Steep insurance could halt Kangaroo Island redevelopment
The redevelopment of the luxury $2500-a-night Southern Ocean Lodge on remote Kangaroo Island — once a favourite bolthole for cashed-up Australians, North Americans and Europeans — will hinge on the ongoing cost of its insurance premiums, according to co-owner James Baillie.
James and Hayley Baillie, the founders of Baillie Lodges, which is now in partnership with the Colorado-based KSL Capital Partners, are intent on rebuilding the $45m, 21-suite, award-winning lodge on the island’s rugged southwest coast. Positioned off the tiny South Australian township of Cape Jervis, much of Kangaroo Island was destroyed by bushfires a year ago, but the remote island’s economy is rebounding strongly, with plans for the construction of at least three luxurious boutique resorts by three separate owners.
The most ambitious project, however, is the redevelopment of Southern Ocean Lodge, which was destroyed on January 3 as the bushfires that had raged across Kangaroo Island converged on it from three sides. All that was left undestroyed was the lodge’s staff quarters, with the rest of the infrastructure near scenic Hanson Bay so badly damaged it was later demolished. “The big issue is insurance,” James Baillie told The Australian.
“We are still negotiating our insurance payout that is still ongoing a year after the fire. The biggest issue now moving forward to bring Southern Ocean Lodge back is insurability.
“With assets like this in remote areas of Australia the actual ability to get insurance in the future … is the most critical issue and that is something that governments in Australia will really need to take on board, because if people like ourselves who add value to the tourism industry can’t get insurance there is no way you are going to get financing to press ahead.
“It’s the elephant in the room for tourism development.”
He said Southern Ocean Lodge’s previous insurance premiums were a couple of hundred thousand dollars a year, which was viable. “Since records began over 100 years there is no record of there ever being a fire on the Southern Ocean Lodge site and all of the new and updated fire protection measures make it a significantly safer and less risky proposition for insurers,” he said.
“That does not change the fact that insurers are shying away from underwriting in bushfire-prone areas and in Queensland’s cyclone-prone areas.
“It’s a massive issue. People are a bit blinkered by it.”
He warned that Baillie Lodges had previously walked away from purchasing an iconic north Queensland tourism resort because of the hefty insurance premiums, at more than $2.5m annually, due to the region’s cyclones.
Nevertheless, Mr Baillie is hopeful construction of Southern Ocean Lodge, which has been redesigned by its previous architect Max Pritchard, will commence in the second quarter of next year for completion by the end of 2022.
If the rebuilding of Southern Ocean Lodge proceeds, Mr Baillie said there would be a tweaking of its architecture given it was designed some 15 years ago and opened in 2008.
He said there were exciting ‘‘product enhancements’’ and the South Australian government had been ‘‘incredibly supportive’’ by fast-tracking Southern Ocean Lodge’s comeback. Mr Baillie said the ‘‘trickle down effect’’ from a product like Southern Ocean Lodge was not to be under estimated as it boosted local tourism and transport operators.
The success of the award-winning Southern Ocean Lodge has obviously affected Daisy and Gordon Ho, who were major fashion retailers in China.
The pair are well advanced with the construction of a country house on the north side of the island at Snelling Beach, also designed by Max Pritchard, which will be available as a tourism rental.
But Kangaroo Island Mayor Michael Pengilly is critical of the couple because they have won approval to proceed with their development but are resisting the development of a couple of tourism units nearby.
“We have no objection to it,” Mr Pengilly said.
“But my personal view of the project is that I find it a bit rich to oppose a local individual who wants to put in a couple of units at Snelling Beach.”
Other tourism developments under way on Kangaroo Island include The Cliffs golf course near American River, which will include four luxury suites.
Its designer has done a similar remote golf project at King Island.
This article originally appeared on www.theaustralian.com.au/property
