Real-Estate Companies Grapple With High Interest Rate Hedging Costs
Real-estate companies are facing soaring costs to protect their variable debt against jumps in interest rates, with prices on some contracts jumping at least 10-fold this month from a year earlier.Banks and other lenders often require real-estate firms relying on floating rate debt to hedge their exposure with so-called interest-rate caps. The caps are derivatives contracts, sold by the lender, in which companies receive a payment when an interest-rate benchmark—for example, the Secured Overnight Financing Rate—exceeds a…