General Growth Properties, which owns the Maine Mall, has confirmed it is among potential buyers of the Sheraton Hotel in South Portland, which has been for sale since 2006.

Sources who follow the commercial real estate industry say a hotel operator also is actively seeking to buy the property, which is being marketed by a Massachusetts real estate company.

The mall owners issued a letter of intent in May to buy the hotel for $9.2 million, according to documents filed with the city.

General Growth Properties planned to tear down the hotel’s twin circular buildings and use the Maine Mall Road site for retail space, according to a letter to the Tax Assessor’s Office from MTS Consulting of Massachusetts, representing the hotel owners.

Although a sale has yet to go through, a General Growth spokesman said in a phone interview last week that the mall developer remains a potential buyer.

“We have not made a final determination on the purchase,” said James Graham, director of public affairs for the Chicago-based General Growth Properties. “We are in the analysis phase in reviewing this property,” Graham said. “There is not much more I can say at this point.”

Phone calls to Starwood South Portland Realty, which owns the Sheraton, were not returned. Starwood South Portland is part of the international Starwood Hotels and Resorts Worldwide Inc., based in White Plains, N.Y.

“The current status is that the hotel remains on the market for sale at this time,” said Thomas Foley, senior managing director of O’Connell Hospitality Group, which is marketing the site.

O’Connell Hospitality Group of Massachusetts has been seeking a hotel buyer since December 2006. In an e-mail correspondence, Foley declined to comment on possible buyers.

At least one unidentified hotel operator has shown interest in the property, making an offer of $8.25 million, according to documents MTS Consulting filed with the Tax Assessor’s Office in June 2007 as a part of its appeal of the property’s $13.2 million valuation.

The Sheraton, which opened in 1973, is located in a high-traffic retail area, directly across the road from the Maine Mall, which recently won planning board approval for a major expansion in 2008.

The Sheraton is familiar to shoppers and residents for its distinctive, twin circular buildings covered with rectangular windows. It is frequently booked for conventions and by tour groups.

The 10-acre hotel also is located in a prime retail area. It abuts five acres of cleared land the Maine Mall owns and hopes to develop as a shopping center.

The mall has been actively seeking tenants for the site, after Best Buy backed out of a plan to move from the Maine Mall to the planned shopping center.

The Tax Assessor’s Office appraised the hotel property at $13.2 million, when it conducted a citywide revaluation in 2006.

In a June 22, 2007, letter to the Tax Assessor’s Office, MTS Consulting wrote that the hotel needs $1 million worth of capital improvements.

“Ownership has wrestled with the idea of completing these repairs but questioned the prospect of achieving a return on this investment given present market conditions and competition,” wrote Christopher Murphy of MTS Consulting.

Murphy noted that the hotel never rebounded fully from a drop in visitors after the terrorist attacks of Sept. 11, 2001.

“…It is not lost on the ownership that the hotel may have outlived its economic life,” he wrote. “Competition in the area represents mostly newer superior products and without a major costly overhaul the subject hotel is not likely capable of effectively competing…”

MTS Consulting wrote to the Tax Assessor’s Office seeking an abatement on the hotel’s property taxes, which was denied.

The Sheraton hotel sought the abatement on its 2006-07 property tax bill, which was $173,182.

Previously, the Sheraton was valued at $8.9 million; its property tax bill was $164,216.

The city denied the hotel’s application for a tax abatement, so owner Starwood sought recourse through the Board of Assessment Review.

The appeal was tabled this fall before the board, when it was discovered that the hotel’s Massachusetts appraiser was not licensed to perform valuations in Maine. The hotel has not scheduled a new hearing.

Tax Assessor Elizabeth Sawyer said this week her office has been trying to negotiate a settlement with the hotel owner, and is waiting to hear a reply.

She declined to comment further.

The Sheraton opened in 1973. The Maine Mall was planning to buy it for $9.2 million, according to a letter of intent the property owner filed with the city last May.

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