Lenders Take Over Wonderland Cave

For nine years, Larry Wilson was plagued by devil worshipers, firebugs and bigoted bankers. At least, that’s his take on it.

Wilson’s saga as one of the owners of Bella Vista’s 1 million-SF Wonderland Cave, the “largest underground nightclub in the world,” and the historic Sunset Hotel ended on April 8, although the three-story, 24,700-SF hotel itself was destroyed by a suspicious fire in 1999.

The two properties — 30 acres of cave and 15 acres at the hotel site — were auctioned April 8 on the Benton County Courthouse steps in Bentonville after two foreclosures on loans to Wonderland Sunset Properties Inc. WSP consisted of Wilson and two partners, John Smith, a writer who lives in Bella Vista, and Timothy Lambirth, a Los Angeles lawyer.

WSP managed to ward off a similar auction last year by filing for Chapter 11 bankruptcy, but the bankruptcy was dismissed, and the creditors wanted their money. After the April 8 auction, Wilson said, “I’m done with the cave.”

Bidding on the cave started at $700,000, but apparently nobody wanted the vandalized 74-year-old nightclub that in its heyday was a venue for Guy Lombardo and the Dorsey Brothers and allegedly a favorite haunt of Harry Truman and Errol Flynn. The nightclub has been closed since 1995.

With no bidder, the cave was basically purchased by the lenders, Jan Edwards of Malibu, Calif., and her uncle David Roberts of Las Vegas. Edwards had claimed WSP owed her $1.7 million including interest, but Wilson sued, and a U.S. District Court judge in Fayetteville set the amount of debt at $800,000.

“They never had any intention of operating or owning a cave,” said Vicki Bronson, a Fayetteville attorney representing Edwards and Roberts.

Edwards plans to list the cave with a local real estate broker and resell it.

Wilson said the loans from Edwards also included a 25-acre tract in Bella Vista and one-half acre in downtown Rogers, but Edwards foreclosed on those properties separately, and they were sold at auction in September for $150,000. Wilson said he didn’t know about that auction until April 7.

Cooper Communities Inc. of Bella Vista bought the Sunset Hotel site with a bid of $575,000. WSP had borrowed $390,000 from Old Standard Life Insurance Co. of Seattle for that property, but with interest the total debt was $521,757 when Old Standard foreclosed on the loan.

All that is left of the hotel is a foundation, 30-foot-tall chimney, parking lot and children’s playground where a swimming pool had once been.

“We’re kind of partial to that property,” said Neff Basore, senior vice president for Cooper Communities Inc. “It was our headquarters back in the ’60s.”

The hotel, which was built in 1929 and closed in 1951, served as headquarters for Cooper’s Bella Vista Village operations from the 1960s until the early ’90s. Cooper consolidated its office at a new location before selling the hotel to Wilson.

Torching the Sunset

Wilson grew up in Horn Lake, Miss. By the age of 14, Wilson said, he was a Golden Gloves boxing champion for an eight-state region and had even clobbered a hairy-chested college kid from Memphis State University in one bout.

After having a variety of businesses, including a detective agency in Beverly Hills, Wilson became a property developer.

In 1995, Wilson’s brother Earl, who lived in Searcy, read in a newspaper that Wonderland Cave was for sale. Earl called his brother, and Wilson left for Northwest Arkansas.

Wilson bought Wonderland Cave for “a steal” — $120,000. On his trip from California to look at the cave, Wilson also inspected the shuttered Sunset Hotel on the mountaintop on the other side of U.S. Highway 71. Five months later, he bought the hotel and 15 surrounding acres for $250,000.

Wilson and his then-partner, William Mitchell, planned to spend $350,000 to renovate and reopen the hotel and $200,000 to $300,000 to do the same with the cave.

But Wilson and Mitchell were still busy with their businesses in California. Wilson said they planned to make enough money to come back to Arkansas and develop the properties with their own money, but a recession hit California, and both Bella Vista properties sat empty and boarded up for years.

In early 1999, Mitchell backed out of the deal.

On Feb. 6, 1999, police arrested a juvenile would-be arsonist who had left a camera at the hotel and came back to get it. The film inside the camera showed pictures of the suspect pouring gasoline in the hallway and trying to light it with a match.

Wilson said “the kid” told police the ghost of his deceased mother instructed him to burn down the historic hotel. Apparently, she had worked in the hotel and wanted to own it someday.

“He said her soul couldn’t rest until he destroyed it,” Wilson recalled.

Lt. Ken Farmer of the Bella Vista Sheriff’s Office said that police record is sealed because the person arrested was not an adult.

Early on the morning of July 1, 1999, the hotel was burned to the ground by what Wilson refers to as “professional” arsonists.

“It was suspected arson,” Farmer said. “But it was difficult to prove. We didn’t have any suspects or anything … That’s a remote location. It had been vandalized to the point that we just knew it was a matter of time before it burned down. Just about every weekend we’d take somebody out of there doing something.”

The hotel was on the National Register of Historic Places at the time of the fire.

A few months before the fire, Lloyd’s of London canceled the insurance on the Sunset Hotel saying Wilson hadn’t been able to secure the building and keep vandals out.

In 2000, Smith and Lambirth came on board as partners in WSP.

Cavemen of Bella Vista

Clarence A. Linebarger, Forrest W. Linebarger and Clayton C. Linebarger bought land in Benton County in 1917 and began promoting Bella Vista as a resort community.

