The throngs cheered on New Year's Eve in Bucharest and Sofia, lit by fireworks. They had good reason to party: at that moment, Romania and Bulgaria joined the European Union. Past experience shows that entering the EU leads to a rise in economic activity, investments, consumption, and the standard of living. For some Israelis, who were perhaps among the cheering crowds, there was another reason to be happy: They represent a growing number of Israeli developers and companies who have recently made huge real estate investments in both countries, in the hope of making some fast and easy money. Israeli developers, including GTC Group (Kardan), Africa Israel, Jacob Engel, Housing and Construction Holding Co. Ltd. and Adama have been active for years in the real estate business in Romania. They identified the potential of the Romanian economy, whose land was much cheaper than the prices in other East European countries - Romania has always been portrayed, perhaps unjustly, as a "second tier" country in Eastern Europe, and activity and prices were set accordingly. Those with a more discerning eye saw the potential, and increased their activity the moment the EU decided about two years ago to include the country in its ranks. GTC Group is building 2,000 apartments and commercial centers in Romania. Africa Israel, which is controlled by Lev Leviev, is building a huge, 80,000 sq.m. shopping mall in Bucharest (along with a US investment fund), alongside office buildings on an area of 75,000 sq.m. It is also developing construction of 2,000 apartments in another part of the city. Ever so quietly, Adama, controlled by David Flossberg and Benjamin Jesselson, bought 17 lots, mostly in the capital, and is building or planning to build 5,400 apartment units on them. Elbit Medical Imaging Ltd., controlled by Mordechai Zisser, has announced that it will build a huge, 120,000 sq.m. commercial and entertainment project (including parking) alongside office buildings, all in Bucharest. For the moment it seems that there is no room for other developers, local or foreign, in the Romanian capital - except for the Israelis. Increased activity ahead of joining the EU Activity increased greatly over the past month, as the date set for Romania's joining the EU approached. Bucharest began to fill with Israeli developers and their representatives who signed, sometimes daily, one deal after another: Bonei Hatihon Civil Engineering and Infrastructures Ltd., controlled by Ami Peretz, finally signed a contract to build 1,500 apartments in Bucharest. Yigal Damari bought 24 dunams in Bucharest for â‚¬54 million, to build 660 apartments. He also announced that he is in contacts to bring in a partner for 40 percent of the project. Adama bought another 10.8-dunam lot in the center of the capital for â‚¬15m., on which it intends to build 400 apartments. Jerusalem-based Digal Investments & Holdings Ltd., controlled by Yehuda Levy and Meir Shamir, also decided, for the first time in the real estate company's history, to enter Romania: Digal bought 50% of a lot for building 145 apartments in the city for â‚¬2.3m. Onami Shiluvim, headed by Yosef Pinson, bought 50% of a 9-dunam [2.25-acre] lot earmarked for construction of 145 apartments, from Israel-based Profit Building Industries Ltd., controlled by Zvi Ichaki. By the way, Profit has been active for several years in the real estate business in a number of East European countries. Aura Investments R&D Ltd., a new real estate firm controlled by Yossi Tzaliah and Boaz Misholi, along with Giron Development, bought a lot for building 400 apartments. With Yona Bahari, it also bought a lot for building 300 apartments in Bucharest. There may already be no room for additional developers in Bucharest, since the developers mentioned above, as well as others, have already filled the city. That might be the reason why developers are deciding to seek out other cities for investment in Romania, headed by Arad, which has about 350,000 residents. Toward the end of last year, Africa Israel bought 80 dunams in that city, for about â‚¬15m. The company even announced that it would build a huge, 50,000 sq.m. shopping mall there, at an investment of â‚¬50m. About three months ago, Aura signed a contract with GTC Group for joint construction of 20 small and medium commercial centers in Romania's provincial towns. With 2006 coming to an end, the two companies together purchased 33 dunams in Arad for about â‚¬6.5m., in order to build a 30,000 sq.m. mall. Is there room in a mid-size city for two huge, Israeli-built shopping malls? Only time will tell. Romania - the human element Thus, within a relatively short time, Romania has gone from being an unknown for Israeli developers, to being an extremely desirable location. What did the developers