John’ s Island Club, Inc. Notes to Financial Statements
Note 6. Leases( Continued)
Operating leases as lessor: The Club leases building space to a real estate agency within the community. The lease includes extension and termination options that are predominantly at the discretion of the lessee, subject to certain conditions. In November 2014, the Club amended and restated its existing operating lease with the tenant. The amended lease commenced on January 1, 2015, with an initial seven-year term, and provides two additional five-year renewal options. The first renewal option was exercised in 2022, extending the lease through December 2026. Rental income is derived primarily from payments specified in the lease agreement, which include fixed annual rent escalations with each renewal term. The leased space is located within the administration building, which is predominantly occupied by the Club. The Club recognized rental income of $ 475,000 for each of the years ended December 31, 2025 and 2024. Undiscounted future cash flows of $ 475,000 are expected for the year ending December 31, 2026.
Note 7. Functional Expenses
As a not-for-profit entity, the Club is required to present expenses by functional and natural classification for program and supporting activities. The Club’ s primary activities are food and beverage and sports and recreation. Expenses reported as supporting activities are incurred in support of these primary activities.
To appropriately report the costs of the Club’ s services and how the Club uses resources, depreciation and amortization of right-of-use assets for finance leases, is not allocated to functions. Depreciation and amortization of right-of-use assets for finance leases, representing in essence the cost associated with replacing and acquiring assets, is funded by new membership contributions, initial capital contributions and capital assessments, and not by revenues charged to members and their guests.
Expenses by functional and natural classification consist of the following for the year ended December 31, 2025:
Program Activities |
Food and |
Sports and |
Supporting |
|
Beverage |
Recreation |
Activities |
Total |
($ in thousands) |
Cost of sales |
$ |
5,052 |
$ |
1,679 |
$ |
- |
$ |
6,731 |
Payroll and related |
|
13,047 |
|
10,644 |
|
10,949 |
|
34,640 |
Supplies, services and other |
|
2,560 |
|
10,519 |
|
8,651 |
|
21,730 |
Total operating expenses |
|
20,659 |
|
22,842 |
|
19,600 |
|
63,101 |
Non-operating expenses: Interest expense |
- |
- |
116 |
116 |
Other expenses |
- |
- |
419 |
419 |
$ |
20,659 |
$ |
22,842 |
$ |
20,135 |
$ |
63,636 |
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