As part of the settlement, the city will amend the existing Airport Junction development agreement, said Danny Crowe, an attorney representing the city.
"I think it will be a favorable agreement that... attempts to balance the interests of the city and property owners," Crowe said.
City Council members met in a closed session Tuesday to discuss the settlement.
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Crowe and Mayor Billy Keyserling declined to discuss details of the settlement.
Officials hope to have a new version of the document finalized later this week, Crowe said.
Once the parties have signed off on the agreement, it will become public, he said.
Council would then have to approve it by ordinance, which requires a public hearing and two votes.
The issues dates back to January 2008, when Walmart applied for permits to build a 195,000-square-foot store on the 40.8-acre wooded site.
Zoning for the property allows up to 250,000 square feet of commercial space, but Beaufort officials rejected Walmart's proposal twice, determining that the Airport Junction planned unit development was for an office park-style development with several smaller office buildings rather than one large structure.
Airport Junction LLC -- which is registered to the property's owner Fred Trask -- filed suit against the city in May 2009 and filed for summary judgment in November 2009.
Fourteenth Circuit Court Judge Carmen Mullen wrote in a summary judgment Dec. 18, 2009, that the city's rejection of Walmart -- or any other store -- based on its physical size "contravened the provisions" of the approved planned unit development agreement.
The city decided to appeal the decision in January 2010.
Other plaintiffs listed in the case were Cane Island Retreat, LLC, and Hanover Park LLC.