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SAN MATEO, CA-The mixed-use redevelopment of the 74-year-old Bay Meadows race track here took a big step forward this week when the San Mateo City Council approved detailed plans for the next phase. The unanimous approval clears the path for Bay Meadows Land Co., which is owned by Stockbridge Real Estate Funds, to obtain the demolition and grading permits necessary to prepare the first quarter of the remaining 83.5 acres for redevelopment.

Site work is expected to begin in September, less than a month removed from the last day of scheduled racing at the track. Plans call for up to 1,200 residential units (apartments and condos), 750,000 sf of offices, 100,000 sf of retail and 15 acres of parks. The first structures are expected to be completed in 2011. The developer has a 15-year window to complete the project.

The City Council vote approved detailed plans for the first 21 acres that will be redeveloped. The piece includes the area’s eventual commercial center, which will be located along Delaware Street and near a proposed CalTrain “express stop.” Plans call for four- and five-story buildings with retail at the street level and office and residential above.

The Planning Commission unanimously recommended approval of the site plan in April. The approvals come nearly three years after an unsuccessful 2005 petition drive to force a citywide vote on the redevelopment.

Bay Meadows Race Course was built in the 1934. In the mid-1990s, with interest in horse racing declining and San Mateo having voted down the idea of adding a card room to the racetrack, ownership decided to begin selling off pieces of the then 173-acre property. A decade later, after voters turned down a statewide ballot measure to legalize slot machines at some racetracks, ownership decided to redevelop the 83-acre core that includes the main racetrack.

Paine Webber acquired all 173 acres in 1997. It then broke off 90 acres that held a practice racetrack and stables and began selling off pieces to owner-users and developers. Franklin Templeton Investments built its world headquarters on some of the acreage. Texas-based JPI built a 575-unit apartment complex on another big chunk, and Ryland Homes acquired some of the acreage for a mix of town homes and single-family residences.

United Bank of Switzerland came to own the remainder when it acquired Paine Webber in 2000. Spearheaded by Terry Fancher, who worked for Paine Webber, Stockbridge took over the property three years ago in a $500-million transaction funded largely by a group of mostly pension-fund investors. The largest is believed to be Pennsylvania Public School Employees, which reportedly has a $368-million stake.

In January 2003, across from the JPI-built apartment complex, Stockbridge opened Park Place, a 7.2-acre mixed-use development with 190,000 sf of office, about 85,000 sf of retail and 19 live-work condominiums. In May 2004, Stockbridge took out a three-year, $50-million loan on the 83-acre racetrack to help run the track, seek entitlements for the redevelopment and lobby for passage of the aforementioned ballot measure, which was known as Proposition 68. At the time, Stockbridge VP Kristin Gardner called the financing “a process used in place of investor equity.”

In late 2005, Stockbridge Real Estate Fund tapped Colliers International executive Phil Arnautou to go hunting for land to replace the existing Bay Meadows Race Course. Stockbridge has said it would be looking in outlying Bay Area communities where land is relatively less expensive. Arnautou was not immediately available for comment.

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