After years of steady expansion, the company behind famed Santa Monica-based brokerage firm KW Advisors has filed for Chapter 11 bankruptcy.
R&LS Investments, led by Rick Cunningham, filed for voluntary protection from creditors in the Central District of US Bankruptcy Court on July 18. In the filing, the company claims it owes less than $7.5 million in debt but has estimated assets between $500,000 and $1 million.
Creditors include a limited liability company linked to real estate investor David Taban. About $430,800 of the debt is in dispute, according to court documents. Taban’s Emerald Enterprises owns a building in Santa Monica where Cunningham used to work. A brokerage firm with ties to Cunningham is said to have vacated an office owned by Taban in June.
There is also a debt owed to City National Bank of approximately $144,800. In addition, $30,000 is owed to Citibank credit cards and approximately $30,000 to CoStar. There are also smaller debts, such as $3,100 owed to an office cleaning company and $3,000 owed to a parking lot company.
Emails seeking comment from lawyers representing R&LS Investments were not returned.
Adam Stein-Sapir, an insolvency expert at Pioneer Funding Group, said Chapter 11 provides a forum for renegotiating all types of contracts, including leases. Sometimes the lease is rejected and the landlord is free to find a new tenant.
“It also applies to bank debts, loans and civil claims. Those debts are frozen the day you file for bankruptcy,” Stan-Sapir said.
New York-based Stein-Sapir has not cooperated with KW Advisors and has no knowledge of the specifics of the case.
An undated website for Cunningham’s The Cunningham Group says it has 1,720 affiliated agents with combined sales of $1.5 billion. R&LS Investments has about 400 affiliated agents, according to a filing with the real estate arm of R&LS Investments.
Cunningham was recruited by Keller Williams in 2004 as the first investor in its Hollywood Hills office. KW Advisors has offices in West Los Angeles and Santa Monica. It also has offices in Napa, Palo Alto, Peninsula Estates, and San Francisco in the San Francisco Bay Area. According to media reports, Cunningham Group also owns other brokerage companies.