The University purchased the University Office Plaza Thursday afternoon for $7 million.

Approximately half of the four-story building, located at 2221 University Ave. S.E., houses University tenants.

The sale will incur big savings for the institution because the plaza’s University tenants will no longer pay property tax via rent to Hennepin County, said Sue Weinberg, director of University real estate.

Because the University is a property-tax-exempt entity, Weinberg said only nonexempt, non-University tenants will continue to pay the tax.

The plaza contains 11 University and six non-University tenants, she said.

The Academic Health Center occupies most of the University’s building space.

Weinberg said the University will honor the building’s non-University tenant leases, including a dental office’s optional five-year renewable lease.

Richard Pfutzenreuter, the University’s chief financial officer, said the institution had discussed purchasing the building from owner Great Lakes REIT for several years.

He said a company was buying out Great Lakes REIT and the property’s purchase price lowered from what was originally discussed.

“It was a doable deal,” Pfutzenreuter said. “The price was finally amenable to us.”

The University worked with the budget office to create an internal loan for the purchase, Weinberg said.

The building’s University units will pay “occupancy costs,” which along with the external tenants’ rents, will pay off the debt and operating expenses, she said.

The plaza has a few vacancies and the Space Management Office is working with the Real Estate Office to fill them with University tenants, officials said.

“We are considering various candidates to occupy the vacant spaces, but have not made a final decision at this time,” said Katy Olson, facilities planner at the Space Management Office.