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No. of Recommendations: 3

In step one you calculated the market value of ARE's real estate operating assets (the 7,341,700 number) using NOI and cap rate. The intent of this step is to come up with a more realistic value for real estate operating assets rather than using the depreciated cost basis on the balance sheet. However, in the second group of assets you added the depreciated cost basis of ARE's real estate operating assets (the 7,226,016 number). You have already accounted for the real estate operating assets in step one, so you can't count them again. The second group should only include assets other than real estate operating assets.

Also, the $7.3B number you get using NOI and cap rate -- which is supposed to represent the market value of the real estate operating assets -- is very close to the depreciated cost basis, which doesn't sound right. I suspect that the issues you are having are with step one.

Hope this helps.
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