Judge Orders Relativity to Drop Extra Office Space in Santa Monica

The bankruptcy court judge overseeing the sale of Relativity Media has ordered an end to the company’s lease on a portion of a Santa Monica Airport hangar and for the insolvent multimedia company to take control of any of its property that remains on the premises.

Though Relativity’s main office is in Beverly Hills, additional space at 3000 31st Street in Santa Monica has also been rented by the company, which it reportedly used for management meetings and sit-downs with investors. The offices there have been used by Relativity CEO Ryan Kavanaugh, whose family investment firm, Knight Global, has offices at the same address. (Though under the same roof, the two offices have separate entrances.)

Any Relativity property at the hangar must be either removed, abandoned with the permission of the company’s creditors or kept on site, according to the order by Judge Michael Wiles of the U.S. Bankruptcy Court in New York. That property would then be subject to sale, at the discretion of Relativity.

Sources familiar with the situation said Kavanaugh intends to pay for and maintain the office space that Relativity will abandon. The location is closer to his Malibu home than Relativity’s Beverly Hills headquarters. Employees said Kavanaugh, 40, has been little seen at the main office since the company filed for bankruptcy on July 30.

In its filing for Chapter 11 protection, Relativity declared liabilities of nearly $1.2 billion and assets with a book value of about $560 million. The company is scheduled to be sold at auction Thursday, thought insiders report that the entertainment company has not attracted any bids larger than the $250 million already offered by three hedge funds that are the senior lenders to Kavanaugh’s company.

Various creditors have complained that Kavanaugh spent lavishly as his company spiraled downward into insolvency. A recent bankruptcy filing revealed that the company leased a Mercedes sports car that retails for more than $220,000. The hangar offices in Santa Monica were seen by some insiders as another extravagance that Relativity could not afford.

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