia.

'Given these factors, there should be should be reasonable interest in the InterContinental as it's a five-star hotel in the city centre and an international-quality product.'

fiochan@sph.com.sg