Racine Harbor LLC, owned by Milwaukee-based Royal Capital Group, will pay the City of Racine $3.25 million for 9.5 acres at 1129 Michigan Boulevard.

Royal Capital Group is purchasing the former Walker Muffler Manufacturing site from the City to build a $50 million commercial-residential property. The Common Council approved the developer’s agreement at a meeting held Wednesday evening.

The terms of the agreement include Royal Capital Group paying the City of Racine annual installment payments of $160,776 between December 1, 2020, and December 1, 2033, and a balloon payment of $1 million on or before December 1, 2034.

Kevin Newall, president of Royal Capital Group, announced the project in December.

The @North Beach project includes two phases. The first phase includes building 242 market-rate apartments in two buildings, a 4,400 square-foot restaurant space and structured parking for 232 stalls. The second phase — if developed — 238 residential units in three buildings, a 4,400 square-foot retail space and ground level parking, according to the developer’s agreement.

BREAKING: Royal Capital Group to build $50 million development

Royal Capital’s project is part of a tax incremental finance (TIF) district, which has 14 years of life left.

A TIF district is a development tool municipalities can use to attract business. The way it works is that a financing district is created and a base value of that district is established by the taxing jurisdictions. The increased value of the property is still charged at the base rate, but the district uses the increased tax revenue to pay for the infrastructure projects and in this case development costs.

Shannon Powell, the communications director for the City of Racine, told the Racine County Eye last fall that the proposed project includes a split of 90 percent of the tax increment generated on the project being diverted to Royal Capital and 10 percent being paid to the City of Racine. A total of $9.6 million in tax increment is expected to be created by the project.

Plans include having the city pay $1 million to build infrastructure projects. However, those infrastructure projects will be paid back by the developer to the city through the tax increment created on the project.

“So the city is not losing anything and they aren’t giving anything away,” he said. “The developer is funding the cost of this over the course of 14 years.”

The one, two, and three-bedroom, market-rate apartments will be built with internal parking and commercial spaces for potential restaurants, coffee shop, fitness gym, and other retail and commercial uses, according to a press release by the City.

The first phase of the construction project is expected to begin this spring and be open in 2020.