Have you heard the one about the Brooklyn developer “robbing” his own new condo of appliances to sell them for a few bucks while falling into bankruptcy? I guess they named it Warehouse 11 in case they needed to use it as a source of high-end appliances for sale! The esteemed architect, Karl Fisher’s “clean, minimal” concept became even leaner when dozens of apartment units mysteriously lost refrigerators, ovens and other stainless-steel wonders on the developers own watch!

Brokers in New York may already be talking about recovery, but the lowest points of the residential real estate market crash are just beginning to show up. It’s normal for the biggest, seediest, messiest cases to come to light towards the end.

According to a lawsuit filed by Capital One bank, a lender to the developers of the cool and upscale Warehouse 11 condominium at 214 North 11^th Street in Williamsburg, just south of McCarren Park, the developers Yitzchok Schwartz and Isack Rosenberg defaulted on their $45.6 million mortgage earlier this year. But that’s not all the story. The real news is that while the lender began to market the loan note to potential investors (the building was 98% complete and many of the 120 units had been sold), their representatives from Massey Knakal noticed that many of the finished units were missing all o most of the appliances! During an inspection in July it was discovered that majority of the inspected condo units had been robbed of the high-end appliances. More became missing by August. The obvious conclusion, although not yet proved in court of law, was that the developers, the only ones with appropriate access to the construction site, may have taken out whatever valuable assets they could to sell for profit or to recoup their money. Now, you can’t sell things out of units that are already promised to buyers. And you can’t rob a collateral that he bank owns in case of your default, Messieurs Schwartz and Rosenberg!

The story gets better. During the inspection ordered by Capital One, “and enraged Yitzchok Schwartz locked most of the units” and then forced the inspectors out of the building. They were eventually locked inside the building and forced to exit through the back and the parking lot.

Finally, not only did the developer remove already installed appliances and defaulted on the loan. They also happened to neglect the construction site, allowing water collect in the basement of Warehouse 11, eventually leading to mold growth.

This case has got to be a perfect example of how bad times drive people to doing bad things. The toxic loan on 204-214 North 11^th St, 11101, NY is now worth an estimated $34 million. That’s a 25 percent loss off the bat for the lender but does that include the loss of the appliances? What will it be worth once the case goes through the Bankruptcy Court (yes, the developers filed for bankruptcy protection in September 2009), and some of the buyers sue back to get their deposits back, or simply back out? The marketing company for the development, Apartments and Lofts, has taken it off their site. And what about the mold removal costs? This is a messy case and one that the beleaguered condominium market of Williamsburg does not need today.