In the early years, the Linebarger brothers built several cottages, a boat dock, a swimming pool, a dance pavilion, the Sunset Hotel and the nightclub in Wonderland Cave, which was modeled after a subterranean restaurant they saw in Paris in 1929.

The Wonderland Cave nightclub opened in 1930. It was apparently a hot spot for big bands during the 1930s and ’40s. Since then, it has had several owners and has been closed for much of the time. In 1962, the federal government commandeered the cave for a short time to be used as a shelter for area dignitaries in the wake of the botched Bay of Pigs invasion. Several potential buyers defaulted on loans over the years, and the cave would go back to the Linebarger family. Such a repossession had occurred just before Wilson and Mitchell bought it in 1995.

Wilson said the 165-foot-long bar and dance floor, which are 130 feet below ground, were in good shape when he bought the cave.

Wilson tried to secure the cave, which sprawls underground for about 30 miles into Missouri and allegedly provided an escape route and hiding place for Jesse James during his gang’s 15-year crime spree that began in 1866.

But vandals kept breaking in and trashing the nightclub.

“Some of them were devil worshipers and goof balls,” Wilson said, after attempting to decipher their cave wall hieroglyphics. “I must have repaired it 15 times, and they would break in again. I wanted it to be perfect for the people of Bella Vista.”

Lonesome Blues

With the hotel burned down, the land was open for a brand new development.

Wilson and his new partners decided to spend $64 million to build a new hotel at the site, run a gondola from one mountaintop to the other and bore an elevator shaft 96 feet from the top into the cave. Plans were drawn up by Dan Ionescu, a New York City architect.

Then the terrorism of Sept. 11, 2001, hit, and it was almost impossible to get a loan for hotel construction, so the $64 million project was buried.

With the hotel project off the board, Wilson turned his attention to the cave. He decided to spend $1 million on the nightclub. He wanted to lower the floors by one to five feet, depending on the area, to provide more headroom and do engineering work to prevent water from seeping into the nightclub area. The renovation work would increase the nightclub’s capacity from 1,500 to 5,000, he said.

Wilson envisioned Wonderland Cave as a world-class nightclub, a Studio 54 for the Ozarks. Wilson said he could sell memberships to people all over the world, and they could jet in to catch a favorite performer in the cavernous club. He envisioned 50,000 members, with the top echelon paying $1,000 per year and getting to sport special blazers while hanging out underground.

By that time, Wilson said, he needed a bank loan of about $3 million — $1 million for the cave renovation, $800,000 to repay Edwards (her loan was used to buy out Mitchell’s investment) and money to cover the interest payments on the loan.

To bankers, the cave looked like a black hole.

“They don’t understand a cave — putting a million dollars in a hole in the ground,” Wilson said. “They can’t think that far.”

Wilson, who finally moved to Bella Vista in 2001 to oversee the properties there, blamed part of the problem on the fact that he was from California.

“I was an out-of-towner when I came back here,” he said. “They didn’t want anybody coming in from out of town to take over two of the primary properties up here … I talked to every bank up here. You had dead ends just like that [snapping his fingers].”

Wilson said he tried to get a loan from every bank in Northwest Arkansas and was turned down.

“We look at all kinds of factors,” said Nat Bothwell, marketing director for Arkansas National Bank in Bentonville, “The fact that it’s a cave is just one aspect of the deal. It certainly sounds like a unique opportunity … We kind of pride ourselves on thinking out of the box, so it wouldn’t have fazed us.”

Bothwell couldn’t confirm whether Wilson had approached Arkansas National Bank for a loan on the cave.

The developers listed the property on eBay, the online auction site, in March to advertise the foreclosure auction.

The eBay auction said the cave was listed on the National Register of Historical Places and is classified by The National Cave Association as a “Class-C Showcave.” It also said the NCA estimated more than 100,000 people would visit the cave per year.

Condos and Mud Puddles

Bronson said she has had several calls since the auction from people interested in buying the property.

At the hotel site, Basore said about 10 of the 15 acres are usable for development. “The rest of it is kind of vertical,” he said of the hilly terrain.

Basore said Cooper Communities Inc. doesn’t know what it will do with the property. The company is considering home sites, condominiums or possibly another hotel.

“I don’t see it as being retail or office,” Basore said. “It’s too far up.”

First, Basore said, Cooper will clear off the land.

Edwards, Smith and Lambirth couldn’t be reached for comment.

Wilson said he had put in about $2 million of his own money toward the cave project.

The cave was appraised by Rife & Co. of Bentonville two years ago for $2.7 million, and the Sunset Hotel site appraised for $3.24 million. But those appraisals were contingent on the land being developed as planned.

“It was based on an as-developed scenario with a four-star hotel,” said Mark Tackett, an appraiser with Rife & Co.

Wilson has a closetful of Wonderland Cave memorabilia at his home in Bella Vista. When he said was “done with the cave,” Wilson sounded like he was trying to convince himself.

Wilson no longer has a key to the front door of the boarded-up cave. If he goes in, it’s through the window, just like the vandals.

On a recent excursion to Wonderland, shattered light fixtures were strewn about the cave and water dripped onto the concrete dance floor. There’s no electricity in Wonderland Cave now, and the batteries in Wilson’s high-powered flashlight began to die. But that didn’t matter.

“I know my way out of here in the dark,” he said.

After climbing the stairs to daylight one last time, Wilson said he’s going to find another project to keep him busy.

“You can’t sit down in the middle of a mud puddle and just sit there and cry,” he said. “You’ll still just be in a mud puddle.”