Dark horse sets pace in race for Hollywood Park.

The owner of Bay Meadows race track in San Mateo has emerged as the leading candidate to acquire Hollywood Park with a bid of about $275 million, according to numerous sources.

Stockbridge Capital Partners, through its Bay Meadows Land Co. unit, entered the bidding late in the process and its sudden emergence has surprised Inglewood city officials, as well as the crowded field of homebuilders and developers who were vying for the 240-acre property.

City officials, losing bidders and other real estate sources said Stockbridge, a private equity finn, submitted a price 10 percent higher than its closest rival and that it has agreed to hire the current owner, Churchill Downs Inc., to manage the race track for three years as it goes through the entitlement process. Horse racing at Holly wood Park will continue during that period.

The terms are far richer than the next closest bid from a partnership of J.H. Snyder & Co., Bisno Development Co. and Credit Suisse First Boston. The group, whose principals declined comment, offered more than $250 million and a two-year management contract.

Churchill and its investment banker, Lazard Freres & Co., have told a principal of the Snyder-led group to be ready to resume negotiations should Stockbridge fall out of contention, according to sources close to the process. Other bidders believe that they, too, could re-submit bids if Churchill Downs and Stockbridge can't come to an agreement.

The two sides will now hammer out a "purchase and sale agreement," outlining terms of the deal. Typically, there is a due diligence period when Stockbridge can perform a title and environmental survey, among other checks, on the property. After that, Stockbridge would be required to submit a non-refundable deposit.

Word of Bay Meadows' bid, which was slowly making the rounds last week, enraged some Inglewood city officials who had been told that they would be allowed to interview the two or three finalists on their plans for the property.

"What's asinine is how Churchill Downs has excluded the elected officials who will determine any prospective development," said Inglewood City Councilman Ralph Franklin, whose 4th district includes Hollywood Park. "Developers are pitching war games about what will happen to this site but without talking to us about what residents want to have there."

Adam Alberti, an outside spokesman for Bay Meadows, confirmed that the company bad bid on Hollywood Park but declined further comment. Alberti couldn't reach Stockbridge Executive Managing Director Frank Fancher for comment.

Messages to executives at Churchill Downs and Lazard Freres weren't returned.

Several bidders said the prospect of developing such a large parcel within urban L.A. could be on the scale of Playa Vista, the community on the site of the former Hughes Aircraft near Marina del Rey. Interested buyers included some of the nation's largest homebuilders such as KB Home and Lennar Corp., and a number of well-heeled development teams, such as the one led by J.H. Snyder.

Another development team considered a top contender was a partnership led by the Canyon Johnson Urban Fund, an investment company of former Lakers star Earvin "Magic" Johnson. The team also includes Forest City West--a subsidiary of Cleveland-based Forest City Enterprises Inc.--and Vornado Realty Trust.

While Stockbridge was the only bidder with experience in operating a California racetrack and a card club-style casino, it doesn't mean that it will keep the track open once the entitlement process is completed.

After buying Bay Meadows four years ago, the company is working on approvals from the city of San Mateo to shut down the track and redevelop the 83.5-acre site into a campus of dense housing, mixed retail, office and public parks--the kind of development that Inglewood city officials and developers had been envisioning for the Hollywood Park property.

Fancher, the top Stockbridge executive, started the real estate private equity firm as a subsidiary of PaineWebber 10 years ago. Stockbridge survived the 2001 merger with UBS AG and two years later a group led by Fancher bought the management rights from the Swiss bank.

Stockbridge is in the process of raising a second investment fund with $500 million of capital, according to the company's Web site.

Hollywood Park began as a glamorous playground for the movie industry's rich and famous. The grounds, former bean fields, were purchased by 600 investors led by Warner Bros. Chief Jack L. Warner and notable investors included Walt Disney, Samuel Goldwyn and Bing Crosby.

But while the 1940s and 1950s were Hollywood Park's glory days, the immaculately landscaped racetrack has been struggling for the past 20 years with declining attendance, falling behind Santa Anita and Del Mar.

Meanwhile, property values in Inglewood have skyrocketed and the site's close proximity to Los Angeles International Airport makes the track more valuable as a potential development site.

Churchill Downs bought Hollywood Park six years ago from Pinnacle Entertainment Inc. for $145 million, but the company hasn't been able to turn around the track's operations.

Earlier this year, Churchill Downs Chief Executive Tom Meeker told investors and analysts that the company was evaluating its options for Hollywood Park. Meanwhile, the company hired Lazard Freres to shop the property.

Inglewood's Franklin said the sale process had descended into "money games" and he questioned how developers were pricing their bids if it's not clear what the city will permit. He said Inglewood's desires for the racetrack aren't being taken seriously.

"We were assured that we would be notified as soon as possible when they shook it down to final (bidders)," said Franklin. "That has never materialized, and no dialogue has materialized either."

Inglewood officials have previously said they would like to have a convention center and an adjacent four- or five-star hotel. They would also like a large retail development with shops and restaurants, office buildings and housing--both market-rate and affordable homes.

That may still be in the cards. At Bay Meadows, Stockbridge is proposing to build 1,250 residential units, office space totaling 1.25 million square feet and 150,000 square feet of shops and restaurants. As part of the plan, Stockbridge has agreed to build 15 acres of public parks and athletic fields.

Stockbridge Capital Partners LLC 

* Headquarters: San Mateo

* Top Executive: Terrence E. Fancher, executive managing director

* Year Founded: 1994

* Background: Started under PaineWebber and transferred to UBS AG after the companies merged. A group led by Fancher bought the management rights from the Swiss bank in late 2003.

* Investments: Bay Meadows Race Course in San Mateo, Wilshire Courtyard office complex in Los Angeles, China Basin Landing in San Francisco, and the Pinnacle office campus in Burbank.