The owner of a long-vacated lot near Thomas Circle at Fourteenth Street and Massachusetts Avenue N.W. is planning to build a $40 million 400-room luxury hotel on the site.

Developer Guiseppe Cecchi said yesterday he is negotiating with Hilton International Co., to run the hotel, to be built directly behind the Madison Hotel, facing M Street NW.

A subsidiary of Trans World Airlines, Hilton International operates Hilton hotels outside the United States is now building its first domestic hotel in New York City's World Trade Center.

Hilton International, which is not related to Hilton Hotel Corp., will use the name Vista International for its American hotels, a spokesman said yesterday.

The Hilton International executive confirmed that the company is "talking about a hotel in Washington" but refused to elaborate on the project. "

Cecchi, a prominent Washington real estate developer whose family built the Watergate complex, said he hopes to reach an agreement with Hilton International before the end of the year and to begin construction in the spring.

Cecchi has agreed to sell the adjacent property, facing Thomas Circle, to a division of the Prudential Insurance Company of American which will build a $28 million office building on that site.

Plans now call for linking the hotel and office building projects by way of an interior passage. Robert Dolan, of Prudential's Washington real estate investment group, said the local office of Skidmore Owings and Merrill is designing the office building with a large atrium entry facing Thomas Circle. d

The hotel and office building projects will complete the transformation of Thomas Circle from a hustling strip for prostitutes into the hottest new office neighborhood in Washington.

"There will be a million square feet of office space going up within a block," said Maughan Gould of the commercial leasing division of Shannon & Luchs. "It's reminiscent of 18th and M or 17th and L five years ago," when the boom in office building was several blocks further west.

Shannon & Luchs is leasing office space in a 12-story building going up at 1120 Vermont Avenue N.W., directly south of the Prudential and Cecchi projects. It is being built by a developer Sylvan C. Herman.

Next door at 110 Vermont Avenue, N.W. developers Stillman and Golub are building another 12-story office building.

Across the Street, on a parcel bounded by Vermont Avenue, L Street and 14th Street, a new headquarters building for the American Medical Association is to be built. Demolition of the group of building on the AMA site started recently.

Just south of L Street, the John Ackridge Company is putting up a 12-story office building at 1090 Vermont Avenue, opposite an older office building that is being renovated by Greenhoot, Inc.

Half a block west, at the Northwest corner of 15th and L streets, the furnishings of the Pick Lee Hotel went on sale yesterday. "You'll see the headache ball soon," said Dolan of Prudential, which will build a $12 million office building on that site, owned by The Washington Post Co.

Dolan said Prudential will pay $275 a square foot for the Thomas Circle land it is buying from Cecchi -- $100 a square foot more than Cecchi paid when he purchased the site a year and a half ago. That will give the real estate man a $2.5 million profit on the 25,000 square foot parcel.

Cecchi said property values at the Thomas Circle site have skyrocketed, accelerating the pace of development.

"When we bought it, we bought it with the intent of sitting on it for two or three years, but then everything sort of exploded in that area. It moved faster than I expected."