The Millennium Biltmore, considered the Grand Dame of Los Angeles hotels, has been put on the market for about $500 million, according to sources with knowledge of the listing, in what would be a record-setting price for an L.A. hotel property.

Some brokers and buyers question the high asking price for the 683-room hotel, the third-largest in downtown Los Angeles after the Westin Bonaventure and Wilshire Grand. Nonetheless, its ornate ballrooms and landmark profile will draw an exceptionally high price in a seller’s market.

“There’s a lot of money out there chasing very few properties,” said Alan Reay, president of Costa Mesa-based hotel brokerage Atlas Hospitality Group, who doubts the Biltmore will fetch so much. “It’s the best market for selling trophy hotel properties that I’ve seen in 10 years.”

Mark Tarczynski, a first vice president with CB Richard Ellis Inc., confirmed he has been hired to market the Biltmore property for WHB Corp., a subsidiary of London-based Millennium & Copthorne Hotels PLC.

The firm recently sold the famed Plaza Hotel in New York for $675 million also a record.

Tarczynski declined to comment about possible pricing for the hotel. Millennium’s North American headquarters in New York didn’t return calls.

If the Biltmore is sold for $500 million, the hotel would set a new record for price per room in Los Angeles County, Reay said. Currently, Kava Holdings Inc. holds the record, for paying $62 million, or $650,000 a room, in 1995 for the Hotel Bel-Air. At $500 million, the Biltmore would sell for slightly more than $732,000 a room.

The asking price is believed to be bolstered because occupancy and average daily room rates are improving at upscale downtown hotels, and the Los Angeles City Council recently agreed to help fund construction of a new 1,200-room convention center hotel a development Tarczynski and others believe will only make the downtown hotel market stronger.

But even if part of the Biltmore were converted into for-sale housing, Reay remains skeptical that hotel buyers will pay more than $250,000 a room, or close to $171 million.

“I don’t think you can get more than that downtown,” he said. “I don’t see someone paying that unless they are looking at a completely different play on that and trying to convert the whole thing to condominiums, but that seems very unlikely.”

The 82-year-old hotel comes with an attached 24-story office building called the Biltmore Tower, of which 130,410 square feet is nearly fully occupied; and 238,243 square feet of office space within the hotel called the Biltmore Court, which is nearly empty.

Tarczynski said he will market the hotel’s office space as a possible conversion to high-end condominiums. “It’s vacant office space,” Tarczynski said. “If the new owner comes in and creates high-end luxury condos dependent on hotel services, it would be good for the city and the union because it would create more jobs and creates more needed housing.”

Developers have already shown they are willing to pay a steep premium for hotels they can convert into condominiums. Last year, New York-based Related Cos. paid $123 million for the 297-room St. Regis hotel in Century City, or $414,000 a room. If it can receive the necessary city approvals, the company plans to convert the 14-story tower into expensive condos.

The buyer of New York’s Plaza Hotel, El Ad Properties NY LLC, has plans to convert a large portion of the Fifth Avenue hotel into condominiums.

Condo conversion plans have drawn the ire of Unite HERE International, the union representing hotel workers, as well as some elected officials. New York Mayor Michael Bloomberg has said he opposes the current conversion plans for the Plaza, which would require closing the hotel while the renovations take place.

In response to Related Cos.’ conversion plans for the St. Regis hotel, Los Angeles City councilmen Martin Ludlow and Eric Garcetti have called for a moratorium on converting hotels into condominiums until the possible effects on the city’s tourism economy can be assessed.

It’s unclear if converting the Biltmore’s office space into condominiums would draw opposition, because the housing wouldn’t take any hotel rooms off the market and, as Tarczynski noted, would actually generate some union jobs.

When the Biltmore opened in 1923, it was the largest hotel in the United States west of Chicago. While the office tower was part of the original construction, the Biltmore Court was carved out from the hotel in 1987, when downtown office space was tight and hotel room rates were soft.

The Biltmore, which takes up most of the 500 block of Grand Avenue and backs up to Pershing Square, is prominently located within downtown, and benefits from the city’s convention business, however soft it may be.

After Millennium bought the property as part of its $640 million purchase of Regal Hotels in 2000, the company spent $10 million renovating the hotel’s common areas and ballrooms.

Reay said the hotel is well positioned to gain from the $1.2 billion project slated to surround the Staples Center, including the 1,200-room convention center hotel, and the ongoing revitalization of downtown into residential neighborhoods.

“It’s got a great location,” he said. “With all that’s going on around it, the Biltmore has a very good position.”