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Thera Capital Management passes A$100m in AUM

Non-bank lender Thera Capital Management has secured two-thirds of its commitments from outside Australia, gaining traction among investors thanks to ag’s defensive characteristics and ESG themes.

Australian agriculture debt specialist Thera Capital Management has crossed A$100 million ($73 million; €67 million) in assets under management for the first time, with further growth expected in 2022.

Thera chief executive officer Mark Allen told Agri Investor that he expects the firm to reach A$200 million in AUM by the end of 2022, with “reasonable certainty” that it will pass A$150 million by the end of June thanks to interest from existing investors that wish to top up their commitments.

Allen said there was plenty of capital worldwide looking for a return and that lending to agriculture had proved an increasingly attractive thematic throughout the pandemic.

Around 95 percent of the firm’s investment base is formed of institutional investors, with two-thirds coming from outside Australia. “We would expect that ratio to get closer to 50-50 in the next year or two,” Allen said.

Thera has gained traction with investors from the Middle East, Europe, Switzerland and the UK, as well as from superannuation fund capital in Australia through a funding warehouse.

“There is a huge pool of capital here that is ready to participate in agriculture through the right structure,” said Allen. “Investors like the defensive nature of the sector and they like the ag thematic from an ESG perspective as well, as responsible investors.”

Allen said Thera has been working with some of its European investors in particular to develop sustainability-linked products, where borrowers can see the cost of capital lowered if they hit certain ESG-linked benchmarks, such as soil carbon levels or water efficiency.

The firm’s portfolio is broadly split two-thirds to livestock enterprises and one-third to cropping, and is mostly focused on Australia’s east coast. Thera currently has no exposure to Western Australia but hopes to establish a presence there now that Australia’s internal state borders have reopened following extended coronavirus closures.

“We are currently in a very bullish cycle for Australian agriculture thanks to the combination of high commodity prices and good seasonal conditions,” Allen said, which he believed would create more opportunities for non-bank lenders such as Thera.

“We can’t compete with the biggest banks on their cost of capital, but we do think we will be able to compete with those second-tier banks over time. As property prices continue to rise, it may be that the big banks will focus more on term lending [for acquisitions], and there will be opportunities for us in seasonal finance.

“We can provide that development finance for a producer wanting to undertake a change of use on a property to permanent crops, for example, and then once they are cashflow-positive they will be able to refinance with a major bank.”

Allen said that northern Australia was an interesting opportunity for Australian agriculture in general, as well as Thera specifically.

“The Top End [region of Australia’s Northern Territory] is a really big opportunity, and we see it as the next frontier for Australian ag. We’ll be supporting the development of cotton gins and looking at cropping enterprises there too.”