Cover detail from New Senior Investment Group’s third-quarter 2018 presentation. Pictured is Kalama Heights, a Holiday Retirement community in Kihei, Hawaii.

Competition for assisted living workers, and the rising costs of paying for them, are dragging on assisted living operators’ balance sheets, New Senior Investment Group executives told shareholders Friday.

Because assisted living has had to ramp up clinical abilities, there continues to be significant differences in expenses between New Senior’s independent living and assisted living operations, executives noted during a quarterly earnings call. 

“To put into context, labor in independent living was up 2% year over year, whereas assisted living is at 5%,” said David Smith, New Senior’s executive vice president and chief financial officer.

In the second quarter, New Senior’s 102 independent living communities’ net operating income were up 1.3% year over year, whereas assisted living was down 11.7%. That continues a trend from the group’s first quarter, where the independent living portfolio was up 2.3% year over year, whereas assisted living / memory care was down nearly 12%.

New Senior sold two assisted living / memory care assets for $14 million in the second quarter. The real estate investment trust also completed transitions of nine underperforming properties to new operators. 

But the assisted living assets face “ongoing and persistent pressure,” including labor shortages, noted CEO Susan Givens. She also explained that as soon as the company addresses underperformers, “other ones pop up.”

“We’re not done with our work. We had hoped that we would address some of the real laggards,” she said. Still, New Senior had a “very productive quarter” with “solid portfolio results.”

New Senior declared a cash dividend of $0.13 per common share for the second quarter, and total net operating income of $41.1 million. The REIT entered into a three-year, $350 million interest rate swap, improving the company’s fixed rate debt exposure to 43%.