Queenanne.komonews.com has the story:

Time is limited for the Funhouse, lower Queen Anne’s skull-adorned dive bar, after the city announced a seven-story mixed-use development planned for the site last week.

The new building at 500 John St. will replace the Funhouse and an adjacent two-story office building. Plans call for 106 to 112 residential units, four live/work units and underground parking for 85 cars.

Read the full story here.

There's a community meeting on March 21st and Funhouse-fans are already organizing via Facebook to attend the meeting and try to save the club.

In the mean time, go enjoy some drinks at the Funhouse. The $1 pints of Rolling Rock all day today.

UPDATE: See the Notice of Design Review here, and go to the meeting to voice your opinion:

MEETING

Date: Wednesday, March 21, 2012
Time: 06:30 p.m.
Location: Queen Anne Community Center
1901 1st Ave W
Room 3

We have an e-mail in to proprietor Brian Foss and will report more when we know. —Eds.

UPDATE 2: From the Funhouse's Facebook Account:

Funhouse Seattle
our landlords told us there was a 50/50 chance of the building being sold. my understanding was this was not a done deal. i'm surprised as everyone else at this news story.
we've been busy dealing with deaths of friends and other stresses so we haven't been in recent communication with the landlords. ugh

Update 3: Read Proprietor Brian Foss's statement on the potential development.