"I'm not sure it can be reused as a theater," Teague said. The prospective gym, he said, was "something we see as a positive for our downtown."
Historic preservationists argued that the dilapidated two-story Haddon Avenue theater could still be saved. They said investors were interested in financing a restoration of the theater.
"The conditions are deplorable," Margaret Westfield, a preservation architect, told the board. "But there are many buildings in way worse shape."
The estimated cost to rehabilitate the property for reuse as a theater was $3.1 million. Lazgor says its project would cost $2.8 million.
Lazgor principal Peter Lazaropoulos said in an interview that his company would buy the property from the township for $50,000. The firm also would have to pay for an environmental cleanup, he said, which could cost between $300,000 and $500,000.
Lazaropoulos said the firm had previously approached other prospective tenants, such as CVS, liquor stores, and a supermarket, about possibly using the property. "Everybody had a lukewarm reception to it," he said.
The township bought the theater for $250,000 in 2000.
Built in 1927, the theater featured live performances and movies until it closed in 1986. A young Steven Spielberg is said to have seen The Greatest Show on Earth there.
The theater changed hands over the decades; among the last movies shown there was Dirty Dancing, according to a book by local author William Brahms.
The Living Arts Repertory Theatre rented it for several years in the 1990s.
The New Jersey Historic Sites Council had purview over the fate of the theater because the structure is listed on the state's Register of Historic Places. The board recommended that the DEP commissioner authorize the sale, though it attached several conditions:
The township must place a preservation easement on the building's exterior; plans for the exterior must be prepared by an architect expert in historic buildings; copies of historic photographs of the theater must be displayed in the gym; and the developer must assess whether historic parts of the interior can be salvaged.
The board said the state Office of Historic Preservation would review and approve all work before implementation.
Architect David Gibson, who is working with Lazgor, told the council that the interior was "catastrophically damaged" - debris and plaster fall from the ceiling and walls; the theater seats have mold, and eight inches of water flood the basement.
But historic council member Marilou Ehrler, who voted in favor of the board's resolution, said at the meeting: "As you start unpeeling the layers . . . you find you can salvage more than you think you can."