A South Hill senior housing complex owned by Clare House Apartments LP, of Spokane, has been placed in custodial receivership pending an upcoming trustee sale to satisfy a debt of $3.9 million owed on the property.

Spokane businessman Harry Green, who developed the independent-living retirement complex, originally planned a multiphase, 418-unit campus on 18 acres along Palouse Highway, just southeast of the Southgate commercial district. The first phase of that project includes an independent-living apartment building with 124 units, as well as a community building and other amenities, and that property is the subject of the foreclosure action. A second phase of work included 28 "bungalow" units and is owned by a separate company named Clare House Bungalow Homes LLC.

Green could not be reached for comment, nor could attorney Timothy Lawlor, who represents Clare House Apartments LP.

Late last year, U.S. Bank, which was owed $3.9 million on the apartment project, notified Clare House Apartments that it was in default on its loan for the property, according to documents filed in Spokane County Superior Court. The bank later assigned the deed of trust to the property to SA Group Properties Inc., of Minnesota, which is foreclosing on the property and filed the request to place the complex into custodial receivership, court documents show.

On Sept. 8, Larry Soehren, of Spokane-based Kiemle & Hagood Co., was appointed by the court to be the custodial receiver of the Clare House Apartments. The receiver was to take possession and charge of the mortgaged property, including all books, records, financial information, computer data, and security deposits, and to manage the property until the trustee sale, court documents show.

A trustee sale on the property is scheduled for Nov. 7.

Green, meanwhile, has been trying to refinance or to sell the property to satisfy the debt. He argued in a motion opposing the receivership request that putting the property into receivership could cost him $1.4 million, and will make it more difficult to refinance or sell the property.

Green asserts in documents that a foreclosure would allow the title owner to strip from the deed the requirement that 93 of the units at the facility be reserved for low-income senior citizens, making the property more valuable to a potential buyer. The court documents indicate that 98 percent of the apartments were rented at the time the receiver was appointed.

Green also argues that if Clare House doesn't continue to operate with a certain number of low-income units, he will have to reimburse Steadfast Cos., a limited partner in the venture, for the loss of low-income housing tax credits worth about $1.4 million.

In addition to 124 living units, Clare House Apartments includes amenities such as a courtyard, indoor walking track, library, and laundry facilities. The complex's community center houses an indoor pool, an exercise area, a kitchen, and physical therapy services, as well as space that's leased to Holy Family Adult Day Centers, a nonprofit that provides rehabilitation and nursing to seniors.

Clare House Bungalow Homes LLC built the 28 adjacent bungalow units in 2001. That property also is listed for sale.

T.J. Meenach III, a Spokane real estate agent who is marketing the facilities for Green, declines to comment.

Clare House Apartments financed the purchase of the property and construction of the apartment complex with $4.1 million in revenue bonds issued by the Washington state Housing Finance Commission and funded by U.S. Bank. It also received a $625,000 U.S. Department of Housing and Urban Development loan, plus tax-exempt bonds and income-tax credits, because 93 of the complex's original units were set aside for low-income seniors. Construction of the building was completed in 1999.

In court documents, Green argued that property taxes the SA Group claimed were in arrears have since been reduced because of the low-income housing status of the property.