find in this country? Land, as was said, is relatively cheap. The economy lags behind other East European countries, so joining the EU could very well give it a tremendous boost. However, despite the fact that Romania is a prominent tourist destination, on paper at least, due to its stunning views and low prices, there have not been any recent reports about Israeli developers entering the hotel sector. The human element is also attracting Israelis to Romania - hundreds of thousands of former Romanians live in Israel. An Israeli developer will not have a hard time finding Israeli businesspeople familiar with the laws and procedures of that country, and who have connections from the past in the right places. The language issue is also easier than in other countries in Eastern Europe. The large number of Israeli developers led Bank Leumi to decide to buy a Romanian bank, which was opened just a few weeks ago at a gala ceremony. Quite a festive atmosphere can also be felt these days in Bulgaria, which also joined the EU. Prices in that country are even lower than those in Romania, and the economic potential seems big. Osif Group, controlled by the Doron Aviv family, was the first to identify the possibilities, and went in two years ago to build a large commercial center in the capital, Sofia. Another firm that entered the country relatively early was Rilon Development & Investments Ltd., owned by Eldan-Tech Ltd., both of which are controlled by Joseph Bodenstein. The company decided to concentrate on Plovdiv, the country's second largest city, which is close to NATO military bases, whose thousands of troops possess considerable buying power. Over the past three years, Rilon bought several lots in Plovdiv and built a commercial center on one of them. The other lots are earmarked for residential housing and tourism. In recent weeks, Rilon has stepped up the pace, buying 33% of a 1,300-dunam site in the north of the country intended for residential, commercial and hotel construction. It also purchased 72 dunams, completing a 400-dunam bloc in Plovdiv, intended for logistics. Just recently, it sold 10% of a lot that it bought three years ago, at a price five times higher than what it paid for it. In Bulgaria as well as in Romania, Israeli transactions accelerated in the final month of 2006. Osif and Theater Israel bought 60% of Rilon's share of a 17-dunam lot in Plovdiv, in order to build a 25,000 sq.m. shopping mall. Two weeks ago, Osif's Dafna Harlev and a representative of Theater Israel's Gardinger family flew over in order to participate in the mall's cornerstone laying ceremony. The mayor also attended the ceremony, perhaps in order to express confidence in the new Israel developers. The tractors are already on site. Electra Real Estate Ltd., which has been actively investing abroad for years, went in a different direction: It just purchased a 12-dunam lot in the well-known resort city of Varna on the Black Sea coast. Electra paid â‚¬5m. and will build 240 apartments there. This comes on the heals of the purchase of a larger area nearby to build 1,650 apartments. Lito Real Estate Ltd., headed by Shabtai Moni, closed a deal for buying 13 dunams in Sofia's Boyaner neighborhood, to build 140 apartments. A new company called Bulgaria-Israel, controlled by Lindsey Katriel and Haim Alkobi, is seeking to raise NIS 90m. on the Tel Aviv Stock Exchange in order to buy lots in Bulgaria, although it has not specified its plans. There is another reason, which not many know, for the race after lots in Bulgaria: Along with the entry into the EU, the Bulgarian government lowered the corporate tax from 15% to 10%, as of January 1. The result: large European companies are planning to move their logistical warehouses to Bulgaria. Germany's Kaufland chain first seized on the principle, and began building a large warehouse near Plovdiv. The lowered tax is supposed to provide an additional incentive for increasing economic activity in Bulgaria. However, it is worth noting some words of hesitation and caution that were uttered last week at the Israel Management Center's annual real estate conference. Several of the participants, including a representative of Israel Discount Bank, expressed skepticism regarding the wave of Israeli investment in Eastern Europe. One person even argued, without providing details or proof, that "There are currently only 10 genuine investments in Eastern Europe, and all the rest are plans that are liable not to get off the ground." Credit rating company Midrug Ltd.'s Managing Director Gil Gazit said that his parent company, Moody's, gave Romania and Bulgaria a "B" ranking, which is relatively low from a credit risk standpoint. In other words, there is more than a little risk in granting credit to projects in those countries.