The Real Reason Grubb & Ellis (GBE) Got Dismanted Yesterday

It wasn't just the market selloff. Yesterday morning Grubb & Ellis (GBE) announced it is selling $30 million in convertible notes, at pretty expensive terms to boot.

Grubb & Ellis Company, a leading real estate services and investment firm, today announced that it has entered into an agreement to sell $30.0 million aggregate principal of unsecured convertible senior notes due in 2015. The notes will have an interest rate of 7.95% per annum and are being offered at a price equal to 100% of their face value. The company also granted the initial purchaser a 45-day option to purchase up to an additional $4.5 million aggregate principal amount of notes to cover over-allotments, if any.

The company estimates that the net proceeds from the offering will be approximately $28.0 million after deducting offering expenses. The company intends to use the net proceeds from the offering to fund growth initiatives, short-term working capital and general corporate purposes.

The notes will be convertible into common stock at an initial conversion rate of 445.583 shares per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $2.24 per share...

I have been bearish on GBE for several months. There were plenty of people mocking me but it looks like I have been proven right.

I actually have not heard of anyone who is bullish on GBE for sensible, fundamental reasons. The marginal buyer seems to be a momentum or retail idiot buyer.

But if anyone really IS bullish, explain to me: why does the company need to raise this expensive capital? Aren't they benefiting from the "recovery" in commercial real estate?