Nearly four decades after it was converted from a grand movie palace into a Pentecostal church, drama has returned to the El Rey Theater on Ocean Avenue.

Only this time the action isn’t on the silver screen but over the building itself.

In December, the El Rey changed hands for the first time since 1977, selling in a trustee sale on the steps of City Hall for $1.06 million. The seller was the Stanford Federal Credit Union, which had foreclosed on the property after the church, now called A Place to Meet Jesus, defaulted on a loan. The buyer was a joint venture between Ricci Ventures and Greenpoint Land Co., both Marin investment groups.

For residents in the surrounding neighborhoods of Ingleside Terraces, Mount Davidson Manor and Balboa Terrace — many of whom have long hoped the building would someday return to use as a community center or theater — the reaction has been a mix of disappointment and hope.

How is it that such an important historic property could be sold at City Hall without city officials becoming aware of the opportunity? Who are the new owners, and what are their plans for the El Rey? Is this at long last an opportunity to designate the building a historic landmark, something the church would never agree to?

Dan Weaver, director of the Ocean Avenue Association, was flabbergasted when he found out about the sale last month.

“After I got over the shock that the building had been sold to someone I didn’t know, my first thought was that for the first time in 38 years we have the opportunity to landmark the building,” he said.

Anita Theoharis, a former planning commissioner who has long fought to revive Ocean Avenue, said she was disappointed that city officials were “apparently missing in action” at the time of the trustee sale.

Assessing building’s future

Ironically, in the months before the building sold, Mayor Ed Lee’s administration targeted the El Rey as part of a new “neighborhood asset activation” program aimed at reviving vacant or underutilized structures. The city has retained consultants to do an assessment of the physical structure, engage with the owners, and hear from the community about what it would like to see there. In addition to the El Rey, the city is looking at six other defunct theaters, a mosque and the Geneva Car Barn.

“There are certain places that mean a lot to people in the neighborhood, and this is one of these places,” said Joaquin Torres, director of the mayor’s Office of Neighborhood Services. “We’re looking at what the current ownership would be interested in allowing us to pursue.”

In California, a building that serves as a church cannot be designated as historic unless the church agrees to the designation.

Opened in 1931, the 1,800-seat El Rey was designed by Timothy Pflueger, whose firm was behind landmarks like the Castro Theatre, the Paramount Theatre in Oakland and the Pacific Telephone headquarters at 140 New Montgomery St. A Chronicle account of its opening described the El Rey’s Spanish-Colonial Revival style as “richly decorative,” with a “gallery of mirrors” adorning the lobby. Pflueger intended the tower top to be a beacon in the fog-bound neighborhood, with a directional light charted by aviation authorities. The theater was also the birthplace of the Gap, which occupied the building’s retail space when the clothing company got started in 1969.

The theater closed in 1977 and was bought by the Voice of the Pentecost, which also operates a small school there. Although its original green and red neon lights are long gone, the El Rey is still the most significant structure along Ocean Avenue, visible from Mount Davidson to Merced Heights.

Jack Tse of the Northern California Community Loan Fund, who is consulting on the city’s activation program, said the new owners have shared little information, but did indicate that they would sell it — for a lot more than they bought it for. “They just said ‘nothing under $6 million,’” he said.

A representative from Ricci Ventures declined to comment.

Tenant not budging

Meanwhile, the longtime tenant, which recently changed its name to A Place to Meet Jesus, insists it is going nowhere. Pastor Richard Gozowsky said that despite defaulting on its loan, the church will figure out a way to buy the building back.

“We will probably be in that building until Jesus Christ comes back,” he said. “The building owners know that and they are going to sell it back to us. They were going to tear it down and build an apartment complex, but we shared with them the vision of the church.”

Gozowsky said he didn’t fully understand the financial implications of not paying the mortgage. “I just pray and try to follow the Lord,” he said. “It was way beyond my understanding.”

Gozowsky’s church has had a checkered relationship with the city. In 2004, the church rented a city-owned soundstage on Treasure Island to make a religious film the producer described as “‘The Ten Commandments’ meets ‘Star Wars.’” The film never came to fruition, and at some point the church stopped paying its $17,000-a-month rent. That led to City Attorney Dennis Herrera successfully suing the church for $425,000, over half of which was interest.

Matthew Rothschild, head of the claims division of the city attorney’s office, said, “We did everything we could to work with them.”

“It’s our job to protect the taxpayer,” he said. “They used our facility for a over a year and didn’t pay rent. However, if the pastor had come forward with part of the principal and said, ‘How can you help us?’ the city family would have done everything it could to work something out.”

The city had a lien against the El Rey, but it was secondary to the mortgage and was lifted when the property sold. Still, Robert Beck, the Treasure Island Development Authority’s director, said he was surprised he wasn’t informed that the El Rey was foreclosed on and being sold. “The judgment is still outstanding; we have not received any of the money at this time,” he said. “It’s accrued to be a significant amount of money.”

With a silent owner, a hefty price tag and a tenant that insists it is staying put, residents harboring dreams of a revived neighborhood movie house have their work cut out for them. At a Feb. 9 neighborhood meeting at the Ingleside branch library, Balboa Terrace resident Bob Switzer said the city needs to do a rapid assessment of the structure and figure out what it would take to preserve it.

“We don’t have a year to get the lay of the land — we might have three months,” said Switzer. “We have to move quickly.”

Alexander Mullaney, a preservationist who also publishes the Ingleside-Excelsior Light newspaper, said that once a plan is in place and an assessment of the building is completed, the city should approach City College of San Francisco and San Francisco State University about acquiring the building for film or performing arts. He also suggested involving the family of the late Gap founder Donald Fisher, who he said might be interested in creating some sort of Gap-related history center.

“Because there's a lot in play — community members seeking landmark status, an owner trying to sell, tenants scrambling to get the building back — it would behoove the city to keep tabs while waiting for things to shake out,” he said.

Tse said the first goal will be to “demystify” the property by getting into the building and seeing what its condition is.

“The issue is going to be site control — you are dealing with someone who wants to make a profit fast,” he said. “Engaging the owner is important and making them understand the value of the asset to the community.”

J.K. Dineen is a San Francisco Chronicle staff writer. E-mail: jdineen@sfchronicle.com Twitter: @sfjkdineen