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Moscow Hikes Rent for McDonald?€™s

This restaurant near the Arbat was one of two properties where McDonald?€™s paid 1 ruble per square meter per year. Vladimir Filonov

McDonald’s will have to start paying an annual 1,200 rubles ($40) per square meter, instead of 1 ruble, for properties on the Arbat and Bolshoi Nikolopeskovsky Pereulok after a court canceled its long-term contract with the city.

The Moscow Arbitration Court approved a suit brought by the city forcing the restaurant chain to increase its rent, an official in the city property department told Vedomosti.

In July 2009, the department filed two suits against Moskva-Makdonalds seeking to overturn the rental rates for a 1,577-square-meter restaurant on the Arbat and a 859-square-meter training center on Bolshoi Nikolopeskovsky Pereulok. The city approved the rental rates for 49 years in 1992, when it was still the controlling shareholder in the joint venture with McDonald’s.

In 1996, McDonald’s Restaurants of Canada purchased 31 percent of the joint venture, and in 2005, it bought the remaining 20 percent to become its single shareholder. For most of the company’s properties rented from the city, the rates were gradually increased, but the rate of 1 ruble per square meter was kept for these two buildings.

Starting in 2010, McDonald’s will have to pay the new rate, which is the minimum rent for municipal property in Moscow, the City Hall official said. McDonald’s will likely appeal, forcing the city to continue in court, he added.

A spokesperson for McDonald’s in Russia declined comment, saying the company had not seen the decision.

The property department has been in court with the company since 2007. Two lower courts had ruled against the department, which had been seeking to raise the rate to 18,883 rubles annually, before the latest decision increased it to the city minimum.

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