This blog explains the Sequencing Limitations of App-V 5.0 SP3 with '.rels' files:

1. The Microsoft App-V 5.0 (SP3) sequencer fails to package application if that application contains "relationship part" (.rels) file.
2. This is a known limitation in App-V 5.0
3. The error message:
    "An error was encountered while trying to finalize the package. Please check the event log for more details".

4. Relationship part can be identified by the presence of a file with a ".rels" file extension in a folder named "_rels".

5. To work around the limitation, all relationship files (.rels) needs to be deleted from the package source folder prior to saving the package.
6. Delete the file(s) when reaching the Create Package page in the new package wizard, just prior to clicking the Create button.
7. One of such application we have recently worked is:
8. This application has ".rels" files associated, so couldn't sequence the application as after deleting the files application was not working properly;
    hence we have proceeded with MSI packaging.
9. More details on this can be found in this below KB article: