From Exit to Endgame: The Build-to-Hold Shift
Build-to-Hold: Rethinking Legal Strategy for Long-Term Success
For years, Australian developers operated on a familiar model: acquire land, secure approvals, sell off-the-plan, and exit. That formula delivered consistent results in a rising market. But the environment has shifted.
Higher debt costs, tighter planning rules, changing buyer demographics, and a pullback in speculative demand are pushing more groups toward longer-term strategies. Build-to-rent, co-living, fund-throughs, and hybrid income-plus-growth models are replacing quick exit plays.
This isn't just a financial pivot. It calls for a full legal reset.
Profit Timing Has Changed, and So Must Your Structure
In build-to-sell, profits are realised upfront. You sell lots or apartments, repay debt, and wind down the SPV. It's transactional.
In build-to-hold, revenue is spread across years. You collect rent, manage ongoing costs, depreciate assets, and hope for capital gain on exit — if there is one.
That changes the legal conversation:
Loan terms need to stretch across operating cycles, not just settlement periods. Lenders will look at income coverage, not just pre-sales.
Tax planning must consider GST, depreciation, and timing of income recognition over the asset life.
Exit strategy becomes more complex. You’re not exiting a project. You’re managing an asset. Maybe indefinitely.
If your structure is still geared for a quick sale, you're setting yourself up for inefficiencies — and possibly friction with banks, investors, or the ATO.
Long-Term Assets Require Long-Term Governance
Build-to-hold models turn projects into businesses. You’re not just delivering a product. You're managing a platform.
That means governance matters more.
Boards and investment committees need to do more than sign off on funding. They must oversee decisions like capex, refinancing, and divestment.
JV arrangements must reflect long-term control, not just initial equity splits.
Voting rights, reporting rights, dispute mechanisms, and delegation frameworks all need to be documented with operating continuity in mind.
You might hold the asset for ten years or more. Your legal documentation needs to reflect that, not a two-year development timeline.
Regulatory Complexity Still Applies
Longer-term holds often come with new layers of regulatory scrutiny, especially where capital is pooled, structured, or sourced from offshore.
FIRB implications continue post-acquisition. Holding entities may trigger new conditions, especially where there are leasebacks or foreign beneficiaries.
Structured vehicles like co-investment platforms or fund-throughs may attract ASIC interest if poorly documented or inadequately governed.
Even where formal licensing is not triggered, the regulators expect clarity, transparency, and investor protections built into the legal stack.
GST and Tax Complexity Increases
Compared to build-to-sell, tax treatment under a build-to-hold model is significantly more nuanced:
Input tax credits may not be fully available for residential leasing
The margin scheme often does not apply where leasing was intended
Long-term tax planning must consider annual distributions, depreciation schedules, and capital gains on exit
Trying to retrofit your tax structure later will cost more in time, money, and friction. It’s far more effective to align legal and tax strategy at the outset.
Final Word
The shift from building to sell toward building to hold represents more than a change in business model. It’s a change in mindset.
Success in this new landscape depends on having legal foundations that are designed for longevity, operational flexibility, and regulatory clarity. Legacy documents, transactional mindsets, and short-cycle assumptions won’t cut it.
This article is general information only and does not constitute legal or financial advice. For tailored guidance, contact MWBL Consulting.