License to strip

A sexy venture with a priceless liquor license, the 1819 Club — a Washington strip club that vaulted to national prominence during the spy trial of Robert Hanssen —— will be put up for auction later this month, with trustees hoping to fetch as much as $3 million.

The 1819 Club, a gentleman’s club in downtown Washington, goes up on the auction block — along with a liquor license valued at $1.6 million.

The current owner, Nicholas “Nick” Addams, filed for bankruptcy last fall. He blames the Sept. 11 terrorist attacks for triggering a decline in his business. Worried about subsequent terror strikes, business travelers — the lifeblood of his gentleman’s club — simply stopped coming to the nation’s capital, Addams told bankruptcy officials.Prior to Sept. 11, 2001, Addams’ club was bringing in $1.6 million a year. By contrast, the club grossed roughly $70,000 last month.But the dwindling revenue stream isn’t expected to deter prospective buyers.“It’s going to be easy to sell,” said bankruptcy trustee Bryan Ross, who is hopeful bidding will reach $3 million.He has reason for such optimism.There is considerable demand for prime real estate in downtown Washington, and the 1819 Club is considered prime, located in high-traffic Dupont Circle and within a half-mile of 27 hotels, including the Renaissance Mayflower and the Hay-Adams.Perhaps even more enticing to buyers, the 1819 Club holds one of only 20 or so liquor licenses that permit nude dancing in Washington, and new licenses cannot be created thanks to a citywide moratorium. The club’s liquor license alone is valued at $1.6 million in bankruptcy documents.The 1819 Club also has the blessing of D.C.’s Alcohol Beverage Control board to double seating capacity from 75 to 150.“The second floor is completely gutted and ready for build-out,” Addams told the auction company Tranzon Fox in preparation for the sale. “New owners could easily double the gross income for a relatively modest investment. You could add 40 seats in less than 60 days with renovation costs of under $150,000.”Of course, Addams’ comments beg the question: Why didn’t he succeed if it’s as easy as he says to increase revenue?Ross, for one, doesn’t believe Addams’ Sept. 11 theory. Ross points the finger of blame at Addams himself.The owner “simply stopped marketing the product. He didn’t put in any capital improvements for years and years. He didn’t improve the second floor and didn’t rehab the third or fourth floors,” Ross said.While Addams declined interview requests for this article, Charles H. Bogino, Addams’ attorney in the bankruptcy proceedings, said his client’s explanation is accurate.The club relied heavily on tourism and business travel, both of which collapsed after Sept. 11. “The flying public stopped flying and executives scheduled teleconferences rather than traveling off-site. There are tales of woe for the nightclubs and restaurants in the area,” Bogino said.Addams also was banking on the new Washington Convention Center to bring in male conventioneers. But that hasn’t come to fruition.“The convention center has yet to take off,” Bogino said. “I don’t think it would take any marketing expert to say he would do well if larger conventions that were primarily men would come to town. These men are out-of-towners without their families.”Convention center officials do say the district’s hotel occupancy rate has risen from 67 percent to 69 percent in the past year.Bogino speculated nearby clubs made it through the travel downturn by dipping into other income sources. “The rainy day fund wasn’t there for 1819.”Next up …Ross said most of the potential bidders are interested in maintaining the night club — although a few have expressed interest in converting the entire structure into office or residential dwellings.

Owner Nick Addams already has approval to double the size of the club, as seen in this rendering from the club’s Web site.

Regardless of what use the new owner makes of the building, the coveted liquor license comes with the package, said Cynthia Simms, a community resource officer for the D.C. Alcoholic Beverage Regulation Administration. “As long as [the owner] puts it in safekeeping, he can get it back or sell it or transfer it — as long as it’s to an area zoned for nude dancing,” she said.As it is, the 1819 is open nightly from 6 p.m. to 2 a.m. The establishment earns most of its income from beverages, but Addams does offer food.But the 1819 is about more than just a business, said Stephen Karbelk, who will auction the property.Anyone who owns it “certainly has some bragging rights,” he said. “It’s not the typical business to own.”Karbelk is clearly excited about the transaction.“This is certainly one of the sexier deals we get to do. Most people have heard of this place — either they have been there or they deny being there,” he said.Someone who can’t deny having patronized the 1819 is convicted spy Robert Hanssen.At the center of the scandal was one of the club’s dancers, Priscilla Sue Galey. Hanssen wrote to Galey, telling her he had never seen someone so beautiful and graceful.The note, along with $10, started an 18-month platonic relationship during which the former FBI agent gave her more than $100,000 in jewelry, a Mercedes, a computer, a credit card and a trip to Hong Kong, Galey told the Larry King Live show in 2001.Sentenced to life in prison, Hanssen was accused of taking more than $1 million from the Soviets in exchange for information.For the 1819 Club and its history, serious buyers need $100,000 to enter the bidding May 18 at 11 a.m. Three hours later, a hearing is scheduled in U.S. Bankruptcy Court in D.C. to approve the sale.